Ask HN: Do you run a dev shop/consultancy? How should I go about it?

[swagency]

tl;dr - s/w product dev shop, few months in business, looking for benchmarks/advice.

I'm an experienced engineer and product/eng leader. Earlier this year I started a software dev shop, after having been in engineering and product IC and leadership roles for over a decade. I mostly worked at early stage startups, so my consultancy focuses on helping non-tech founders build MVPs. I work with talented freelancers to do a lot of the dev heavy lifting and focus more on product/technical review/problem solving and play the role of the lead who gets it done well. I also focus a lot on finding new business.

I've worked with 4 clients so far but given that I work with founders/early stage cos, they haven't been particularly cash rich projects. Biggest one was 15K spread over 2 months. My margin has roughly been 40-50% on each project so far.

Those of you who've been in this business for 2+ years now, I'm curious how it's worked for you and what advice you would have for yourself starting out or for me. My goal is to build a healthy income (200k+) for myself. I'm not looking to build a $multi-million consulting practice but it'd be great to get to a million or high six-figures in billings.

How did you grow from a few one-off clients to a healthy pipeline of new business? How does one outgrow this phase where business only comes from your network?

How long did it take you to cross $1M in billings/yr?

What's the typical client you work with? early stage? mid-sized/large companies? founders? are you focused on a niche?

I understand what I'm offering is a commodity service but I try to focus on my USP of bay-area based strong technical leader/fmr founder who you can trust with owning product development. This doesn't scale though - I can't be doing 8 projects. The easier path to the money I want to make would be to just freelance at a high rate but I am looking to grow this as a business, not as a solo practice.

Can you share your learnings?

[Jugurtha]

I wrote a bit about it in a Twitter thread[0] and repeated here sometimes[1]. The context is custom machine learning products for large enterprise clients in the mid six-figure range that one or two individuals can pull off.

We've been doing this for seven years and fortunate to have been profitable from the start. Now building our machine learning platform[2] to streamline this and solve actual problems we faced in the real world doing real projects that enterprise clients has paid for. Some projects took us longer than what we think their irreducible duration should have been. It is important to always remember so one does not build a product around imaginary workflows, or around workflows that never produced actual paid products. i.e: when you abstract something into a product, it helps to leverage your domain expertise and it helps having shipped paid product in that space. This is a reminder to people who go into something from a different background and think nicer stylesheets/UI will solve things, or assume people in a domain are morons who never heard of "the cloud" or "Kubernetes". Sometimes you may even have to remind your team looking at other products and wanting features: have we actually ever faced that in real life or is this Aikido stuff/Don Quixote battling imaginary adversaries/problems?

Why: at some point in your consultancy, you'll notice that certain patterns emerge and that you can solve certain classes and clusters of problems you faced delivering software itself with software. That product will help you tremendously if you build it.

Happy to answer questions.

- [0]: https://mobile.twitter.com/jugurthahadjar/status/13106682933...

- [1]: https://news.ycombinator.com/item?id=24972611

- [2]: https://iko.ai

[brudgers]

New contractors tend to encounter mediocre to bad potential clients. Because good clients have regular work and adequate budgets, existing contractors are already working with them (the regular work part) and existing contractors are moving heaven and earth to keep those clients (the adequate budget part). Good clients have long term relationships. As do established contractors.

It is a long game. Deep pockets to ride out cycles are helpful. Because of relationships.

A common mistake is pursuing clients with little money. There is a sound business reason established contractors don’t work for people with no money. New contractors do it as a way of avoiding competition. But there’s only so much runway to fritter on a dead end strategy.

In your case it sounds particularly dead end because the projects are undercapitalized. This makes them even less likely to succeed. It means the founders are less likely to be plugged into a network of well capitalized further opportunities. And your role is central to the success, under resourced, and requires working with “amateurs” (as opposed to founders with successful fundraising track records...never mind exits).

In short you need better clients and time spent doing work for lousy clients is both easier and less productive than time spent pursuing good clients. Good luck.

[scottporad]

Someone posted about an aspect of this here: https://news.ycombinator.com/item?id=25048031

[sheepdog]

I'm not sure I'm in the "heathy pipeline" stage. But I have a small number of repeat clients, and have landed a good number of $49k to $60k projects over the last five years. I currently do most of the work and use 2-3 subcontractors as needed. And during year one I did a lot of sub-contracts for 5-10 person shops. So I've been able to see what works.

I guess the TLDR version is that you need partnerships.

For example, if you are working primarily with AWS or Oracle or whatever, you need to have really good relationships with their account executives.

You'll also need partnerships with other agencies. For example, if your projects are often referrals from marketing or web design shops, you'll need to cultivate relationships with several of those. And that usually means referring web-design projects to them as well. (I'm not great at sales, so many of my projects came from this source.)

But if your projects run <$50k each, you'll never build a $1M sales pipeline without a sales team. Hire somebody with existing relationships in your industry, so they can open up their address book and land 1-3 clients right out of the gate.

My partner account execs are constantly telling me to focus on a niche. I work with a specific SAAS product that's a bit higher-priced. So that naturally brings me clients with some semblance of a budget. But they recommend even more specialization, such as "growth clients in the fintech space with A round funding". That's tough for me, since I'm a generalist and like to work everywhere.

Lastly, remember that it's ok to be small. If you don't have a huge team, you can pick and choose projects to ensure maximum success and minimal stress. People always ask me "what's your growth plan", and are surprised when I tell them that I don't plan to grow this year.

Good luck!

[sheepdog]

In your case, a great partner might be a handful of VC firms?

[swagency]

agree, I'll need to cultivate relationships into those networks.