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Failure Plan

Here's my dilemma: after 8 years inside the Fortune 500 bureacracy, first as a programmer, then as a project manager and middle manager, I left 3 years ago to start my own ISV.

Our main product is fills a specific niche in the financial services community.

It's tops in its class, and gets rave reviews when compared to competitors.

We have it up and running in prod, and we make enough money in revenues to cover our (modest, as we're still in startup mode, essentially) expenses.

My two problems are:

(1) The market niche is not large enough -- there are fewer than 500 firms who could use this kind of service

(2) Inertia is difficult to overcome -- the product offering by the leader in this space pales in comparison to ours, but they are a trusted name, and sticking with them is the safe option for career bureaucrats and middle managers at the prospective client companies we're targeting

For the last 9 months, I'd been confident that we could gradually chip away at that market shares, but despite our best efforts, we've simply not been able to add new clients recently.

So I've been thinking about my "Failure Plan", as Eric Sink would say.

What would my options be if I were to wind this down and look for other opportunities?

I'm 34, a grad of an Ivy League school in engineering, and in addition to the 3 years of startup experience, have 8 years working in IT for blue-chip financial firms.

Looking at some of the other posts here about the jobs situation (one guy wants to work for McDonalds!), I wonder about what's really out there.

Any suggestions?

google wanna-be but never was
Thursday, July 29, 2004

Approach this leader?

i like i
Thursday, July 29, 2004

I would think a 34 year old developer, with development and project manager expertise, who had started a business that broke even, would have LOTS of opportunity in the current job market.

Software companies are always looking for PM's (they tend to blame them for failures, fire them, get a new one, and keep trucking -- so it can be a dangerous position unless you REALLY know what you are doing.  It sounds like you do.).  Companies want successful entrepeneurs that can 'leaven' their in-house efforts.

Read any non-disclosure/non-compete agreements carefully though.  With your own product, you are in a good position, but you want to keep ownership of your product.

AllanL5
Thursday, July 29, 2004


Do you have methods of importing their data into your system?

If you can demonstrate that the conversion costs are relatively small and all of the functionality is there and intuitive, then you need to get at some of the actual decision makers.

*OR* give it away to a medium-sized client who has some clout with the condition that they try it for XX days and then let you know what they think of it and if they convert over, you can use their name as a customer.

Drug dealers give the first hit for cheap(er) to get people hooked, why can't we?

KC
Thursday, July 29, 2004

I sysmpathize with the original poster.  A few years ago I developed a program that was used by thousands of Fortune 500 companies but waas never able to really make any money.

M. Night Shammalamma
Thursday, July 29, 2004

Thousands of Fortune 500 companies?

Anon
Thursday, July 29, 2004

This might sound really stupid, but double the price of your software.  Dont underestimate how some people think that more expensive is always better.

Anonymous Coward
Thursday, July 29, 2004

I second the double your price. Also add in expensive support packages and costs that tie you and the buyer together over the long term. Possibly look into getting a big name consulting group to support your software for you or for them to 'sell' it.

In the end maybe look into selling the product to the competitor. If you have the ability to convert their users to the new system they could see it as a complete next version.

Jeff
Thursday, July 29, 2004

Jeff has some solid advice. Don't price it competitively with your competitor, if it's a superior product, price it as such. Give it away to consulting firms that deal with financials, with the understanding that their clients will buy a licence for anything they develop.

The problem with large companies is that once a product type is stable, they lock in on a particular vendor & don't deviate from that choice. Ever. Oracle, Sun, Compaq, Microsoft. It's impossible to make inroads in to these companies once they've done this. Everyone follows corporate edict. I should know. I also worked for a Fortune 500 financial. ;)

www.MarkTAW.com
Thursday, July 29, 2004

They also tend to do research on the company in question, and if there's any doubt as to whether they'll be around in 5 years, they simply won't deal with that vendor.

www.MarkTAW.com
Thursday, July 29, 2004

Don't give up, 2-3 years to break even is normal for most businesses - it seems like you feel you have hit a sales wall.  Either your product is not as good as you say it is or you are not selling it effectively.

Get a 3rd party to honestly critique your sales presentation - many customers are too polite to tell you where you have gone wrong.

If you have a better product then you must convey this information and overcome any other reservations they may have.

If other Fortune 500 companies are using your product then the excuse "we want to play safe and stay with our existing prodcut" is BS, what they are realling saying is that you have not convinced them to make the switch.

If you are saving them money by improving efficiencies or whatever, they can never justify saying no to you unless they think there is a serious flaw in your product - find out whats holding them back and your problem is solved...

Chris Peacock
Thursday, July 29, 2004

"many customers are too polite to tell you where you have gone wrong"

I've never been accused of that. I once told a guy he was wearing the wrong suit to sell to our company.

"If other Fortune 500 companies are using your product then the excuse "we want to play safe and stay with our existing prodcut" is BS, what they are realling saying is that you have not convinced them to make the switch."

Wow, that's a sales presentation I would NEVER go for. I don't give a crap what Berkshire Hathaway or Wal Mart uses, we use XYZ here.

"If you are saving them money by improving efficiencies or whatever, they can never justify saying no to you unless they think there is a serious flaw in your product - find out whats holding them back and your problem is solved... "

Unless they lose money when your company goes under & they're stuck with an unsupported product.

www.MarkTAW.com
Thursday, July 29, 2004

Is there a number 2 in the industry that could buy you out? Does number 1 in the industry have a rival that might link up with you?

In my experiance the smaller, better, hungrier company can feed of the crumbs of the larger, established competitor for a while, but it's tough. However, if the buy guy stumbles and leaves you an oppotunity you can make huge strides.

MilesArcher
Thursday, July 29, 2004

MarkTaw

"I've never been accused of that. I once told a guy he was wearing the wrong suit to sell to our company."

Didn't I see you in Office Space?

Chris Peacock
Thursday, July 29, 2004

lol. I meant it in a friendly way. I didn't have the buying power anyway, so i figured I'd warn him before he made his presentation to the boys upstairs.

www.MarkTAW.com
Thursday, July 29, 2004

Thanks to everyone who replied.

I was interested to see that except for Allan, everyone said, essentially, "stick with what you're doing now", so is that a tacit way of saying "the job market is terrible" ?

Partnering with other firms is a good idea in theory, but doesn't work in practice b/c I have no leverage with direct competitors (they're already winning the battle, so there's no reason to have anything to do with me, unless I can convince their major clients to switch to me), and non-competitors won't take me seriously without millions in revenues.

Trials at clients are good ideas, but one quirk about our service is that we need clients' proprietary trade data.  That data has to come from the client's order management system (OMS), and therein lies the problem.

There are hundreds of OMSs out there; some firms wrote their own, others use vendor systems like Charles River, eze castle,  etc.

Despite ISO and FIX protocol efforts, there is no standard for this data.  Each prospect has its own data format.  Even worse, and more relevant to the sales process, the guys in the firm who would want our service are usually not in technology, and have no idea how to get this data.

One prospect actually told me "Getting something like that from IT will take months".

I had a vision of making our service like Salesforce.com: i.e. people could try a demo on our webiste, and if they liked it, could signup for a subscription.  The OMS trade data issue, though, means we'll get a lot of responses like the prospect above: "looks good, but I don't know how to get that data to you, and IT isn't helpful."

A creative solution to the OMS data issue could open the floodgates (in a good way), so if that's preferable than winding down the company and going back out there, then that's what I'll focus on in the short term.

google wanna-be but never was
Thursday, July 29, 2004

> "I was interested to see that except for Allan, everyone said, essentially, "stick with what you're doing now", so is that a tacit way of saying 'the job market is terrible'?"

No the job market for someone with your obvious skills and background isn't terrible.  The truth is that many of us are working stiffs living vicariously through people like you.  We wish we had your problem(s).  It's almost unbearable to think that you'd want to go back to the corporate grind.  It's probably just a case of "the grass is greener on the other side," but I concur, you should try to make things work unless you're completely burned-out.

Ewan's Dad
Thursday, July 29, 2004

Drop me an email -- I might be able to help.

Bill T.
Thursday, July 29, 2004

better sales people (they cost and they aren't nice people) and as many case studies as possible

Zealot
Thursday, July 29, 2004

"Trials at clients are good ideas, but one quirk about our service is that we need clients' proprietary trade data.  That data has to come from the client's order management system (OMS), and therein lies the problem."

Does the OMS have some kind of text export?  Alternatively, can you pull the needed info from the portfolio accounting software (which is more likely to have an export function)?

If so, create a simple, flexible system to import from the text file (Example, Excel.  OTOH, I've seen middleware that has telephone book size manuals).  This may not be a permanent solution, but can demo the product with the client's data during the sales process and installation.

Mike

bankstrong
Thursday, July 29, 2004

I would rather suggest to look at it this way...

If you were the senior manager at a company where you would like to sell your product. You could be convinced about the ROI, but what would stop you from making the switch over would be the inherent fear "what if this fails"
You would loose all data for the period for which the software was installed.

You should make a switch out easy(atleast give them the notion). You should highlight this in your sales pitch. That way the managers would feel that they have nothing to loose.

Ask them to use the product for three months and if they are not tremendously happy(as Joel says) with the product,  they get a full refund plus the data in the database  in whatever format they require.

This should convince the managers that your product is for real!!!

Product Manager!!!
Friday, July 30, 2004

As well as making it possible for people to migrate *to* your product, you have to make it easy for people to migrate *from* your product.  Joel has made this point before in some article, and it rings true.

People will feel less worried trying your product when you aren't locking them in.  You make it a low-risk proposition.

i like i
Friday, July 30, 2004

Why not simply ask your potential clients "What do I have to do to make you switch?".

Seriously! Just ask those clients to be reasonable. You won't get answers like "Yeah make your product better than the competition and give it to me for free - including support".

Start like "We are really wondering. Our product gets great reviews, our customers love it, etc. We really think we have the best product/support/etc. for you but we are not able to make you switch. What keeps you from doing so?" Offer them some benefits for taking their time to answer your question.

If you do it right, you will get the most accurate feedback you could wish for.

Good luck!
Stefan

Stefan
Friday, July 30, 2004

I agree with Stefan.

Ask direct questions. People seem too scared to do this.

Mike G
Friday, July 30, 2004

"Wow, that's a sales presentation I would NEVER go for. I don't give a crap what Berkshire Hathaway or Wal Mart uses, we use XYZ here."

Maybe *you* don't care what other companies use, but 90% of the PHBs do.  Management by copycat.  That's why the dotcom frenzy happened, and that's why they are jumping on the offshore bandwagon.  The copycat phenomenon also explains the 200 different "reality TV" series going on now and every restaurant or food producer hyping something "low carb".

T. Norman
Friday, July 30, 2004

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