Why we gave up web design after 10 successful years to move to products

http://blog.silktide.com/2011/07/why-we-gave-up-web-design-after-10-successful-years/

by paulsilver • 15 years ago

191 53 15 years ago

blog.silktide.com

Swannie• 15 years ago

tl;dr: The work was varied and interesting. We were trading time for money. We feared firing customers for lack of cash flow. There is too much competition, and margins are thin. We failed to expand our market. We took almost any work, so felt we could not control our wider contribution. We started to create a product, but could not stay away from getting paid for our time. Eventually we cut the web design work, as the margins were getting even tighter. Now we have two products, which we are proud of, but don't know if they will make a successful business.

Sounds a little to me like the story of Pyra Labs, and many others that I can't recall.

krmmalik• 15 years ago

Yeah we're currently trying to do a similar thing with our company except we started in IT Support

johnx123-up• 15 years ago

> It’s not easy to make a lot of money in web design.

Agreed. Companies like http://www.cssilize.com/ are difficult to compete. They charge as low as $39 and have instant PMS.

On the other hand, there will be huge demand for mobile app themes.

jordanlev2• 15 years ago

Actually those companies only handle slicing a PSD into HTML/CSS -- this is a very small portion of a "web design" job. There's still spec'ing and estimating and implementing it in a CMS and adding custom functionality and testing it and deploying it, and of course actually designing the thing in the first place :)

eropple• 15 years ago

Agreed. There's also the fundamental problem that directly sliced PSDs create a terrible experience for the user; you can't build smart, responsive web pages that way.

PSDs are good for specs, but not directly converting into the actual end project.

cyphorous• 15 years ago

It's better to work for yourself as compared to work for someone else. Good choice.

kieranyo• 15 years ago

This blog post sums up exactly why I wouldn't start a web agency.

justincormack• 15 years ago

Charging by the hour kills the incentive for productivity gains, which generally arise from building internal or external products that help you do things better. It kind of works in fields like law where the delivery has not changed much over the years, but delivering technical services like anything else in the technology business changes very rapidly.

Clients somehow need to be sold the idea that they will get better and cheaper delivery if they accept fixed costs, so that services can be productised, made profitable and improved, rather than buying one off non repeatable time for everything.

We are sort of seeing this as we get an increase in the number of product businesses being started, and so more types of activity are being productised.

danoc• 15 years ago

If anything, charging by the hour not only kills the incentive for productivity gains, but also lowers a designer's productivity.

talkingquickly• 15 years ago

Agree for very well specified projects where the amount of time a project will take can be easily be predicted and so a suitable fixed fee identified.

In an ideal world all projects might look like that but in practice I think there's a chunk which don't. Agreeing fixed fees for these can be a horrible productivity killer because the estimates will tend to be way off and an "it's impossible to do this in the time/ budget allocated so why both trying" mindset can set in which de-motivates everyone working on it.

In this environment I think fixed fee can encourage corner cutting so for me it's about taking projects on a case by case basis and deciding whether fixed fee or time and materials is appropriate based on how predictable the scope and workload will be.

gexla2• 15 years ago

This largely depends on the services you are delivering. Design should only be based on hourly if it's a salary situation. The creative process isn't the same as typing out HTML / CSS.

Hourly rates - incentive for productivity gains - this is a two way street. I base my fixed prices on my hourly rates (though I may raise these rates significantly depending on the client and the job) and try to estimate the hours needed. If bid good, then I will get my hourly rate. If I bid horrible then I'm either making more money or losing money.

Of course I want to get the job done as fast as possible (without cutting corners) to get the best rate possible for the job, but I also have to keep an eye on deadlines and the start date for the next project. There are always more factors than just money to give you incentive for productivity gains

davidedicillo• 15 years ago

I completely agree, that's why at 39, Inc. we try to split client work and internal projects 50-50. Of course that eats big time in the potential profits in the short turn but it also can also spin off in something good. SyncPad for example was first a 39's project before we made it into a separate company called Fifth Layer.

jleyank• 15 years ago

>Clients were my bosses, and we were at the mercy of their whim.

Not sure how I see the difference between this and the phrase you get by substituting "Customers". It's all well and good deciding to be entrepreneurial, but if the shmoes with the $$ don't play along, it's not going to be fun. You're going to have to compromise your ideals to sell product.

To me, a better way of describing the shift from consulting to product development is that you can sell the same development effort multiple times when it's a product. Thus, no matter how well the consultants work, there's an upper limit on their income.

garbowza• 15 years ago

With a product, you design the solution based on your vision and find customers who match that vision. With web design work, you are essentially taking direct orders and requirements from the client.

mechanical_fish• 15 years ago

Precisely.

Here's the difference: Replacing a customer is easier than replacing a client. If you build widget X, but then your customer decides they want Y instead, all you have to do is find one other customer in the world that wants X and you sell to them instead. Whereas in a consulting relationship you tend to have to throw X away and build Y, because hey, you're under contract and the client must be appeased.

(In theory you can write a contract stating that if you build X for a client and they refuse delivery you can repurpose X and sell it to a different client. In practice... consultant-built work product and an actual product are different in so many annoying little ways - assumptions about client's specific workflow and IP baked in, for example -- that this is never as easy as you think, and rarely easy enough to be worthwhile.)

Firing a customer is also easier than firing a client. They buy in little discrete chunks. Just apologize that your product no longer meets their needs and they won't buy the upgrade, or they'll cancel their subscription. In the absolute worst case you'll issue a refund. But compared to the soap-operatic stress-filled lawyeriffic delights of contract negotiation such events are almost a delight.

zeemonkee• 15 years ago

One problem is with the product-as-service. You have a basic product - for example a project management system - but to sell it to the big enterprise clients you have to add that one feature they need to integrate with their backend accounting system, or put the logo on the right instead of the left just because.

With a good design you should be able to customize without losing the integrity of the product, but if you didn't design with that in mind you have a problem. Customer requirements may also go beyond what even a good, decoupled design is capable of. You can therefore end up in the same situation as the consultancies, only with lots of customized, hard to upgrade or refactor versions of your product.

elmomalmo• 15 years ago

Agreed, I've always thought of it in these terms.

With a service, how much you earned is directly linked and therefore constrained by effort your able to apply. Ultimately limited to the number of hours in a day.

Alternatively, when developing and selling a product, the amount of money you can make is more limited by how good (and how well marketed) the product is than it is the effort you are able to put into developing the product.

My view is that you can make living providing s service, sometimes even a good living. You can make a fortune selling products.

oliveremberton3• 15 years ago

Oliver here (I wrote the article, and run Silktide).

It's early days for us, so I can't speak from years of experience, but so far there are marked differences for us:

1. We have a lot more customers. Before one or two of our web designer clients could hold us ransom over a big cheque - the sort of thing we needed to make payroll. Now we'd need a mass exodus of customers for the same to happen, and usually that would be because we screwed something up (i.e. it's fair).

2. Customers now have clearer expectations. Web design customers can expect all sort of things which they consider reasonable, and don't understand why they're not (e.g. supporting a website 5 years after you built it, changing their business fundamentally mid project, expecting 'as many designs as it takes' to get right etc). I know you can and should educate your customers, but essentially you're dissatisfying them. With products, generally people pay a fixed amount to use a thing for a time. If it doesn't work, we refund them. Simpler and happier all round.

I totally agree with your last point - if you can scale it pays better. So far, the jury is out on that one for us, but let's see where it goes...

peteboyd5• 15 years ago

Number of customers is critical. When web design studios only have a few customers and one makes up a large percentage of revenue (ex: 10% or more), then you are definitely at the clients whim.

However, if an agency has a lot of customers, each with only a percent or less of total revenue, then its a much more stable platform. You can decline representation of certain clients and they do not effect the total revenue.

Of course, a product line might be better. All customers under one pricing model, customization is limited, and it scales easier. Good stuff.

PaulHoule• 15 years ago

Hell yeah.

I'd never do that kind of stuff on a fixed price contract. I'd rather wash dishes or wait tables. Some of that work can be fun if you do it on a time & materials basis, but there's certainly less of that around.

I've seen a few companies try to move from 'contracting' to 'product sales' and it appears to be a difficult transition.

The problem is that web shops tend to be driven by success at sales and to be undisciplined about business. They find it impossible to make a "to not do" list and stick to it. There's always the old client who's got a crisis that you need take care of, or the new client who's got deep pockets which (you think) will pay for product development.

A few months later there's the inevitable meeting where it turns out that the product is terminally late -- if the software developers have a backbone, they'll point out that they've spent 60% of their time on "legacy" projects so no wonder it's late.

leftnode• 15 years ago

With some of my clients, I negotiate dual-ownership of the end software in exchange for a lower price. That way, if it is something that looks like it could be monetized as a product, I have the ability to do that.

bergie2• 15 years ago

Our standard practice is that all software we build for clients is published as Open Source. This leaves things like templates and configuration out, of course, but still every project grows and improves our toolkit.

r00fus• 15 years ago

Can you please elaborate? Does the client financially benefit from additional deployments?

jasonwong• 15 years ago

I'm in the same boat. Started a web design and development firm 12 years ago, became one of the first Rails shops, and now I'm (finally) doing a product company.

About 6 months ago, I had an idea for a product, designed it, and put together the final team in the last 6 weeks. I've leveraged old contacts for customer development, and getting the demo done. Now we're pitching some of the largest VCs and angels in the world. Exhilarating stuff.

Maybe I just needed to find out myself, but there's a whole new energy level for myself, and those around me. I think the feeling of satisfaction has less to do with dealing with insane clients, and more to do with creating something that is my baby, rather than someone else's, though.

rglover• 15 years ago

Don't blame these guys at all. I'm just starting out in the web design business and I'm learning that it's quite a demoralizing set. There's little motivation to do well when you essentially bend to the will of your clients. Some are good, but most are not. The result? You lose faith in your work and your trade. Glad to hear another company turned on the light and is working toward doing their own thing. Here's hoping they're successful.

jamesteow• 15 years ago

"There's little motivation to do well when you essentially bend to the will of your clients."

The motivation is a killer site to put in your portfolio, potential future projects from that client or friends of that client, and certainly tackling new challenges.

And the trick is not to bend to every situation. There are plenty of big companies that respect outside talent. HBO/Target/CNN off the top of my head.

xxjaba• 15 years ago

I particularly like the comment of how service based work is "decent sustenance, but a poor investment".

rick888• 15 years ago

I think every developer that wants to go out on their own has the idea to start a consulting company (I did too). I will never do it again because of the reasons listed.

I also had problems getting customers to pay me on time (and some at all). Some realized we weren't a big company and figured we wouldn't have the money to go after them in court.

Customers also loved to completely change the spec halfway through the project and then get angry when we tried to charge them more money.

poetjon• 15 years ago

This is something i have wanted to do for sometime and i think after reading this am finally getting some guts

peteboyd5• 15 years ago

Dealing with clients is all about setting expectations. I really view our contracts as just the expectations codified and hopefully never read again. The key is what the clients actually expect you to deliver. If we ever have to turn to the contract language, we have already lost something in translation.

I won’t go over all the articles points; I think it is well written. I am a bit envious that they have a product to transition too. However, I will point out two ways to help small agencies deal with clients. Specifically on how to take payments and whether to accept certain clients. Both of these areas will help alleviate stress in running the business.

1. Not getting paid. To fix this issue simply demand more up front. We start projects at 75% due. Have done this for 10 years now. Larger contracts, over $15,000, we will start with a 50%, 25%, 25% split. We have never started a project for less than 50% of the entire.

The key is that you never work on collection model. Never send an invoice for work completed. You always are working from your funds you have, so you are never at a loss.

Sure some clients balk at the higher up-front costs, but do you want those clients? Stick to your guns. If a client likes you and your portfolio, they probably will sign even if it means a bit more upfront costs.

2. Owning your time. We get our fair share of "interesting" clients, but have found a way to weed them out in the sales process. This way we only work with clients that we like and want to help. Key tips that it will be a "interesting" project and you may want to pass:

- Wanting to change our standard contract. Our contract is a short 1-page that is really fair to both sides. The more they change the harder the project will be, always. Stick to your contract. - The client needs to start, now, now, now. Basically someone internally has dropped a ball in scheduling and now it is your problem. Charge more to help them or pass on the project. - Disorganized email chains and hectic meetings. The client won't suddenly become organized during the project, which means you are now their organizer. Have fun with that project if you accept, but charge more for project management.

Anyways, I think going the product route is great for web agencies. But you can make a successful agency model work and have fun, we have for 10 years now.

shareme• 15 years ago

all very good points..

Would it be correct to say that dealing with clients takes some 'back-bone' to have the courage to say no and to turn stuff down.

peteboyd5• 15 years ago

I find it better to set up expectations up-front. It is really hard to argue with a client, then go and be "creative." So if you can completely avoid the issue in the first place by having a workflow process, detailed deliverables, what to expect chart or graphic, it makes life easier. Money should not really have to be brought up, if everything is done right from the outset.

rahoulb2• 15 years ago

I'd love to know a bit more about what your contract looks like. I've had real problems with getting clients to agree to pay 50% upfront in case I vanish (I'm quite happy to admit mine is a tiny, 3 person, company) and I'm guessing you must have clauses in there to put their mind at ease.

peteboyd5• 15 years ago

For the vanishing issue, I tell clients that:

a) Look at our portfolio and call our existing clients, b) that we do most of our work in the first few weeks of the campaign so it is only fair to pay that high of an amount, and c) I don't want to have to pause the campaign to wait for a check, it just ruins the flow.

I have not really changed our contract in 10 years. It used to just be me and now we have 13 full-time, a few part-time and a few freelancers. So I know it can work and expand the business.

I really think that 50% is needed to start. It helps weed out clients that are hoping to get funds, or get free ideas, once the project gets going. It shows both sides are serious in committing their time and effort.

If you want, I can send you a sample contract. It is US law based, but the ideas are the same for your law. Just fill out one of our contact forms with your email and I can hit you back with the PDF.

oliveremberton3• 15 years ago

(Oliver from Silktide here, I wrote that article).

Might be useful to see our own Terms, they're still online here:

www.silktidestudios.com/tandc

We always charged 50% upfront for anything over £1,000 (about $1,600). Projects over around £20,000 usually had three way splits.

Of course some bigger contracts (esp. government) insist on their own onerous terms but usually they're decent payers.

Hmm. Perhaps I should write an article on getting this too...

OzzyB• 15 years ago

Just to add, 37signals, and SkinnyCorp (Threadless), are two companies that come to mind that started out working for Clients, then pivoted and made their own products and destiny...

More power to them and all that do this.

SonicSoul• 15 years ago

totally reminded me of http://theoatmeal.com/comics/design_hell

dpcan• 15 years ago

Web Design: The business where the more successful you get the more you want to kill the business.

If you are in a services business, and you catch the products bug, it's all over.

This is my own opinion of course, and based on my own experiences.

When you enter the Web Design business, you do so because you are both technically capable AND creative (hopefully). The business honestly feels perfect, like what you were MEANT to do.

Then the Client steps in.

You realize that your creativity is rather meaningless. You can be given "free reign" to come up with a design, but at the end of the project, the Client will probably murder it with no regard for your expertise. Your creativity is stunted, and your soul dies as you have to start asking for permission to implement every bit of genius you want to throw at a project.

Then there's products. You create them yourself, for who you believe the customer may be, and your creativity and know-how form the product. When you are done, it's your own masterpiece. Now you sell it. Some will buy it and love it, others will buy it and hate it, others won't bother, others will tell the world.

But it's all OK. You keep iterating. When your "customers" give you feedback, you don't have to implement everything. And the things you do implement are usually loved by yourself AND your customers.

Like I said. If you are a "services" person and you get a taste of the "products" world, there's just no turning back.

chc• 15 years ago

That's a little unfair. I think the eating-regularly aspect of the services world appeals to a lot of people. That's more hit-or-miss with products, and certainly more delayed in most cases. If you're good at what you do, you can pretty reliably make decent cash on a contract. If you're selling a product, you can make alarmingly close to zero dollars a month before it catches on (which might be forever).

tsotha• 15 years ago

The real money in software comes from selling the same thing to as many people as you can. The more customization you have to do, the lower your potential profits are.

At one time I worked for a medium-sized software company in the process of going public. One of the metrics analysts were keen on was the ratio of license revenue to services revenue. The lower that ratio is, the less of a product company you are and the lower your potential (and the crappier your IPO).

If all of your work is custom you're no better off than guy who installs kitchen cabinets for a living, in the sense that every new dollar comes in only as a result of new work. If, for some reason, the customer doesn't pay up you have very little to show for your effort.

Cyph0n• 15 years ago

There's one point I don't entirely agree with. Do you have to meet with the client face-to-face? I mean, wouldn't a video call on Skype serve a similar purpose?

You probably would have been able to cater to clients from all over the world through video chat. Or is there something about face-to-face meets that makes your task easier?

prawn2• 15 years ago

Many, many clients expect face-to-face meetings. I have clients overseas and interstate (including some I've never met or even spoken to on the phone) but the majority are greatly comforted by meetings. Many have a strong preference for going through things in person as opposed to writing down requirements in an email.

(Have run a web design company for 13 years now.)

skarayan• 15 years ago

The problem for the web design community is that web design has become a commodity.

jinushaun• 15 years ago

As someone in the field, I can totally relate to this story. After a while, web design starts to feel like a treadmill. You really have no control of your own destiny and have to constantly rely on a consistent flow of new clients. The better you get, the more expensive are your services. Unfortunately, web design is a commodity so you're constantly being nipped away by cheaper competitors. It feels like a bubble waiting to burst.

The only way out is to create a product that can be packaged and resold to many different clients. This allows you to focus and develop one product, instead of spreading your talent across multiple projects. More importantly, it allows you to control your destiny because you schedule when and how releases happen.

It's farming, versus hunting and gathering.

jordanlev2• 15 years ago

Just want to chime in here with my own experience. I'm sure what you said holds true for you, but for me I find that the better I get, the less I'm being nipped away by cheaper competitors. Perhaps this is because of my specific skillset (I'm a web developer, not a designer -- although it's basically the same setup, same kinds of jobs, same kinds of clients), but I find that as I get better at what I do I gravitate more towards clients that appreciate high-end service and the quality I can provide (as they do me). I've also found that focusing on a smaller technical niche has helped tremendously (that is, getting really good at one platform -- in my case the Concrete5 CMS, but same holds true for people specializing in Wordpress, Drupal, etc.). Yes there are always people willing to do the work for cheap, and a majority of potential clients don't know the difference and will go with them. But finding someone who is good at what they do and communicates well and delivers on what they promise is incredibly difficult, and there are a lot of potential clients out there that understand this.

gexla2• 15 years ago

And as you become better in your niche you are likely more efficient than the lower priced competition. I have seen plenty of cases where developers from relatively poor countries are charging far more than I would (and I would still be getting my target rate) for something because they likely have no understanding of what the job requires. In these cases I would likely have to raise my rate (and as a result make a killing) just so I don't look like the crazy cheap guy.

Produce• 15 years ago

>It's farming, versus hunting and gathering.

I like that. Another way to frame it is that it's single vs multi-tasking. I remember reading that contemporary research found that those who multi-task are worse at everything they are doing. It's essentially what's described by this article - http://arstechnica.com/old/content/2006/03/6417.ars but applied to business models instead of teenagers.

bergie2• 15 years ago

I've heard from anthropologists that most hunter-gatherers spend only about two hours per day on getting food, and spend the rest dancing, telling stories and having sex.

I don't know many web designers who achieve that productivity ratio. Then again, hunter-gatherers had less competition, or at least could go and bash in the skulls of competitors.

ARolek• 15 years ago

Client work is an excellent way to subsidized research costs. ;-)

prawn2• 15 years ago

Would love to know how many web design company owners are reading this article and thinking "Could I?"

I've run a web design company for 13 years (currently a team of three) and it's tough work. To your friends, you're the guy who can work anywhere and at any time, charge a decent hourly rate, etc. Reality is you're juggling hosting and domain invoices, maintaining decade-old sites, having your designs ruined by weird requests and on it goes. For every gem of a client, there is a difficult project that was tough to foresee or avoid for whatever reason.

My problems are never contract-related (I don't bother with them at all, figuring that if a relationship ever needs to refer to the contract, it's as good as lost) and rarely about being paid (the money gets there eventually). I also don't worry about competition from smallfry (rarely unhappy to lose a job because I'm too expensive). Yet even without such critical issues as legal, billing and competition, it's still a difficult line of work.

Why don't I experiment with products more? Since I am the client, I can't give myself a serious must-hit deadline and that final 10% never gets done. I also get distracted by the next idea before I finish the last one.

Why we gave up web design after 10 successful years to move to products

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