A little background
I’ve been wanting to get back to writing for years but never found the time and incentive to do it. As my company Cloud Horizon embarks on a new adventure in product development, I’ve decided to finally pull out my digital pen and start writing about our experiences launching SaaS products.
But before I get into that, the first post I’ll write is a short background on Cloud Horizon and how we got to where we are today.
Cloud Horizon, as the name suggests, started off as a cloud computing company in 2009. After about 3 years in this space and some moderate success, I decided that cloud computing is not the area I wanted to focus on in business. For me, managing cloud infrastructure is boring. What’s more, clients never call you to say “hey, you know that server you’re managing for me? It’s running beautifully!”. No, clients usually only call you in the middle of the night in a panic when there is some kind of meltdown happening.
So in early 2012, I changed directions and partnered with Slobodan Stojanović to start an agency to help businesses build web and mobile products. At the time, mobile was a hot area of technology and we were both excited about the possibilities it provided to businesses.
Initially, we worked only with startups since we didn’t have a portfolio and larger companies found it too risky to work with a couple of guys who were just getting started. This in retrospective was a blessing as it allowed us to work with innovative teams that were creating new markets. It also allowed us to move fast and to experiment with cutting edge technologies. Anyone who has worked with enterprise clients knows they’re a bit on the slow side when it comes to decision making processes and adoption of new technologies.
As we were starting to re-build Cloud Horizon, we discussed at length what we wanted to accomplish with our company. So we defined the philosophy which has guided us for the last 6+ years:
- To work on interesting projects that challenge us
- To be surrounded by awesome people that inspire us
- To always be learning new things
This led us to define our mission statement as “helping people and businesses succeed”, where the “people” part is our team and the “businesses” part is our clients. Our idea was that if we made sure our team was successful and felt they were growing on a professional level, our clients would also be successful as a result. It turned out to be a good mission statement for our company.
At the same time, we discussed the idea of having a service versus a product company. I’ve heard many times that product companies want to be service companies and vice versa, so we said let’s do both. But, we agreed to start with services since it would provide immediate cash flow and would put a roof over our heads while we figured out how to build and scale a business.
This approach also allowed us to work with other companies to build their product ideas and learn about the problems different industries were having to which technology solutions can be applied. Eventually, we said, we would start working on our own products when we have the time, resources and the necessary knowledge.
Companies like 37 Signals, Fog Creek Software and GSOFT were a great inspiration for us because they started off as service companies, executed brilliantly, eventually built successful products and did it mostly without external financing.
And speaking of financing, we agreed at the beginning that we would try not to take investments and we hated debt so we refused to borrow money from banks because we thought they were the root of all evil. We could have scaled Cloud Horizon faster had we chosen to get additional financing but we felt strongly about bootstrapping our way to success.
And thus our journey began and we started building products for startups. Somewhere along the way, we developed a reputation for being good at product development and for being committed to our projects and our clients, so larger companies started approaching us to do work for them as well.
Magic kept happening and new projects were coming in so quickly that we regularly turned down about 20–30% of them because we didn’t have the capacity to take them on. What’s more, we were short staffed even on the projects we agreed to take on because frequently our clients would expand the scope of our collaboration within a few months of starting to work with us.
All in all, good problems!
Fast forward 6 years and about 80 projects, most being successful with a few disasters sprinkled in to keep us humble, and we’ve reached a new milestone in Cloud Horizon’s journey. We currently have a team of 27 people spread out over two offices in Montreal and Belgrade. 2017 was by far our best and most profitable year so we were able to set aside a sizeable amount of cash to invest into a small R&D lab. In fact, we had set aside cash in 2016 to work on products in 2017, but that didn’t happen because so many great opportunities presented themselves to us in 2017 that we would have been idiots not to take them.
As of the beginning of 2018, things have slowed down a bit for Cloud Horizon. We finally got a chance to stop and catch our breath from the marathon we’ve been running over the last 6 years. And for the first time, we have a few people on our team who are available to work on our own products. An opportunity is presenting itself for us to finally invest time and resources to do our own thing.
And this brings me to the purpose of this post. As we’ve started to experiment with product ideas, I realized that I would like to write down why we are doing this and our current product development strategy. The plan is to then follow up this post with others that document what worked for us and what didn’t.
I’m sure our strategy will change as we make mistakes and learn from them. We’ll do our best to make creative mistakes so they’ll be more fun for you to read about! And it will be interesting to re-read these posts in a few years and reflect on the lessons we’ve learned.
We knew from the moment we started that product development was something we wanted to do. The main reason is that we knew it would allow us the freedom to make our own decisions about how to design the product, how to build it, which technologies to use, how to market it and who to target.
We also think that once product-market fit is achieved, revenues scale in an exponential way relative to the number of people in the company. In a service business, the correlation is much more linear and revenues depend heavily on the number of team members in the company. This conclusion is based on observations of some of our startup clients as well as people in our network who have built service and product businesses.
And finally, we think that we’ll eventually have a much bigger impact through the products that we’re developing than by being guns for hire. That’s not to say that building products for others is not fun, it is and we’ve had a lot of fun working with some awesome people over the years to make their visions happen. So we do plan on continuing to work with clients to develop their products in parallel to developing our own.
Our current product strategy
So the master plan at the moment is quite simple: tackle smaller product ideas and work our way to more ambitious ones. In a broad sense, we look at product development as three consecutive parts:
As we’ve developed products for others over the years, we’ve gotten really good at the middle piece. But we know very little about the first and last step because our customers usually come to us with specs in hand and tell us how to build their product. Yes we do have some input about the direction, but our clients generally have a pretty solid idea about how they want us to develop it.
Once we finish building a client’s product, we hand over the keys and the client then searches for product-market fit, gathers feedback from their users, does the marketing and provides customer service. They also develop their own roadmap, decide which features to prioritize and how to iterate.
So in order to not waste a bunch of money learning step 1 and step 3, we’ve made the decision to start small. We hope that we can turn some of these mini-products into profitable businesses and that we can use the cashflow generated from them to invest back into our internal R&D lab.
But it’s not just reaching our revenue targets that will be important, we also want to keep maintenance and support costs low so that we have at least a 80-90% gross margin on each product. Ambitious, I know. But we have a really awesome team that can get a lot done with a little, so hopefully we can make this happen.
It’s really important for us to bootstrap all of our products, especially the small ones which we plan on starting with. The only time we would even consider going to investors is if one of our more ambitious ideas takes off wildly and we need capital to scale the business quickly.
In terms of goals, we want to start by creating 4 simple SaaS tools that we need internally. These products mostly already exist but we’re going to do our own spin on them. If we can reach $25k in monthly revenues with each of these products within 12–24 months, we’ll consider these products a success.
I’ve tried to keep everything at a very high level without going into too many details. My goal now is to write as often as time permits about things we’ve learned and the strategies we’ve used to reach our revenue targets.
We have an ambitious 5 year plan, with the first 2 years dedicated to experimenting and learning as quickly as possible. We’re in this for the long haul and expect to be working on many different ideas over the next 2 decades. We’ll be learning and adapting quickly because we expect to fail at many of the things that we’ll try.
I know that there are many other companies out there that are providing services to clients and who either want to, or have already gotten into product development. So what we’re doing is by no means unique. However, if we can save companies contemplating a similar strategy time and money by sharing our experiences, then writing these articles will be worth it.
If you are facing in the right direction, all you need to do is keep on walking.
If you’re interested in getting updates on our journey, please follow me and Slobodan Stojanović on Medium.