How the Company-Startup Thing Worked Out For Me, Year 3

It’s time for my annual update on the wild ride. A brief recap of what’s happened so far:

• April 2011 – started the company.
• April 2012 – year one finished, but I didn’t blog about it right away. I wanted to get it into the rear view mirror for perspective before blogging.
• April 2013 – year two finished, so I blogged about year one.
• April 2014 – year three finished, so I blogged about year two.
• April 2015 – year four just finished, so I’m blogging about year three – April 2013 to April 2014.

When last we met

As we finished up year 2, we started hitting our stride. Our new site made consulting sales much easier, we’d focused on a single consulting product, and we’d run our first training class.

In year 3, we wanted to focus on growing our in-person training class business. We’d decided to amp up to two class agendas held in three different cities, growing from 3 class-days total up to 15 class-days. That was a huge jump, and we had no idea if we’d be able to fill the seats.

We’d also planned on hiring one consultant per year, so we were already on the lookout for America’s Next Top Consultant.

So how’d it go? Well, aside from breaking my arm while carrying a monitor?

To make long term investments, I had to change my own consulting.

The way we set up the company, I didn’t take a salary – I just got a percentage of the income that I produced. If I billed $10k worth of revenue, I got a cut of that. (That isn’t how we treat employees, just to be clear.)

Therefore, if I was gonna do unpaid work to build out a future training income, one or more of these things had to happen:

• Cut personal expenses to match the income drop (think like 50% or more)
• Pay personal expenses by depleting my savings account
• Work longer hours (like do the unpaid work on evenings and weekends)
• Focus on higher-value engagements (so I’d make the same money in less time)

Any of these answers are legit, but I went for the last one. I focused on doing high-value work like onsite training. In-person training is one of my biggest strengths – I enjoy it, and I seem to do a pretty good job of it – so I was able to charge a premium for that.

I still made time for blogging.

I published a lot of stuff that I’m proud of from that year, but two posts stand out:

SQL Server 2014 Standard Edition Sucks, and It’s All Your Fault – sometimes, you just gotta step out in the limelight and say the obvious in blunt language. I got a lot of off-the-record talks from Microsoft folks who thought I’d lose my MVP status for sure, and I even got attacked publicly with gems like “My only hope is that … you end up losing that income that supplies you with your fancy toys and vacations.” As it turned out, the memory limit for Standard Edition was raised, and I heard from more than a handful of Microsoft employees that the change was driven by my blog post. Awww yeah.

Did Microsoft Stop Releasing SQL Server Service Packs? – no, but maybe they should have.

I don’t regret those posts – they were popular, and I think they achieved the objectives I’d set out to accomplish – but then as year four started, things took a serious turn for the negative. More on that next year.

I had to let go of some clients.

The downside is that I had to let go of some long-term customers who’d been working with me for a couple of years. Thanks to the advice in a couple of consulting books, I was able to have good, fair conversations with them that basically went like this:

• Client: “We’d like to bring you in for another project.”
• Me: “Great! This year my rates have changed from $X per hour to $Y per day, and I’m only booking in whole-day increments from here on out.”
• Client: “Uhhh, we only really want to spend about $2,000 on this project.”
• Me: “Totally understood. I’m not a good fit then, and I’ll refer you to a couple of other consultants who would be very interested in the work.”
• Client: “But we want to work with you.”
• Me: “That’s awesome! I’m glad to hear it. I’m not going to ask for specifics, but have you gotten a raise since 2010?”
• Client: “I see what you did there.”
• Me: “And I bet your job description has changed over the years, too? You’re probably tackling bigger and tougher job duties?”
• Client: “Damn, you are some kind of wizard.”

No, I didn’t win those clients over – and I didn’t expect to. They wanted to hire 2010 Brent, and I’m not 2010 Brent anymore. It was kinda tough because they were fun clients doing cool things with SQL Server, but looking at my task list, my personal budget, my family commitments, and my goals, I just couldn’t keep my $150/hour, a-couple-hour-per-week clients.

And it sounds odd to say we had to let go of clients when at the same time…

We expanded the consulting by hiring Doug Lane.

Kendra announced our open position in the form of a Missed Connection: Employer Seeks Employee ad, and we had another killer turnout with dozens and dozens of really, really good responses. I know a lot of companies struggle to hire great SQL Server talent, but the combination of telecommuting and great benefits really opens up a company’s choices. Again this year, I wish we could have hired more than one person.

We hired @TheDougLane, a SQL Server professional in the Denver area who happened to have a passion for filmmaking. Before we hired Doug, I remember sitting in the very back row of his absolutely packed PASS Summit session about tuning SSRS. At one point, he got an audience question, and he prefixed the answer by saying, “Well, I know Brent Ozar is in the audience, and he isn’t going to like my answer, but I’m going to say it anyway.” First off, I don’t know how he even noticed I was in the room (it was a really big room), but I was so impressed with his answer AND his explanation of my viewpoint as well. (Not to mention how he handled a demo problem too.)

Even though we hired a new consultant, I still had to let go of my past clients because we wanted Doug to exclusively focus on our SQL Critical Care® process.

We focused the consulting big time.

At this point of our company history, the process had gotten decently refined, and it was selling really well with clients. We kept experimenting with slightly different ways of selling it (2/3/4 days, with videos or without, with labs or without) but the core product was pretty stable. We were proud of it.

I’m a huge believer in two Steve Jobs quotes: focus is about saying no, and get rid of the crappy stuff.

We had one awesome product – SQL Critical Care® – and we needed to build an awesome training product. To clear out enough time, we decided to let go of our not-so-awesome products, so we stopped offering Amazon cloud migrations, Hadoop projects, SAN design & implementation, and VMware implementations. We also steered clear of the remote DBA business – I still think there’s room for an attractive product there, but I haven’t seen a successful implementation where the customer, the remote DBA firm owner, and the remote DBA employees are all wildly happy. Yet.

We designed our training offerings.

We’d been invited to sell our training through a few companies, but we wanted to control our own distribution platform. We envisioned some long-term benefits:

• Our own look/feel – we’re huge believers in having our faces and gestures built into our training videos
• Quality guarantees – our training wouldn’t be sitting next to something questionable
• Bundling with client services – when companies hire us, we could give them customized video training as part of their consulting
• Bundling with training classes – when learners sign up for our in-person classes, we could give them video prerequisite homework, plus extra resources for continued learning after the class finished
• Easier deep linking – in an email to a client or attendee, we could link directly to a module in their training course
• Sales price control – we could run Black Friday sales, new-class launches, and secret sales
• Single e-commerce platform – so we could sell in-person training classes, one-on-one mentoring, or even consulting followups through it

However, there’s a big drawback to running your own online training delivery system: you actually have to pick it and run it. We had to make decisions about what features we wanted and what vendor could best deliver those features. We spent weeks researching, and settled on one. It wasn’t perfect, and it wasn’t cheap – we spent something like $50k USD on it the first year – but it had powerful features that justified the cost.

When it came time to launch our training, we looked at the market and saw:

• $50 – in-depth books that take weeks or months to absorb
• $500 – one-day pre-conference sessions, or one year’s worth of access to videos
• $2,000 – one-week classes with non-expert instructors reading from a book
• $4,000 – one-week classes with hands-on experts

We launched with two tiers of videos:

$29 for ~90 minutes of video. We weren’t really aiming at books per se, but aiming to hit an underserved $10-$100 market. If you wanted focused relief for one specific SQL Server pain, and you wanted it fast, the $29 market seemed like a tempting price point. There just wasn’t anything else in this market.

$299 for 6 hours of in-depth video. These focused on a tougher pain point that takes longer to solve, like learning to manage SQL Server indexes. You got 18 months of access to the video, so you could continue to revisit it over time without worrying about a credit card charge every month.

Altogether, our training tiers were:

• Free – blog posts, webcasts, YouTube
• $30 – videos
• $300 – videos
• $3,000 – classes

Implementing the store, recording videos, building training material for in-person classes – it was all a ton of work. Unpaid work, initially – a build-it-and-they-will-come gamble.

The training gamble paid off.

In June 2013, we launched our online training video system and the passive income started up. The awesome thing about passive income is that it just comes in – it pays your bills while you focus on building more passive income sources, and it becomes a snowball that just propels your business forward.

In November 2013, we held our first Black Friday Sale just because we could – one of the fun benefits of running your own training sales platform. We learned that people love discount sales.

In February 2014, we held our first expanded one-week training classes in San Diego, and they were successfully profitable. Not wildly profitable – if you look at the unpaid work to integrate the e-commerce platform, market the classes, and build the training material, we probably only made minimum wage, hahaha – but most of that work was a one-time investment that we could repeatedly reuse over 2014.

As year 3 came to a close in April 2014, and we prepped for our nearly-sold-out (~40 students) training classes in Chicago in May, we were really sold on the whole training & passive income thing.

What I (not we) screwed up in year three

At the end of year two, I’d reviewed my year and realized I’d done too much travel and not balanced work/life time appropriately. I think I fixed that pretty well in year three. I had some great times with my friends and family, spent less time on the road, and unlocked levels 3 and 4 on my Epic Life Quest. However, while work/life was balanced, I didn’t do a good job of allocating my work time to the right tasks.

In years 1-3, I should have tracked and categorized my time so that I could recognize trends. As we built the company, I didn’t notice that some unpaid admin duties had crept up to being nearly full-time jobs. In October 2013, we hired Erika (my now-wife) part time as our admin assistant, and that certainly helped offload work, but there were still a large number of duties that each of us partners held on to.

I failed to recognize that the sales duties of keeping 4-5 consultants busy had become a significant job in and of itself, and I should have recommended that we hire a salesperson earlier. Jeremiah and Kendra were totally interested in hiring a salesperson, but I thought we didn’t need it because I really enjoyed the sales work. (It was really order-taking more than sales at that point, so it was fun.) Whether or not I enjoyed it shouldn’t have mattered – I should have recognized the amount of time it was taking, and that it wasn’t the right use of my time.

Was year three successful?

When Jeremiah, Kendra, and I first laid out our manifesto for the company, my own high-level goals looked like:

• 0-1 year – consult 16-32 hours per week – which might sound like I was being lazy, but the reality of a small business is that you have a lot of unpaid work to get the business moving down the runway.
• 1-3 years – consult 16-24 hours per week – a dropped ceiling from 32 to 24 due to the admin overhead of a growing business, and wanting to do less paid work and more R&D/presenting/training-writing.
• 4-6 years – hire people to offload the non-technical work – maybe a business manager, salesperson, and/or accountant so we can stay focused on the technical stuff we love.

And yowza, we were actually on track! That’s kinda awesome.