Category: Business

2020 – Beginning a new challenge

2020 has been an enormous challenge for all humanity and while I could write a Covid-focused post and focus on the New Year as a way to put 2020 behind us that is not the focus of this post. The challenge I refer to in the title is the new business that had the seeds planted a few years ago when I sold Cadimage Group and embarked on the next step of my life journey here in Hungary.

From my point of view life and business are both journeys and each run through various cycles of ups and downs, joy and pain. 2020 – while unprecedented in my lifetime – can be seen as another one of these cycles which brought change to all our lives in a number of ways.

At the start of the year I was very much in the frame of mind to build a new business. I’d always expected that at some point I would give it a crack and had always been searching for ideas.

January saw me, along with a couple of others, exploring a BIG idea, in fact it was probably a little too big! While having big goals is important, the main trouble we saw with our idea was it was very difficult to start with a small piece and add to it over time. For our solution to be accepted by the market it really needed to be close to 100%. I realise this simplifies things and could be seen as running from a challenge but being bold also requires confidence and whichever way we looked at things it was hard to be totally confident about the idea. (We still keep it in mind though 🙂 )

Confidence is a core value I have always felt strongly about in business. Confidence sets businesses apart and confidence builds confidence. If you project confidence to your customers, they become confident in working with you and your product.

Anyway, Covid came along and I saw my consulting business dry up so I started focussing more and more on ideas and opportunities. Prior to air travel being restricted I attended a conference which was very stimulating. Covid obviously saw a huge move to working from home, however even before Covid I knew any new business I would create would be based on a remote team.

As have many people, I used the opportunity to learn new things and taught myself the basics of iOS, Swift and SwiftUI. I started building some prototypes and exploring ideas and further refining them.

I continued to engage with my co-founders and the idea started to crystallise and we started to put the foundations in place for a new business. We established the business and set about building the first version of our product. We put in a small amount of money to help us get things moving and within a couple of months had made sufficient progress to do a very early pre-seed round to give us some runway to double down on our development. In parallel with development I started some Lean Marketing.

Building a business can be viewed like building a house, with the ground work and foundations being the first part and critical to creating a strong platform on which the rest is built. To a large extent this applies, however the actual process is probably more like building an entire town of houses. As a startup we build foundations for what we need to achieve, doing just enough of some things in order to keep going. In some cases we know what we build today, we need to rebuild (or replace entirely) down the track.

I have been involved with owning and managing businesses for almost 20 years. I’ve been involved in all aspects across building and growing businesses, developing, selling and supporting software and all the marketing, service and admin that surrounds these activities. However, this time instead of joining a well established and profitable business we’re starting from zero.

This is a new, exciting and at times scary challenge. I am confident in the abilities and experience of my team and while a huge challenge lies ahead by the end of 2020 we have begun our journey and have enough pieces in place to start 2021 with confidence.

Experimenting is essential for learning

When it comes to business, as with most things, you know less than you don’t know. So how can we shift this balance? how can we learn? how can we improve?

My approach is to learn by doing. This will also involve making mistakes, which should also provide us a chance to learn.

However, simply doing, isn’t quite enough. You need to come up with an idea of what you think the answer to the question is and then test that theory. And then test and test and test some more.

While at Cadimage we introduced a [paid] student version of Archicad and over a number of pricing experiments we ended up providing the student version for free and finally reached the point where student usage took off.

At the time we did this, it wasn’t necessarily as formal an approach as designed experimentation, but early results were a failure so we tweaked and tweaked until it worked.

In hindsight the answer is as clear as daylight and ultimately providing free student versions, free training for staff and students, and then sponsoring the NZIA Student Design Awards was seen as way of building the commercial side of our business – why we tried to sell something to students is beyond me but the point is the 3-4 years of trial and error led to the answer and not only solved its own situation but had a far broader impact on our business. In my opinion we could never have foreseen this outcome as our focus was very narrow.

Technology has come a long way since we did these early experiments, and there is a huge range of software to support conducting and analysing experiments and the data they generate.

Our Student pricing can be viewed as a fairly simple experiment, but equally I think that is also key to being able to learn. Don’t try to test everything at once. Focus on pieces that will appear to have the biggest impact.

When experiments became automated via technology they began as A/B Testing – ie testing two options. Software allows many more options to be tested simultaneously but I think A/B testing truly encapsulates the approach to take.

Obviously you can experiment with everything from pricing to email subject lines and contents. But stay focused – especially if you are a small team – and don’t experiment with everything just because you can. You simply won’t have the bandwidth to assess the results.

Keep it Simple

Yes, this is a pretty straight forward statement, however, as a business you need to be extremely disciplined in order to constantly keep things simple.

Personally I like to equate simplicity with perfection and the following quote sums up my general thinking with regards to simplicity.

Perfection is achieved not when there is nothing more to add, but when there is nothing left to take away

Antoine de Saint-Exupery

I have spent my career building product based businesses and it is all too easy when you have a team of talented product managers and developers to come up with all manner of features that they feel customers need.

Once a feature has been suggested – and in some cases even partially/fully developed – it is very difficult to imagine the product without it.

The problem can quickly escape when you start talking to customers. In general teams I have found that the customers who love to provide feedback and ideas are at the “power user” end of the scale, and therefore they amplify and reinforce the feeling regarding the need for a feature.

The problem lies in the fact that these power-users (and your own staff basically fall in the same category) represent the absolute minority of users. Catering to their every need, wish and whim means that very quickly you have a complex product. Yes it may be extremely powerful, but it has now become difficult for new and less power users to use.

The real art of keep things simple doesn’t have to mean reducing these power user features, but can also be dealt with in different way from creating a very well crafted UI that only exposes complex functions when needed through to creating different versions of the same product with different (extended) feature sets.

Keeping it simple doesn’t only apply to products and features but is important in all aspects of business.

In this article I outlined the changes to our pricing that changed the adoption rate of ARCHICADselect from around 15% to virtually 100%. By looking at our pricing model and adjusting it to make it more easily understood we found we were able to present the price to new and existing customers in an easily understood manner which led to a massive improvement to our business.

Some people love to come up with Complex Pricing Schemes in order to cater for every option with a sense that by doing so they will maximise their margin. However, if an internal sales person can’t understand a pricing matrix then it is a big clue that your potential customers won’t, or they will look for the easiest option that satisfies their needs.

In the same way when we launched Cadimage Tools on Subscription we could have provided a whole host of options to allow customers to pick and choose. However, we decided even with 7 individual tools that packaging them in three plans made the most sense. Some would argue we left money on the table, but I believe we attracted most customers at a higher price point then we would have had we given them infinite options. It can be counter-intuitive, but sometimes sacrificing apparent margin in order to keep things simple actually ends up being far more profitable.

As I said at the start, it requires discipline to always keep things simple and its all to easy to get carried away internally with grand (complex) ideas. Remember to ask yourself:

Is there anything I can remove from this without materially affecting it

And bring a sense of simplicity to all aspects of your business.

B2B SaaS Pricing

It is great to see this recently released report by Chart Mogul following their research in to over 600 SaaS Pricing Pages.

The whole report is worth reviewing if you are in the B2B SaaS business. Some of the key things I was interested to review include:

Optimal Number of Plans

I’ve always had a gut feeling that 3 was the ideal number of plans. I’m not quite sure where it came from but maybe it was from browsing a number of payment pages when I first looked into offering Subscription.

Anyway this report confirmed that 3 is the most popular number of plans on offer – whether or not that is actually optimal is harder to judge but maybe it is a fair assumption.

Incidentally, when we launched the Cadimage Tools on Subscription we opted for 3 plans!

Free Trials

Free Trials definitely appear the way to go with over 80% of companies offering some sort of free trail.

I was surprised however, that over 60% of free trials request card details up front. This is always an interesting debate as to whether asking for details up front presents another hurdle, however, in a sense it also most likely leads to higher conversion so there are different trade offs to measure.

Freemium

I wrote the other day about my thoughts on Freemium so it was interesting to see that less then 30% offered a Free Plan.

That said, Freemium is used extensively to grow ARR in the $100m – $1B range [ nice range 😉 ]

The reference to this article regarding “Monetizing backwards” still reinforced my thinking though.

Annual vrs Monthly

This one was more surprising especially with regards to the over 40% who don’t offer annual plans. I’m a firm believer that having annual and monthly payment plans help create a natural balance of lowest cost of entry, versus longer term customers.

Though that said, my own experience when introducing ArchiCAD Subscription was that I felt monthly was sufficient. Mainly because the entire exercise was to reduce the barrier to entry, and an annual pan would have been still too costly for the part of the market I was targeting at that stage.

NXT BLD 2020

Earlier in the year I attended BIM live show. When talking to a friend about what I was up to he recommended I attend NXT BLD.

This year – like many conferences and events – NZT BLD turned into an experiment with it being held as a Virtual Conference.

There were a series of 6 Sessions spread over 6 days. I found the daily sessions a great way to attend those that attended me and found it easy to fit into my day.

Obviously it missed the interaction with participants but from a content point of view the delivery was very well done. I enjoyed all the sessions I attended and found them very thought provoking.

All sessions are available on demand for those that register and are definitely worth a watch.

At this stage NXT BLD 2021 is scheduled – in person – for London June 2021.

Based on this years event I hope I can attend 2021 in person and maybe even have an opportunity to show what we are working on.

To be or not to be… Freemium

When I was first thinking about setting up a business I touched briefly on the concept of Freemium.

Now that I am underway with my new business it is now time to give it serious thought.

There are a wide array of articles in relation to freemium, and to boil them all down – there is no one right or wrong way – as always it depends on a number of factors.

Mailchimp for example spent 8 years refining their product and pricing before they felt confident a Freemium offering would be beneficial. While companies like Dropbox, Evernote and Slack embraced Freemium from the beginning and the majority of their success is based on their Freemium model.

That said, businesses that target markets above 100 million, can be quite happy with 1% conversion rates as 1 million paying customers can generate an extremely healthy business.

My general feeling is that it is extremely important to truly understand what customers value in your product before embarking on a Freemium journey. This need not take eight years like Mailchimp, but really understanding and your market for a period of time prevents the guesswork associated with launching Freemium from day one.

Also you don’t need to be worried about not launching, you can always introduce Freemium when the time is right.

This quote from a recent article I read encapsulates my current thinking:

“If implemented right, Freemium can be a long-term revenue driver for businesses. However, this can only be realized by measuring metrics that showcase this strategy’s impact over time.”

Freemium: Playing the Long Game

Freemium is definitely something I want to explore in the future but in the first instance I want to measure and understand value. That said, I will have a Free Trial Version so that at least allows potential customer to access the product before committing.

Business Lessons

October always seems to be a month of reflection for me for a couple of key reasons.

Firstly on a deeply personal level October is the month my mum was born. Unfortunately she left us all too soon over 8 years ago but October is a month full of amazing memories.

Secondly, October is the month Cadimage was formed and so I also think back to a major part of my life and career.

A year ago I wrote a series of posts on the Cadimage Story.

Today I’ve decided to post a few of the lessons I learnt during my time.

I’ve created a page so you can keep track as I post them.

Check back soon for my first post.

Making a start…

Quite often things take longer then expected! But today marks the official start of something new.

Ive been trying to get something off the ground for over 12 months and after a few misguided attempts today marked the incorporation of a new business.

We’ve got a lot ahead of us before we’ll be in a position to talk about it but it is a great feeling to have my own business again.

Today marks the point where various prototypes from the last 6 months get put to the side and we start development of what will hopefully be v1 of our product.

Getting started is always a hump to get over, but while we have lots of challenges ahead of us as we begin to build a new business from the ground up, we now have a single minded goal and focus to aim at.

Architizer

While I’m figuring out what to do with myself I am looking for inspiration in a number of places.

I have some ideas forming and its probably not surprising they are architecture / building industry focused.

I have tried to think outside of the industry to see if what other opportunities there might be but I keep coming back to architecture like some sort of homing beacon.

The Architizer Website is a great resource and I also follow them on instagram as well.

I’ve found there 17 Awesome Apps for Architects and Designers page a place I return after first seeing it a couple of years ago. It is great to see the apps that people are creating but I also use it to see if there are any potential gaps that I might be able to fill.

I can see a couple and am starting to explore and prototype some things to see where this may lead.

The posts on the Architizer instagram channel also provide some very useful inspiration and generate a lot of thoughts around some of my ideas.

What Platform?

This is a tougher question for me as there is no clear cut answer and the ideas I have are spread across all platforms – web / phone / tablet / desktop. All platforms have different pros and cons and also require different development skills.

I’ve been developing web based apps for over 20 years. The original ARCHICADselect Website was powered by early ASP and SQL Database. This evolved over time and became a whole front and back office system integrated with accounting, support, payments, subscriptions.

More recently I have been learning iOS development with Swift and SwiftUI. This has certainly been fun and has been great to see some early ideas come to life on my iPad – even if they are very primitive!

When considering platforms I’m also coming back to business models like subscription and freemium.

Freemium is where you have a Free Version and a [paid] Premium Version of the software. The general idea (and the details should be a post on themselves) is that the Free Product is a marketing Tool to capture as many users as possible and then convert a number of these to paying customers.

A key consideration with regards to Freemium is the “cost to serve” that is, how much does it cost to serve each freemium user. There are many businesses that have failed purely due to the excessive costs associated with supporting their ‘free’ users.

A fairly simplistic view admittedly is that free customers on a “web based” system will have costs that can increase significantly as the number of customers increases. While a piece of software installed on a users iPad has a very margin cost to serve which (should) stay under control with large volumes.

This is not the only consideration but an example of how different platforms can have different affects. Like I say Freemium is a strategy in itself and I’d be jumping the gun a little to be deciding my business model detail without first knowing what I am developing.

In short, this is one area I still need to give considerable thought, though based on some prototypes to date I can at least reduce the options to web or iPad – or ultimately maybe a mix.