Carsonified

Matt Cowen (@londonjourno) from Reuters just published a short piece on me. He wanted to talk about the fact that when times are good, everyone sings the praises of using social media transparently. However, as soon as things get tough, everyone wants to hide.

There are some important questions to answer here. The primary one being: Should businesses be transparent and honest, even when it might hurt them?

I’d love to hear your thoughts …

[Photo credit: flickr.com/photos/grantmac]

Last week I had to make the terrible decision to lay off three amazing people from the Carsonified Family. We really love and value Simon, Elliott and Dom, and it was very painful to have to let them go. We’re a tight knit group so it was tough on everyone - especially those who are having to leave. They’re talented, friendly and hard-working so I know that another company will snap them right up.

If you’re for an amazing developer, Elliott really kicks ass. If you’re trying to find someone who really understands the web industry and has amazing ideas, Simon is your man, and if you need someone who’s an expert in Mobile, just get in touch with Dom. We’re really sad to part ways with these guys - they kick ass.

So why did we do it?

We did it to make sure that Carsonified would make it through this recession. These weren’t emergency cuts. It was a pre-emptive decision that will give the company plenty of what Jason Calacanis calls ‘Runway’ - cash to see us through slow times.

What are you doing about the Recession?

Whether you’re a employee, freelancer or entrepreneur, you need to be thinking about several important issues right now. These tips should be followed at all times, but they’re especially important during an economic downturn.

Employees

1. Make sure you’re earning revenue for the company and covering your salary. As brutal as it sounds, the founders of the company are going to be looking at your salary versus the amount of revenue coming in and making a decision accordingly. If you’re not directly bringing in enough revenue to cover your salary, it’s going to be very hard for them to justify keeping you on board. If you aren’t currently covering your own salary, then make sure to be able to demonstrate that your revenue stream is increasing dramatically and you’ll soon be covering your salary and making a decent profit for the company.

2. Demonstrate that you have profit-generating ideas. Create and execute simple ideas that bring in profit for the company. These can be things like selling t-shirts or sending valuable leads to the sales team (make sure your boss knows you did this!).

3. Volunteer to do extra work. I’m not talking about kissing the founder’s ass. I’m talking about doing anything you can to help the company survive. The more you demonstrate that you’re committed to helping the company make it through the recession, the more valuable you’ll become.

Unfortunately, even if you’re working hard on the above three points, sadly there’s no guarantee that you’ll be able to keep your job. Sometimes your company just doesn’t have enough time to allow you to build up levels of revenue or value and they will have to make a tough decision. If you think this might be the case in your situation, it’s important to communicate early and often with your boss to ask whether your job is at risk and what you can do about it.

Entrepreneurs and Freelancers

1. Cut unnecessary costs. And I mean all of them. Here are some ideas:

- Sell the company car and ride a bike. I sold the company Audi A6 and now ride a bike to work - great for getting fit.
- Rent out desks in your office.
- Book your travel tickets way in advance to take advantage of early-bird offers.
- During business trips stay at a cheap B&B instead of in a hotel room.
- Learn how much your broadband, phone and electricity cost. Can you change providers to save money?
- Go through your P&L statement line by line and check all the figures. Any over-spending should be identified and cut.
- Double-check everyone’s credit card statements and get on top of any over-spending.

2. Get deadly serious about watching your cash flow. I’d recommend doing this every week, no matter how big your business. The most important thing is to plan on a decrease in your revenue of at least 20% with costs increasing by 5%. Make this a variable that you can change in one cell which then updates all your revenue forecasts.

3. Require 50% payment up-front from your customers and make sure this is in their contract. Don’t be a hard-ass (as they’ll just ignore you) but make sure you get paid early.

4. Diversify. At Carsonified we recently branched out into consultancy, marketing, design and development. We are pretty good at all these things but we previously only did them for our own products. As soon as we offered these services to other companies, we immediately created a new revenue stream.

5. As hard as it may be, it’s time to lay off staff who aren’t directly generating revenue. If you avoid doing this now, you might go out of business later which means you have to lay off everyone, which will be much, much worse.

6. Think hard about what sets you apart from your competitors. Why should your customers spend their hard-earned cash with you?

7. Take really good care of your big customers. We should take good care of all our customers, but make sure youre paying extra attention to the folks who do a lot of business with you. Ideas: Send them thankyou and birthday cards, call them, send them a personal gift and remember their partner’s or kids’ names.

Thoughts?

Times are tough but if you’re smart, you have a great chance of surviving. The key is to not stick your head in the stand - be proactive.

What are your tips for surviving the recession? Please share below.

Pret, a sandwich shop here in the UK, regularly amazes me with their copywriting.

In a (misguided) bid to stimulate the economy the British government has just decreased the sales tax rate here and all the shops and businesses are having to update their prices.

Here’s what it said:

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I had an eye-opening experience the other night and it reminded me how important it is to open up real conversation with your customers. It’s so exciting how tools like Qik and Seesmic are encouraging this.

I saw this tweet from Kathy Sierra, which piqued my interest to go see what was Gary Vaynerchuk was up to on Seesmic. Gary Vaynerchuk and Kevin Rose (digg) where doing an impromptu Q&A where you could ask them questions using Seesmic.

So I thought I’d have a go and shoot them a question (about Grand Theft Auto IV, of course):

I was really fun to get a reply almost instantaneously:

What is so amazing about this interaction is that it was personal and fun. That just isn’t possible over email or even the phone. They were in Las Vegas and I was in Shockerwick and we connected. It increased my loyalty to Kevin and Gary because they took time to interact with me - and that’s the value of that personal exchange. Amazing.

How do you all think this is changing the way we interact with our customers, fans and friends?

I was walking back to the office after grabbing a Dulce de Leche frapp from Starbucks and I spotted this poster in the window of the Orange store (a mobile phone company here in the UK):

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Update: I’ve added a few more web apps to the list at the end.

My last post on Web Mission stirred up a lot of discussion so I’d like to expand on my original thoughts.

My main point was not that going to Silicon Valley to build relationships is a waste of time or money. Everybody knows that making friends and nurturing connections is of the utmost importance and I’m 100% supportive of that.

Also, if anyone is participating in Web Mission because they’re trying to establish a specific relationship with someone in the USA - more power to them.

So what’s the problem?

Getting the message right

What bothers me about Web Mission is that it sends out this message:

“Web apps need to emulate the Silicon Valley model: Funding, quick growth and exit by acquisition or IPO.”

I disagree. And I also don’t think that that’s the message we should be sending out to the UK Web industry.

David Heinemeier Hansson doesn’t agreed either and makes the point in his post Are you sure you want to be in San Francisco? I think this quote is particularly relevant:

“It [being in Silicon Valley] takes away much of the urgency to make money that I think is critical to build sustainable businesses. It gives you too many resources to be satisfied building simple tools for niche markets. Everything becomes about catching that huge wave.”

There’s glory, money and fame to be made in California but the problem is that only a tiny percentage of web apps will ever find it.

More of us should be focusing on building simple, focused, small-team web apps that meet everyday needs. Am I saying we should kill our dreams of changing the world? No. But we all need to admit that YouTube, Facebook, Bebo, Google and Twitter just aren’t the norm.

Instead of desperately trying to create the next phenomenon, which is highly unlikely, why not aim for something that’s definitely achievable?
If you have a team of two or three and you bring in $1M in revenue per year, I’m guessing you’ll be pretty damn happy with your earnings. And to do that, all you need to achieve is 2000+ accounts at $40 per month. With those kind of numbers, you just don’t need mass adoption.

We’ve done it. So can you.

As I’ve said before, we spent $45,000 on building DropSend. It now brings in profits of over $200,000 per year, and we don’t even have someone working full time on it.*

YouSendIt, our biggest competitor, has raised at least $10 million in funding. I don’t know how big their team is, but I’m willing to bet it’s at least 20 people. So immediately, they’ve created a huge amount of pressure on themselves to generate large revenues. With all that funding and all those mouths to feed, it’s a completely different game.

Could they crush us because they’re throwing more money at the problem? Possibly. But we’re more agile and can react much quicker. Even if they squeeze us out of the market someday, we can easily launch another niche-market web app and quickly become profitable.
I’ve got nothing against taking big risks and betting big, but sometimes it just doesn’t make sense. We’re currently enjoying a lot of profit from DropSend for almost zero risk or stress. Which model is better?

Too simple?

I can see the comments already: “Ryan, you’re naive. It’s not that simple.”  Well, maybe not all of the time, but you know what, most of the time, it is that simple. Build your app on a smaller budget, with a smaller team, focusing on a smaller niche, and you’ll be profitable much more quickly.

With the advent of cloud computing and storage, it’s much easier to build more than one app with a small team. If you build three applications and two of them are mildly successful, you’ve got a great business on your hands.

There’s just no need for being TechCrunched and trying to reach the mass market.

I’m sure someone will say in the comments: “But Ryan, you’re an edge case. You’ve become friends with some of the big names in the Valley and that’s why DropSend is successful - you’ve received a ton of exposure.”

Here’s my answer: 99% of our paying customers have never heard of Web 2.0, TechCrunch or any of our events. They’ve just googled ‘Send large files’ or someone has sent them a file via DropSend so they decided to give it a try.

The bigger question

The real issue I’m getting at here is this: What does it take to make you happy?

Money is important to being happy, I’ll admit that. You need enough cash to live comfortably and feel secure. However, I think it’s dangerous to assume that your company needs to bring in a huge amount of revenue in order for you to live the good life.

Take a minute and do a little exercise with me. Imagine logging into your online banking and seeing a deposit of $10 million - right after you’ve been acquired or sold all your shares.

How do you feel? What would you do with the money? Buy your dream house? Pay off your debts? Get that Audi R8 you’ve been dreaming about? Send your kids to private school?

OK, now imagine you’ve done the things on your list. How do you feel. Any happier? I’d be willing to bet that you won’t actually feel much happier than you do now. You might feel nice for about two months, and then you’ll be itching to do something else.
Happiness isn’t found in being the next company to sell for $100 million. So that’s the whole point - you can have a small web app business and still enjoy the good life.
No Silicon Valley needed.

They’ve done it too

Here’s a list of great web apps that are small, successful, profitable and happy - all without emulating the Silicon Valley model:

BlinkSale
37signals
FreshBooks
WeLoveLocal
Flexiscale
Remember the Milk
Fogbugz (from Joel)
Campaign Monitor
Nozbe
ActiveCollab

There are a ton more, obviously. Please add them in the comments and I’ll update the post.

* I plan on changing this as soon as I get off paternity leave, I’ll be going back to work full time on Carsonified’s web apps. We’re hiring a full-time developer and we’re hoping to start on our third web app quite soon.

I’ve noticed that TechCrunch is fully supporting Web Mission ‘08 and I just can’t hold my tongue any longer.

Web Mission exemplifies everything that’s wrong with the UK and European web start-up scene.

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