Weathering the Drought by Jack Krupansky Dealing With Tough Times First you develop a product, then you tell everyone it's ready, and finally you cart your income off to the bank. Ideally. But what do you do after you've advertised the product for six months and response is far below expectations. You've got a good solid product, but people just aren't buying it. You're stuck out in the middle of a marketing desert with no "quick fix" in sight. Parched. Depressed. Tired. Desperate. You watch the jet planes of mediocre products go streaking across the sky as you walk on alone. Being an entrepreneur is not about easy success. I don't think you're a real entrepreneur unless you're ready to take on a lot of hardship on the path to maybe only limited success. Endless months of midnight product development may seem the hardest part and marketing may look like a tedious and mindless but predictable process. The reality is that weathering the drought between the first day the product is on the market till product sales come up to speed is going to be your worst nightmare. There are some predictable phases to that nightmare. You start with wild euphoria that the product will be an overnight success. Then you realize you need to be more realistic and you cut your expectations and develop a "realistic plan." Then you cut them again and again. Then you move on to having no expectations so that any sales are great and no sales is par for the course. That works for a while, but gets real old real fast. You want more and you want it now. There must be a quick fix. What is it? You try some quick fixes and maybe you get some results. But still not the results you really need or want. And the responses to the fixes taper off real fast. You'll try anything, but there doesn't seem to be anything worth trying. You think of giving up. Or maybe hiring a marketing consultant to tell you what you're doing wrong. You have doubts about the product. Maybe it needs more features. Maybe it's priced too high. Maybe you need to spend lots more money on advertising. Maybe you're not doing enough promotion. Maybe you misjudged the market. Maybe your target customers are just simply too stupid to see the value of your brilliant product. Maybe the Internet is the answer. Lots of maybes. But what should you do? For your first product, the only things you can do are extrapolate from the experience of others (e.g., read this magazine or talk to friends) or just guess your way across the desert. I made a lot of stupid mistakes on my first product which I hope to avoid this time around. Just pretend that your first product is really a training course entitled "Entrepreneurial Marketing 101 - Worst Case Scenarios." Business Model You need to do some serious thinking about your business model. The model attempts to show how levels of sales translate into levels of profit (your profit margin.) It should tell you where your break-even point is. It should also indicate your "reserve" financial resources so you know how long you can survive if sales don't materialize as expected (or at all.) The model should also have some sort of "end game" that indicates whether you want to continue the business for the rest of your life or whether you intend to sell out. A lot of businesses just end up "petering out." Is this a stand-alone product-based business that pays all expenses, your salary, and throws off a handsome return on your sweat equity? If so, you need quite a blockbuster of a product. Kind of like Borland's first Pascal product that paid for the first ad before the bill for the ad even arrived. And you need to plan for successor products as your product's market matures. Or is your product little more than a hobby designed to give you a little extra pocket money and lots of emotional satisfaction? If so, make sure you have a stable job or consulting projects to pay the bills. And avoid any expensive advertising. Or are you really just interested in catching the eye of one of the big guys and selling out or licensing your technology to them? If so, concentrate on a solid product with lots of built- in flexibility so it can be adapted to a variety of purposes. Maybe you're like me and really only know that you want to be independent and don't really know what model will ultimately get you there. My approach is a hybrid of trying to develop a small but loyal customer base that provides "some" income and offers evidence to larger businesses that I have a business or technology that they may want to acquire. The point of all this is how to interpret early success/failure of your new product. For a stand-alone business with limited reserves, it's all or nothing. If you've got substantial reserves or a "day job" then you can try waiting it out. A key part of my model for my second product is to keep an eye out for situations where I can adapt the underlying technology of my product for customers who need something similar but not quite exactly the product that I offer. For example, one customer already has an embedded scripting language but wants to replace it with something better. They have language compatibility issues, performance issues, a different operating system, etc. Next week we're supposed to talk some more about our next step. They're excited, but I know all too well how quickly euphoria can evaporate when it runs into real world obstacles. Sales Forecasting Technically, you really do want to have a plan for how many sales you expect in the next period of time. Practically, this is a waste of time. The important thing is to have three plans: 1) what you'll do if things turn out as you "expect", 2) what you'll do if sales are way under expectations, and 3) what you'll do if the phone starts ringing off the hook. Plan for the unexpected. Promotion A proper product introduction includes sending/faxing press releases, contacting key editors to get the product reviewed, trade shows, and a lot of other standard techniques. But for all the effort I expended on my first product, I think a focused, low-cost initial advertising campaign gives the biggest return. That may not be true for many other types of products, but for software development tools you can count on the fact that programmers like to read informative ads that tell them what they want to know. Quotes from reviews are nice, but they don't carry as much weight as showing the reader how you can solve their problems. On your first product it's easy to take a shotgun approach and advertise in lots of different magazines, attend lots of different trade shows, get lots of reviews, etc. Each of these activities takes some amount of your money and, more importantly, your time. I made a conscious effort with my new product to let it promote itself from its initial low-cost ad. That lets me test the waters with minimal risk. It let me discover flaws and weaknesses in the product. It gives me time to make the product more robust and more flexible. When I'm ready for the second major release I'll then do wider promotion with a higher probability that the product will have greater appeal. When your primary strength is technical (as opposed to marketing) then it makes sense to focus on letting the technology sell itself. If that approach was good enough to get Borland started, it might just still be good enough for me. Advertising My first product taught me that my first instincts are usually correct. I started advertising in one magazine and expanded to others when I was not satisfied with the response. I continued expanding into other magazines in search of the ideal magazine. Ultimately, most of my sales came from the first magazine anyway. It was just a question of delayed response, letting readers see the message a number of times, enhancing the message, and responding to concerns raised by ad respondents. Writing an article for the magazine also helped sales immensely. So this time around I kept my focus on only that one magazine. When sales were less than expected I just dropped out for a couple of months. As sales kept coming in due to delayed response (programmers and managers read the magazine many months after it comes out) I decided I could afford to continue advertising. I also took the time to slightly redo the ad to reflect input from readers. My big concern at this point is whether sales will continue at some predictable or growing rate or whether I'm just about to saturate my niche market. If I knew they were going to expand for awhile and that the potential market was really large, then I would make the jump to a larger publication that covers the same general market. But I could end up spending a lot more money and get only somewhat more sales. For now I'll wait and see how the business develops from the smaller publication. Besides, from my first product I know that the smaller publication yielded more sales over the long term. Probably due to its focus on a tighter niche. Free Demos One "mistake" that I re-made with my second product is that I still don't have a "free" demo of the product. It's not so much that I made the mistake, but that I still haven't figured out or decided how to do it "best." In fact, I really do think I made the right decision and finessed the problem by having a low-cost developer's kit separate from the distribution license. I think only a fraction of all "demo disk" requesters actually end up buying, so you really do need to have a large volume of ad respondents to yield a significant level of sales. If a caller is uncomfortable investing $129 of his money for an evaluation effort that will involve hundreds of dollars of his time (2-10 hours at $50 is $100-$500), then why should I be interested. Besides, I end up doing a "free" mini-evaluation for them on the phone by asking questions that quickly determine whether there is a product-need match. I am still very interested in a "hands-off" demo approach where the prospect simply downloads from CompuServe or the Internet. With a "web" page I can simultaneously gather information about the requester and give them access to detailed product information and a "demo" without the expense of my time. I figure it would cost me $25 to deal with a phone request for a demo (assuming we talk for ten minutes.) That cost also includes me making a follow-up call. If I didn't try so hard to satisfy their information request on the phone then maybe it would only cost me $15. And if my volume was greater and I directly entered their information into a database that spit out the label on a label printer it might cost only $5. My primary concern about the on-line demo is that my product is about 1MB and that really is too much to download unless you really know you really want it. Maybe next year when CompuServe and lots of users have 28.8Kb modems I'll reconsider. Set Your Own Pace Like a trek across a desert, you need to find an optimal pace that is not so fast that you burn out and not so slow that you die of thirst. More advertising and greater promotion can increase sales, but maybe to the point that you need to build too large an organization to manage that level of sales. Once you build up a larger "sales machine" you become a slave to it and must put more into maintaining that machine. A smaller machine is more manageable. It's all a matter of what you feel comfortable with. Maybe the raw excitement of a larger machine might give you a greater incentive. In my case, I still have a lot of debt from past years to pay off. Being self-employed, I was not setting aside all of my tax obligations and retirement plan contributions and ended up short on April 15th. Not to mention that I hadn't been building up much of a "reserve" savings account. All of this is now a higher priority for me for now. I need the dependability of my consulting income to pull this off. Once I become debt-free and have a one-year reserve I'll reconsider my options. For now I'm comfortable with a modest, fairly slow product marketing effort. That has the side effect that I can concentrate a lot more effort on product quality issues. Consulting for Income Consulting can be a business of its own. For me its just a source of funding for my desired goal of running a product-based business. It's tempting to say that if you just put 100% of your attention on your primary goal you will have a higher probability of success than if you split yourself between competing goals. If you have a product idea that's "guaranteed" to take off like a rocket then go ahead and try it. But for the rest of us it makes more sense to ease into success and slowly shed our dependency on other forms of income. In fact, even rocket-like products can quickly come crashing back to earth, so it makes a lot of sense to maintain at least a background level of consulting that you can fall back on when times get rough. While I'm anxious to rapidly ramp up the level of effort I put into marketing products, I'm just as anxious to assure that my consulting base doesn't get neglected. I have been doing work for my current primary client for almost four years and have decided that I need to prepare for branching out. There are several low-probability opportunities and one high probability client. Even with my current client, I could use a little extra income. Optimizing the Equation Product marketing can be thought of as a big equation with lots of variables. Some variables relate to expenses, some to income, and some to sense of well-being and quality of life. Some reflect short term concerns and some concern long-term success. The goal is to continually optimize the values of the variables (i.e., adjust your position on the n-dimensional "curve") so the result is zero. You tweak one variable slightly and suddenly the result goes way negative. You increase another variable greatly and the result hardly budges. Then one day you inadvertently adjust some seemingly irrelevant parameter and suddenly for at least one magical moment it all balances out. You're not really sure exactly why it works (don't tell anyone that) but it does. A business is less like a well-oiled machine and more like a stubborn but energetic pack animal that seems to have a mind of its own when presented with "obviously good" inputs. Managing the "beast" is quite a challenge since you really only have a vague idea how various inputs produce desired outputs. One of the hard parts of the equation is that it factors in time delays and some sort of sense of expectations and the value of making investments that don't have an immediate impact. I have no idea what the equation for my business really looks like, but I suspect that it looks rather like one of Charles' fractal renderings and I feel like a little ant climbing over one of the mountain peaks. Or maybe its a little like surfing a tidal wave. Information Good decisions are a combination of good judgment and good information. Information is your lifeblood in any marketing effort. The market floods you with information. Even when you get no response, that's information. Enhance your information flow and you can make better decisions. If leads don't turn into sales, call them up and ask what happened. Sometimes the very fact that you bothered to call can turn a dead lead into a sale. Or maybe product deficiencies are a problem. Don't sit at your computer and "guess" what's wrong, ask your leads. Don't forget about your customers. Although a sale flows to the bottom line of the business, the information you get from a happy customer can be worth much more than the few dollars you pocketed from the sale. Find out what customers like most about the product. Then you can focus more attention on the product features that make sales happen. Information from the marketplace is worth just as much if not more than any great ideas floating around in your head. Anxiety As if it weren't enough to have all this real work to do, the real killer is anxiety. Constant worrying about whether you're doing the right thing. Occasionally feeling that its all hopeless and will never work. Trying to decide whether you really should give it up. Wondering whether you're forgetting something really big. Worrying whether you're worrying too much. Sigh. All of your anxieties are worth paying attention too, but not too much. It all just comes with the turf. Welcome to the land of the entrepreneur. Ultimately, your sense of realism and commitment to succeed with win out. But in the mean time just try not to panic too much. When faced with anxiety about whether to make a change, frequently the best thing to do is nothing at all. It usually is better than excessive tinkering. If you really are good at spotting potential trouble spots, just focus on a combination of early diagnosis coupled with careful monitoring. Give trouble a chance to go away on its own. If after a reasonable period of time it really looks like you have a real problem, then you can take action. A lot of apparent problems are really non-problems in the long-term when you look at optimizing the overall success of your business. You might be able to focus your attention on a problem and enhance your business, but you might be able to focus the same energy on a bigger opportunity that gives far greater returns that the little problem that you fixed. Conclusions Invest your marketing dollars in a time machine, go ahead to where your first product becomes successful (or fails), and then go back and adjust your plans accordingly. If you can't swing that, just go ahead and do a first product, make all sorts of mistakes, and then move on to your second product as quickly as possible. In fact, the more mistakes you make on your first product, the easier it will be to make decisions for the second product. Unless you're stupid enough to decide to go off into an entirely different market or technology. The only real, substantial advice I can give for dealing with the lean times before your product takes off is to hang in there and keep your eyes open. The market tells you what to do. You just have to avoid blinking at the wrong time. Oh, and don't forget to write an article on your experiences for Midnight Engineering. Jack Krupansky runs a one person software business, Base Technology, which develops and markets the Liana object-oriented programming language and C-odeScript callable scripting language interpreter and offers Windows software development consulting. He may be reached at 800-786-9505, e-mail at jack@basetechnology.com, or on the web at http://www.basetechnology.com.