I am on leave from today, back in the new year to continue the Trickytix build.  Hope you all have a great holiday season, and your business soars in 2008.

When next I blog in January, I hope to be able to share with you the news of two important milestones:

1. The first customer
2. The first full time hire of a developer for Trickytix

Both are close, but I wouldn’t want to sound off until contracts are signed!

Later,
Scott.

Ever wanted to work in a start-up environment? If so, we are in need of a full time php developer based out of our Melbourne office.

This could be your desk. Don’t worry, we will add a second monitor for you as soon as you start.

This could be the view from our office that you see each day (sorry, can’t see the beach from here).

Apologies for the lousy images. My phone makes a better talky box than it does a camera.

The full advert is at Seek, but the basic details are below:

Job Advert

We are a small web development company based in Melbourne, using predominantly open source products.

We are looking for a junior php developer to come on board and help us out with a variety of web development projects. You will be working on a combination of small and large projects, including helping us build a web application. The web app has lots of interesting bits of code for you to enhance and develop, under the tuition of our lead developer.

We need this person sooner rather than later, and are willing to offer a full time role to the right candidate.

Responsibilities:

More important than actual PHP experience is a solid understanding of OOP, good problem solving skills, the ability to be able to work independently and be a quick learner.

We will consider training someone with strong OOP skills in another language as long as they have a good theoretical knowledge of how to program.

Experience

Any experience in the following would be handy but not essential:

• PHP 5
• MySql 5
• Linux (bash scripting extra handy)
• Subversion
• XHTML/ CSS / Javascript
• Web api’s
• Model / view / controller pattern

We are offering monthly RDO’s, a good starting salary with a guaranteed yearly increase and profit sharing. Our office is very casual and relaxed.

Apply online at Seek.

Last post I discussed a number of methods we had used to try and discover market size, some more successful than others. While our attempts seemed logical enough, there didn’t seem to be a lot of information on the web to steer an aspiring entrepreneur in the right direction.

What is the lesson here?

“The lesson is, never try”.
Homer Simpson

Well, not quite. A better lesson is probably:

“When in doubt, ask someone who has already solved the problem”.
Wise man with white hair and long goatee

So that is what I did, emailing a range of experts, entrepreneurs and C-level executives with the question:

“When you started your company, how did you estimate market size prior to commencing trading?”

Eight emails sent, with three great replies received. I have shared them below, because each answer has a few gems in it that will assist people out there looking to start a business.

Martin Wells, CEO and Founder of Tangler

Sizing a market is a tough one, and sometimes how you get to the result is dependent on what you’re trying to achieve. I guess since you mentioned VCs then you’re likely doing it for investment.

The two ways I use to estimate markets are:

1. Hire a marketing consultant
2. Guess (and plug in as many facts as I can) – You’ve listed a bunch of good ways to accumulate facts in your article. I think the only one you missed was to track down analysts in your sector and talk to them. Sometimes you can swap knowledge with them, but you want to build a relationship early.

Since you’re a startup you can’t really be expected to have detailed market knowledge, so at this point investors are really looking for market size to evaluate the high level potential of the business. Who cares about making a better blade for lawnmowers if it’s a $1m market?

Sizing a market is done by making a series of high level assumptions based on known values. For example, you could get to online ticket spending by doing:

• Number of people in market (20 million for Aus)
• % people attending events
• Total $’s they spend
• % people online
• % people who buy tickets online
• Total $’s spent in online ticketing

Then you plug in whatever facts you have now, and then whatever you discover along the way. I know this seems like a bunch of guesses, but that’s ok, investors will look at your assumptions to see if they are reasonable; they won’t expect exact numbers.

The other thing to look for in your market evaluation is the trends that are changing that market – trends are the core of your market assumption; what’s changing in the market that makes your product an opportunity – internet usage, acceptance of online purchasing, new web technology. I find investors like to hear about those more.

Andrew Pearce, CEO of New Water

I think it very much depends on the nature of what you are attempting to put into the market, but I would suggest the following practical approach.

This is in part what we have done.

Define who you think your target customer group(s) are

In our case it is people who fall into the “Do-it-for-me” category of home owners – ie people who are the opposite to DIY. We are obviously a business to consumer type of company. In a business to business type of operation it might be an industry segment or a functional segment or a size segment or a combination of all three (eg medium sized companies in the telco. sector)

Validation of your target group

This is the hard part – especially if you have a new product or service which people/organisations do not understand (we have this challenge with our grey water treatment system as people do not readily understand what it is). You need to basically be able to go and speak to a representative sample of what you think are your target customers, explain what you do and ask them if they see a need for it.

Also try to find out how they value it (this will enable you to determine if your price points are correct). Market research firms will set this up for you (via focus groups) if you have the money to pay for it. The alternative is to arrange one to one interviews yourself or ask people at networking functions – this is much more cost effective. The good thing about this approach is it also helps you develop your sales pitch for use later – ie what are the customers “hot-buttons” etc. and how do you appeal to them?

Quantify

Assuming you have validated the above, then basically you need to quantify how many people/organisations (or whatever measure is appropriate) are in your target customer group? If it is people then the ABS (and equivalent in other countries) provides heaps of statistics. If it is businesses then you can use business directories – there are various ones, some from the ASX and others from organisations like Dun and Bradstreet. Again by way of example we know there are approximately 766,000 homes in our target market so if we can achieve a penetration of only 5% that is 38,300 sales.

For international sizing, you will find the US distorts any analysis you do because it is so large but with VC’s they look for rigour in one market and then extrapolation for others.

Ben Richardson, Co-Founder of Freshview

When we were looking at the potential market size for our first product, Campaign Monitor, we had 2 key areas to look at. Firstly, we had to make sure there we a need for the service our product offered – email marketing.

A quick Google search showed a bunch of stats produced by companies such as Jupiter Research showing that “email marketing spending will reach $1.1 billion in 2010” etc etc.

Is it just me or does it seem like there are stats just like this by one research company or another for pretty much every industry? For me the best validation that there was a decent market for email marketing was the amount of competition out there, and the fact that quite a few of them were reporting very impressive profits.

The second market of interest to us was Web Designers, since our product is built specifically for this market. We were a web design company before we moved into product development, and after watching the industry grow over the 5 years we’d been in business, we had a good feel for the number of web designers worldwide. We didn’t bother looking for exact numbers of how many designers there were, but we knew there would be more than enough to make our product worth developing. And since we bootstrapped our product, we didn’t need to come up with a figure to satisfy a VC’s checklist.

How do you work out the size of the market that you are about to enter?

Answering this question is proving hard, despite having exhausted a number of avenues to source the information. It is made all the harder when none of our competitors are publicly listed.

As we move from “bootstrapping” the prototype to seeking funding for expansion, it becomes a critical question.

If all we planned to do was use our existing money to slowly grow the business over the next 10 years, it wouldn’t matter. We know (gut feel, anecdotally, the fact we have numerous competitors, plus any number of other ways) that our proposed market is big. Online registration and ticketing is growing in size (we think!), and there is enormous potential for the right company to build a killer product. We think we have it.

Now try that same justification, but imagine your in a boardroom pitching to a table full of venture capitalists.

Trickytix: “Yes that is correct, we want a few million dollars for not much equity”.

VC: “How big is the marketplace you are going after” (what they are really saying is, “how much money can you make us?“)

Trickytix: “Absolutely no idea, now hand over that cheque”.

Doesn’t quite fly does it. So what exactly have we done so far to research the size of our prospective marketplace?

1. Google the phrase

Is there anything Google can’t tell you? Apparently there is. Always my first step in any research project, typing in the phrase “how to evaluate the size of a market” returned only results telling me what a great idea evaluating market size is, with none actually telling me the best way to go about it.

The MIT Entrepreneurship Competition was good for the quality of the comments by Omar Khudari, but didn’t offer much past that.

Google searches for “evaluating market size”, “size of online registration market” and “size of ticketing market” all returned results of little or minimal value.

I at least found out that:

• Lawson Ticket Inc did 6 and a half billion in sales in Japan alone (different market to us though)
• The German based Get-Go did 6.2 million Euro in sales for the first 2 quarters of 2002, just two years after launching (probably mostly David Hasselhoff tours).

It is a start, but nothing I can really put in the business plan. Much more success with “online ticketing growth” and “online registration growth”, which told me that:

• Ticketmaster did more than 4 billion in sales in 2002 (although this includes their retail outlets and call centres)
• For all sales channels, the events tickets market reaped over $30 billion in 2005
• The market for all tickets sold online was expected to be in excess of $5 billion in 2006

2. AsktheVC.com

If you have a startup question, there is a good chance it has already been asked and answered at www.askthevc.com. A search returned nothing of of any real value (although I did spend a pleasant hour reading through the archives).

3. Australian Bureau of Statistics

If you want to know the average household income of DINK’s living in Sydney, the ABS is your honey pot. If instead you want some global market size statistics for the online event registration business, welllllllll……not so good.

4. Post in a forum and hope someone heeds your call

Australian Anthill have a new forum up and running, so back in September I posted a question about market size. It got just the one reply after 30 days (my own!). I may have had more luck posting in a larger number of forums.

5. Ask another entrepreneur

I emailed a fellow entrepreneur, as people who have been through the same trials as you are often more than willing to give advice. He recognised the problem well, and steered me towards point number 6. For his particular market he was fortunate enough to get the information he required from the Aus-US free trade agreement documents! No such luck for me.

6. Purchase a report.

Both IBIS world and www.researchandmarkets.com provide paid reports on any number of companies and industries. If your target market is travel or the gambling industry, you need look no further. Slim pickings for online ticketing though.

I did find one report on a major competitor, so gleefully shelled out $A150 for an electronic copy. I would have been better served hanging onto my money, as it contained no financial information whatsoever. Jibbed!

7. Ask the accountant and the lawyer

While I have a great accountant and a great lawyer, neither has sufficient exposure to the global markets that we are targeting. I could be wrong about my lawyer, but the thought of paying a few hundred an hour for a quick phone call makes me quiver. There has got to be a way of getting this info for free.

8. Professional Organisations

They exist for things like the secondary ticket market place, but nothing specific enough for my needs.

9. Analyse your competition

Possible the best way of evaluating market size and potential. Ridiculously easy if your competitors are publicly listed, but tough if they are privately held. Unfortunately all our main competitors are privately held, so the best we can do is make educated guesses.

Competitor 1:
Claimed to have done single digit millions in ticket sales in its first year, and will be doing double digit millions in 2007. If we assume a figure of 20 million, this would give them revenue of $500,000 (they take 2.5% of all tickets sold).

Competitor 2:
Invested $10 million in setting up their business, and have since processed over a million transactions. No idea of pricing model.

Competitor 3:
Processed close to 5 million transactions, and has over 40 staff. If we assume an average salary of $US50,000, and if wages make up 40% of revenues, this would give them annual revenues in excess of 5 million.

10. Ask people who have been there and done it before

I have decided to expand the scope of my network and ask a much larger range of people the question:

“When you started your company, how did you estimate market size prior to commencing trading?”

I have emailed a range of Australian, US and UK business folk in the hope that a few will have some pearls of wisdom. I won’t list them here now, but if I get any replies I will include them in a follow up post next week.

I guess no-one said doing a startup would be easy. If you have any experience in estimating market share, please share your thoughts in the comments below.

It is hard with everything else that is going on to make time for blogging, hence why my posts here have been somewhat infrequent. Time management has never been a great strength of mine, but two things have happened in the last few weeks which give me cause for optimism.

By themselves they are small, but together they can have a massive impact upon your ability to get things done.

1. Inbox zero

The basic tenant is that the most effective way of dealing with an overflowing inbox is to process to zero. An inbox is not a to-do list and should not be treated like one. Every single email is either replied to, deleted, archived or moved to a “to-do” list. Be ruthless.

I won’t go into great detail about the why and how, for Merlin does a much better job of explaining it than I would.

www.inboxzero.com - links through to the original series of posts on 43folders.

You can also catch Merlin discussing the concept at a Google tech talk. Watch it through while preparing dinner one night as I did, and you will find it worthwhile investing the 60 minutes it takes to watch.

[youtube=http://www.youtube.com/watch?v=z9UjeTMb3Yk]

Take your inbox zero methodology and combine it with concept number two.

2. Schedule EVERYTHING

A to-do list of 10 items that doesn’t have a schedule is a waste of time. Trust me, this is 10 years of corporate life talking here. Over the years I have created a myriad of to-do items, and then wondered why at the end of the day I only achieved 3 of my 10 tasks.

3 out of 10. Am I inefficient or just plain lazy?

As it turns out, it’s neither (although my girlfriend may disagree about the laziness call).

The problem is that it was never possible in the first place to achieve all ten tasks in one day. It looks so easy on paper…ten little things to do….should have this all wrapped up by lunchtime…duck out to the noodle house for dumplings….come back and spend the last 5 hours working on fun stuff. Too easy.

It doesn’t work. It sounds so simple, but the answer is simply to schedule everything in your day. Take your ten tasks, work out how long each is going to take and then plot them into your favoured calendar tool.

To show you what I mean, here is my actual calendar for today.

Everything I want to achieve today is slotted into a time. Even lunch. I am only writing this blog post because I was scheduled to do so!

I know..I know. You are thinking “This is so obvious, what are you going to teach us next…the multiplication tables?”

My only response is, yes it is mind blowingly obvious. But do you do it?

The upshot of all that is that I am now scheduling regular blog posts. Proper detail, to really fill you in on what it is like to go through the process of starting your own company. The first is being written this weekend, so come back Monday for some more.

Scheduled blog posts means they get done. Inbox zero means I have the time to do them.

This week marked three important milestones in the evolution of Trickytix.

1. We started to receive emails from prospective customers asking about using the product. No prompting from us, no cold calling. Just unsolicited emails.
2. We developed our first piece of marketing material (a brochure), and sent that to a prospect.
3. We all got together and discussed the current state of our solution, and unanimously agreed it was crap. More on that below.

Unsolicited emails

The only marketing we have done so far is attach a logo to our email signatures, and this blog. Somehow, the word is trickling out there, as three separate prospects from around the country emailed us this week asking for more details. It’s a good sign that we are building something that solves a tangible business problem.

Marketing Material

Due to the fact that we have started to receive enquiries before we have a complete product to show, we quickly whipped up a brochure that can be easily emailed out. The best thing about putting the brochure together was that it forced us to put down on paper our pricing model (something we had been avoiding making a decision on).

It also helped us to define exactly what it is we are doing. In fact, page 1 of the brochure goes something like this:

Trickytix is an online event management solution that anyone can use. Whether you’re planning for 2 people or 20,000, Trickytix can handle the online registrations for your event.

In less than 5 minutes you can:

• Create an account
• Set up your event
• Accept online registrations for free

Trickytix is free to use for free events. If you want to accept payments for your event, Trickytix provides a low cost solution for processing online transactions. Accept real-time credit card payments straight into your own account, or use the Trickytix account if you don’t have your own facility.

Yes - the more savvy amongst you will have noticed that we write our own copy. Web consultants we may be, copywriters we are not. Having said that, we will continue to bang out “acceptable” marketing copy while our budget remains tight.

Download a copy of the Trickytix brochure yourself. I would love to know what you think, so feel free to leave a comment below.

Crap User Interface

The meeting this afternoon was called to discuss the prototype of Trickytix, and get a feel for what the four of us thought of it.  The consensus was that it was not quite ready to release to the market.  I think someone even used the word crap.

This is a good thing though.  In fact, it’s fantastic.

A moment such as this is exactly why we built the software in this way in the first place (no wireframes, no use cases, just straight into coding).  Wireframes don’t tell you how easy your screens will be to use, and the only way you are going to find out is if you build it and start using it.  We built it, we used it, we hated it.

Now we change.  Now we spend the next 2 weeks improving and tweaking the interface so that it becomes a great user experience.  We embrace the fact that we are small (4 employees) and simply change direction.

It was one of those moments where we realised we were heading down a path we didn’t want to be on.  Being small allows us to simply stop, turn around and go back to the last fork in the proverbial development path.  Launch gets pushed back again, but the product improves significantly.

Now that we have a prototype of sorts (plenty of internal testing still required), we are starting to shop the concept around to a number of prospects.This is our customer development phase. We have a product, now we need to find someone willing to use it.

When speaking to our first customers, we are trying very hard to resist selling anything other than the prototype. When asked “Can it do this?”, the answer is usually “Yes it will be able to do that in the future”, rather than “Yes, let me go away and add that on for you”.

Ultimately, we are trying to sell the customer what we have right now. If they are not interested, we move on until we find someone willing to accept our existing list of features.

It would be easy to come back from a customer visit, add all the features that they thought would be helpful and then revisit the same customer. We have decided not to do that for a number of reasons:

1. The features we add now may not be what the majority of the market really wants.
2. Adding features before we have actual customers doesn’t allow us to really test whether the product is going to be useful or not.
3. The kind of customers we want at this stage of our development are not the kind of people who wait 6 years before buying an iPod. We need early adopters willing to take a chance. We want visionaries.

If in the next month or two we cannot find anyone willing to buy into the vision, well then we go back to the drawing board and add some more “must have” features. Until then, we keep looking.

We recently pitched a potential customer on the benefits of our software as an event management tool. They were looking to run a national charity event, and needed to progress from their existing manual process that had served them for the last 12 months.

We ended up missing out on the job due to price. The customer decided that their return on investment (ROI) over 3-4 years would be better served by paying a large amount of money upfront (with our competitors), than paying a small percentage for the life of the product (us).

We missed the job, but we learnt a lot about our potential customers. Do I really think this customer will still be using our competitors’ software in 4 years? No not really, but it is great to know that some customers are interested in their ROI over that kind of time frame.

So missing the job didn’t cause us to rush back to the office and instantly throw out our pricing structure. It simply increased our knowledge of our customer base, therefore getting us closer to landing the first one.

Visit the Anthill forum

One of the great things about the Internet is that people have started sharing some great information about their products and processes. It is now possible to find out what some of the leading web applications cost to build, and therefore make a good guess as to what it is going to cost you to build one.Some costs of other web applications are shown below (US$), with the numbers taken from Read Write Web.

Dropsend: $48,012
Freshbooks: $20,000
Maya’s Mom: $70,000
Mobissimo: $60,000
Wesabe: $200,000

The numbers above suggest that angel financing (or your own cash) should be all that is required to get a prototype out the door. Anyone asking for 7 figures off a VC without having anything to show for it is trying to run before they are walking. Any VC happy to give out that kind of money without first seeing a prototype, well my contact details are here!

If you ask Guy Kawasaki however, building a web app can be done even cheaper. In a tribute to that post, the following numbers are supplied from our experience in building TrickyTix. All financial figures are in Australian dollars.

1. 2 - The number of external developers we added to our existing team of 5 in order to create the right set of skills.
2. 0 - The number of finalised business models we had before commencing development (although we did have a broad understanding of how we intended to make money)
3. 0 - The number of documents (functional specification, scope of work, business requirements, business plans, change management requests, risk registers,) we wrote before starting building our app.
4. $6,500 - Legal costs for trademarks and terms and conditions (x 2). We didn’t skimp on this, and went and found ourselves a firm that specialises in IT, IP and fast-starting companies.
5. $500 - We spent approximately $500 registering domain names.
6. $2,500 - Accountant fees to be spent on setting up two new companies. One to run operations, the other to hold the IP.
7. $60 - We used Basecamp to project manage the entire development, as well as manage task allocation.
8. 4 - By the time we push the prototype out to test, 4 months will have been spent building the app.
9. $1,000 - Time spent developing the logo, colour palette and typography. All done in-house.
10. $4,200 - Money spent on User interface and the design of both the website and the application. Again, all done in-house.
11. $6,500 - Development costs for the front-end of the application. As with any modern web app a significant portion of that was spent on javascript, with 1 specialist contractor brought in to assist where required.
12. $9,000 - Where there is a front-end, there is usually a backend. Think databases, think scripting, think geek. Half the costs here were spent getting in a specialist contractor, and the other half completed in-house.
13. $0 - When you use open source software, the license fees are pretty sweet.
14. $450 per month - Dedicated server to host the application. There are cheaper options, but this should suffice for now.

There are other fees still to come (merchant account for one), but it won’t be much higher than what is listed here. In the final wrap up, we end up with:

$30,710 to develop a prototype web application in Australia.

I have tried to account for in-house development at wage cost rather than actual consulting prices, but to be honest there is probably still a lot of “sweat equity” unaccounted for.

So what do you think - has the price come out lower or higher than expected? Anything you think we have failed to take into account?

Visit the Anthill forum

I haven’t blogged for a while, as I was waiting for the newly minted Australian Anthill website to go live. Now it is here, I hope to be able to share our ups and downs as we attempt to grow a brand new business.So where is the prototype I hear you ask?

It is close. Real close. If it was a freshly baked loaf of bread, you would be able to smell it rising in the oven right about now.

While our regular consulting work has taken priority many times over the development of Trickytix, if we are honest with ourselves we have also neglected to properly embrace the notion of constraints.

he team at 37Signals put it best in their e-book Getting Real:

There’s never enough to go around. Not enough time. Not enough money. Not enough people.

That’s a good thing.

Instead of freaking out about these constraints, embrace them. Let them guide you. Constraints drive innovation and force focus. Instead of trying to remove them, use them to your advantage.

Constraints are limitations that actually improve the likelihood of a successful outcome. While we have embraced a number of important ones (restricted budget, small development team, tight deadlines, no wireframes just jump straight into the User Interface), we may have built “too much” software for the first prototype.

That is not to stay that the first cut will be a perfect, bug free solution (far from it!). But it may do some kind of cool things that it didn’t really need to do for the first launch. Your customers won’t thank you for spending 4 hours to make the background of an element light up when it is dragged and dropped on the screen, if by doing so you miss your ship date.

But enough of that, and back to what I promised the Anthill guys I would blog about. Everyone wants to know what things cost, especially if they are considering making the leap into self-employment themselves.

With that in mind I will get my next post out by the end of this week, with details of what it costs to build a prototype web application in Australia. Development costs, hardware and software, legal fees, accounting fees, trust companies, food, beer and everything in between.

eep in mind we are boot strapping the initial build from our own cash reserves (no VC funding at this stage), but we are an established company and so have tried to do things properly.

Therefore:

1. If you are a freelancer in your bedroom thinking of building your own app, yes you can do it cheaper than what we have (divide our cost by at least a factor of 5).
2. If you are a business unit within a large ASX listed company, hire 30 more people, multiply our cost by a factor of 25 and spend the next 18 months building your product. You too will miss ship date.

See you next post.

I read back over my first post and wonder where the time went. To quote myself from May:

Good enough is good enough, and we will launch something within 8 weeks no matter what

Welllll… good enough is good enough, but you still need to have a functioning product to launch something. This coming Friday the 6th of July was our original launch date, and we acknowledge we are going to miss that.

Setting the deadline in the first place was still a great idea, and it has worked well for us. We have made a lot of progress on the prototype, while still churning out a hell of a lot of client work. But the 6th of July will come and go without a launch.

Reasons for missing the launch?

1. This is our first web app, and to be honest the 8 week timeline for development was a bit of a guess
2. Developing an app while completing client work in parallel means resources are pulled out of development at inopportune times. The extra time will allow us to get the business better prepared for the first customer, including sorting out the pricing model (a subject of a future post).

A new launch date has been set internally for the 27th of July 2007, and we are now re-focused on getting a prototype out the door on that date. This first cut is likely to be a closed door beta (invite only), so sign up at TrickyTix if you want to help test.

Visit the Anthill forum