Ask HN: Making money is really hard. Help | Hacker News Reader

Ask HN: Making money is really hard. Help

6 pointsj2bax11 comments

Hello HN. Does anyone have any bright ideas on how to bring a company with significant design and development resources to a higher profit margin? Currently we work primarily for larger corps designing and developing websites and games for them. It seems like it's getting more and more difficult to build our cash reserves even though we seem to be getting more and more work every year. Our number one expense is our work force, which we love and wouldn't want to downsize if at all possible. Would we be better creating our own product rather than working for other companies all the time? Should we bootstrap as best we can while continuing to pay the bills by working for other companies or should we go after VC? Any books anyone would recommend? Is there a particular industry we should go after for better margins?

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Raise your rates. Stop billing hourly; set a 1 day billing increment for normal clients and a week-long minimum for all but preferred clients. Offer retainer agreements to every new client and to every client you have a strong relationship with. Get better at recruiting, which will ultimately reduce your overhead.

Except for the last one, those are things you can do immediately, without thinking hard, for an investment no larger than a couple hundred words of sales copy.

Could you productize some of the work you do? So, perhaps you create a software solution that eliminates some repetitive work for you, or something the customer pays for monthly - like a white label option.

It sounds like you start from scratch with each client. Your hours of work, work force & expenses are growing but is your revenue per head growing at the same rate? You could easily have a concerted effort for your team to produce something once & sell it many times. Perhaps a less bespoke product that may appeal to a wider business audience - then you may get clients you can upsell at a later date.

Here's a trick that many companies use successfully.

Step 1. If you do the same type of job repeatedly, create a "platform" (a bunch of re-usable code). Don't actually spend too much time on this.

Step 2. Create a great marketing section on your site for this platform. Create sales materials. You will be telling clients: our "whatever-we-do-all-the-time platform" will save you tons of time and money.

Step 3. Apart from the normal hourly development cost, you charge clients a licensing fee for the platform too. And: PROFIT.

Now let's be clear: your platform doesn't have to be highly polished. It doesn't need to actually save you development time. It's a sales tool to increase your profitability. Pick something hot, like a "mobile platform" or a "social platform" or something like that. And make some pretty graphs for it.

My friend, who was nearly broke and strapped for cash started a web design agency solely based on Wordpress.

Started at Wordpress themes online. Built 10 custom theme frameworks, for every client he just picks the one that best suits the job, adds a logo, changes colours, does a bit more tweaking and deploys at 5k/pop.

In his first month he did 5 sites. A month later he opened his own agency with a few employees under him. All on Wordpress.

+1 on reusable platform. So much time saved.

The way he brought in clients was mainly via twitter and running searches. He searched for any tweets within his locale geared towards the web and hunted clients down, mostly through convincing them that they NEED a new website. For example, if someone or a few people tweeted about a small businesses shitty website "omg I wish xy pizza had order options on their site -_-", he would archive these tweets, compile a listing and other market research and pitch it to the company and score himself a new job.

I hope this is at least of some use to OP. Social media + platform + hustle/hounding = $.

tptacek makes some valid points in regards to securing revenue.

You must have heard of The Lean Startup and like most people get confused about what a MVP really is. The vision behind building a MVP is to identify the most valuable prospects (that make you money) and to get that to the market earliest.

As soon as the MVP starts generating revenue, any further development requires less out-of-pocket investment because the revenue generated will be substituting the cost. This allows for more breathing room to automate, improve, reduce waste, innovate and grow the product.

The biggest secret regarding business is possibly the concept of perceived value. Perceived value is not about 'faking' value, instead it is about defining it.

Example being, instead of charging $ x per hour for web development; break it up into different tasks and charge accordingly: website design, graphic design, copywriting, SEO, marketing (social media, ppc/ppv), system design, consultation (ex. to determine best path forward), training, support, analytics, business analysis etc.

Once you have defined the tasks involved, you can be honest with your client in terms of your strengths and every task will be judged according to its merits (what defines success?). Most clients would prefer paying a qualified copywriter the same amount (or less) than he would be paying a non-qualified web dev.

Defining what you do will allow you to reduce waste and distribute work more easily on your team.

The real trick behind successful software development/consultation is the focus on building systems instead of services. Systems being defined workflows concerning components and participants, focused on re-use. Because lets be honest, real software design reuse either require building generic systems that allow for all scenarios (or can be extended) or defining interactions and components (ea. a design 'pattern').

You'll want to read everything written tptacek and patio11 on consulting. I'm off to bed, but I'll dig up some links tomorrow.

Maybe your rates are lower than expected. Also, once you have a team, it's always better to start a project while doing client work and turn it in an own product, then switch to that to make it bigger.

I think our rates are fairly industry standard. A lot of times it comes down to what the clients budget is though. Admittedly we do have an awful time staying on budget.

Set rates and stick to them. And when the a project starts to grow beyond its original scope, stop work and renegotiate.

What do you consider to be industry standard?

Then I highly recommend some coffee, a good idea that would make and a lot of teamwork to make your own product. Sell it and make profit. In the end you will be only working for you, guys.

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