Campfire and Highrise are not failures at all. They generate millions a year in profits. They just aren't our focus anymore. We want to focus all of our energy on one thing, not multiple things. Nothing more than that. No hidden agendas or hidden news.
Anything is possible with software - especially horrible complexity. Rolling more things into something isn't the way forward. We're committed to getting simpler over time, not harder. Not more stuff, but the right stuff.
No crisis. Business has never been better. The reasons are all honest and all clearly spelled out at http://37signals.com. We just don't want to hire a bunch more people and we don't want to have to spread ourselves too thin. Focus is where it's at and we want to regain it.
No one sold anything and no one bought anything. The piece of the company that Claire owns was a gift from us - and she can earn more as the company does better.
We moved it out into its own company, which Claire now runs.
Why are you spinning off the business if it's profitable? Why isn't Claire joining 37S instead? What's happening to ClarityBox? What other operating scenarios did you guys consider? Who is going to run the business . . . will Claire be doing product development, programming, customer support herself? What exactly will she be doing? Is she hiring people? Who are these people?
Of course you don't owe anyone any of that info. However, if you crack the door open just a little bit, don't be offended/surprised etc. if my curiosity is piqued and I want to open it.
Know Your Company was a big experiment from the start. A totally new kind of product for us, an entirely new kind of business model for us, etc. And now we're taking that to the next level with an entirely new strategy for us: Spinning it off into it's own autonomous company and letting it find its own direction.
As I mentioned in the original post, we wanted to hire Claire to run Know Your Company inside 37signals, but there was a fundamental conflict of interest: She had interviewed everyone at 37signals as part of a consulting project, and knew a lot of details about how everyone felt about the company. Everyone spoke to her in confidence as an outside consultant, not as a colleague. Bringing her into 37signals as an employee later would be a violation of that trust, so we weren't able to hire her.
You'd have to ask Claire how she plans on staffing the company, but initially it's just her with a little bit of our help during the transition. As far as I understand, soon she will be bringing someone on part time to help with product development until she's ready to make a full-time hire. Slow, steady, and prudent.
I really like the organic approach you've taken here. Just let things evolve, see where they go, and make the best decision you can at that point in time.
Also, Claire was friend of friend of mine in college, and I'm very excited for her!
yup, it makes sense why Claire wouldn't be part of 37s, and if the fit with her and the product is one-of-a-kind, makes sense that it would be organized separately if thats the only way to have her be a part of it. Of course now that you add more color, I'm more curious. I always got the impression you were more personally associated with Know Your Company than the other 37s products (having your signature on the marketing page), if so, are you personally bummed to give up the product and not direct it's continued development? Are you going to be working on something new?
Hey there, this is Claire. Hopefully Jason was able to answer most of your questions. But if not, just wanted to chime in...
As the CEO of Know Your Company, I'll be running the business day-to-day. In the beginning, that will include everything from sales to customer support. I'll be bringing on a part-time programmer to do a bit of product development + maintenance until I'm ready to make a full-time hire. Overall, I'm not looking to build a huge team out-of-the-gate. I want to focus on talking with customers, listening to why KYC works for them, and learning how it could be better.
I'll be placing ClarityBox, the consulting practice, on hold to focus on running KYC and delivering the product. In the future though, I could potentially envision both a service and product offered together.
Let me know if you have any other questions – I'm happy to answer them.
"Why are you spinning off the business if it's profitable?"
I think it makes a lot of sense and is a smart move.
Gives an incentive to the person running it to "do their own thing" and by creating a separate entity they can also sell it more easily (if they want to). Or give an equity stake to Claire. And empower her to take chances she might not take if she is just "joining 37 signals" and is all distracted with general company goals.
More importantly it even creates a template to start other similar businesses and do the same. And not to get dragged into the day to day of each and every business or product line or decision.
Why not just keep the product in 37Signals if it's a profitable product?
"not to get dragged into the day to day of each and every business or product"; 37S has a successful history of getting into the day to day of every business and product, that's what they do exceptionally well. Why change that?
The one time pricing is very interesting. How do you define the $100 one time pricing? What if you decide to cut the product in the middle, do you give a full refund? Is there a time limit (20 years) or is this for as long as the service is alive? Is there a limit on file uploads? Is there a small annual recurring fee for maintenance?
$100 per person one-time works exactly how it reads.
If you have 27 employees, it costs $2700 one time. If you hire 3 more people, it's an extra $300, one time. If you let someone go, and hire another person, it's an extra $100. We don't sell against seats, we sell against unique people.
Hi Jason - mundane accounting question: how do you account for revenue deferral? I believe in general you're supposed to match revenues and expenses as they are incurred providing the services. i.e. Up-front revenue gets deferred over the lifetime of a contract, because you will incur costs of servicing that revenue during that whole time.
How does this work when there is no actual term?
(Sorry if this is off-topic - we're thinking through some pricing model stuff, and this was top of mind!)
"This is a one-time investment, not an ongoing expense."
I like the idea and it makes sense.
But I think it has to be restated in a way to not
sound as if there is a hidden cost that pops
out when getting to the fine print. That creates a negative
in a buyers mind [1]. Needs to be restated in more of a "ok I understand makes sense" or might backfire.
[1] Example: I had a building security system quote (cameras). Company said "we take care of the installation and everything". Quote states more or less "oh yeah but you have to supply 110vac outlets where we will put cameras". Oh great what is that going to cost me? Surprise. To me "everything" means turn key. Doesn't mean I am right but that is what I (not dealing with this every day) thought. My reaction. Had the salesperson said "Installation includes everything but electrical and that's normally $100 per outlet" prior to the quote I would have felt much better about the process.
It's all very clearly explained when we talk to the customer. Remember, no one can buy Know Your Company without spending at least a half hour talking with us first. We go through every single thing about the product, the model, and how it all works in those 30 minutes.
I was at a funeral the other day for a man who built a very successful residual alarm installation and monitoring business.
At the eulogy it was said that he taught his kids to say "and that's only" specifically the word "only" (not "just").
Btw, I would think that there is a fair amount of elasticity in this pricing. I would guess that people would pay $125 as easily as they would pay $100. "think" means that I would test. You may have already.
Since I brought up the point (which you answered) the way I would restate the copy (since this is HN and people want to learn and debate) would be:
(for now let's go with $125 for my illustration)
"The cost for this?
It's only $125 to setup an employee.
That's it.
The fee is one time and there are no additional or ongoing charges.
None at all."
(Note the word "setup" is used).
My point is by saying "$125 per employee" in my mind the (ad copy) gives me the impression that I won't have to pay if I replace an employee. The "only $125 to setup" in my opinion takes away that issue for the most part.
Strictly my thoughts from playing with pricing and wording for many many years. Others may feel differently. Personally I feel $125 is a better number than $100 can't quite put in words why.
Thanks for the clarification. It would be very interesting to see if anyone else adopts this pricing.
In spite of the flak you get from the HN crowd (the reason I am guessing, might be that you make it deceptively simple to hit $390,000 with 99% retention rate) it is always very refreshing to see your blog posts and the quality of your work is very inspiring. Thanks!
Most companies have a bit of turnover every single year. For knowledge based companies like mine, we have 3000 people at the desk. I don't know our turnover numbers, but if i ballpark it at around 20%, that would be $3M up front, then around $15000/yr perpetually, assuming that turnover rate.
For large enterprises, the upfront cost requires a bit of coaxing, while the maintenance cost is a no-brainer. I'd be curious to see where they go with larger installations. I'd love to see this product aimed at enterprises for 50-60 employees reporting up to a dirext or middle manager, while also proving insight to the executive team.
I agree. Sortfolio was a natural fit for a sale. Nice product, consistent revenue stream, easy to separate from the other products, not too expensive for a buyer so lots of potential buyers, etc.
