Know Your Company grows up and moves out | Hacker News Reader

Know Your Company grows up and moves out

37signals.com

59 pointsstirno40 comments

Parse.ly has been using this product for the past several months. In fact, I think we are the "smallest customer" that Jason cited, with 16 employees. We're a fully distributed team (as I described in http://bit.ly/distributed-teams), so it was a particularly good fit for us.

Our team loves the product. They loved it from the first week it was in use. It sends a weekly email rounding up what everyone is working on every week. It also has team members sharing interesting social things like favorite recipes, childhood stories, books, and movies. And the "Company Question" (a weekly question picked by management) allows us to get regular feedback from employees, which we used to do sporadically using hacked-together Wufoo surveys, but this has much less friction and actually works. One of my favorite of these questions that we recently asked was, "Is there anyone at the company you wish you could apprentice under for a few weeks?"

I don't want to reveal too much about the product because I don't want to preempt their own marketing of it, but here's a quick glimpse of how the "Questions" view of the product looks -- this is where you can see the answers from employees of past questions. In general, it has a simple, sparse, and beautiful design that achieves the goal of the product with ease.

http://ubuntuone.com/3gYi3mg65rCM30dTSGsYB8

I always feel like 37signals shares just enough to make you think you're part of their community, but not enough if in fact you actually were.

What does that mean? 37signals is a business. Savvy businesses create superficial communities for marketing, and 37signals is especially adept at doing that; they've even created a genuine community (Rails) which bolsters their bona fides. But they are at the end of the day a business. What information do you feel that they owe you that they haven't shared?

"But they are at the end of the day a business"

I sometimes wish that some of the "newly hatched" were around back in the day when I started in business. The idea of "download netscape now" buttons and links outside your website would be as likely as a mall store putting in a door to let you escape from the maze of aisles meant to focus you on their product. Not to mention allowing your customers to share their opinions with your other customers.[1]

[1] In other words, unthinkable.

What did you want to know that we didn't share?

what your 3 favorite craft beers are!!

Pick any three from New Glarus! http://www.newglarusbrewing.com

As a Minnesotan living in SF, this warms my heart. New Glarus is only available in Wisconsin so anyone bringing some back was very popular.

you sir, have good tastes.

if you're a fan of IPA's, you should try and have some Pliny, Heady Topper and Ghandi Bot.

The one time pricing is very interesting. How do you define the $100 one time pricing? What if you decide to cut the product in the middle, do you give a full refund? Is there a time limit (20 years) or is this for as long as the service is alive? Is there a limit on file uploads? Is there a small annual recurring fee for maintenance?

$100 per person one-time works exactly how it reads.

If you have 27 employees, it costs $2700 one time. If you hire 3 more people, it's an extra $300, one time. If you let someone go, and hire another person, it's an extra $100. We don't sell against seats, we sell against unique people.

No recurring monthly or annual fees.

Hi Jason - mundane accounting question: how do you account for revenue deferral? I believe in general you're supposed to match revenues and expenses as they are incurred providing the services. i.e. Up-front revenue gets deferred over the lifetime of a contract, because you will incur costs of servicing that revenue during that whole time.

How does this work when there is no actual term?

(Sorry if this is off-topic - we're thinking through some pricing model stuff, and this was top of mind!)

Thanks for the clarification. It would be very interesting to see if anyone else adopts this pricing.

In spite of the flak you get from the HN crowd (the reason I am guessing, might be that you make it deceptively simple to hit $390,000 with 99% retention rate) it is always very refreshing to see your blog posts and the quality of your work is very inspiring. Thanks!

Most companies have a bit of turnover every single year. For knowledge based companies like mine, we have 3000 people at the desk. I don't know our turnover numbers, but if i ballpark it at around 20%, that would be $3M up front, then around $15000/yr perpetually, assuming that turnover rate.

For large enterprises, the upfront cost requires a bit of coaxing, while the maintenance cost is a no-brainer. I'd be curious to see where they go with larger installations. I'd love to see this product aimed at enterprises for 50-60 employees reporting up to a dirext or middle manager, while also proving insight to the executive team.

From the blog post:

"This is a one-time investment, not an ongoing expense."

I like the idea and it makes sense.

But I think it has to be restated in a way to not sound as if there is a hidden cost that pops out when getting to the fine print. That creates a negative in a buyers mind [1]. Needs to be restated in more of a "ok I understand makes sense" or might backfire.

[1] Example: I had a building security system quote (cameras). Company said "we take care of the installation and everything". Quote states more or less "oh yeah but you have to supply 110vac outlets where we will put cameras". Oh great what is that going to cost me? Surprise. To me "everything" means turn key. Doesn't mean I am right but that is what I (not dealing with this every day) thought. My reaction. Had the salesperson said "Installation includes everything but electrical and that's normally $100 per outlet" prior to the quote I would have felt much better about the process.

It's all very clearly explained when we talk to the customer. Remember, no one can buy Know Your Company without spending at least a half hour talking with us first. We go through every single thing about the product, the model, and how it all works in those 30 minutes.

Separate thought.

I was at a funeral the other day for a man who built a very successful residual alarm installation and monitoring business.

At the eulogy it was said that he taught his kids to say "and that's only" specifically the word "only" (not "just").

Btw, I would think that there is a fair amount of elasticity in this pricing. I would guess that people would pay $125 as easily as they would pay $100. "think" means that I would test. You may have already.

Since I brought up the point (which you answered) the way I would restate the copy (since this is HN and people want to learn and debate) would be:

(for now let's go with $125 for my illustration)

"The cost for this?

It's only $125 to setup an employee.

That's it.

The fee is one time and there are no additional or ongoing charges.

None at all."

(Note the word "setup" is used).

My point is by saying "$125 per employee" in my mind the (ad copy) gives me the impression that I won't have to pay if I replace an employee. The "only $125 to setup" in my opinion takes away that issue for the most part.

Strictly my thoughts from playing with pricing and wording for many many years. Others may feel differently. Personally I feel $125 is a better number than $100 can't quite put in words why.

Why are you spinning off the business if it's profitable? Why isn't Claire joining 37S instead? What's happening to ClarityBox? What other operating scenarios did you guys consider? Who is going to run the business . . . will Claire be doing product development, programming, customer support herself? What exactly will she be doing? Is she hiring people? Who are these people?

Of course you don't owe anyone any of that info. However, if you crack the door open just a little bit, don't be offended/surprised etc. if my curiosity is piqued and I want to open it.

"Why are you spinning off the business if it's profitable?"

I think it makes a lot of sense and is a smart move.

Gives an incentive to the person running it to "do their own thing" and by creating a separate entity they can also sell it more easily (if they want to). Or give an equity stake to Claire. And empower her to take chances she might not take if she is just "joining 37 signals" and is all distracted with general company goals.

More importantly it even creates a template to start other similar businesses and do the same. And not to get dragged into the day to day of each and every business or product line or decision.

Why not just keep the product in 37Signals if it's a profitable product?

"not to get dragged into the day to day of each and every business or product"; 37S has a successful history of getting into the day to day of every business and product, that's what they do exceptionally well. Why change that?

Know Your Company was a big experiment from the start. A totally new kind of product for us, an entirely new kind of business model for us, etc. And now we're taking that to the next level with an entirely new strategy for us: Spinning it off into it's own autonomous company and letting it find its own direction.

As I mentioned in the original post, we wanted to hire Claire to run Know Your Company inside 37signals, but there was a fundamental conflict of interest: She had interviewed everyone at 37signals as part of a consulting project, and knew a lot of details about how everyone felt about the company. Everyone spoke to her in confidence as an outside consultant, not as a colleague. Bringing her into 37signals as an employee later would be a violation of that trust, so we weren't able to hire her.

You'd have to ask Claire how she plans on staffing the company, but initially it's just her with a little bit of our help during the transition. As far as I understand, soon she will be bringing someone on part time to help with product development until she's ready to make a full-time hire. Slow, steady, and prudent.

Hope that was helpful.

This was a remarkably human-centric explanation. Thank you.

yup, it makes sense why Claire wouldn't be part of 37s, and if the fit with her and the product is one-of-a-kind, makes sense that it would be organized separately if thats the only way to have her be a part of it. Of course now that you add more color, I'm more curious. I always got the impression you were more personally associated with Know Your Company than the other 37s products (having your signature on the marketing page), if so, are you personally bummed to give up the product and not direct it's continued development? Are you going to be working on something new?

I'm not bummed at all -- I'm excited! I can't give Know Your Company my full attention forever.

The product is in great hands now with Claire fully-focused on making it better as her full time job.

I'm standing by as an advisor and eager to help when called upon.

We also still own a sizable piece of the company so it's in our best interest to see it succeed.

And we're customers - we use Know Your Company every week.

I really like the organic approach you've taken here. Just let things evolve, see where they go, and make the best decision you can at that point in time.

Also, Claire was friend of friend of mine in college, and I'm very excited for her!

Hey there, this is Claire. Hopefully Jason was able to answer most of your questions. But if not, just wanted to chime in...

As the CEO of Know Your Company, I'll be running the business day-to-day. In the beginning, that will include everything from sales to customer support. I'll be bringing on a part-time programmer to do a bit of product development + maintenance until I'm ready to make a full-time hire. Overall, I'm not looking to build a huge team out-of-the-gate. I want to focus on talking with customers, listening to why KYC works for them, and learning how it could be better.

I'll be placing ClarityBox, the consulting practice, on hold to focus on running KYC and delivering the product. In the future though, I could potentially envision both a service and product offered together.

Let me know if you have any other questions – I'm happy to answer them.

I'm surprised by the decision to spin off KYC: from what I understand, it fits nicely in 37signal's toolshed and would help cross-marketing quite well -- especially with those great numbers.

If I were to guess (and this is with the caveat that I'm not too privy to what the actual product is -- from what I can guess from the marketing copy, it's a mixture of one-time consulting and internal SaaS), the growth rate of the project is increasing in a way such that scaling on the part of 37signals is infeasible.

(Edit:) Napkin math: if a company grows from 25 to 40 over the course of two years, that works out to be $1500 over 24 months, or effectively $62.5/mo for KYC. It also strongly incentivizes the product (er, company) to help with a company's HR attrition and growth, which is neat.

I read through part of the slightly scammy-looking long sales letter (complete with bullet points and money-back guarantee) at https://knowyourcompany.com/ and still don't have a clue what this product does.

Can anyone enlighten me?

PS: @jason - the comment about the sales letter is not a comment about 37S, of course, but I'm sure you're aware of the format you're using there...

I'm fairly sure there was a post a couple years back by 37s along the lines of "this style of sales letter is often used by somewhat scammy companies ... but that's because they don't have a real product at all so they have to be really good at marketing copy".

Which is a fair point - and, well, the last time I read one of those I started off thinking "this is weirdly high pressure" ... and then ended up reading the whole thing and signing up for a basecamp trial anyway (which I promptly failed to try properly, so I have no opinion on the product ...).

I think my point is "call it high pressure instead of scammy". If I actually have one. goes in search of another coffee

I like the pricing model. At first it reads like a one time sell ($100 per employee, once), but considering attrition, this is much more attractive for KYC since most companies have significant attrition. What's the typical tenure length at an American corporation? 2-3 years? 5 years? Also, the organizations that need this service the most might also have higher attrition to begin with. Clever.

The pricing model creates a strange incentive: it's in their best interest for their customers to have a high rate of employee turnover.

The issue of knowing your people is such a basic fundamental tenant of leadership that every year or two another tool is invented to solve it. 360 degree feedback was the previous hot company evaluation tool and 15Five had a pretty interesting approach to this as well. I haven't used know your company, but it seems to me that at its core it is an employee feedback tool - with the caveat that it is as minimally intrusive as possible (which is always the goal by the way).

I would love to see how it actually works compared to other management tools, but my company is not big enough to actually be able to implement it.

I do think this is an example of the way that startup/technologists/hackers do things when compared to the rest of the universe of management/leadership: reinventing the wheel that the business management community has been chiseling on for over a century. Hopefully this will do great things.

This will be interesting to watch. Given the sales page currently is simply a letter by Jason Fried, my assumption (and it is just an assumption) is that companies have gone with this offering because it's 37Signals. That said now momentum is built, that in turn should generate the referrals rather, perhaps more so than the initial buzz of working directly with 37signals people, so I guess this makes sense.

I've always seen 37signals as a very focused company, and this spin off enables them to focus back on their core business. I just finished reading Focus by Al Ries, hence this is top of mind, but 37signals seem the masters of relentless focus in the modern age.

It is really a good idea to know our employee's ideas and their work culture. It also provides a great things about our employee through this. We can know that what exactly our employee wants from us and are we giving or not??

And 100$ is not a big deal...

So basically, 37signals sold this product just like they sold Sortfolio.

(They seem to be on a bad run lately given Breeze was shutdown after a few months. Sortfolio sale. etc)

I don't think it's necessarily a bad run. It seems like Basecamp is pretty stable these days, and well staffed, so they're looking for the Next Big Thing for the company. In order do do that, you have to do a lot of little experiments with things that seem trivial but have some potential to become big. There are going to be a bunch of things that work OK but aren't that perfect fit for the next tent pole for 37signals. That's a normal, expected part of the experimentation process.

What's noteworthy is that most companies just shutter their failed experiments, and most startups fail. The fact that they've spun out two of their projects into sustainable businesses is kind of amazing really.

We didn't sell Know Your Company.

No one sold anything and no one bought anything. The piece of the company that Claire owns was a gift from us - and she can earn more as the company does better.

We moved it out into its own company, which Claire now runs.

Nothing at all like Sortfolio.

Is 37signals still the majority owner in this new company?

yes

Isn't the thread in breach of HN rules?

The title of the post is: "Big: Know Your Company grows up and moves out."

Shouldn't it be exactly the same?

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