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Lessons Learnt: One Year Running Our Own Business

Captain's log, stardate d195.y36/AB

Time flies. We have been so busy this year, that we have barely had time to look back to all the things we have accomplished thus far. Actually, it’s been a year and a month since we legally founded MarsBased.

One of the companies we look up to is Dockyard. They run a very inspirational blog, where they publish their experiences. This is a small homage to them and to this post, where they described the difficulties they faced during the first six months running a consultancy.

Here’s what we have learnt in this first year of operating full-time as service providers.

Keep Calm And Trust MarsBased Keep Calm and Trust the Martians

Market share

One of the first fears we had when we created the company was that there would be no demand for customized web apps in Ruby on Rails. Ruby does not have a big market share in Spain, so we had to create it.

The truth is, we have been overwhelmed by the incessant demand of Ruby development. Apparently, there’s not enough developers, nor specialized companies. We've also done a lot of technology-agnostic projects where we chose the tech stack. That means we have contributed to increasing the number of clients using Rails. You’re welcome!

Lesson learnt: Identify the companies you want to work for and contact them or ask for an introduction. Most of them will want to hear your story. 

To keep this section short, we will publish a dedicated post about each project we have completed throughout the year.

Clients

Clients are the essence of all consulting businesses. The difference between a successful company and a failed one often times boils down to choosing your clients right.

A good client can be your best asset: they talk about you, recommend you to other potential clients, give you more projects, promote your stuff, and offer better conditions over time. Actually, a happy client rarely ever changes providers.

Conversely, a bad customer can bring your business down. People that force you to work without a contract, on abusive conditions or not paying customers pose a real threat to your company.

Once you have defined your business model, and your company culture, you should also define what kind of clients do you want to have and stick to them.

Accepting bad conditions now might seem a good idea if there are complicated months ahead for finding new contracts — such as summer, or Christmas time -, but it’ll prevent you from potentially finding a better client a little later in time (this is the so-called Opportunity cost).

Lesson learnt: Before committing to any contract, find out what the opportunity cost is.

Price

The most important advice we can give here is: do not undervalue yourself. Not only because you will lose the opportunity cost (see above), but also because you are what you repeatedly do. That is, if your hourly rate is 70 euro, but you always offer friendly prices and end up working for 30 euro/hour, then you are a 30 euro/hour company.

If your strategy is competing with price, skip this section: we’re not a good example. But if you compete with quality, your high rates are more justified. Specialized companies/individuals charge more per hour.

We, for one, started off at 50 euro/hour, which is actually cheap for a specialized company, but we wanted to build our portfolio. The market welcomed us with open arms with that price.

This year we have raised our fee. We need to filter out the number of opportunities we get each month and we have a larger team now. Strange as it might seem, our ideal clients might not want to hire us if they perceive we are “too cheap”.

Lesson learnt: do not start with a lower fee than you’d normally charge. Once you have got a client, it’s not easy to increase your rate.

Company culture

This. Is. Key.

Probably because we look up to companies like Thoughtbot or 37Signals (now Basecamp), we always wanted to define a company culture for MarsBased right from the get-go.

Company culture is one of the things we always review at our board meetings, or while talking to our employees. Most of all, we try to keep the Martian culture as present as possible in our daily grind.

A strong and well-defined company culture will help you take strategic decisions, for instance, when choosing projects or clients "is this client aligned with my vision?" or when hiring "will this person adapt to our company environment?".

Lesson learnt: Defining your company culture should be the first thing you do when creating a business. Then, make it evolve naturally.

Methodologies

One of the best things we have done - and feel more proud of - is having defined our own working methodology.

We have consistently identified workflows we incur in on a daily basis (or frequently enough) and turned them into a working methodology by identifying its bottlenecks and documenting where it was possible.

For instance, our sales process was a bottleneck. Every time we needed to send an offer for a new project, the document had to undergo a revision by the whole team. More often than not, this revision was pushed back for over two weeks, potentially risking losing a customer.

We identified this problem, analyzed it and found some solutions to this blocking issue. After the document is ready, the whole team has two days to do their revision. If no feedback is given, we assume everything’s OK and deliver the document. This way, if somebody needs to actually work on the document, he just needs to ask for some extra time.

Lesson learnt: Find one day a month to step back and revise all your workflows. Identify issues and work on them. Rinse and repeat.

Hiring

One year ago we did not expect to hire anybody before 2014 ended. At best, we could only hope there’d be enough work to sustain the three founding members.

Turns out we had enough work to hire Javi in September, Emilio in December and Xavier in March, while outsourcing an additional 33% of our workload to companies like Evil Martians or Mortensen.

However, hiring is not easy. As a consultancy, you need to focus on delivering results to your clients. There’s little to no time to do HR. We actually wrote a blog post where we spoke about this.

Luckily enough, we have friends and colleagues that have recommended potential employees to us, and everyone we have hired so far turned out to be a really good asset to the company.

Lesson learnt: Hire only people you have worked with in the past or that you know very well. They will work harder to avoid disappointing you, and the risk of them being a flop is therefore minimized.

Delegate wisely

One of the principles we have built our company around is bootstrapping. We did not want to risk a lot of money in this, as it is our first company. So we decided to spend every penny wisely.

This is great at first, when you have enough time to deal with chores, while working on small projects (or even none of them). But as a specialized company, we needed to focus on what we do best: developing apps with Ruby on Rails.

As we started growing, we found out that our workload increased as well. Thus, we began delegating some tasks to external companies. Bookkeeping was the first one, then legal stuff, and now we even delegate part of our development or some of our designs to companies of trust.

Lesson learnt: Always delegate stuff that is not imperative you keep in-house. It might save you time, and time is ultimately money.

Burnout

As first-time entrepreneurs, this is tricky to handle. The founding members entrance to the company was by working part-time on weekends and spare hours until we accumulated enough cash to employ all of us. It was a slow but safe process.

In hindsight, we would probably do it differently now. When half of your company is working full time, and the other half only on weekends and spare hours, working schedules might not overlap. Therefore, the part-timers drag the full-timers to work longer shifts (till late night) or even on weekends, when they’re not supposed to.

Remember, stretching your working shift today will have an impact tomorrow. It’s easier to avoid burnout if you stick to your 40 hours work week.

Lesson learnt: Define a clear roadmap for the incorporations and stick to it. Try to avoid the aforementioned situation by adjusting your schedules accordingly.

Sales

One of the things we have had to learn so far is business development. Since none of us had a full sales background, we decided to have one person dedicated 100% to this area.

Having a full-time member focused on business development is something most early-stage development shops do not have. For us, it has allowed us to build a consistent image on the social networks, a blog, a good ranking on the search engines and a frequent offline presence (organizing Startup Grind Barcelona!), building the Startup Circle community and attending an average of two events per week).

Lesson learnt: Sales are a service company’s fuel. Invest big time in this.

Estimates, guesstimates and project planning

Throughout this first year, we have learnt the cultural difference of working with Spanish clients and clients from outside of Spain.

Spanish clients prefer to work on a closed estimate of time and budget. A rather exhaustive document justifying how long will it take us to complete the project and a guesstimate in price.

The truth is, project plannings change following users’ or investors’ opinions & needs, so this method is only fit for projects with a very clear and fixed scope.

On the other hand, our clients from abroad prefer to work on a more agile way: we fix a price per hour and a number of hours per week and we start working. The project roadmap is built and rearranged every now and then during the length of the project, making it less of a hassle to change a functionality for another that was not in the original planning, thus allowing developers to focus on developing rather than doing estimates.

Lessons learnt: So far, we have learnt to work using both methodologies, but we don’t have a dog in the fight.

What has helped us getting clients

In order of relevance:

What has not helped us getting clients

The following haven't proved 100% useful yet when looking for new clients. Probably because we haven’t devoted enough time to them or because the timing or the execution were not right.

  • Our website.
  • Cold emailing.
  • Posting on LinkedIn groups.
  • Using freelancing platforms (Workana, Elance, Freelancer.com…)

Other small lessons

Here are some other tips we have learnt but do not deserve an own section:

  • Always meet your deadlines. Clients will often not meet theirs, but that does not spare you from doing your homework. Be always ready for unexpected changes and to help your client.
  • Previous experience in consulting and management have proved useful, especially when reporting to clients and managing expectations.
  • Treat your employees responsibly and they will behave responsibly (Basecamp's Jason Fried wrote about this first).
  • Define a minimum budget for projects. You don’t want to waste your client’s time, so tell them what that price is upfront.
  • Clients that don't fit your company might be a right fit for others. Offer them to pass their contact onto companies/freelancers you trust. They will be very grateful for that.

Do you also run a company? Want to share some advice? Do it using the comments section below!

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