Bootstrapping, shortcuts, and painful lessons learned in our early days

I had a really interesting question a little while ago which made me think a lot about how we originally grew at Hanno:

“I’m a young founder (21 years old) and our business has been up and running for 6 months now. We’ve been producing good work and our clients are happy, so we’re really keen to keep growing and have been looking to hire a business development person. What would you do in our position?“

The trouble with these questions is that sometimes, they assume there’s a set ‘right answer’. But if we’re honest with ourselves, we know that’s not likely. All we can do is share what we’ve seen from our own experiences, and hope that provides useful perspective for others. Even if they choose a totally different route.

We were (often painfully) bootstrapped at first

When we started up, we were very much bootstrapped, profitable and proud from Day 1. We didn’t take on any external funding (despite it being available), turned down offers to sell the company, and worked very hard to keep costs low while we learned more and grew further.

I’m hugely conscious of my own inexperience in these things. Having turned down a fairly dependable legal career and taken a risk on this whole ‘design thing’, I was determined to not have to turn around and go back down that route again. At the beginning, we had a few freelance clients who brought in just enough money for us to scrape by. By keeping costs as low as possible, we could give the whole thing a go without having to desperately chase big projects to keep the doors open.

It was very hard work–there’s no doubt about that. The hours were long and the work was tough. We couldn’t buy and hire our way out of problems, so it really forced us to learn a lot and to be extremely hands-on. I remember one project, about 5 years ago, which was the biggest one we’d ever had, at the time. We were in charge of integrating a recurring membership platform with a WordPress blog, which charged a big annual membership fee (£1000s/year). Since my PHP development expertise was very limited, to say the least, I’d found a partner to help us was very good at what he did (WordPress plugin development and security auditing), and he’d handled the setup and integration.

But he was clearly out of his depth on this project. The problem was that since the membership platform was a totally custom affair, built by another developer, it was riddled with bugs. We hit problem after problem, and were trying to deal with some complex business logic for the client, that kept throwing up strange edge cases which needed fixing. The problem was that testing and fixing these was adding a lot of time to the project, and it just wasn’t possible for the partner I’d found to fix them all. Especially when he has some pretty major personal issues on his plate at the time.

I remember finishing work for the day, heading home for a quick dinner with my girlfriend, and then walking back to the office again at 11pm, before working all night and trying to hash out what the problem was. It was horrible, gruelling work, and I barely knew how to write PHP at the beginning. Thankfully, with moral support and guidance from some brilliant friends, and a lot of hacking away, I ended up with a much better understanding of how PHP, and the application itself, actually worked. I gained a lot of hard-won lessons which still strongly influence Hanno, many years later.

It would have been much easier to take some of the funding on offer, and bring a decent developer in full-time. But you know what? I think we’d be much worse off today, if we’d done that. I’m very glad we grew at the speed we did, which was, initially, very slow. Those lessons from the early days are the ones I value the highest these days.

So how does this connect to hiring people to help you with bizdev?

Well, this is something that 37Signals definitely grasp. If you’ve ever read REWORK, you’ll know that they’re also strong advocates of ‘doing everything yourself until you absolutely have to stop’.

There are a lot of advantages to being young and passionate. Experience is definitely not the solution to every problem, and in many cases, the ones who are most disruptive and innovative are the ones with nothing to lose. They’re almost always young people. But even if we accept that, I only have to look back at myself a couple of years ago, to appreciate how much less I knew back then, compared to now. I don’t think you can necessarily take shortcuts to get hold of this life experience which makes you so much better at your job. There’s no substitute for putting in the hours of practice and learning.

I know from my own experience that I was only able to pitch to potential clients well, once I became a better designer and developer. My growing knowledge of my craft and my tools came across in the way I communicated with them. That makes me sceptical of how well a purely client-facing, business development person, can effectively market us to clients and bring in business. Especially in an industry like ours. Sure, these type of people can deliver some value. But I don’t necessarily think that they’re the right early hires for a young founder to make. I know they wouldn’t have been so for us.

A big concern of mine when we’re looking at how our team should be growing in the future is how many ‘pure bizdev’ people we will want to bring onto it. And that concern comes from the fact that these people aren’t necessarily capable of making stuff. When you’re running a services business, every non-billable team member has to be supported by the people who are actually doing the billable work on projects. That increases your overheads and puts more and more pressure on you to bring in more work. So on a really simplistic level, if your new bizdev person costs you £35k in salary and expenses each year, they need to bring in £35k of business, simply to offset their own salary. That puts a lot of pressure on a small team.

My hunch is that the number of managers and business development people at traditional agencies are a big part of the problem. They push rates up and often leave the actual designers drawing a far lower salary. That feels hugely inefficient and unbalanced, to me–a recipe for job satisfaction amongst the most important people in the team.

For us, slow was good

It’s pretty well established that the lower your overheads are, the more freedom you have to make mistakes. You simply have a longer ‘runway’ and less pressure to chase the big money and get distracted by this, before you’re ready to handle it.

I think this is crucial when you’re inexperienced, because we will all make mistakes. Especially when you’re young. I know I made plenty. And I think that giving yourself that little extra bit of flexibility can make the difference between your company surviving, and failing.

I suspect (though have no hard evidence to back this up, sadly) that when young founders get big funding, they make rasher decisions and these can often have a negative effect. Sure, there are some exceptions, and sometimes there is a strong case for investing in order to grow a business fast. But I think those situations are rarer than many people think. Especially those who are over-exposed to the startup scene and VC mentality. First-mover advantage is not always critical, and there’s a good argument to support this in The Innovator’s Dilemma:

In sustaining technologies… evidence strongly suggests that companies which focus on extending the performance of conventional technologies, and choose to be followers in adopting new ones, can remain strong and competitive. This is not the case with disruptive technologies, however. There are enormous returns and significant first-mover advantages associated with early entry into the emerging markets in which disruptive technologies are initially used.

So what’s the rush? I’m talking about client services, here. Most of us are not startups in the true sense of the word, and we’re arguably not really dealing in totally disruptive technologies. At least as far as our business models go. In many cases, our businesses have a lot more stability and afford us a lot more breathing space than a funded startup would have. While we shouldn’t get hung up on failure, as long as lessons are learned, we also shouldn’t glamourise it.

I think that you can learn just as much from taking a slower, measured approach to gaining experience, and filling in the gaping holes in your knowledge, as you can by failing miserably a few times. I’d argue that in terms of learning how to build a stable, successful business, you can learn you learn a lot more by doing it ‘the slow way’, than you could by betting big on a moon-shot startup.

I’m confident that the natural ‘brake’ of having to have profitable client work coming in the door slowed down our growth. But it also forced us to think long and hard about how to deliver really big value on projects. And I think that is critical to where we are today.

I mentioned this when I recently wrote about the future of design agencies too. While VC investment is something which is necessary if you possess certain ambitions, I don’t think it’s necessarily the best bet for everyone. I know it wouldn’t have been for us.

Allowing ambitions to form

A couple of years ago, when we first started Hanno, I was fresh out of university. I knew that I wanted to work in ‘web design’ if I could, and I knew I wanted to build a strong and successful company that was great to work for, and changed the world in a positive way. But I really had very little idea of how we’d look in a couple of years time.

People would ask me questions like “how big do you want Hanno to be?”; “where do you want to be in 5 years”; “what’s your billing target next year?”. I would always respond with a general indication of the direction I had in mind, but I would freely admit that I didn’t have a definite target or a specific figure I wanted to hit, at that point. Understandably, some people considered that to be a dangerous sign: that we were aimless, indecisive and would struggle to survive with that mentality.

A couple of years later, I’m actually glad I took that position. Obviously we had targets. But they were more about figuring out how to make sure the team was getting paid fairly, and how to gradually get the business to a stronger position. Goals like putting six months of our operating costs into a bank account to protect us, were probably the closest we had to a definite target.

But in the intervening time, working full time in the industry and doing a lot of client work, learning a lot, growing as a person, and understanding a lot more about myself and my own motivations, I now have a much clearer idea of my personal goals, and how they fit into our goals as a team. And Hanno itself has gradually formed a strong and well-defined culture, too.

We’re now in a position to confidently set those bigger, longer-term goals, and I’m not sure we’d have been in the position to do this well, beforehand. We now know what our mission is as a team, and we know the kind of impact we want to have in three years’ time. We know what we need to do to get there, and where it is we want to be.

So I can comfortably say that I’ve got no regrets about taking a slower, more measured route in those earlier days. By focusing on simply “getting stronger and more stable” and building a better team culture, I think we’re in a vastly stronger position now, than if we’d been minded to grow much faster. I don’t think it’s necessarily healthy to subscribe to a relentless “growth is good” mantra. Sometimes, the tortoise beats the hare.