business – Page 3 – Brent Ozar

Working ON Your Business vs Working IN Your Business

August 2, 2016

Working IN your business means being a revenue-producing, product-fulfilling member of the team.

Working ON your business means designing, planning, refining your business, but not directly producing revenue.

Independent consultants typically work IN their business.

When you’re a lone independent consultant or contractor, it’s easy to fall into the trap of spending all your time working IN your business. You find one or two good clients, and they’re willing to buy as much of your time as they can get. You work for them long hours, maybe 40-60 hours per week.

Then one of them changes tacks, and doesn’t want your services anymore.

Suddenly your income plummets, and you have to replace them, fast. You scramble, make lots of phone calls, pay a fortune for outbound marketing, and desperately try to bring in a new client – but you don’t have any leads, because you haven’t been working ON your business.

Growing past one consultant usually requires a ton of work ON the business.

Not only do you need to build your inbound sales lead pipeline long before you run out of clients, but you also have to put in a ton of planning to:

Build a process for future employees to follow
Hire the right employees
Manage their product delivery and their personal growth
And worse, scale it fast enough that you can hire a manager to do all this stuff (because technically this isn’t really working ON the business either)

And you’re not getting paid for any of this – it’s all just an investment for the long term. As a solo founder, it’s extremely hard to financially afford to pull this off because you’ve also gotta put bread on the table for your family. You have to work IN the business in order to bring in revenue, work ON the business to get ready for the next level, and take care of your own health and your loved ones.

There are shortcuts: let other people work ON your business.

HALP

If you don’t want to deal with designing a product or managing people, you can hire wildly overqualified, self-managed people to pave the road as they go. However, you’ve gotta make them really happy – they’re building your business for you, and if they’re unhappy, they simply bail and do it on their own.

If you don’t want to deal with bringing in customers, you can attach yourself to a larger company who wants to offload work. There are plenty of smaller consulting firms that just pick up leads that bigger companies don’t want to hassle with, or can’t find the skills to deliver. The Microsoft Partner program is a great example of this – you can make a good living picking up their leftovers. However, you lose some flexibility in setting your rates and picking your perfect customer.

If you don’t want to deal with managing finances, you can hire a business manager who watches your top line, bottom line, and connects the dots. They’ll make sure you have as many profitable customer engagements as possible, and alert you to when you should change tacks. However, if they’re not savvy – or if they’re only driven by by short-term bonuses – they can drain you dry. (The entertainment industry is full of stories about horrible personal managers who bankrupted stars.)

The more things you find yourself outsourcing and offloading to someone else, the more it’s time to think about whether you really want to grow the business – or whether you’d be better off staying small with a lifestyle business rather than aiming for growth.

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Behind the Scenes: Open Sourcing sp-Blitz

June 21, 2016

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Yesterday, we announced that we open-sourced a bunch of our SQL Server tools.

I say “yesterday,” but I’m writing this weeks in advance because a lot of thought and planning went into this. Here, I’m going to give you the behind-the-scenes story as a small business guy.

sp-Blitz and friends were successful.

About five years ago, I launched sp_Blitz onstage at the PASS Summit. I wanted to really blow the attendees’ minds by giving them a tool that would make their lives way easier. It worked – that session was voted #2 of the Summit overall.

That script inspired more scripts: sp_BlitzCache, sp_BlitzIndex, sp_BlitzRS, sp_BlitzTrace, and sp_AskBrent. Each script shared a common goal – let’s automate something difficult and make it beginner-friendly.

By all accounts, they were kick-ass successes. Tens of thousands of people per month downloaded the scripts. I got so many personal thank-yous from DBAs, developers, managers, ISV support engineers, and consultants who said these scripts helped them make a better living.

Along the way, we considered open sourcing them.

We’d always accepted community contributions, and the sp_Blitz changelog shows how folks helped us make it better. To make contributions easier, Jeremiah, Kendra, and I tried moving them to Github.

The first problem we ran into was people distributing old versions. They would upload ’em to Github or their web site, and those old versions were gaining SEO and getting downloaded by people who didn’t know better.

The next problem: consultants and software vendors taking our code, commenting out our names, and then distributing our code as their own. That one really made our blood boil, and we’d be damned if we’d make their jobs easier by open-sourcing it. (This happened twice again last month – it blows me away every time it happens.)

This year, three things made me go for it.

Microsoft embraced open source – no, really embraced, not embrace-extend-extinguish. Call me a sucker, but I believe Microsoft is a different company today than it was several years ago. I believe they’re changing towards an attitude of open-by-default, and I think they’re not just looking for token things to open source – they’re getting creative and pushing for more and more things to be opened up. Not cheap stuff, either, but things that take real money to open source. As a Microsoft community member and a Microsoft MVP, I want to follow that example.

DBAs started to embraced code and devops. I talked to our training class students and clients about what open source would look like, and some of them got really excited. For example, one client uses automated builds up in AWS, and they already fetch certain tools from Github. Putting our own stuff in Github means they can stay up to date faster, and even implement fixes faster.

I’m tired of fighting the inevitable jerks – as long as the tools are open T-SQL scripts, jerks are going to copy them, edit out the copyright, and claim the work as their own. Compiled applications have a better shot at this kind of thing, but stuff like T-SQL and PowerShell have a tough time at it. I’d rather spend my time empowering users.

The PASS speaker contract went sideways – Scott Currie explains the craziness. Right now, we can’t even mention VMware, Hyper-V, ZoomIt, Amazon Web Services, MySQL, or almost anything else onstage. I hope for the community’s sake that PASS Board hears the attendees’ voices (rather than just the sponsors), but for now the only way to talk about community tools is to make them open source and downloadable without giving an email address.

There are still drawbacks and risks: it’s going to mean less traffic on BrentOzar.com, for starters. We’re going to have to build new tools and create new value for the community in order to keep up our inbound marketing efforts.

It also means more work. Yes, open source is harder than keeping your light under a bushel.

The open-source work required wasn’t easy, but it was fun.

Before we could even announce it, we had to:

Pick a license – we went with MIT to be as simple as possible
Clean up our Github repo
Migrate documentation pages from BrentOzar.com to Github (and eventually, we’ll move the syntax stuff over to StackOverflow’s new documentation product
Migrate feature requests and tickets from Uservoice over to Github
Change BrentOzar.com’s download & subscription pages

Now that it’s gone live, if we want this thing to succeed, we have to:

Welcome new developers with friendly language, easy tasks to accomplish, and clear standards
Help coordinate work between developers, testers, and documenters – a big part of these scripts is the more-details URL, and we don’t want to release code that doesn’t explain warnings to DBAs
Rename sp_AskBrent (that name doesn’t seem right for an open source script)
Build a roadmap – which sounds funny, but we’ve been doing reactive development on these for the last couple of years, and it’s time to have a vision so people can help drive it in the right direction (and not turn it into SQL Server Trivial Pursuit Warnings)

It’s already been fun seeing the forks, watching the traffic, and approving our first pull request. (Thanks, Nick Schonning!)

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How the Company-Startup Thing Worked Out For Me, Year 4

April 19, 2016

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

Typical partner meeting in year four, Vegas

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 finished, so I blogged about year three.
April 2016 – year five finished, so I’m blogging about year four – April 2014 to April 2015.

In April 2014, we had two full time employees, a part time admin assistant, a successful consulting business, and a growing training business. It felt like things were going like gangbusters at work, but…

My personal blog went very anti-PASS.

I was so pissed off about how PASS handled one thing after another, and how they’d ignored private feedback. I decided to go public, and the results weren’t pretty:

As a community journalist, I was proud of those posts.

I cared (and still care) a lot about repeated privacy violations, clearly misleading/wrong vendor spam masquerading as education, wasted money, and a disregard for a quality product.

But it’s not all that different from the ongoing Uber controversies – many consumers (myself included) are willing to overlook that kind of thing when they like the business’s product, and the PASS product is the best SQL Server conference product in the US right now. (I’d argue that the SQLbits UK product is better and cheaper, but that’s for another day.)

March 2014 – suddenly, my new favorite restaurant

Looking back, I can really clearly see that I burned a lot of bridges that year. I caught a lot of flak for saying bad things in public – as if I hadn’t been complaining privately to PASS Board members for years. I don’t think my complaints made anything better, and I was a fool for standing on the street corner, yelling for faster changes. PASS is changing (and improving) at the rate that big, bureaucratic institutions change, and it is what it is. Today, in the rear-view mirror, it’s easy to see that the technique didn’t help, and instead hurt the community. Today, I understand that I don’t know how to affect the changes I want to see in PASS, but I also recognize that it’s my own shortcoming, not that of the organization.

Thankfully, the company kept right on trucking just fine despite my distractions. PASS had never been a revenue source for the company, but I wager that we lost a few potential employees due to my rants. I bet there’s good people out there who would have been interested in working for us before, but weren’t after the rants. That’s a bummer, and that’s entirely my fault. And probably unrelated (but you never know)…

Employee #1 left for greener pastures.

As Doug Lane (employee #2) was getting up to speed, we lost Jes Schultz-Borland, our very first employee. Going forward, as I write more about the company’s successes and failures, I won’t talk about individual employees leaving (PLEASE GOD DO NOT LEAVE, ANGIE, DOUG, ERIK, ERIKA, JESSICA, RICHIE, AND TARA) because it’s just not appropriate. I do think it’s appropriate to talk in generalities about employee retention, though.

Here’s some of what’s hard about hiring employee #1:

Accounting – holy paperwork, Batman – taxes, payroll, retirement planning, insurance, states
Management – planning a successful path for their career, training, and evaluation
Communication – letting them know where we’re going, and how they can help

It’s tempting for me to say that as long as you’re hiring one person, you might as well hire 2-3 to spread your risk around, but that first employee is going to have a really chaotic ride. The #1 trait you should look for in employee #1 is a sunny, upbeat outlook despite strange obstacles. We never would have known to look for that, but Jes’s disposition made all the difference as we conquered one startup obstacle after another.

The holiday card lineup

Jes was with us for three very tumultuous startup years. She had to put up with a complete lack of HR functionality as we learned how to set up insurance, payroll, taxes, procedures, expenses, you name it. Kendra worked her tail off to set the company up, putting in infrastructure as fast as we could. It’s hard to overstate how hard Jes and Kendra both had it for the first couple of years. It took two very special people to pull that off, and they did it with impeccable awesomeness. I don’t think any two people could have done the startup process any better than those two did.

As a result, I totally understood when she switched gears and went to work for Concurrency, a larger, more traditional consulting company. There’s a limit as to how much transparency I can have here on the blog, especially when other peoples’ careers are involved, so I would totally understand if you read the rest of this as, “He’s just being polite to be good to Jes.” No, seriously – believe me when I say I really do wish Jes the best success in the world. She’s awesome. We want our employees to learn, grow, and succeed, full stop, and I was actually excited to see what Jes did next. She’s going to be in the SQL Server community for the rest of her life, and she’s going to be successful. I’m proud that we’re on her resume.

When you only have two employees, losing one of them is hard.

I’m not talking emotionally – which of course is hard too – but it’s hard on your client calendar. We’re lucky enough to focus on short-term engagements, so we didn’t have to worry about replacing Jes on a large project, but we had enough client demand that we really needed to add more people, stat.

Our business model made it challenging because we were focused on a single, repeatable process – but we didn’t have any training material built up to teach people how to do that process. We were teaching it like some kind of ancient tribe passing down our traditions verbally.

Since we were under the gun, time-wise, we made the decision to hire someone very senior with a lot of performance tuning experience. We put out a call for resumes, and we grabbed Erik Darling in an entirely work-appropriate way. (Both Doug and Erik had to deal with our very haphazard way of training new people because our product methods were iterating as fast as our hiring.)

When we originally started the company, we aimed to hire one person per year, but year four was pretty wild because…

We also finally hired a salesperson.

I really should have recognized earlier how much of my time sales was taking. I wasn’t doing outreach or cold calls – I was simply answering the contact emails, scheduling introduction calls, signing contracts, and scheduling consultants. It doesn’t sound like hard work, but it was sucking up more and more of my own time. I should have been using that time to write training material, do consulting, and blog, but I enjoyed the sales process too much.

Jeremiah and Kendra saw this problem long, long before I did, and they suggested we should hire a salesperson. The single biggest mistake I made during the startup process was not listening to that suggestion. The simple fact that they even made the suggestion should have been my clue to let go. They were amazing cofounders, and they had faith in me when I said I could keep running with the sales duties.

In summer 2015, I had a Eureka moment when I realized that I was the bottleneck holding back the business from growing faster. We started looking for a salesperson, and it was the toughest position we’d ever hired for. We know a ton of data professionals, but we don’t really have a solid network of salespeople. I happened to ask a friend of mine what he’d look for in a salesperson, and one thing led to another, and I met Jessica Connors for dinner. By the end of the dinner, I was thinking, “PLEASE GOD, LET HER BE INTERESTED IN THIS JOB,” and whaddya know, she joined the company.

Seriously, when I look back, this is the one thing we should have done long ago (only assuming that Jessica was the salesperson we’d have hired.) Hire people who are really good at the stuff you’re only passable at.

This was important because something else in year four was really kicking my ass.

Our training class inventory kept growing.

In summer 2014, Jeremiah, Kendra, and I took a deep breath and increased our commitment again: we’d up our 2015 training lineup from a couple of shorter 2-3 day classes all the way to three week-long classes. Even tougher, we ran pairs of them back-to-back in the same cities in order to cut our expenses.

It’s funny – I clearly remember when I left SQLskills, I told Paul and Kim that I had absolutely no interest in running week-long classes – and that was true then. Teaching is pretty hard work, and a week-long class means being on the road away from home longer and longer stretches. But the siren song of profit was too good to resist, and we really liked training, so we took the leap. Plus, our customers had been telling us, “As long as I’m away from the office for a 2-3 day class, I might as well be gone the entire week.” So we structured week-long classes around three imaginary people: Sandra the Senior DBA, Paula the Performance Tuner, and Danny the Developer. (I’m reading these profiles and giggling – they were fun to write.)

The back of the class in Chicago

Selling these kinds of classes is a huge financial gamble for a small startup. You have to pay huge deposits to the hotels where you host the training (we’re talking tens of thousands of dollars), and hope like hell that people actually show up. You have to guess what people want to learn, how much they’ll pay, and what cities they want to visit. We got lucky that year, and things worked out okay, but the stress was definitely there.

We booked the hotels, then announced the lineup in July 2014, and ran our Black Friday sale in November. We breathed a huge sigh of relief when all the classes finally looked like they’d be profitable.

Along the way, I was working way, way the hell too hard (along with Jeremiah and Kendra). I had to work my ass off in order to get the new training material ready, and then after each class, I had to keep working to iterate over the material and make it even better. It paid off, don’t get me wrong – we made money doing training, and we built up a valuable inventory of training materials, but I don’t think we paid enough attention to work/life balance that year.

We tried a lot of fun experiments.

No, really, a lot, and I’ll only mention a few:

A spiffy explanation video on the home page of BrentOzar.com
A week-long partnership training experiment with Dell (it didn’t pan out in year four, but it later ended up being Dell DBA Days)
Online training classes – like a hybrid of recorded + live video training classes so people could do homework, and then ask questions live, plus an Extended Events training class
Setting up conference profit & loss statements – so we could see how much we were spending on each conference
More ambitious video/training sales pages on BrentOzar.com – put some decent money into PHP development here
User group video night – where user groups could get one-day access to our video library to show recorded presentations
Moved the company to Nevada in preparation for me moving to California (since we didn’t have a reason to be incorporated in Illinois anymore)
Started planning our 2015 FreeCon, a professional development event at the PASS Summit
Changed the weekly presentation-based webcast into a totally Q&A Office Hours approach

Looking back, I’m really proud of how hard we worked to figure out the maximum possible that we could give back to the community without going broke as a company. I’m super-competitive in an odd way: I wanted to help every SQL Server professional more than anybody else in the industry, for free. Tools, scripts, blog posts, videos, live webcasts, in-person events, you name it – I want to make a real, meaningful, permanent difference in peoples’ jobs and lives.

One thing we didn’t experiment on was the product: we had really focused on the SQL Critical Care® process, and at this point, it was the only product we offered. (We still do additional services for companies who find disturbing things inside their servers during the SQL Critical Care®, though.)

Was year four successful?

Oh yeah. Looking back at my original personal goals for the company:

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.

Technically, we were on track, but I didn’t realize how much work sales would be, and I should have had that hire-non-technical-people goal up in year three. Not bad though. And now we’ve checked off the stuff through year 6. What’s next?

It’s time to recalculate goals for years 6-10.

Jeremiah, Kendra, and I originally wrote up goals further out, but since the company’s purchased their shares, I get to make my own vision.

2016 is basically a stabilization year – it’s my first year managing the company on my own, teaching the training classes by myself, and making sure we’re financially stable enough to pay off Jeremiah & Kendra over time. As time goes on, though:

Years 6-7 (April 2016-2018):

Grow to around 10 consultants – which I think we can do without too much infrastructure investment or the company losing its fun vibe.
Take the community’s available tools to the next level again – I think we’ve made a huge difference with our sp_Blitz® tools, but we can do better. I want to give the community something even easier to use, yet more scalable and more actionable.

Years 8-9 (April 2018-2020):

Be a vital, valuable part of every SQL Server database administrator’s daily routine.

Yeah, it’s grandiose, but you don’t get big stuff by dreaming small, and we’re building a team that can do it. This is gonna be so much fun sharing the next steps with you.

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Things Real Businesses Say to IT Consultants

February 2, 2016

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Peter Notarian (Photo by @Jenbeee)

Before you sign a contract, read it. Here are some real examples of things I’ve run across:

The employees who work with us must pass a background check.
All of your employees must pass drug tests. (No wording about if someone lives in a marijuana-legal state, and how we’re supposed to react then.)
Employees – not just the company – must be personally liable if something goes wrong.
You must have $1mm liability insurance.
You must have $10mm liability insurance.
You are liable for everything that goes wrong, with no cap on liabilities.
Any confidential data we give you must be stored in an encrypted location.
We’re not going to tell you what’s confidential and what isn’t.
If we give you confidential data by accident, you have to report it to our security officer, and participate in the investigation at our headquarters.
If we ask you to delete our data, you must delete all copies of it, including any backups.
If we suspect that you leaked any personally identifiable data at all, you’re liable for the investigation costs.
If we prove that you leaked personally identifiable data for any one customer, you’re liable for personal credit monitoring for all of our customers for the next 3 years, regardless of whether or not their data was leaked.
If you leak personally identifiable data, you’re liable for a marketing campaign to fix our company’s image.
You can’t work with any of our competitors for 3 years.
You can’t work with any of our competitors for 3 years, and we won’t tell you who they are.
You can’t work with any of our competitors for 3 years, and we may change our lines of business or acquire more companies at any time during those 3 years.
If you learn anything during the engagement, you can’t apply that knowledge to other customers.
If you give us advice and it doesn’t work, you’ll do the engagement over.
If you give us advice and we ignore it, or it’s too hard, you’ll do it over.
If anything breaks during the engagement, you’re liable, but you can’t stop anyone else from using the system during the engagement. (And oh yeah, we’re calling you because things are broken already.)

None of these requirements are crazy – they’re all based on troubles somebody had once, and now they’re trying to build in permanent protection in their contracts. I get it. Everything’s negotiable, and it doesn’t hurt them to ask.

But it can hurt like hell if you sign, so read carefully.

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A million dollars.

January 19, 2016

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In my Epic Life Quest, sometimes I post [Redacted] achievements. It’s stuff that I’m really proud of, but I’m not quite ready to talk about publicly yet.

Back in level 4 in 2013, I wrote:

[Redacted] – I set a 2013 revenue goal for Brent Ozar Unlimited this year, and we made it! I’m not sharing the goal publicly yet, but I’ll circle back in a couple/few years and blog about it in my Life Quest category. Completed 2013.

It’s been a few years now, so let’s un-redact that: the company hit one million dollars per year of revenue.

To be specific, this wasn’t for the calendar year of 2013 – when managing a quickly growing company, you watch revenues over a running 12-month period. We did indeed have >$1mm for calendar year 2013, but we hit this achievement earlier than 12/31/2013. We hit it earlier in the year when there were only four of us doing consulting – me, Jeremiah, Jes, and Kendra.

How do consulting companies hit a million dollars of revenue?

The Brent Ozar Unlimited team, circa 2013

For consulting companies, there’s three common ways to increase revenue:

1. Increase inventory – hire more consultants, minimize the amount of non-billable stuff they do, and make them work more hours. You, dear reader, know that our company philosophy focuses on a good work-life balance, so that last option wasn’t going to happen. We started by hiring Jes, and then after hitting the $1mm mark, we added inventory with employee #2, Doug Lane.

2. Increase the effective billing rate – sell time in blocks of days rather than hours, focus on adding as much value for clients as possible, and sell productized services: fixed-price packages rather than hourly work. For the first few years of the company, we experimented with several different kinds of services – project work, architecture, data warehousing, cloud, Hadoop, and even Oracle. Within a year of hitting the $1mm mark, we focused our offerings down to just one: our SQL Critical Care®. We made a profit on that product by giving clients a huge amount of value relative to what they paid, but it wasn’t like we could charge $1,000 per hour for this product. If we wanted to scale revenue higher, we needed a different route.

3. Sell things not tied to hours – non-consulting products like books, videos, training classes, applications. This looked like a pretty good growth route for us (in addition to scaling up the staff quantity), so in 2013, we started selling online SQL Server training. The idea is that you put in time to build and record the training videos, and then over time, they keep selling and providing you with income that isn’t tied to the number of hours you spend at the keyboard.

What we did isn’t the only right way – there’s lots of consulting companies that make different choices along the way and do a great job of scaling. I’m proud of the way that Jeremiah, Kendra, Jes and I took our route together, though.

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What to Ask When Becoming a Partner in an Existing Firm

December 8, 2015

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You’re thinking about joining an existing partnership, and you’re wondering how the hookup works.

WHEEL! OF! PARTNERSHIP!

Ask these questions for starters:

What are you bringing me into the partnership to do?
What goals do I need to accomplish in order to earn my share?
Over what time do I need to accomplish them?
What ownership of the company will I earn for achieving those goals on time?
Will the ownership be expressed in terms of equity, voting, profits, or a mix?
Will I achieve my ownership all at once, or vested over time?
After that time frame, do I own my shares permanently, or am I in danger of losing them?
If I leave the firm at that point, do I keep my shares, lose them altogether, or lose them partially over a time span?

Then, build a written document together that recaps the answers so everybody’s on the same page.

Be specific about tasks and timelines.

Be specific about tasks. For example, “managing employees” can mean everything from setting a vision, designing products, doing HR tasks like payroll and taxes, or even making sure employees don’t get busted doing something stupid. You want a measurable list of big-picture tasks.

Be specific about dates. Some tasks have a finish line, like bring in $1mm of consulting revenue. Other tasks are never-ending, like “keep consultants 80% billable.” If you’re only granted equity after completing a goal, and the goal can never be permanently completed, then you’re getting screwed – you’re an employee. This combines with the “after that time frame” question – if someone tells you that you’ve got X% equity as long as you keep the consultants Y% billable, then you’ll never actually get paid, and you can never change your job. You’re a slave to the manager’s whims.

Be specific about what ownership and profits mean. You want to know how you’re going to get paid. For example, when we started our company, we assigned an even split of voting, ownership, and profit rights, but we agreed that nobody would get paid profits for 3-5 years, because we wanted to build up a safety fund in the business. Then, we also agreed that we wanted to keep at least 6 months of operating expenses in the bank, and we’d only pay ourselves profits above and beyond that. Then, the partners can also agree to tackle projects like a web site redesign or hiring new staff – which affect the 6 months of operating expenses. You don’t want to be in a position where you want to take cash out of the business, but you can’t because the other partners keep deciding to tackle big projects that diminish savings and eliminate your ability to get paid.

Be specific about what happens after you leave. For example, I worked at a startup that had non-competes built into their contracts. If you left, in theory you could keep your ownership equity, but if you did anything even remotely competitive, you lost your ownership equity. (Plus, some people had signed on for equity terms that didn’t have timelines, so as soon as they weren’t keeping the consultants 80% billable, they lost their equity no matter how long they’d worked.) You want to have a goalpost where you can say, “At this point, I own what I own, and I can go do something else if the company’s future goals aren’t lining up with my own.” They may write in something along the lines of gradual phase-out of your ownership if you leave – for example, when you stop contributing 40 hours per week on the business, your ownership vesting drops by 10% per quarter.

These questions will produce disagreements.

Talking about money, ownership, and what happens when things don’t work out – these conversations will produce friction. It’s gonna be awkward.

When you ask these tough questions, it reduces the likelihood that you’ll actually join the partnership. These questions surface disagreements, and more often than not, you’ll come to an agreement that the partnership isn’t a good fit for you or them.

That’s a good thing. That’s a great thing. While it can temporarily feel bad that you missed out on something, the reality is that you missed out on years of friction and pain.

If the partnership does actually pan out, you’ll have a closer bond with partners who are on exactly the same page. When the time comes to separate the partnership, you’ll have a nice, clean, easy discussion because you’ve already set the ground rules in play. (And yes, Jeremiah, Kendra, and I had these discussions years ago, and that made our company changes a lot easier.)

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What Does It Mean to Buy Out Your Partners?

December 1, 2015

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Brent Ozar Unlimited, The Early Years

Today over at Brent Ozar Unlimited, we announced that the company is buying out Jeremiah and Kendra’s shares. What exactly does that mean, and what kind of work is involved?

Fifty Ways to Leave Your LLC

Decide who’s getting out, and when. We had an oddball situation: we shared the same vision for the company, we’d found good product/market fit, and any of us could have been successful executing on the vision. The company just didn’t need three partners at the top to do it, and the business had just accumulated enough value that it made sense for one or more of the partners to take money off the table and bow out. (There’s a tremendous amount of voluntary unpaid work involved in starting a company, and it’s nice to be able to get paid for that at some point.)

Decide what they’re taking with ’em. We built a lot of protection in the company’s operating agreement. The cofounders got a permanent, royalty-free license to any intellectual property they’d created while with the company. For example, Jeremiah could have kept the sp_BlitzCache® code, and Kendra could have kept sp_BlitzIndex®. This would have made it easier for an exiting cofounder to keep making a living doing something else – but it also reduced the value of the remaining company. In order to maximize the company’s worth (and therefore, the buyout price), Jeremiah & Kendra elected to let go of that license.

Decide what they’re not allowed to do after leaving. In an acquisition, it’s not uncommon for the bought-out parties to be prohibited from competing in the same industry, or pursuing the company’s clients, or hiring the company’s staff. All of that is negotiable, including timelines. (For example, with our agreement, Jeremiah & Kendra are allowed to go to work anywhere.)

Figuring Out the Value of the Company

Review what the company needs to succeed. In the next 12-24 months, does the company need a big cash injection? Does it need the resources of a specific kind of partner, like a software development shop or a large sales force? What additional resources would suddenly make the company more valuable? We looked at our partners, competitors, and clients, thinking about who could find the most value in us.

Decide how much of the company will be sold. We could have sold the entire company, a majority of it (since Jeremiah & Kendra owned 2/3 of it), or a minority of it. We could have sold for cash, merged, or had a stock swap with another company.

Guesstimate what the company’s worth. The above stuff all affects the company’s worth. Look at the assets and liabilities that the company has, how much revenue it’s bringing in, and its profitability. If it’s going to be acquired, consider what these assets will be worth to the newly formed/merged company. (Ideally, have a qualified valuation professional do this big review.)

We thought about a lot of different options and their payoffs during this exercise. We learned a lot about our business, our industry, and other businesses. After doing the homework, we believed even more in our vision of what we wanted to do with the company over the next 2-4 years. (This is why you’re not going to see a lot of changes in the way Brent Ozar Unlimited® works – it wasn’t like we had passionate disagreements about where the company was going or what it stood for.)

We came up with numbers and a payoff plan, and we breathed a sigh of relief because we thought the hard work was over. Nope!

The Legal Stuff

Get attorneys involved. In our case, the business was going to buy out Jeremiah & Kendra’s shares, which meant that for the first time, the business was going to assume debt. The company’s attorney (the super-awesome and highly-recommended Tom Cox of McCarthy Duffy LLP) wrote up the debt paperwork and drafted a set of changes to our operating agreement. However, that’s only one side – Jeremiah & Kendra had to get their own attorneys to represent their own interests.

Let the attorneys build a set of discussion points. Jeremiah & Kendra’s attorneys came up with a set of changes to the company’s paperwork. For example, if the company defaults on the loan, Jeremiah & Kendra come back into the business – but at what ownership share, and how does the company’s operating agreement look then?

The partners have the discussions. When Jeremiah, Kendra, and I talk, nobody’s getting billed by the hour. When the attorneys argue with each other, we’re lighting hundred dollar bills on fire, as Kendra says. We talked through the objections from each side, figured out what risks we wanted to mitigate, and which risks we were comfortable living with. Then we explained what we wanted to the attorneys, and they ironed out the details.

The Aftermath

Up the river with paddles

As I write this, the paperwork’s all inked, the champagne has been consumed, and the announcements are scheduled.

And the pressure is on.

See, now it feels like Jeremiah and Kendra are Mom & Dad. (Well, not in that order.) They’ve given me a set of responsibilities and a mission. They’ve trusted me with the company, and I don’t want to let them down. They’ve worked so hard to get the company to where it is today. I owe them success.

And I’m really, really excited! Let’s see what happens next.

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The toughest thing for independents: saying no.

November 17, 2015

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Before you freelance or become an independent consultant, you’d think the hardest thing would be getting other people to say yes. You’d think it’d be hard to find work, or find interesting projects to work on in your spare time.

Oh, no. Not even close.

You can always find work if you lower your prices far enough, and you can always find spare time projects if you value your time low enough. But if you say yes to everything, you lock up your calendar. Then, when interesting (or more high-paying) things come along later, you’re not available.

Even during the day, when you’re already doing something, there are times when you have to reconsider your decisions. If you’re attending a training session, for example, and it’s not going well, and you’ve discovered that the description wasn’t accurate, and you already know the material beyond what’s being discussed – is it the best use of your time? Is it too late for you to say no, and take back some of your precious time?

The GTD philosophy helps here.

David Allen’s classic book Getting Things Done forces you to:

Prioritize what’s important to you (like family, friends, health, and financial security)
Set time windows that you’re willing to spend on each one
Build a list of tasks to improve each one, and prioritize those

The end result is that at any given time, you know what part of your life you’re supposed to be working on, and you’re confident that you’re doing the most important thing right now.

Then, when you’re approached with something, you can quickly prioritize where it relates to the other tasks on your plate. While it may be in someone else’s best interest for you to say yes to something at a moment in time, that doesn’t mean it’s right for you.

You have to stand up for your time – especially your work time – or no one else will. Everyone else will just keep handing you things to do even when they’re not in your best interests.

Saying no means hurting feelings.

Say yes to Mister and throw the ball just one more time.

Clients and prospects will be disappointed that you won’t work for free. Vendors will be bummed out that you won’t sit and listen to a sales pitch. Your own body will protest when it doesn’t get rest and relaxation time. And family members will be sad that you’re not home when they need you.

Whose feelings do you want to hurt?

You’re going to have to say no to somebody. Make sure you say no at the right time, so you can say yes to the rest.

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2 Reasons Your Cofounder Shouldn’t Be Like You

October 13, 2015

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Reason #1: you need an accurate, critical second opinion. If you start a company by yourself, you don’t have anybody that can give you an accurate second opinion. Oh sure, you can phone a friend every now and then, but they’re hearing your story about the business – which is often very different than the facts. You’ll tell them the facts that support your decision, omit the ones that don’t, and they’ll give you a second opinion that matches your decision. Not a big surprise – but sometimes, a very big failure.

They also need to be critical – not just yes-men with the same point of view. If you’re a singer trying to build a rock band, you don’t build the entire band out of singers. You need people coming from different backgrounds with different perspectives, and yes, that’s going to mean disagreements.

But it works.

When Keith Richards was asked how the Rolling Stones worked so well together for so long, he answered, “Friction, baby.”

I loved that answer so much that before my days of personal branding, I chose Friktion as my name in Yahoo Messenger. (Wow, that was forever ago.) I never wanted yes-men around me – I wanted people who could pull me aside and say, “Wait – the jazz hands are all wrong for this song. It’s a love ballad. Maybe just hold a candle for this one.”

Wanted: Technical Copilot

Reason #2: you need to divide tasks to match passions. Starting a company is a lot of work – you’re going to have to handle attorneys, accountants, marketing, sales, product design, delivery, customer support, hiring, management, and much more. The founders may have experience with some of those tasks, but not all of them. Even throwing in 2-3 cofounders still isn’t going to cover all of your bases.

You’re still going to have to do work you suck at.

But sometimes, that work is actually enjoyable.

Even though I sucked at sales, I loved doing it, and it actually energized me. Managing people, on the other hand – I suck at it, and it drains the life blood out of me. Thank God Kendra enjoys tackling that stuff.

The more diverse your cofounders are, the more likely somebody’s going to enjoy doing a task you hate. That keeps everybody happier longer, and you need that happiness because starting a company is hard.

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Our first Augusts scared the hell out of me.

September 29, 2015

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We started Brent Ozar Unlimited back in 2011, and we had plenty of surprises along the way. We’d worked for consulting companies before, but we’d never run one.

Our first surprise came in August 2011: incoming business simply stopped.

We were terrified. What had we done wrong? Were customers just not that into us? Did we need to revamp our strategies? There were moments where we really doubted ourselves and the business we were trying to build.

Fortunately, work started coming back in September, so we didn’t have too much time to freak out.

Then it happened again in 2012 – the incoming calls just stopped dead in August. We didn’t connect the dots at first – we just utterly freaked out. We called our existing clients, and begged our way into quick projects to keep the bills paid.

At some point in the following months, we guessed there might be a pattern, and that our target customers just didn’t want to start new SQL Server consulting projects in August. We lined up longer-term projects to carry ourselves through August, and when the lulls hit, we weren’t caught so off guard.

This year (2015), we made a gamble and planned ahead.

Watching bears go fishing in Alaska

About a year ago, we said to ourselves, “What if we completely fill up our August dance card with non-billable work ahead of time?” It was a gamble: if client work came pouring in, we’d be leaving money on the table.

We took a deep breath and scheduled a bunch of stuff ahead of time:

Two weeks of training classes in Portland – because we correctly guessed that while consulting revenue might drop, training class attendance probably wouldn’t
One week company retreat – which we used to do in February because it’s a great time for a vacation, but we switched it up to August to minimize revenue loss because we’re usually busy in February
Dell DBA Days – a week in Round Rock doing webcasts and experiments
A personal Alaskan vacation, plus a trip to see my sister in Texas

Thankfully, the gamble paid off. We had our usual August lull, but we didn’t mind because we had so many things planned ahead of time.

So now it’s time to plan for 2016.

When you know the timing of the tides, you can be more effective. As I look at next August, now is the time to start planning ahead. The training classes worked well, so we’re running those in Portland again. We’ll likely do the company retreat in August again as well.

Then, what else? Vacation? Longer-term, lower-rate client work? Take a training class on some new technology? What would you do to invest in yourself and keep moving yourself forward during downtime?

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