What you might not know about most of the successful websites and web applications you visit – is that many were initially funded with millions of dollars to make them a success. Hell – even Basecamp – who touts itself as “bootstrapped” received a lot of funding (and help) from Amazon’s own Jeff Bezos.
If you’re an upstart web app (or phone app) – it’s vital to know how the web really works, in order to make your business a success.
Building Web Applications – Where many owners typically start…
About 3 months ago we were approached by a company looking to work together to build and market a web and phone based on-demand application for hiring carpet cleaners and other professional trades people (think contractors, house cleaners, personal assistants, etc.). You would be able to open up the site, phone or web app, see a list of people in your area you could request “right now” and ask that they help you – immediately. Think UBER but for the professional trades businesses.
But, this successful business owner (he owns a string of cleaning companies along the East Coast of Florida) didn’t have a budget (for development or marketing). He didn’t have a plan. And during subsequent phone calls he revealed that he had gone with another “firm” that would be able to build everything for just a couple thousand dollars.
Low-and-behold though, it looks like his idea has already been executed (many times in fact), and it’s being executed successfully:
Last night, I saw this had already been done: HandyBook – Seeing this got the idea for this post going inside my head. Namely – what does it take to build a web application, some of the common pitfalls we at Atilus see business owners making as they explore this space, and what simple tips I think would help a majority of those people considering developing web applications (or Internet businesses) to help them succeed.
I’ll be explaining more about the HandyBook story, and how it relates to our potential client – and what you can learn from this experience throughout this post. This is mostly written for the upstart entrepreneur. If you’re thinking about implementing a “cool idea” you had that relates to the web – you must read on…
Web Development – A Very Strange Business
WHY I’m writing this story ultimately involes a frustration I have with businesses, or business owners looking to “partner” with Atilus as they haven’t set aside a budget for our services. Particularly in the case of a web business (explained below) I think this is a massive mistake on the part of the entrepreneurs requesting our assistance. It’s akin to a airliner not thinking about airplanes… such a core part of the business must be thought about, planned, researched, and financed from day-1.
I’d also argue that as we progress to more of a digital economy, even the smallest mom-and-pop retail stores will soon have to be as conscious about the web and it’s effects (positive or negative) on their business as even wholly based web companies (think google, amazon, ecommerce stores, etc.). The reality is computers and the internet have taken over – now it’s just finally seeping into every facet of our lives and the economy in general.
“Where’s this coming from,” you might ask? Partnering Up – In the last 6 months I’ve been approached with about 10 offers to “partner” up as a business, provide Atilus services for free or at a greatly reduced cost in exchange for partial ownership or an equity stake in a company.
But, let’s start at the beginning:
What is a Web Application (IE Internet Business)
This is a tricky one to answer in one sentence, but I’d say any business that relies on Internet technology or it’s website or phone applications specifically for revenue (either direct through membership, purchases, or advertising) is an Internet business. IE – if you’re an ecommerce store, if you’re a web application, if you’re a phone or mobile application – all of these are great examples of Internet businesses.Even on our own site we refer to these kinds of projects not as “web applications” but instead as “business applications” because often times they’re vital components of the businesses we’re working with.
What Your (Internet) Business Should Look Like
Not speaking at all to the underlying business models and technology your business will need I believe that web businesses – like most businesses, should start with a plan. Here’s a quick breakdown of what this plan should look like:
- Business Mission/Vision (what you’re offering and why)
- Target Customer Base
- Research (market research)
- Financials (projections, startup-costs, etc.)
- Required Technology & Assets (hardware, software, etc. as well as key personnel, key partners, etc.)
- Step-By-Step Plan (ie what actions are you going to take, in which order, and what are they going to cost)
- Marketing (how are you going to get to your target customers? how much is that going to cost? where are your break even points?)
- Milestones (what does success mean? when do you stop? or where do you go once you meet a certain milestone?)
Sadly, most new Internet businesses (particularly upstart web companies) don’t think this way. Typically they start with step 1 – ie, they have a great idea. And jump to a part of step 6 – how are they going to build the thing… but they ignore the other key steps.
Back to HandyBook
Jumping back to the HandyBook example (and really this applies to all web businesses small and large – even Facebook is a great example of this) – they started with this – a plan. They defined their interesting concept, then they took that and sought funding.
According to this Forbes article on HandyBook – they started with $2 million in seed funding (IE capital to START to execute the above 8 steps) and since then have sought even MORE funding – to the tune of $12,000,000 from two VC firms – for a total of $14 million. Meaning essentially (not withstanding any prototypes) that day 1 they created their plan, pitched it, and didn’t really start growing the company (or building) until they had $millions$ of dollars in capital.
Again – I’m brought back to ANOTHER client who many years ago had an idea for an online barter business – to which I showed them Zaarly.com (which has since changed it’s business model to be exactly like handybook oddly enough). At the time it was exactly what they were looking to create. Similarly Zaarly received $1,000,000 in funding from Ashton Kutcher almost immediately. Again – at least some money for the above 8 steps.
As an aside – I don’t think it’s a coincidence that the most successful online companies and start-ups are created by “web entrepreneurs” coders, designers, project managers, system architects, etc. I think their are multiple reasons but here are the two key reasons:
- They see the need and understand the costs – I was having a discussion with a friend in the boating industry the other day. It’s clear there’s a need for a web-based platform to help dealers manager their inventory and sell better online. The auto-industry has giant digital agencies and whole software as a service companies that do ONLY this… the boating industry does not. Right now it’s all one-off sites being developed for individual dealers. With an initial investment, one could generate a platform for all or most boat dealerships and sell them in mass. Unfortunately no one has stepped up to the plate. In this case this one dealer doesn’t see the need or opportunity, they only see a high up front cost. But then again – they’re not in the business of creating and selling software – they’re in the business of selling boats.
- They can deal with the realities (and limitations) of the tech industry – Last year I attended a web developer owners’ conference. One of the best web app companies in the business has a scrum/agile model where you get a certain number of devs on your project and you book them in chunks (sprints/weeks). Essentially you pay anywhere from $10,000 – $40,000 (depending on the project and assets required). And this is PER WEEK! Entrepreneurs in this space, already know how hard it is to find, train, and retain great people, and understand the reality of the expenses involved. Be it experience, or research – costs like these are welcomed with open arms. Conventional business owners only look at it as an expense, and ignore the exponential potential of a job well done – when a job well done can reach millions or billions of people.
The web is a unique space where the owners – regardless of their backgrounds – need to understand the computing world as a whole. Although this knowledge can be learned, often times business owners or entrepreneurs with more “conventional” thinking rarely succeed because they’re unwilling to come to grips with the realities of the industry. Mix this with the “conventional” entrepreneurs idea that “if you build it they will come” on the web – and you have a sure-fire recipe for disaster. As an example – just like conventional business, online companies and applications have to be marketed. The specifics might be different, but the general idea is the same. Case in point – Wesabe vs. Mint. Two applications that tracked personal finances. Mint invested heavily in marketing and user experience (although I’d argue it was less sophisticated than Wesabe) and it ended up winning.
Selling Internet Business Services & Building Internet Businesses
In many ways Internet businesses are similar to their brick and mortar counter parts – they rely on planning, research, and money for development, building, and marketing – to succeed. Although the funds may be allocated differently than a conventional retail store, or restaurant for example, a lot of time is spent up front in prepping and planning and a lot of money is typically allocated for everything that needs to get done now and needs to be handled later.
Extending this analogy further – a retail store spends an exorbitant amount of money on rent and inventory. A web application or Internet business should expect a similar mindset when it comes to spending on coding, design, online marketing, etc.
Where Does Atilus Come In?
Atilus is typically brought on board at the very early stages of a business plan when it comes to Internet businesses. We’re often asked to help shape the plan, particularly from a marketing or development stand-point, and also bring our experience to bear in deciding whether or not the venture has merit at the request of the owner.
We’ve done a lot of research for many companies to provide a basis for market share, market size, projected growth and revenue (based on search figures in the industry) to figure out whether or not a business has merit, is planned to run sustainably (and reasonably considering the needed talent many of these companies require) and to provide a framework for how such a business will operate, scale, and make money.
However, unlike conventional businesses (particularly retail stores or brick-and-mortar stores) there’s this paradigm that web developers are willing to partner with clients in exchange for a partnership and a larger upside potential. Without going into much detail, I believe this generally is the wrong way to look at your web developer or internet marketing company – as we’re in the business of creating relationships and servicing our clients. We’re not in the business of running our clients’ companies, or in the business of ___________ (insert your web business model here).
Think of your development/Internet marketing company much in the same way you think of any professional service – a requirement and a go-to resource. Just like a great attorney or CPA – a great developer can make or break your company – even more so when your entire business is built on the work they’re doing.
How You Should Go About Planning Your Next Web Business
If this is your first internet business, or web application, or if you’ve executed many successful ventures before and want to get even more ahead than you have in the past – how should you go about planning and executing yet another web business?
I’d start with research and planning. You can either compile it yourself, or you can work with a company like Atilus to get you 10 steps ahead more quickly – to figure out how much current demand there is, what growth projections will look like, and to gain a realistic perspective on immediate and future costs (particularly for marketing & for talent, employees, etc.).
Because of our skills not only in planning, executing, and marketing projects for our clients, but planning, executing, and marketing projects for ourselves – we have a wealth of knowledge – with each team member specializing and getting deeper than anyone person – we’ve been able to cull over the last 10 years. In total we have around 50 years of real-world experience doing everything from server scaling for 7 million hits/hour – to marketing for a 1-night online initiative for a global streaming video event. Any modest amount of money invested in the beginning to help plan the course of your business out, will pay off many times over as this information helps you avoid pitfalls and stumbling blocks.
As always, if you have any questions – feel free to contact us or leave a comment and we’d be happy to help! Best of luck with your own Internet business!