Unsexy and Profitable Businesses ~ More Observations From SXSWi

John Reeve | April 7th, 2010 | , ,

“We can’t all be heroes because somebody has to sit on the curb and clap as they go by.”
— Will Rogers

For every Twitter, Facebook, and every other Geolocation-Enhanced-Social-Network online, there are hundreds, if not thousands, of inconspicuous small businesses churning along at a profitable pace. They’re not attractive to mainstream media who seem to peddle more in headlines than in content these days. And making blips on someone else’s radar is not their top priority. They are simply content running these profitable small businesses that you’ve probably never heard of. You probably won’t find very many web design, development, and creative agencies in this group.

It’s not that web design, development and creative agencies can’t be financially successful (believe me, they can), it’s that us designers and creatives eschew the idea of not being sexy. We are all guilty of spending way too much time perfecting our creative agency’s brand and not enough time growing our business. Our narcissistic nature can lead us to put more of a premium on recognition and awards than on building solid and profitable client relationships.

At SXSWi we listened to a panel titled Unsexy & Profitable: Making $$ Without Hype, moderated by Paul Carr of TechCrunch, which explored the merits of being an unsexy and profitable small business. Paul is an incredibly funny guy who took a few cheap shots at his own employer to guide the panel in making its point — that businesses should focus more on profitability and less on sex appeal. Web designers, developers, and creatives will have a more difficult time with this concept, as they are entrenched in an industry that places so much emphasis on image, and has granted demigod status to the likes of Zeldman, DHH and David Carson.

There are so many great web design, development and creative agencies online who create great web sites, but who you’ll never see in Communication Arts or winning a Webby award. They are successful, content, and profitable, and yet, you’ve never heard of them. To be successful like them, you will have to decide how much time you want to devote to being sexy and how much time you want to devote to being profitable. Because, in all likelihood, you can’t have both.

What does it mean to be unsexy and profitable?

Unsexy businesses have a higher probability of success because they operate in less crowded markets and are focused on building valuable assets. Unlike their sexier big sisters, who are focused more on standing out in a competitive market than they are on making money. What does this mean for web designers, developers and creatives? How can an agency build up valuable assets? For most agencies the most valuable asset they have will be their people, their talent. Hiring, retaining, and nurturing talented designers and creatives is a top priority for any agency. For those, like us, who delve heavily into web development, valuable assets will extend beyond your developers to include a vast code library. Well maintained code libraries can be leveraged into profits by seeking out consistent client work that builds upon work already completed for other clients.

Speaking of clients, don’t worry about reeling in the big ones. In the early days of Pelago we struggled with not having bigger names on our client list (in fact, we got burned in our pursuit of one bigger client in particular, but that is another story). Instead, we found a niche designing developing web sites that most people will never see — company intranets and custom web applications. The money was a lot better and the clients weren’t as preoccupied with themselves. This business approach got us through two recessions, both of which caused a lot of design, development and creative agencies to go out of business. A sexy portfolio is pretty much useless if your are out of business.

But, all the cool kids are doing it!

“…Walmart is a real business, Twitter is not.”
— Ted Dziuba
I Can’t Wait for NoSQL to Die

Marketing an unsexy business is not easy, especially when all we see around us are the Twitters and the Facebooks. Popularity is a good thing for getting your small business noticed, but it’s not easy to obtain. The panelists made several valid points on the imbalance of hype in the marketplace. First, angels and venture capitalists are just as caught up in the hype as everyone else. They are funding features, not companies.

Meanwhile, journalists are attracted only to the sexy businesses, regardless of their ability to monetize, much less figure out how to monetize, their customer base. As Paul pointed out, TechCrunch is perhaps the most guilty of this by currently chasing after any headline with the word “geolocation” in it. Keep in mind that none of these hype machines are worthy of the holy grail status we’ve assigned them. Hype is simply not sustainable. There are other media avenues worth exploring when it comes to marketing your business, many of which have deep influences in more targeted markets.

How to become profitable

Becoming a profitable small business is not that difficult given enough time and patience. In the context of web design, development and creative, this means committing yourself to doing great work while you build reputation and respect. In the meanwhile, the panelists shared some ideas on what you can be doing to become profitable:

  • Find opportunities where other people aren’t looking. Older industries offer fertile marketplaces for tech companies to grow in.
  • Prove the profitability of your business from day one. Focus on how you are going to make money.
  • Attract talent through company culture and opportunity to grow. Job satisfaction and stability can be more attractive to potential employees then working at a over-hyped company.
  • Focus on your business, then your clients. Focus on PR last and don’t over-hype your business.
  • Growing your business will always take longer than your model predicts. A lot longer. Be patient.
  • Don’t fall in love with the first incarnation of your business. Be open to change.
  • You can’t fail if you stick with it long enough.

“37signals does not enter award competitions. We believe that the self-congratulating awards “scene” encourages agencies to misplace their priorities on the opinions of their peers, rather than the needs of clients and their customers.”

The process of becoming profitable tends to be easier for a web design, development, or creative agency. You calculate your expenses, your hourly rate, and then go find the work. However, agencies can learn a lot from what unsexy and profitable businesses have to teach us. It’s not all about the agency. The quality of your work is determined more by the success of your clients than by a jury of your peers. Building inroads into targeted markets can help agencies by making them experts in their field and by providing new business opportunities.

When we started back in August of 2000 we soon abandoned our hopes of becoming rock star web designers and developers who worked on hip and cool web sites. And it’s a good thing we did. By specializing in developing business strategy and web-based applications for other small online businesses, we were able to apply what we learned to our own web-based time, task and project management application Intervals. We aren’t the first ones to do this, either. Take a look at 37signals, a small web design agency from Chicago, Illinois, who has made big headlines with their commitment to business strategy in a web-based marketplace. The lesson to learn here is that if we focus on our clients and our customers first, building a profitable business will be less difficult, and it just might get you the media recognition you’ve always secretly wanted.

Notes from the underground

Explore the links below to see what others at SXSWi had to say about this panel:

4 Responses to “Unsexy and Profitable Businesses ~ More Observations From SXSWi”

  1. SMR says:

    Consider me one of the curb warmers … “We can’t all be heroes because somebody has to sit on the curb and clap as they go by.”

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John Reeve
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John Reeve

John is a co-founder, web designer and developer at Pelago. His blog posts are inspired by everyday encounters with designers, developers, creatives and small businesses in general. John is an avid reader and road cyclist.
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Jennifer Payne
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Jennifer Payne

Jennifer is the Director of Quality and Efficiency at Pelago. Her blog posts are based largely on her experience working with teams to improve harmony and productivity. Jennifer is a cat person.
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Michael Payne
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Michael Payne

Michael is a co-founder and product architect at Pelago. His contributions stem from experiences managing the development process behind web sites and web-based applications such as Intervals. Michael drives a 1990 Volkswagen Carat with a rebuilt 2.4 liter engine from GoWesty.
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