Julian101.comThoughts, Lessons, Business Tips from ProWorkflow.com’s Serial Entrepreneur - Project Management Software

I found an old email the other day with some thoughts on bootstrapping our project management software company that I’d written to a mate. I thought it was interesting reading over what I’d written, so decided to repost the thoughts here… Here goes!

Regarding bootstrapping, It’s a hard balance. We put lots of time into systems and development, but sales suffer… or we focus on sales and then development suffers… Bootstrapping is fun to a point, then if the intention is to bootstrap through to profitability, the issue is 100% correct allocation of resources between development, sales, systems and marketing.

We don’t have a lot of wasted resource, only a tight team, no flash offices and a few contractors but we do A LOT with what we have. We have a good number of dedicated servers in California and one in NZ, are in profit and have no debt. So the years of hard work are paying off. Not an industry legend yet, but we’ll get there.

LOW INERTIA
The biggest problem I see in our local market is the high number of software/SaaS co’s trying to scale, but using (old school) high inertia sales and marketing.
Ie: people having to sell, or visit companies to sell. Or going to trade shows and exhibitions, travelling etc…

All this is fine, but the underlying business model HAS to be low inertia, otherwise, it’ll scale, but so will the costs and expense… and profit will never come. This is just good sense!

MARGINS
To be in NZ and compete in SaaS globally, there needs to be minimum expense per sale, and as the revenue grows, the margins need to expand as well. If your business’s margins shrink with scale, you’ll hit a lid and have no profitability long term… Expanding margins mean you can scale faster as you grow.

SUSTAINABILITY
Some companies I know of think that ‘Speed to market’ is the key. You must grow fast! – Not necessarily true… Long term sustainability is the key. We’d rather be smaller and healthy rather than rush things with the wrong model only to find out that we’ve scaled up too fast on a bad model and the only path to profitability is to take round two funding (and lose more control).

COMPETITORS
We track our competitors (as it’s a competitive market) and probably 20-30% of the ones I track have disappeared in the past 12 months. Gone! We don’t want that to happen to us…

INVESTMENT
In my personal opinion, Founders should also take a company to profit BEFORE taking investment to scale – otherwise you simply give away too much of the company and the investment goes into R&D (Investment should go to Sales/marketing). Not only that, but it’s those bootstrap years that help you truly discover the ‘profit recipe’ of your business. You can’t spend needlessly – every dollar out must return. This thinking can be lost or clouded if too much investment comes in too early.

THE SUCCESS FORMULA
Ultimately there is one formula we ALL must adhere to to succeed long term.

Cost to Aquire Sale < Must be Less than Average Revenue from Sale

Where most companies get it wrong is on the ‘Cost to Aquire a Sale’ part. They make plenty of sales, but when you look at their model and costs, with trade shows, print ads, high sales costs etc they can blow 30x or more the monthly revenue they’ll gain.

Ie: A software company may spend (if analysed) $2000-4000 in time and company resource to land an average $100 per month sale. This means they’re not in profit until that customer has been with them 30 months. On this note, every company has a different ‘Average Customer Retention’ time. This may be 3 months or 2 years, but simple maths will tell you that if it takes 30 months to get to profit and the ‘Average Customer Retention’ time is 12 months… Guess what… you have a problem… and you’ll be chasing 2nd round funding sooner or later to stay afloat.

Understanding the key metrics around ‘Cost to Aquire a Sale & Average Revenue from a Sale’ is a key issue we all need to focus on – every day…

That’s my 2 cents for the morning… Time for a coffee!

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About the author:
Julian Stone, CEO – Project Management Software visionary for: ProActiveSoftware.com, ProWorkflow.com & Julian101.com
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We’ve been curious to try some print advertising for www.proworkflow.com - our web based project management software, just to see the effect from a marketing perspective. We recently purchased a full page ad in July 2008’s Startup Mag - A spin off from the guys at www.start-up.co.nz/. Make sure you check out their website - they’re doing a great job promoting local businesses.

I’ve copied the full-page graphic of the ad and placed it below, I’ve also noted the increase in account stats from the time we got the data for the magazine ad to now. It’s kind of an odd thing to put ever changing stats in a print ad - but we thought it was an interesting piece of content to ad to lend further product credibility.

Managed Through ProWorkflow

Note: Current numbers as at 23rd July 2008

Interesting to see the gain? It’s great validation for the team that people are definitely using the ProWorkflow tool for their project management. Oh well! Back to work, just thought this worth sharing…

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About the author:
Julian Stone, CEO – Project Management Software visionary for: ProActiveSoftware.com, ProWorkflow.com & Julian101.com
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We have recently started upgrading all existing subscription accounts to the latest version of ProWorkflow Version 6.0. We have also changed our trials system over to using the latest version of the code.

For trial users nothing will seem new because this is the first time they’ve seen the system, but for subscription account customers there are so many little changes that you can become blind to any noticeable differences.

Lets go through some of the biggest and coolest new features/changes…

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I blogged a week or two ago about an article talking about the size of the SaaS market in New Zealand. My blog was questioning the research as it didn’t sound accurate to my knowledge. By the way, a SWAG is a “Silly Wild Ass Guess”. The research company replied with their comments about their research.

Here’s the original post to read:

SWAGS - Interesting, but can you trust the research?
Click here for the article!

And here’s the comment emailed through from the research company:

Julian,
 
Thanks for the comments and the feedback it is appreciated. Congratulations on the success of your company to date.
 
To clarify the forecast, we are looking at the demand in the market within New Zealand. This only include vendors selling solutions within NZ. If you have international revenue to Australia, the US, or any other market, in this instance we do not count it.
 
I take heart that at least we are in your opinion being conservative, having been around the analyst market for many years, including during the ASP mega hype days, I believe a more conservative view on market potential is appreciated more firmly than an over the top one. Like a few people I am still waiting for the XSP market to hit US$1 Trillion by 2004 or so which was forecast in about 2000.
 
To highlight the methodology, there was a combination of both end user perspectives and discussions with vendors. The SaaS market is very fragmented as you know, so we cannot always get to every vendor.
Finally on the NZ market, it is a very innovative and clever market, and by proportion puts Australia to shame in many ways. As a 50-50 Australian/Kiwi, I guess I can take the best of both markets.
 
Regards and Thanks
Phil Hassey
VP Services/Country Manager ANZ
Springboard Research

Technorati Tags: New Zealand,Project Management Software,ProWorkflow,SaaS,Software as a Service

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About the author:
Julian Stone, CEO – Project Management Software visionary for: ProActiveSoftware.com, ProWorkflow.com & Julian101.com

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Disclaimer: I’m not knocking this company, just interested to know if the numbers are true… Their numbers seem to paint a grim picture of their users as being tyrekickers rather than long term users. Basecamp - please correct me if I’m wrong.

I’m curious. I went to http://www.basecamphq.com today and saw some numbers that got me thinking.  Here’s the screenshots.

Does this seem a little odd to anyone? It looks like their average user breaks down like this:

• Has Created 0.7 projects
• Has created 6 To-Do’s
• Has sent 4 messages
• Has uploaded 3 files
• Has tracked 4 hours

I’d like the guys at Basecamp to comment on this post as I’d be interested to know what the average user account looks like? I’m sure they’re doing well and the average user uses the system a lot heavier than that. Basically, the numbers on their website are painting a picture that the average user has used BaseCamp for one day! That can’t be right…

Although not a fair comparison (as we’re at a higher level of functionality), but still interesting, I’ve taken a screenshot of some average user stats from customers of the http://www.proworkflow.com solution - our web based project management software.

This paints a picture of heavy extended use of ProWorkflow over a long period of time (and yes these numbers are provable).

There was no real reason for this post other than to tell people to always consider the numbers marketed on software company websites’ carefully. My suspicion of BaseCamp is that they’re doing better than the numbers portray and they should update these numbers on the website…

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About the author:
Julian Stone, CEO – Project Management Software visionary for: ProActiveSoftware.com, ProWorkflow.com & Julian101.com

Our SaaS business focuses on a project management solution we rent to a global user base (servers in the USA, the business is remotely run from NZ). No matter how hard we drive home the ‘Value & ROI’ message, there’s always a large number of ‘Price driven’ customers as we all know. The way to a price driven customers’ heart is education, not price cutting!

Price driven SaaS customers these days need to understand that SaaS software pricing does have real overheads behind it. The Simplicity of a SaaS business to a customer is a facade that actually hides the complexity of systems, material and resources needed to create a simple front end user experience… To explain further…

The shift to SaaS: Interestingly enough, in the old days (5-10yrs+ ago) the customer side (web and application development) of business would be a complex procedure for a one-off project, with sites often built by a business with a simple resource/skill base (designer+developer) and they’d charge heaps.
 
ie: Customer (Complexity) + Web Business (Simplicity)
= Revenue (High, one-off fees)
= Fast income, non scalable/sustainable model
 
Nowadays, we offer the clients a simpler tool and user/sales experience. However, as we have to charge less through market pricing shifts, the real money is made on margin and scale. Automation and infrastructure solves these, however comes with a cost of behind the scenes complexity and technology costs.
 
So the equation now looks like this:
 
ie: Customer (Simplicity) + Web Business (Complexity behind)
= Revenue (Slow, recurring fees)
= Slow income, scalable/sustainable model

To show this in a real world example, find out below what goes into our SaaS based project management software company’s latest V6 ProWorkflow software release!

Disclaimer: Firstly, I should just point out that I’m the CEO of ProWorkflow.com (ProActive Software ) and do understand that all software companies manage software releases differently. This is simply an example of how ProActive Software handles releases.

We’ve been working away on a new version 6.0 release of our flagship product www.proworkflow.com. This isn’t just a few updates, it’s a fairly solid new release with over 100 updates and pieces of functionality added. The main focus is on improving usability, speed and customer ROI. One of the mistakes we made was telling the user base there was a new release on the way! Now every day we get “When’s it coming? Is it late? Can you include this and that? or another common comment… “Why is it taking so long? It’s only an update?”

It was these type of comments that prompted me to write this post so I could show people the amount of work that goes into a release :-) The following is a glimpse into ’some’ of the thinking and effort needing consideration just to “Roll out V6?.

Customer Feedback

Throughout the year, customer feedback relating to functionality and usability is collected through various means. Emails, forms, calls, testimonials, sales calls etc. We file away the comments of interest in a document, categorized by the sections in the ProWorkflow application. When we do a minor release, we pick a few items of the list.

For a major release we pick the top 50-100 requests that are frequently requested. There are many hundreds of requests that either get dismissed or scheduled to a later release. We make sure no requests are contradictory and that they make sense to add to the core application. We aim to add generic features where possible.

Planning the Functionality

What goes in V6.0, 6.1, 6.1 etc? We always prioritise urgent needs of the masses first, then other needs, throw in a few ‘nice to haves’ and try to hold back on minor functionality for smaller updates later. Major releases (ie: V3, V4, V5 etc)  are ‘database releases’ so we add any new tables to the database needed in this release rather than the smaller regular updates.

When we have the desired list, developers give us estimated times per task and these are entered into our personal version of www.proworkflow.com to manage the project. Our core product ProWorkflow is web based project management software, so we may as well use it for ourselves! Also, this way we’re testing the solution at the same time as we’re working in it! Cunning way to test usability too…

Planning Development Time frames

We take a development list, which has been itemised and times assigned. When this has been put into ProWorkflow, the developers start working through it all. The most important aspect of keeping to the development timeframe is keeping tight communication with the developers. Every day or two we talk with the developers, see what’s been completed and look forward to the deadline to make sure there’s enough resource and hours to meet it.

In this industry, it’s always difficult to meet deadlines as unexpected complexities can arise when working on a complex application, however, through tight communication with developers and daily checking of the development plan we’re able to keep on track. The direct and real time visibility of progress through ProWorkflow makes this easy.

Development

When working on the ProWorkflow application, we prefer to use small tight teams. We do not want large teams of developers working over the top of each other causing errors or programming with different methodologies. Our lead developer and CTO Alan Barlow is the guru behind the ProWorkflow code base. Alan determines what he’ll work on personally and what others do (staff or contractors).

Testing

As we use the ProWorkflow solution for our own internal projects, the team are always testing in a live environment. In addition we have a small group of heavy usage customers that enjoy being early adopter test monkeys. Between the select group of 10 customers there are approximately 100+ users. These users create a combined few hundred projects and few thousand tasks and time records a week. So if there are any issues or bugs, we’ll know about them pretty fast. One of the great perks and opportunities with SAAS (Software as a Service) is that issues spotted can be easily and quickly fixed, applied to a live account, and then rolled over other accounts in a maintenance update. No need to notify the user, just apply the patch. Often we apply a patch live that fixes an issue a customer has never seen or improves a feature’s usability. It’s seamless ongoing development!

Pricing

With every major release (typically annually), the solutions’ pricing is reviewed For the past 3 years we’ve kept pricing as is - we’re currently reviewing pricing again pre V6. As much as we want to keep the pricing affordable, we also have to keep in mind that businesses don’t run on good intentions. In addition the tool provides great ROI to the companies using it so should have a relative value. So… the factors we consider when pricing ProWorkflow are:

• Value/ROI to the customer
• Technical Infrastructure (Servers, networks, comms etc)
• Support Infrastructure
• Research, development and ongoing development
• Scalability/Sustainability
• Competitor pricing and feature sets 

Support

When the V6 upgrade is released, there will be some new functionality. Even though this will be documented in the Knowledgebase, we’ll still receive calls and emails about the upgrade at a higher rate than normal. This puts extra pressure on support staff so we need to be prepared with quick answers and help docs.

Website Content Changes

The ProWorkflow website has a fair number of pages needing updating when the V6 product is launched. The following will need to be updated: Features, benefits, FAQ’s, packages, overview, all screen shots, version numbers, upgrade pages etc…

Update Knowledgebase (Online help guide)

A huge job, but an important one. There are 100+ tweaks to the ProWorkflow product. When you consider that 1 tweak may be referenced in 5-10 places in the knowledgebase, you start to understand that it’s a sizeable task. The knowledgebase is a strategic asset as the better it’s written, the less email and phone support we’ll receive. Self help means quicker support for the customer and less support infrastructure required at our end.

White papers

We have a couple of white papers  that give a brief overview of the solution. These will need to be read through and modified as needed.

Trial Account Master Code

When companies sign up for a Free trial account, the system sets this up from a master code package. This code package needs updating with the latest V6 code. The demo system then needs re-testing.

Subscription Account Master Code

When companies sign up for a Subscription account, the system sets this up from a master code package. This code package needs updating with the latest V6 code also. We have quite a few servers so the master code will need to be updated across all the servers.

Upgrade Packages & Downloads

In addition to Subscription accounts, the ProWorkflow software is also available as a code download to install on a local server. The master packages will need to be updated and the upgrade packages will need to include a new script to add the new V6 tables to the database when installed.

Update All Billing Systems

Depending on pricing or product options, the billing system may need to be tweaked. This would affect the Signup form, payment pages and account and billing pages in the Client Area.

Upgrade Current Subscription Accounts

When a new major upgrade is ready to deploy, we do this in a phased rollout over the customer base. The reason is simple - if there are any bugs we’ve missed, we’ll pick them up early, fix them and roll out further. In addition, we do the phased rollout to stop any new release from having a heavy support load over the initial week. The beauty of a SAAS model is that we can update customer accounts quickly. The downside is that if you rollout an error quickly you can easily affect a large number of customers. So planning a phased upgrade rollout is definitely the safe way to go.

Marketing

• Newsletters
  A few newsletters will be emailed out to the mailing list talking about the V6 release and new functionality.
• Press Releases
  We’ll write a handful of releases about the new product. These will be sent or syndicated to both local and global news sources. 

Project Management

Someone has to manage all this! Easy, We use our own www.proworkflow.com solution for our project management of new releases. See a screen shot (below) showing the huge project task list and timeline. There’s about 100+ tasks on the V6 development alone, and keep in mind this can increase if any of the new update code affects other parts of the application.  So effective project management is a key part of getting a release out…

Here’s the ProWorkflow Project screenshot for the V6 release  ;-)

Technorati Tags: Project management Software,Software,Rollout,SaaS

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Republishing Note:
Anyone is welcome to republish this article as free online content, provided that the paragraph below is included in the full form as shown.
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About the editor:
Julian Stone, CEO – Project, Management Software specialist for: ProActiveSoftware.com, ProWorkflow.com & Julian101.com

One of our awesome ProWorkflow customers made a mention of ProWorkflow (Project Management Software) in their latest media article.  To read the article, click here:
http://www.btob.co.nz/cms/news/2008/01/art10003038.php

I’m always excited to hear customer success stories! I’m also amazed at the large variety of industries gaining productivity benefits from the ProWorkflow software. I guess fundamentally though that most industries use generic principles of projects, tasks and time. ProWorkflow has been designed as a generic PM tool so can adapt to many situations easily. From Crash Brokers to Creatives, to IT co’s or Manufacturers… The solution can create efficiencies!

Here’s a snippet from the article…

“…The “project” is then entered into the on-line system which sends an automated email-alert to the customer advising log-in/password details.  Crash Brokers staff update all milestones daily so customers know as soon as insurance assessing is complete, target completion dates, any subsequent updates and other relevant information. Other files and images can also be attached.

Crash Brokers’ Director Karen Knight says a number of software packages were trialled over many months before deciding on Christchurch based ProWorkflow.  She says they’re delighted with the functionality and robustness of the system, as well as the unlimited technical support provided by ProWorkFlow’s Director Julian Stone and his staff. 

Knight describes ProWorkflow as a first-class product that’s easy to navigate and intuitive to use - it fully supports Crash Brokers objectives of providing a highly efficient professional service that saves customers time, stress and money.”

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About the author:
Julian Stone, CEO – Project Management Software visionary for: ProActiveSoftware.com, ProWorkflow.com & Julian101.com
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I just found this article about the size of the SaaS market in New Zealand. Have a quick read as it’s interesting Here’s the article (and the first paragraph)…

Software-as-a-Service Ups Its Game in New Zealand

“Market Expected to Experience 65% Growth in 2007 and Grow to NZ$64 Million by 2010″ - http://www.crm2day.com/news/crm/123334.php

Springboard Research, a leading innovator in the IT Market Research industry, today announced the results of its latest research on the Software-as-a-Service (SaaS) market in New Zealand. Increased vendor activity and the inherent appeal of SaaS have been responsible for the market growing 65% in 2007 to NZ$14 million. Together with Australia, New Zealand continued to be the most mature market in the region.

NZ$14 million? That seems a bit on the low side. I would have thought it would have been higher - perhaps double. But 14 million? I’ve known of software co’s in NZ that have been successfully renting software in a SaaS model for years. I also can tell you that we (ProActive Software - www.proworkflow.com - Project Management Software) were never interviewed or asked about our earnings in any survey and that would have added a chunk to the numbers. We’re a dedicated SaaS company! One of the few truly global established SaaS players in NZ.  I wonder how many other companies weren’t included in this research? There’s plenty of great SaaS co’s around Wellington as well…

The point of this post? Firstly, that there is an emerging Software as a Service industry in New Zealand, and secondly, whilst interesting numbers and from a seemingly reputable source, never trust a SWAG (Silly Wild Ass Guess)  ;-)

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About the author:
Julian Stone, CEO – Project Management Software visionary for: ProActiveSoftware.com, ProWorkflow.com & Julian101.com
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Original Post: Being 37signals for free
http://wisdump.com/business/being-37signals-for-free

After reading this post I felt I should speak my mind a bit in the comments section. They’s discussing how easy it would be to copy BaseCamp’s project Management Software product and offer a free version. I thought I should point out a few things in defence of them, www.ProWorkflow.com and other software providers who are trying to offer value-based solutions in a market flooded with price-driven customers. Here’s my comment:

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“Our solution is called www.ProWorkflow.com - project management software and we have many thousands of users in the 1-100 user level. I can tell you from experience that copying the code and building a similar tool is only a small part of it. Think about 37s’s overheads, back end management systems, networks, marketing commitments (paid and social), security, support, sales, backups, billing, 24/7 requirements, load balancing, monitoring etc. All this comes at a cost to 37s (or in our case, to us).

How much do you value your business? Some people on this list obviously don’t think their own businesses are worth a few cents a day! Sheesh! ;-)”

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Republishing Note: 
Anyone is welcome to republish this article as free online content, provided that the paragraph below is included in the full form as shown.
——————————
About the author:
Julian Stone, CEO – Project Management Software visionary for: ProActiveSoftware.com, ProWorkflow.com & Julian101.com

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I read a good article in the NZ Herald online the other day called “NZ Entrepreneurs going to town on web” about some New Zealand internet software start-ups taking some promising steps towards international success. In the article, Wellington entrepreneur and Xero founder Rod Drury quotes “There are a number of next-generation entrepreneurs kicking it on the international stage”.

Good on all these guys! Keep up the 20hr days! I’ve met Rod from XERO, and had a few good chats with Grant Ryan from Eurekster and they’re both passionate, and focused. XERO seems to be fleshing out it’s powerful offering nicely and Eurekster looks to be picking up some good momentum. I think in the next few years we will see even more great Internet successes come from New Zealand as more kiwis learn to use the Internet as a massively powerful and leveragable marketing and distribution platform for their ideas. Rod also has some tips on starting a business on his website that may be of interest.

Definitely some great talent being displayed there, however I wanted to add a couple of other promising Internet companies to the list (ours included). Keep an eye on these companies as they’re both growing nicely. They both are keeping a strategic low profile whilst refining their low inertia scalable business models but are set to scale and should make some good ground this year.

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