by Tim Jahn on March 15, 2011
Amy Hoy is a product crusader who blogs at Unicorn Free. She believes that real businesses charge for products, rather than basing their revenue on glitter and rainbows.
I invited Amy here to explain why product based businesses help you generate revenue more effectively, to share her experience selling products, and give us some tips on how to start our own product based businesses.
Tim Jahn: You have a blog called Unicorn Free, where you talk about creating products as a business, and then, you also created Freckle, a web-based time tracker, and that’s where you got your start with products. What were you doing before all this? What were you doing back before you became the product crusader?
So, I had been doing interaction design, and then my husband and I together had been doing these crazy sort of event Twitter-based art installation-type things for large companies like Pepsi and Ford, and we were just sick of the treadmill and I always had known that you can’t easily get rich doing consulting, even if you can — no matter how much you can charge.
It’s a matter of, well, if you stop working, you stop making money and you’re limited to an hourly rate, essentially, even if you sell by project rates instead of by an hourly rate. And so, definitely wanted to make products and always meant to, ever since I saw Base Camp when it first came out, and I was like, “You know what. Got to do it this summer.” And we built Freckle.
Amy Hoy: We released it right after, but we didn’t — we did more of it before we were working on Freckle, I think. That might actually not be true. Freckle might have gone first. I don’t remember anymore.
Amy Hoy: No, it was definitely a multi-faceted attack. It was a question of, well, if this eBook sells well, which we thought that it would, then we would also be able to use that money to, again, move away from the consulting.
Tim Jahn: Okay.
Amy Hoy: So, the less consulting we could do, the better. The more money we could spend on products, the better. That was the plan, and that worked very well, even though, you know, very stressful along the way.
Tim Jahn: I’m sure. So, your crusade for this, you know, for selling products really began out of a need to get away from the limits of hourly billing from consulting?
Amy Hoy: You know, yes it did, partially. I think a lot of it, though, is that, as someone who’s a very good designer, very good interactive designer, so on, so forth, it’s been hard because most of the time when you are skilled at what you do and you work for other people, they use you kind of like a tool for their own ends, but when you’re very good at what you do, they often don’t demand or even know if you’re doing your best, or committees will stomp all over your work.
I once had to write a three-page rebuttal to a glorified secretary who wanted to remove the page titles, like, the headings in the web pages from the web app because the tab already says where you were. It’s like, “I’m sorry, I’m not going to let you contravene 500 years of document design because you think it’s redundant.” And, it’s just like, why am I doing this, you know?
And I thought, well, wait, why do designers, and why do programmers always wait for someone else to hire them to do anything. That doesn’t make any sense. We’re creators. We can create. Why don’t we create for ourselves and sell products instead of waiting for someone to hire us and then hoping that they’ll like what we do.
Tim Jahn: Yeah. The fact that you had to answer to a secretary about that is.
Amy Hoy: See, and it wasn’t her job title, but it was on a project where they rotated the project manager every three weeks or so, and they were paying me and my former design partner a lot of money. Like, they would have meetings and we would be charging them, you know, nearly $300 an hour. For each of us, we were having three hour long meetings. They were paying, you know, $600 an hour for us and they were just going, “Blah, blah, blah.”
It’s like, none of them had a clue about software at all, but they all had to have their say and this is typical, right? Maybe not that hourly rate, but that experience, typical, and you think, “Oh, maybe if I charge more, I’ll get better clients.” You do, to a small extent. They pay on time, for example, but it doesn’t necessarily improve their understanding of what they’re paying you to do or their trust level of letting you do your job. So, it’s very frustrating.
Tim Jahn: Yeah, I think you just said the number one argument people have for staying a freelancer is, I’ll just get, you know, higher-paying clients, I’ll work with less clients and they’ll pay me more, and I’ll be fine, but like you said, that at the end of the day, you’re still doing the same tasks and the same reasoning for those tasks.
Amy Hoy: And, you know, it’s fun. Like, we have one client that we’ve kept. We fired all our other clients, or rather, we just no longer worked with anyone, consulting-wise, except Pepsi, because Pepsi basically is the only client that I’ve ever worked with who will trust me and listen to me and let me do what I do best, which doesn’t make any sense, right, because these companies that have been paying me hundreds of dollars per hour then want to tell me exactly what to do when I’m trying to do my best for them, but you find as you raise your rates into the hundreds of dollars per hour that, not only do you — I mean, yes, you get paid more frequently and more on time and, you know, they’re nicer and so on, so forth, and they don’t lie to you, which is nice.
Lower end clients often lie. They do, it’s true. Like, bigger companies don’t lie, for the most part, but what they do do is hire you for plausible deniability. Like, often, you’ll get hired for projects that will never ship, but no one actually has any intention of shipping, but they hire a high-priced consultant so they can say that they’re doing something, and that is the sad truth.
Tim Jahn: I was just going to say, sad but true.
Amy Hoy: It’s depressing when you got into something because you love to make things, to be used as an excuse, no matter how much you’re earning. It’s really depressing. I couldn’t take it anymore.
Tim Jahn: That’s really interesting. So did you try and get out of that and get into products because you wanted to create more products that would, I don’t know, get used or that you could see actually hit the marketplace, or did you do it more from a financial standpoint, in terms of, like, it’s more of a steady income and you don’t have to worry about the hourly rate.
Amy Hoy: Yes. Both.
Tim Jahn: Both?
Amy Hoy: I don’t think that it’s more one or the other. I think that it’s pretty much equal both. Some days, it’s all about the fact that I can actually make something that’s as good as I can imagine, or better, and directly talk to the people who are actually using it.
Because, when you do consulting, no matter how much your client talks about the bottom line, it’s almost always actually about pleasing their ego, so you almost never get to interact with your end users of the product and you end up changing things based on what the client wants, versus what will actually help their business or help their customers, and that, to me, just incredibly frustrating.
So, that is one of the biggest joys of what we do. The money is really nice. I like money. I do. I like money. I like having money, I like earning money, I like spending money. But that’s not the only reason because I could have continued to make lots and lots of money, more and more, doing the consulting stuff, and I just, I hated it anyway.
Tim Jahn: I don’t think there’s anything wrong with saying you that you like money because I’m the same way. I like money in the sense that, we live a society where you have to have money to function, so I mean, you know, obviously the more money you have, the more you can function, so it’s not a matter of being, you know, I don’t know, materialistic or anything. It’s just a matter of, you want to live the life you want to live based on the rules we have.
Amy Hoy: Yeah, I agree. I think that lots of people, they say that their goal is money, when they haven’t really thought about why. But once you learn to look at money as a tool, which is all that it really is, then there’s nothing wrong with wanting money, I agree, you know.
Amy Hoy: So, that was Thomas’ idea. I mean, I had wanted to do some information products as well, because you can have multiple types of income, so the subscription income from Freckle is great. Subscription income is awesome, but it takes forever to build up. It’s slow
On the other hand, you do an info product and you launch it and you — well, first if you make something people want, or will want, and then if you launch it properly, you can get quite a bit upfront, which is nice, and then, it doesn’t require much in the way of maintenance. So, I know we wanted to create something and Thomas was currently doing some work for — can I tell them who you were doing the work for, now? A major electronics manufacturer.
Tim Jahn: So, that was a no, then.
Tim Jahn: So, it was almost a perfect combination of you guys looking for a product to make and this big need he was aware of that he knew he could provide info for?
Tim Jahn: If you only — okay, so you weren’t aware of the big need. You were aware that you needed it. If you’re only knowledge is that you need the product and you’re not sure if there’s a giant market out there, how do you justify yourself spending all the time on creating the product and hoping there is a few more users out there?
Amy Hoy: Well, if you don’t have an innate marketing market assessment skill, which I do have from years of honing it, you need to do the research first, and that’s the only way to make sure that you create a product that people actually want. In fact, in my 30×500 product creation course, I teach people to investigate the audience before even trying to come up with a product idea because almost everyone I speak to, their product ideas are bad. And many of mine are too, but I can admit that my ideas are bad because I know how to have a lot of them if I need to or if I want to.
Do they buy educational materials? Are these blog posts popular even though that they’re not consistent or coherent and they’re spread all over the Internet and no one’s put them together? Things like that. So you can verify. If you’re making a regular product, you charge for it and not, like, you think you’re going to be the next Facebook, then you can verify.
Tim Jahn: You mentioned that most product ideas are bad. In your eyes, what makes a product idea good?
Amy Hoy: That it’s something that people will pay for, aimed at people who will pay for it and that it either increases revenue or reduces costs or kills a significant pain that people have.
Tim Jahn: Yeah, we always hear that, about solving a pain. I feel like no matter what you’re doing, it has to absolutely heal a pain. What — have you ever launched a product where you did the market research, you know, as best you could and you did all the background you could on that market and then sales were okay and they just never really took off, or is a matter of, you do all research, that would never happen?
Amy Hoy: It’s not happened yet. We did create a product with our friend, Dave, that did not sell, but I hadn’t done the research. It was relying on what people said that they wanted expressly. We made — have you seen Twistori? It’s a little —
Tim Jahn: No.
Amy Hoy: Twistori is a little Twitter visualization that I made with Thomas the first part that we worked on together, actually that sort of set the whole tone for us making stuff, and it was extremely popular. It still gets 5- or 6,000 uniques a day. People have screen saver installed all over the world. It’s been used at conferences. It led to all this consulting work for Pepsi, and so on. People said, I want Twistori for my key words. What it does is, it searches for phrases like, “I love,” “I hate,” “I think,” “I feel,” “I wish,” “I believe,” on Twitter, and then it streams them anonymously, colored. It’s quite fun and addicting.
Tim Jahn: Oh, you know what. I have seen that a while ago.
Amy Hoy: Yeah. That’s mine.
Tim Jahn: Yeah, that’s so funny.
Amy Hoy: People have always, had always asked for a version for themselves, so we got together with my friend, Dave, and we made a Mac version, and it was really cool and no one bought it because they were lying. People lie through their teeth, like, “I’ll buy this,” and then they’re like, well, I don’t know, $12 is a lot of money.
So, if I had done the market research, I would have realized there was no specific audience that wanted that except, like, event managers and event managers, we could charge like a hundred times the price, but most probably, we would have to do sales calls, which we would never want to do. So, if I had done my research, then I would have never wasted the time making that product and Dave would still like me.
Tim Jahn: I think a lot of people who aren’t marketing professionals might — they would say, doing the market research would be just what you did, asking people what they want. But you’re saying that people often don’t —
Amy Hoy: No, people lie.
Tim Jahn: They lie.
Amy Hoy: People are full of shit.
Tim Jahn: So, what kind of market research should you have done, then, as opposed to asking people what they want.
Amy Hoy: Okay, what people do, not what they ask for. You cannot ever listen to what people say they want. Not when you create a product, not when you create features in your product that already exist. It doesn’t make sense. It’s like, what’s best for your child? Well, you don’t ask your child what they want to eat for dinner every day, because they’re going to say, “Chocolate cake,” and research has shown with focus groups, people will say one thing and do the other.
As a famous example from a maker of CD players, I think it was Sony. They were offering it in yellow and black, and they asked all these cool teenagers, which color would you prefer? And they all said, “Yellow,” and then they let them all have a free one at the end, and they all picked black. Classic. Focus groups, crap. Asking people what they want, crap. Don’t do it, it doesn’t make any sense.
And so, one of the things I try to teach people, which, this is, like, a skill that is kind of nuanced, but I didn’t have any friends and so, I read a lot of business books when I was a kid. I tried to teach people in my class how to do it in this sort of a formulaic way that makes it easier to understand, and the thing is, you have to read between the lines. You have to be willing to look at trends and synthesize. I call it doing the sales safari. You kind of have to go and find the people who define themselves as a group with an identity.
For example, Ruby programmers or even JRuby programmers, and so on, as narrow as you need to get, and identify what the trends are in their communications. Where do they hang out? Where do they talk online? What are the trends that you see? What do people struggle with that they don’t actually talk about being a struggle?
For example, a lot of the problems that we solve with our products aren’t things that people have said, “I have a problem with x.” It’s more like, “How do you do this,” or “How do you do that,” and you look at it overall, and you see that it’s a problem, but none of them have put it together. The product maker’s job is to, “condense fact from the vapor of nuance,” to quote Snow Crash.
Tim Jahn: I see. Okay, so after you — I want to touch on Freckle a little bit because I’m interested in how — where did the idea for Freckle come from? Where did you decide you needed a web-based time tracker because I feel like there’s a lot of them out there, so —
Amy Hoy: There are a lot of them out there and they all suck.
Tim Jahn: Was that the reason right there?
Amy Hoy: Yes, and no. So I had been doing consulting and freelancing for a long time, and of course, if you’re a good freelancer or consultant, you’d have to track your time. Even if you sell on a project rate, you need to know what you’re actually spending on a project for the flat rate. How much time you’re spending on marketing or sales calls and preparing contracts. All the stuff that you think you can’t bill for, and having used all of the major time trackers and some of the ones you probably haven’t heard of, I discovered that none of them supported a person in their business. They were all really clunky.
So, to log time for a new person, you have to — new project. Say, someone calls you, and they said, “Hey, let’s talk for 45 minutes about my new project,” and you’re like, okay. To track time for that as it emerges, you have to create a client, create a project, possibly even define a task, and then, and only then, could you log time, and I thought that was absolutely ludicrous. And that’s going to discourage everybody from tracking their time.
People are like, I don’t track my time, it’s so irritating, and they don’t consider that it was their tools. But being an interaction designer, I knew it was the tools, and so, I wanted to fix that because I needed it. Everyone I spoke to also needed it, and I knew that Harvest and these other companies were making good money doing it, therefore, there’s a market for it, people who pay.
And so, I went and I designed the exact opposite of all the other software out there. I designed it to support the business, I designed it to make it dead simple, painless, frictionless to log time, and to track time, and to analyze the time in a way that supports the business like, what’s your overhead? How much time are you spending on this client that you can’t charge for, and things like that, that actually help you run a better business. Not just time in and then time out.
Tim Jahn: And you mentioned earlier that subscription-based products are slow to grow and I remember looking at a graph on your blog from, I think, October, where you showed your income distribution for 2010 up to October and, sure enough, on the Freckle part, you had, I think, it was almost, like, maybe, double the revenue of the previous year, but I mean, you could tell that you weren’t making 300 grand three months after launching Freckle, or anything.
Amy Hoy: No, no. In fact, Freckle has just now crossed the forward-going $180,000 a year mark, and I was telling that to another sort of friend of mine who also creates software for service, and I told him $180,000, and he’s like, “Wow, that’s great. It took us two years to get to that point.” I was like, “Dude, Freckle is two years old.” So, noticing a trend, you know? And my husband and I had dinner last night with another couple who makes software products, and I told them this story last night, and they were like, “Exactly, and no one talks about that.”
So, it took them about two years to get to the same income level, approximately, and I think it’s — I don’t know if it’s a constant, but it seems to be. We all started part time on our products and we didn’t have big marketing budgets and it seems like if you market some but not forever and if you spend part time on it, that’s about the kind of result you get. So, it might take two years to get to $200,000 a year, which is not bad.
Tim Jahn: No, not at all, and I think you’re right. Most people don’t talk about that fact. They think —
Amy Hoy: They don’t.
Tim Jahn: — that it happens right away.
Amy Hoy: Which, of course it doesn’t. Wouldn’t that be nice, though.
Tim Jahn: That would. What would you say is your number one piece of advice for someone watching this who is a creator or a freelancer or, you know, they want to start creating products and selling them? What’s your number one piece of advice?
Amy Hoy: Can I make it two pieces?
Tim Jahn: Absolutely.
Amy Hoy: All right, so my number one piece of advice is to get off your butt and do something now, because if you’re a creator and you’re only working for other people, you’re wasting your abilities. You’re letting someone else strip-mine your future, because you have the ability to create stuff, and they only have the ability to hire you, so if you’re a creator, you should create. It’s kind of simple, if you ask me. Creators create. It’s kind of the thing that we do. It’s our bread and butter.
So it doesn’t mean that we have to create for other people. We don’t need to wait for someone else to hire us to do something. We can do stuff on our own. And designers, programmers, writers, they all need to hear this. It’s the same in all of these creative fields. People are waiting for someone else to hire them to do something, and you can’t. You’re not going to get where you want if you just wait for someone to invite you.
And the other thing is to learn how to do market research and then create a product from what you learn. It’s not that common for someone who’s a programmer, writer, or designer to have an innate understanding, even of their own market, because you’re inside of it. You have the curse of knowledge, right? You think, “Oh, well programmers don’t pay for things.” I’ve heard that a lot from my students, or “Designers don’t pay for things.” That’s not true. Lots of designers and lots of programmers pay a lot of money for a lot of things. So many of the software-as-a-service tools we love are funded, essentially, by customers who are programmers or designers.
Programmers buy TextMate 2, they buy, you know, Things, they buy Hoptoad and Exceptional and GitHub and all these other things and they buy PeepCodes and books and eBooks and training courses and classes. They buy all sorts of stuff, but it’s so easy when you don’t buy things and you’re immediate friends don’t buy things, you think, “Nobody buys things,” but it’s just not true. So it’s important to do the research because, chances are, you’re operating on false assumptions, both that sound good and both that sound bad.
Tim Jahn: I think you bring up one of the most important points that I found myself doing all the time is, I only think about the way I view things, the way I think things and the way, maybe, my closest circle does, but I find out, I’m almost 110% always wrong, and it’s so hard to fix that. Still working on it.
Amy Hoy: It’s the nature of being human, I think. There’s this great book called, “Mistakes Were Made, But Not By Me”, and it’s wonderful. It just shows us that we’re all completely full of crap all of the time.
Tim Jahn: I’ll have to check that out.
Amy Hoy: It’s an amazing book. If you just need a, like, a reality adjustment on what it’s like to be human, it’s amazing. And if you just embrace that, you’re like, “Oh, okay, well, I’m probably wrong.” The things that I think are great ideas because they feel good, probably just sort of memories of something that sounds good, doesn’t mean it is good, and I’m surrounded by all these start-up stories that are, you know, completely impossible, and so, I sort of get this feeling recognition when I think I have something that could be like that. Chances are, it won’t work, so if I just go and I’ll be a scientist and research it, like, just that one switch in attitude makes such a difference. Such a difference.
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