Starting Out

• going from contractor to shop = making a lot of mistakes and surviving them

defining the type of shop you are - what are you selling, what is your market?

• identify your team’s strengths and go with them, but also be adaptable in case your market shrinks
• CivicActions - thought they’d be leading shop for political campaigns and candidates and nonprofits - they’re a mission-driven, values-based company and choose clients accordingly. Quickly dropped notion of working for political candidates & shifted to large international nonprofits. Also use Agile project management, so they have ramped up competency around working with clients and bringing in projects on time and on budget
• figure out what you really enjoy doing and what you’re good at, focus on that

Mission Statement & Business Plan

• you should have both of those early on, but those should be changeable and adaptable
• these help you create your website content, in your proposals, etc
• think about the value proposition that you bring to your clients
• do what you do best and outsource the rest - the skills necessary to build websites are not the same skills you need to run a website-building business

Partners?

• Find people who fit good roles. If you’re a dev, find a business person, or vice versa.
• Define roles for each partner
• Partners need to help boost each other, split tasks
• CivicActions started by 3 partners, were at 13 partners at peak, now at 9. Transitioning from LLP to C-corp. Business structure impacts liability, ability to raise capital, tax structures, and decision making structures. Need to be really clear about corporate structure, decision making, and responsibilities. Don’t need to be set in stone, can rotate or swap tasks.
• Sometimes partners are more affordable than employees.
• Good idea to have a business-focused partner and a tech-focused partner.
• Have to have clear expectations for each partner - clear responsibilities, make sure they’re aligned.

Management

• Remove vs office - sometimes being remote takes too much time to communicate, for some people it works better to work together in person.
• CivicActions: intentionally remote, no office, let people live wherever they want to live. Business units or teams called “pods” will get together to sprint for a week at the beginning and ends of projects. Face time is important early on and throughout. Get together at DrupalCon, other conferences, video conferencing, phone calls
• If you’re a “virtual” or distributed company, the overhead you save on rent, office, etc can be devoted to getting the team together in person
• Have people who are willing to be flexible, work across timezones, are responsible and dedicated

Bids, Juggling Projects, etc

• Advice = don’t do fixed bids! Irresponsible to your shop and to your clients, especially when working with unpredictable open source.
• Juggling more and longer term engagements - you need a business person to juggle all the moving pieces internally and externally
• Balancing contributions to the community vs client work - balancing internal business dev with client work is also very difficult (building biz, website, documentation, etc)
• share back with the community - write up what you’re doing, share your products, write up case studies and white papers. build personal brand.

Investors & Growth

• investors and loans? CivicActions bootstrapped the company, never took out loans or got investors. Advice: if you can’t do this without capital, you might not want to do this now
• Another company did take out loans to facilitate staff growth
• CivicActions project estimating worksheet - very useful
• get advice from other shops, open source community, get advice from friends and family
• if someone’s trying to pressure you into doing a fixed bid, you can give a “best estimate” range, do best to come in the middle
• educate clients so they’re okay without fixed bids - provide estimates with an asterisk,
• prioritize the important pieces from the RFP first, do things in order of priority, if you hit the end of the budget it won’t be such a big deal to leave the little details off
• get a lawyer, get an accountant! start out with good contracts revised by
• CivicActions doesn’t employ people, they have contractors

Sales and Marketing

• create reusable templates for RFPs, Estimates, and Proposals
• demonstrate & publicize community participation and contributions - meetups, camps, local community sites, conferences
• contribute! in open source as in academia, publish or perish
• develop or claim modules or other products in desired markets (e.g. mapping, media, mobile, etc)
• make friends with the “competition”

Basic Roadblocks to Progress

• Cashflow is King! Especially once you get employees, since partners don’t necessarily get on payroll.
• Get upfront money on projects. CivicActions does a monthly upfront; you can ask for half up front for the project, things like that.
• Charge finance fees on late bills
• Don’t get too excited about the high points, don’t get too scared about the low points
• Have a clearly defined payment schedule in proposals and contracts
• Taxes - very hard to anticipate, have to anticipate
• Accounts Receivable = what you’ve got invoices out for that you haven’t gotten paid for yet, have to stay on top of this and do your best to collect

Get Help

• SCORE - Service Corps of Retired Executives, SBA, Business Schools (sometimes they can give you interns)
• Collaborate with other shops
• Consultants email lists

My questions

• pacing growth (staff AND projects)
• speak to the shift from contractors to full-time employees
• if you don’t use fixed bids, what do you tell your clients, ESPECIALLY nonprofit clients?

Panel of the people on this page, also listed below. Sorry for lack of attribution for each comment!

How has managing a Drupal firm changed over the years?

• the focus of a firm is often inward; as Drupal has changed they’ve had to shift to focus outward. As Drupal grows, community grows and you have to be a part of it in order to be successful. Volacci has a partner program where they form relationships with other shops, build and nurture relationships as communities grow
• Used to have to sell Drupal to clients harder, but that’s eroded and changed over time - people started calling them
• As Drupal shops start to appear & Drupal gets higher profile, more competition forces shops to innovate and do things better

What are some of the best decisions you’ve made in your shops?

• working with Drupal is the obvious one
• team relocated from small town in Virginia to a larger city - able to attract and maintain good talent more easily
• a different attitude towards telecommuting
• process is important, but it’s also important to show your clients how your internal processes add value for them
• focus a lot of time on getting team to dance well together - it’s expensive, but everyone who comes into Development Seed gets Getting Things Done and Made To Stick. It’s very difficult if you don’t create a culture, have a consistent base within your organization, creating a GTD culture and having a common lexicon. Two other books for management specifically: Good to Great (prevent burnout!) and Getting to Yes (help decision making process as a team)

Context

• Eric Gunderson, Development Seed: 17 people
• Dave Terry, MediaCurrent, 12 employees, started focusing on Drupal in Fall 2007
• Jon Clark, design group, 6 member team, denver, 4 years in Drupal
• Ben Finklea, Volacci, 60 person firm in Austin
• Jeff Walpole, Phase 2, 32 people, founded in 2001, Washington DC
• Glenn Hilton, ImageX, 12 full time, founded 2001, started Drupal in 2005

Where do you go to recruit good people?

• As an owner, start with culture and vision of the company
• Get a lot of great people from Craigslist - Volacci finds lots of people who do good stuff that’s not Drupal specific well and teach them Drupal
• determine what percentage of management time is appropriate to dedicate to recruitment
• get the wrong people off the bus, get the right people on the bus.
• Always be recruiting, always on the look out
• Keep feeding work to freelancers and look for people to bring onto your team
• Read a book called Who
• call up colleagues & other companies to see if they have good leads on new talent

How to retain employees over time?

• find good fits, self-motivated communicators
• foster a good work culture & environment
• client work is training; product work can be more rewarding. Product culture is essential for staying sane.
• Need to find good structure early on for crafting contracts
• Development Seed basically fix prices solutions that they deliver, which is terrifying.
• Figure out a way to fix scope and be stubborn with clients
• It’s your job as a manager to facilitate your team; crazy client stuff will break down your team
• key to keeping employees is the direct relationship with owner or supervisor - that’s what will make them stay or leave. That comes down to communication. High salaries won’t do it.
• One perk: $2500 per year tuition or education reimbursement. Continuing education is a bigger perk and advantage than money. Send people to DrupalCamps and DrupalCons, get books, etc. Ask for knowledge share in return - e.g. 15 minute debrief at staff meeting.
• Culture of open communication and truly open debate. Not just token opinions, but real debates that change the way company works fosters ownership.
• Hire slowly, fire fast - don’t keep people who don’t work well.
• Volacci has no vacation policy - don’t track vacation, yet to have anyone abuse that. Go as long as you want to, but don’t drop the ball and get your work done. Have a weekly Volacci University - someone teaches a 30 minute course to the company on anything they want. Every Friday is WIFLE - What I Feel Like Expressing - each person has an opportunity to express anything they feel like expressing. No one can talk while you’re talking, everyone thanks each other for sharing, opportunity to get issues out and off chest. Rule that you leave it in the WIFLE. Also have weekly kudos meeting. When you get a kudo, you get to take a Pez dispenser from anyone in the room white elephant style

What’s the most useful technique for getting/increasing sales?

• Must create relevant, fresh content - blogging, white papers, whatever
• Form partnerships and alliances. Some of your best projects will come from other Drupal firms. Outreach to larger firms, ask for their leftovers, work on smaller projects which lead to bigger engagements and form alliances
• Contribute back to the Drupal community
• Blog posts take time, need to be strategic. You can make concrete, specific posts about technical problems and how they’ve been solved
• Errant volume in sales is as destructive as errant volume in recruiting. Better to grow slowly to get the right sales and the right clients, otherwise you’ll lose focus and go where they want to go and not where you want to go.
• Find a niche and be the best possible firm in that niche

Presentation by Liza Kindred

Background on Liza and Lullabot

• Liza’s background is fashion - “a lot of stuff that most people here don’t care about” - and art, nonprofit boards of art orgs, now a Lullabot (employee #3)
• Liza is obsessed with open business models
• Lullabot - podcasts, high-level consulting, site architecture, development, training, books
• Lullabot is not only professional and successful but cheeky, funny, nontraditional, fun

Open Source Business

• awesome video comparing open seeds to open source - navdanya.org
• same ideals that are true in open source technology are true in open source business
• make mistakes - Lullabot has made many ones (epic ones) and it’s and important part of doing open source business.
• Lullabot is an awesome place to make mistakes - e.g. Angie Byron’s major data import messup made her Lullabot’s data import expert
• Be forgiving, create an environment  where people feel comfortable admitting to their mistakes, recognize value of lessons learned from mistakes
• “Management’s job is not to prevent risk but to build the capability to recover when failures occur.” Ed Cartmill, President, Pixar
• “room for stupid” - Addison Berry’s concept - takes “stupidness” and help other people to not be - help others learn the lessons you learned the hard way, value that sharing
• “give it away” - do what good chefs do - out-teach, out-share, and out-do your competitors
• Create, then capture - Open Business Models by Henry Cheeseborough (sp?) - create value, then capture value. Drupal business is a pie; Lullabot grows the pie bigger so we can all share the pie. More room for everyone.
• Ways to contribute back - not just code!
• Social Signal - gave their intellectual property from four years of consulting, strategy, and development and made it available for free online under Creative Commons
• have to balance giving away vs making enough money - at a certain point you have to draw boundaries, determine what you actually charge for.
• consulting vs development: dev is building, consulting is recommendations, best practices
• Liza did some surveys of small Drupal shops, got data on what rates people are changing. She’ll post them soon. (All of the rates are higher than my highest rates! Hmm.)
• Threadless business model - designers submit design (1500 designs submitted per week), community votes, when they rise to the top the designs are chosen and printed. Designers are paid $2000 per design that’s chosen, additional money on reprint
• “have faith” - if you have faith in what you produce, you feel more comfortable giving it away
• Example: In Rainbows, Radiohead album that they gave away. They weren’t able to count the ones they gave away as album sales, but the “official” sales still sold 3 million copies and topped the charts
• Moby - his sites are on Drupal, including mobygratis.com - given away for free to small filmmakers, nonprofits, etc

Lullabotisms

• 20/20 rule - Lullabots get 20 hours a week of client time, 20 hours a week of whatever else they want to do
• No Bad Clients - mean people suck, only work with people who are nice and interesting and return the favor
• Saying No - Liza’s first job description was to say no, filter through all of the requests, tell almost everyone no (client gave her a nickname - the Velvet Hammer!)
• Rule of Threes - clients need to be nice, have a healthy budget, and/or have a fun or interesting project. Each client has to have two out of three, one of them being “be nice”
• keep it open!

Audience Q&A

• Q: How do you structure ownership, profit sharing, etc? A: don’t do ownership because it is expensive for Lullabots; have done profit sharing; try to give good, competitive compensation (though not at the top) but make it an excellent place to work. Not a monetary part of the compensation but a really big part of the compensation.
• Q: how do you identify the people you want to hire? A: Used to have a saying - never hiring, always looking. Open source = meritocracy - sit back, see who’s really awesome, grab them up
• Q: how do virtual teams work? A: up to 17 people, no office, entirely virtual, all over North America. Everyone works from home or their own office. Get together a couple of times a year entirely as a team (usually Drupalcon North America or Do It With Drupal). Tools for communication. Use IRC, IMing, Skype, team calls, screen sharing. In constant contact!
• Q: are Lullabots paid hourly or salaried? A: Salaried! At first it was hourly, went from group of freelancers to employees after about 1-2 years. REALLY HARD TO DO - Liza spent a year on the transformation! (eek!) Core Lullabots all full timers with 401k and benefits and all, though some contractors as well
• Q: How does advertising work? Google Ads, Targeted Search, etc? A: They do some of that. Lullabot was started on $10K, never got outside investment, never took out a loan. Competing now with much bigger budgets, so they’ve had to start doing a little advertising
• Q: Where does most of the revenue come from? A: for a long time it was mostly consulting, now more evenly split between consulting, development, training. Had to diversify over time. Made cognizant choices. DVDs are a product but they’re a service company; saw that the economy was changing, people would have smaller amounts of money to spend, Drupal was growing huge so needed new ways to reach more people
• Q: How did Lullabot start? A: first did dev, then started doing higher level consulting, then realized they needed more Drupalistas out there so started doing trainings to create a bigger Drupal pie to sustain themselves on multiple levels (training revenue + more people doing Drupal to make Drupal sustainable and successful)
• Implicit Q, A: for startups, use freelancers for as long as you can before converting to employees - so much overhead and resources go into making people into employees!