Apr 14 2009

Where do Value and Cost Meet in your Business Model?

Jeffry

This post comes out of a conversation that John and I had a while back.  We thought it would make a good post here; so this is my attempt at ‘summarizing’ the discussion.

We were discussing potential topics and sponsors for our podcast, The Flex Show and that led to a comment on pricing of various conference tickets.  Obviously that is a topic important to John.

Jeffry Said:

I don’t have the magic wand to tell us where the value / cost line should meet.  I do tend to agree that some conferences have crossed a line, where their cost no longer matches its value.

I think I read a blog post that made me think 360|Conferences was struggling with the same cost vs. value issue.

I was reading something about the down turn of the newspaper industry.  A lot of people complaining about the downturn seem to say that the newspaper “business model” was to sell news to people.  But, I read something that said the real business model was selling the access to people (community) to advertisers.  It makes a lot of sense to me.

The [current] business model of The Flex Show is to sell our community to advertisers.

The [current] business model of Flextras is to sell software to the community.  I worry it is not a long term sustainable approach, though.  I believe the real profit benefit to customers is going to be selling access (support) to myself [and other Flextras employees.  Plenty of companies (Redhat, MySQL) have had success with the “premium support” style models.  A lot of my support option ideas don’t apply to a company w/ no proven record and/or only one component, though.  This comes back to my theories on the difference between digital / infinite goods and scarce goods.  Many of these theories were fueled by reading techdirt commentaries.

I think the business model for a conference (such as 360|Flex) is to two fold.  You sell access to the community to advertisers. And to attendees you sell access to the experts.

John responded:

We’re actually in the opposite problem as some other conferences  (IMO). We offer way more, but charge too little. We’re realizing that we’re so bent on two very counter ideas. We’re obsessive about being less than everyone else, and equally obsessive about offering the most value. If we were wal-mart and conferences were made in China, that might not suck, but for Tom and I, it sucks.

We’re not thinking of raising prices, but realize our current pricing model’s biggest flaw is our price/attendee mix. we can’t do enough shows at that level to really be profitable. beyond paying our phone bills, writing a check here and there, but nothing FT Salary level.

Yeah I agree. it’s more about connecting sponsors to community, while providing community a reason to be there. That’s what I’m hoping to help us figure out with The Flex Show. we’ve got a very targeted community, there has to be some one who wants to talk to them.

I dunno, but these topics rock!!

Jeff Responds

I’d always recommend focusing on adding value and less so on cost through the door.  Companies who compete only on price die.  Because there is always someone who can come in and do it cheaper.  When I was doing focus groups for Flextras, no one blinked on pricing [as long as the components would help them get their job done].

I struggle with the difference between providing a discount (generally bad) and adding value (generally good).  I’m pretty sure that providing the pre-conference day free to attendees is adding value.  Most other conferences charge for such things.  Charging extra for that day might cause backlash.  But, I wonder if you offer a lower-priced 3 day pass for those that don’t want to / can’t make the pre-conference day?  I’m not sure.  I’m entering a realm where I don’t have experience to back me up; and I always have a sense of discomfort telling other people how to run their business.

Maybe we should turn this into an OurStartupStory post somehow.

John Responded:

Yup, exactly, wish we had realized it sooner, but yeah. We’ve woken up and realized low price is fine, but better value is better, and we have that in spades.

Shoot, Tom and I ran head first into a realm we had no experience with :) I actually prefer that, since experience leads to more of the same in my opinion, LOL

Jeff Responded

It is often hard to get out of the “more of the same” thinking, that is for sure.  Reminds me a bit of Courtney Love’s now famous article about the music industry.  Around that time she was quoted as saying she would hire non-entertainment lawyers who could offer a fresh view of the “indentured servitude” of musicians and songwriters.  Hard to believe she wrote that 9 years ago.

And for our readers, here is the post.


Jan 17 2009

Pounding the Pavement and Getting Over the Fear of Sales

Tom

Part of my goal is to do an almost diary-like coverage of me doing the startup.  Until February, I’ll still be part time on the biz and full time on my developer job.  I did, however, get a taste of what’s to come last week.

When John and I decided to do 360|iDev, we figured we should go to Macworld for a day.  We agreed to do a show and then 3 days later, Apple announced it was pulling out of Macworld.  We saw this as a great opportunity to talk to sponsors and developers to let them know that there’s a new show in town: ours.  John and I reg’d for the expo and John bought his ticket for Cali.  Now we needed a plan.  What would we do at the show?

John and I do one offline marketing campaign per 360|Flex.  We print up a bunch of oversized postcards and mail them out to Flex User Group Managers.  They hand out the fliers and we give them a free pass or two to raffle in exchange for them hyping the event.  It works out great for us and for the UGs as well. Then that’s it for marketing. We never really go anywhere to promote our show.  We never really pound the pavement so to speak.  We’re blessed to have a community that loves us, so word of mouth pretty much takes over from there. With 360|iDev, we realize that wasn’t going to happen.

When we did 360|Flex Europe, we assumed our US brand would carry over and we’d have to do little work.  We were wrong.  It hurt to be wrong, but we learned a valuable lesson: Don’t think you’re brand is as recognizable as Mickey Mouse.  Success in one market does not in any way, shape or form guarantee success in another market.

Therefore, for 360|iDev, we realized we’d have to do more.  We put in our order for our traditional oversized postcards for attendees, but our Daneen, our marketing gal, got smart.  She pointed out that it would be better to print the sponsor cards in a matching fashion vs a ghetto inkjet print job done at home.  With these two pieces of collateral, this time we’d have to hit the streets and find people to give them too.  Find people who would not only attend the show, but also possibly speak or sponsor.

Last Thursday, John and I walked into the Moscone Center with a handful of general info cards and sponsor cards.  We were walking towards the main expo hall.  Along the way, we passed tables full of attendees awaiting to get into the expo hall.  Initially, we walked right by them.  LOL  Like I said, John and I are new to this in-person sales stuff.  :)  It hit me, “Crap, we need to be giving these people the attendee fliers.”  I make John pull over, grab the fliers and turned to the people.

Now, the people were oblivious to me.  I was just another goob in a conference shirt (a 360|Flex polo) standing with fliers looking in their general direction.  I probably looked no different than any other Apple Fanboy standing around.  Inside though, was a whole different story.  I so desperately wanted to turn to John and say, “Here’s the fliers.  Go give ’em out!”  It was that initial fear of rejection we all have regardless of what the task is.  The butterflies were a fluttering and the sweat glands were in the process of dumping all moisture they had in reserve.  I’m sure if I stood there much longer and doted on it, I would’ve not done anything.  I would’ve talked myself out of doing what we came to do: “These people probably aren’t even iPhone developers.  They wouldn’t want one of my fliers. I bet some might even get mad for me spamming them in person!”

After a few moments of inner arguing and turmoil, I said, “Oh shut up and suck it up will ya.  There’s work to do.”  With that I stepped to the nearest table and started handing out fliers.  I worked my way around to all the tables near the main expo hall.  There was maybe 40 of them spread about.  I walked up and dropped a handful of attendee fliers on the table.  I gave a smile to those that looked up at me.  You know what, not one person gave a bad vibe.  Quite a few actually said, “Thank you” as I put the fliers there.  “Thank you” is usually reserved for when you do something nice for a person, not when you’re trying to sell them something I thought.  Thing is though, if they are an iPhone developer or want to be one, they’d need some help getting their A-game on.  This conference of ours will help them do that.

I think that’s the aspect of sales I need to take more to heart.  Sales isn’t about being the sleazy used car salesman portrayed in movies.  Sales is all about attitude, which should one of helping.  John and I aren’t criminals taking people’s money and returning nothing in return.  In fact, we’re the opposite.  We take a lot less money than our competitors and we give as much, if not more, value than them in return.  We’re a value and we here to help our customers.  It is our duty as a business to make them aware of what we offer and how it can help them.  They, in turn, can then decide whether they see value in that offering.

After handing out the fliers to those on the tables, it become readily apparent to John and I that we grossly underestimated the amount of fliers we’d need.  Luckily, we had another 2800 back in John’s hotel room.  LOL  It was very cool to walk around and seeing people carrying/reading our postcards.  It gave a little more pep to our step as we hit the expo hall.

The expo would be a completely different beast.  Dropping the card on the tables involved a smile and fast movement.  In the expo hall, we’d need to sell the show.  Luckily, I had John with me.  I’m not quite sure how people start a business on their own. I’d be too scared to do most of the crap that’s needed.  John and I though, if nothing else, genuinely enjoy each others company.  We started out a bit timid.  As the day wore on though, we realized everyone was very positive about the show.  This lifted our spirits and helped us keep going after 6 hours of walkin around.  We did have two sour pusses: 1 – “What’s in it for me?” attitude from a marketing gal no less.  (I feel sorry for that company) and 1 – “Uh yeah, thanks.” as he folded up the flier to trash it.  The high points came when we approached vendors/dev shops and they already had our postcard from outside! w00t!!

By the end of the day, I was exhausted and exhilarated.  We talked to a ton of people and got the word out about 360|iDev.  It’s shaping up to be a great conference.  It was also a great preview of what’s to come for me.  Hitting a deadline for your FT job is a nice feeling, but nothing compares to working your butt off all day to support your own business.  If you haven’t tried it yet, you gotta do it.  I’m just sorta bummed I can’t do it again until the end of the month!


Dec 22 2008

Full Time Startup’ing vs Part Time: Which is the best?

Tom

Twyla Tharp is a choreographer.  While Twyla talks about a lot of things in this 3 & 1/2 minute video, the part starting at 2:53 is my favorite section.  She talks about how she didn’t immediately try to make her passion pay her bills:

I was lucky, in the beginning, I began to work to simply make the dances. I never thought it was going to make an income.  I never thought I was going to earn a living doing it.  I was just curious about doing it.  My mother also gave me lessons in stenography; We could type, we could do other things and we did.  We did other things and we did dance because that’s what we were really challenged to do, but we didn’t look at dance to pay the bills at the beginning.”

Creating a business around your passion is a good thing.  Forcing your passion to pay your bills overnight with a flip of the switch though is not a good thing.  My passion is helping folks grow and learn. The odd thing was that when John and I gave birth to 360|Flex (and thus 360|Conferences), I didn’t know that was my passion.  What I did know was that there was a hole in the market for a good conference focused on Flex.

The first year 360|Conferences was alive, we put on 2 shows and entered our second year $15k in debt.  We took no salary, so that $15K was tied to actual losses from the shows.  Now, John thinks because we didn’t pay ourselves it wasn’t a business but a hobby. I think Twyla sort of backs him up there.  There seems to be this strange stage of a business where it’s post idea and not quite making steady payroll, a business zygote so to speak.  During this time, you’re making money outside the business (in a day job most likely) while moonlighting on  your passion. To compare us to Twyla’s quote above, programming was our stenography and conferences were our dances. The one luxury this afforded us though was the ability to do it right.

I was so glad to have that luxury our first year. It’s very important to build trust in our brand by making it the best it can be.  Sadly, I don’t think we could’ve done that with no jobs and bill collectors breathing down our necks.  There’s a certain peace of mind and/or liberty about being able to focus on doing something right vs getting paid.

For instance, when we were $15K in the hole we decided to go international. It was a bold move and a painful learning experience.  However, from the dialogue in preparing for that show came our successful business model.  Now would we have made that same choice if we were $75K in debt (the loss of the shows plus some salary for us)?  I doubt it.  We would have stuck to US only and we wouldn’t have discovered our new business model.

In our second year, I think we finally hit our stride.  We had the new business model in place. This was the show breakdown:

  • Febuary in Atlanta, GA – profitable
  • April in Milan, Italy – not profitable
  • August in San Jose, CA – profitable

I remember being 30 days out from Atlanta and not having the numbers in ticket sales to make either Atlanta or Milan profitable.  I darn near gave up.  I told John, “We’ve tweaked the show as best we can to achieve profitability.  The one factor we need though is the numbers (in ticket sales).  If we don’t sell over 300 tickets, we’re in trouble.  If we don’t make that number, I think we have to concede that no one sees the value in our offering and throw in the towel.”

John, being the good biz partner that he is, gave me a pep talk and got me excited again.  I don’t remember much of the pep talk, sadly because i was probably wallowing in self-pity.  The one thing I did remember was this bit: “The money will come.  If there’s one thing I’m sure of, it’s that the money will come.”  There was also talk of us having to help it come, which we did late into the night but he had the faith.  I had the fear of failure, he had the faith of success.

Whether or not we should have gone FT at the start of year 2 is debatable.  In hindsight, we probably could have.  I think there was enough ground work in the conference biz concept to get to profitability. Being FT near the start of year two or just after Atlanta would’ve made the other two shows that much better.  It may have even been enough to make Milan a success or at least break even.  Hindsight is 20/20 though and I can’t very well say it would’ve been all good.

Now, I will say this though. As soon as it became clear that San Jose was going to be profitable (or at least by the end of the show), I should’ve jumped ship and gone FT on the conf biz.  Granted that’ll only be six months by the time I leave. Still, six months is a heck of a lot of time for a startup.  John and I did our first ‘corporate summit’ in October.  (More on summits in another post.)  It would have gone a lot differently if we were full time and for that I am sad.  My employer is great and I love them dearly for the opportunity they’ve given me.  However, I can’t help but feel that the impact my presence made at their company was negligible in comparison to impact my presence would have been at my own company.

Sorry if you’re looking for a clear cut answer, because I don’t think there is one.  You need to look at your situation and make the best call.  Ben knew what he wanted to do and thus set aside the funds to make it happen.  John and I had no idea we would be jumping into the conference biz until we did, so there was no way for us to set aside funds for that jump plus we needed time to learn the biz itself.

I guess it boils down to this: Go FT as fast as possible.  If you’re living at home and young, heck yeah jump ship and go FT the day the idea hits.  If you have a family, you have responsibilities that you need to think about.  Try your best to juggle both, but don’t get too comfortable.  Be honest with yourself and when the opportunity presents itself to go FT, see it and grab it.  Don’t push it off just because you can.