Starting a Software Business in Today's Economy?

Ryfar asks: "I'm a programmer with 3 years of experience in C, C++, and Java. With the current low economic trends in the software sector, the small software company I've been working for since I graduated is going out of business. Since it's so hard to get a job at another software company with so little experience, I'm considering the option of striking out on my own with a friend with similar development experience and creating a small software consulting company. Naturally, until we were profitable to the point that we could hire other people to work with us we would be both the programmers and the marketers/salesmen. The question is, Where should we start looking for business? How do we capture the hearts and confidence of potential customers when we don't have PhD's from MIT? Could those here with applicable experience on this subject share with the rest of us?"

Comments

Get a contracting job first

[darkwiz]

Find a reputable consulting firm/group and offer your services as a contract worker to them first. Marketing yourselves directly as independant programmers will be very difficult.

Most companies who are looking for out-sourced programming needs are looking for:

1. Small, one-shot deals (a database, a parser, etc)
2. Maintenance on old code.
3. Supplemental help on a large, in house project without any strings attached.

You will not have time to be an effective programmer and self salesman in a slow economy.

ha ha ha ha -- um, no.

[SlashChick]

"Naturally, until we were profitable to the point that we could hire other people to work with us we would be both the programmers and the marketers/salesmen."

Not to just be a troll, but this sentence alone shows that you haven't really thought this through.

Think about what are you going to be doing in this business. Keywords do not make a business, friend. I don't hire a "C, C++, and Java" programmer; I hire someone who can create an order invoice system (for instance).

"How do we capture the hearts and confidence of potential customers when we don't have PhD's from MIT?"

Another question that shows you haven't researched your market. Potential customers, again, aren't looking for resume keywords. They're looking for someone who can fulfill a specific need. Better yet, they are looking for someone who can explain things to them without resorting to words like "TCP/IP", "HTTP", "DNS", and "C/C++/Java".

To put it bluntly, if you
a) try to sell resume keywords like "C++" or "B.S. in Comp.Sci" as a business;
b) can't explain things in a simple, non-technical manner;
c) pressure your clients to do things your way ("Oh my God! You're using Internet Explorer! UGH! You want me to code what?");

your business will FAIL.

And most of all, don't be flaky! Make your clients feel like they are your #1 priority, even if they aren't. As a consultant, that is the top complaint I have heard regarding other consultants.

I would write more, but I'm onsite at a client's office right now, doing freelance PHP consulting -- that's what I do for a living. It's not easy to be freelance full-time, and you're definitely going to need to put more thought into it than you have already. If what I have said scares you, and you don't want to spend 50% of your time explaining what an "Internet Explorer" is, do the world a favor and don't go into consulting. If, on the other hand, you enjoy dealing with people, dropping off business cards, and generally showing off your work at every opportunity, go for it. You'll most likely find it to be a much more rewarding career in the end.

Some Free Advice

[Monkelectric]

Ive been involved in so many failed software company ventures I couldn't count them all ...

#1 - Do *not consider* starting a company unless you know exactly what niche you are going to fill.
#2 - Under no circumstance start a videogame company, if I see one more shitty Allegro/Clanlib game Im going to scream :)
#3 - Get a day job, a couple close friends, and work nights. That way when you fail it wont hurt as bad :)

good luck :)

You shouldn't

[droyad]

I work for a small IT company and my boss has over 20 years expirience. Now we hold on to our customers because we deliver. We usually gain customers by word of mouth and usually take over from inexpirienced hacks who totaly destroyed the network.

Business and Retail are two different fields. Retail usually buys on price, they don't care that the motherboard is a piece of s*$! just it's cheap. Business on the other hand will get mighty pissed if the computer they just bought needs fixing after just one year.

Also it is unethical as a professional to pass yourself off as a consultant when you don't have the expirience. Remeber those professional ethics classes at uni? Don't pretend to be someone who has 15 years expirience when you only have 3. That's why there are so many unemployed "IT" people out there. They don't know jack. And those who do, still have a job. In our expirience it has been god-damn difficult to find someone GOOD to employ

Not to be a troll but ...

[Christianfreak]

are you kidding? 3 years of experience??? People straight out of college are getting jobs you should be able to find one. I only have about 4 1/2 years of experience, I was laid off 3 weeks ago and I have contract work to do and people calling me (probably about to accept a job) and my strong points are Perl and PHP.

Seriously if you know C and Java you have it made, you might have to relocate but there are hundreds software jobs out there. I'd suggest going to ComputerJobs.com or to Monster.

I'm not saying you shouldn't start your own company, I don't know anything about the local economy where you live but I'm going to say that with 3 years experience and your skills you shouldn't have too much trouble finding a job.

Lessons I've learned

[Infonaut]

I started up a two-person consulting business last year, and so far I have learned a lot. Most of what I learned was that I didn't know as much about business as I thought I did, and that I still have a lot to learn.

But I also learned that the most difficult part of getting a business going and making it self-sustaining is marketing. Word of mouth will be your most powerful marketing tool, as others have suggested. However, in my experience, lead conversion is the most difficult part of building the business. Once someone expresses interest in your services, you have to convince them to actually lay down the cash to have you do the work.

One book I've found very helpful is "Managing the Professional Service Firm" by David Maister. This book really brought home to me the reality that as a technology consultant, you really are in the service business, and as such your marketing efforts have to be an integral part of everything you do.

Another thing I discovered is that getting someone to let you do work for them is not the same as them actually paying you in a timely manner. Developing a billing procedure that lets you provide deliverables in stages, which are tied to invoices, might be something to consider. We've been doing that for the past few months with much better results than the "build it, bill it, wait for weeks and weeks to get paid" process, which really sucks. It may seem like a minor detail, but cashflow can be a real problem when you need to buy a development tool or some service, and suddenly you find that you don't have the cash because your clients have been late in paying you.

Also, treat the business process as you would a technology process. Constantly critique your business efforts and try to learn from your mistakes. As obvious as this sounds, a lot of small business people simply don't conduct any form of self-evaluation or process critiquing.

Don't let the naysayers get you down. It takes a lot of courage to go out and start something on your own. There will always be people sitting smug in their salaried positions, ready to sharpshoot you. But they'll never know what it means to put yourself out there on the edge and go for it.

Finally, for the financial and legal matters associated with starting a business, check out Nolo Press. Their books are very thorough and have been extremely helpful to us in negotiating the often frustrating local, state, and federal paperwork shuffle.

Best of luck!

Extremely difficult

[Krusher55]

I am in a similar situation having been laid off a while ago and I too have considered doing some consulting work. It is awfully tough though because you won't be alone and so few companies are willing to spend. Some reccommendations:

1. Work out of your home, keep expenses low and your rates very reasonable. You need to have a very attractive pricing advantage over the larger, more established out sourcing firms.

2. Even though you are working out of your home, you need to look professional and not a fly by night venture. If you live in a basement apartment or the low rent district of town don't advertise it. Also don't use a PO Box. If necessary hire the services of an office front where they offer admin, mail and boardroom services. Have your mail sent their and pick it up or have it forwarded to your place. Whatever you do, make sure you look professional and as good as the other guys.

3. Define a very small target market or a very small set of services you wish to sell. Become a Java consultant not a Java/C/C++ consultant. Even better would be a Java web developer or a Java enterprise software developer. Choose whatever you know best, learn to know it better, and market only those skills. You will need to market yourself as being 'experts' in that field as opposed to a couple of smart guys who knows a lot about software development and can do whatever people may ask. If you try and be too much you will come across as not being an expert in anything and right now I think companies are only interested in talking to the experts.

4. Read books about sales and marketing strategies. Few "techies" really understand what sales are all about. We've all heard and told the jokes about sales and marketing people. Be prepared to become one. When approaching a company, try to figure out what services they might need and focus on solving their needs as opposed to what you can do for them. They aren't interested in what you can sell them, they are only interested in having their problems solved. If you don't think you can solve their problem, forget about it. Don't waste your time on a potential contract you likely can't/won't get.

Other than that, be prepared for a lot of work but have fun. Don't expect to make a million dollars. If you are only in it to get rich, you will certainly fail. If you enjoy what you are doing you are more likely to be successful.

Re:How to make money on Open Source software?

[johnnyb]

How can an Open Source software company make money in today's economy?

********

By selling solutions, not software. The software "product" idea is going away. In it's place, there will be numerous tools developed by people building solutions for others. If you sell a a product that you obtain for 0 cost, people won't need to do business for you. But if you sell solutions that consist of free elements that you put together to solve business problems, you will be paid well. In fact, the business usually won't care how much you pay for the pieces, as long as you deliver the full package.

Those solution providers will release the tools they develop themselves solving business problems as free software. Why? Because they recognize that it is important to maintain the environment that allows them to be successful.

The legal environment is a good analogy. Legal knowledge is free. All court cases and laws on the books are accessible at zero cost. However, lawyers are one of the highest-paid professions. Why? They put the pieces together (which were obtained at zero cost) to create a valuable solution for the client (getting out of jail, etc.)

Reward back

[bluGill]

Note, that word of mouth is the best reward is a two way street. When someone mentions they are looking for X, pull out the buisness cards of all your clients in X, and give them out. And tell your contact the next day you did so (if they are good salemen they will call right away to see if your friend is serious)

Referals are a two way street, if your customers find out that you don't refer people back to them when the opertunity comes up they will drop you (and perhaps activly refer others to your compitition). You can only contact a few people a day, and not all are interested in your business, but if you work for all your customers and suppliers they will work for you a little, and you contacts will go way up.

Eventially you hope to hire salesmen who do this, and love the doing the referal game, but even then you should refer when the oportunity comes up. Your pocketbook will thank you.

PS, always make sure your referals are to good companies. If you know one of your customers does cheap work, don't refer them except when cheap is the only consideration, and then make it clear that cost is the only reason to consider them. In general you should refer people to the best.

Recomendations I can make...

[Eric_Cartman_South_P]

1) Get an S Corporation going.

2) Read up a little on tax law.

3) Read up a LOT on selling, cold calling, marketing. Self help stuff too if you need motivation. Many people do.

4) SELL, that's right, *SELL* your service. Be a salesman first, geek second.

I did the Java programming route for five years in NYC. Fun, but even my bubble went pop and working as an S Corp has soooo many benefits. Shall I list a few?

1) You are your own boss.

2) You have no limit to what you can earn (no bottom either, carefull!)

3) You are officially an Officer of a Corporation, a "President" actually, and you can tell that to cute girls in bars and it's great. Much better sounding that "Java GUI programmer". GUI sounds icky, makes most girls run away.

4) You keep most of what you make (you'll know exactly why after reading a bit on tax laws).

Good luck!

Be warned...

[jkirby]

What I have learned:

- ~80% of all new businesses are started by engineering types.

- ~80% of all new businesses fail.

- Technical people, for the most part, are not business people.

- 3 years of experience will not you make a business success. Trust me. It takes a long time and a large effort.

- You must be focused and have an over abundance of energy.

- You must be able to put your ego and ideals aside when required; you will have ample opportunity to show your $hit; patience truly is a virtue.

- You must be able to ride the storm. In most cases, life will be feast or famine.

- Quickly gained success is quickly lost.

- There is no substitute for experience.

- A partnership is like a marriage. You better be ready for this one.

- You must be prepared to fail. And, when you fail, you must get back up and keep going. Otherwise, you are wasting your time; get a job.

- Attitude is everything.

Jamey

From someone who hires consultants

[m00nun1t]

I work for a large corporate, and a big part of my job is to manage software projects. We have no inhouse developers, all work is outsourced. My job is to select & manage outsourcers, I often use small companies (<10 people) as I find, if you pick the right ones, the rates aren't excessive, they are excellent software engineers, and you get more attention from them.

Here's the top hints that would make me hire you:

• Price: don't be the cheapest. Price isn't my top priority. Just don't rip me off like some of the big consultancies.
• People are busy. I am busy. My internal customers are busy. Do things that will save us time and we will like you.
• Focus on business value. I'm not giving you money so you can write kewl code. I'm giving you money so that you can write something that will add value to my business. Don't ever forget that. The more value you add, the more valuable you become.
• Give realistic budgets & estimates.
• Deliver on time (see above).
• Develop a good understanding of my internal systems. Like all large corporates, we have a large collection of sometimes confusing and often illogical internal sytems and tools. Achieve a good understanding of them, and you get a certain amount of "lock in" with me - I find it harder to replace you, as I need to brief a new consultancy on all those tools. See the point about being busy.