Things have been busy this quarter…so busy in fact that I’ve hardly had time to blog at all, which is why you’re getting a quarterly report rather than a monthly report.
Q1 2016 was a very productive time for Epsilon Eight. I’ve been hustling like crazy to drum up new work, stockpile some cash for slow months, launch new products, and put processes in place to free up more time.
The holidays are always a rough time for business. Budgets are generally locked in towards the end of Q3, and folks are slow to get started at the beginning of the year. Heading into the holidays I was particulary concerned we were going to run out of money so I worked with one of my previous clients (funded by a government grant) and we locked down a rate that fit their grant guidelines and allowed me to work full time.
I’m forever greatful to this client but the unique way in which they are funded meant that it took 60 days for them to pay their invoices, through no fault their own. When I invoiced the client they would invoice the state of California. I was forced to wait until the state reimbursed them so they could make a payment to me. Now, the CEO was very aware of this and worked hard to streamline payment. In the best case scenario I was paid within 45 days. Worst case, approximately 60 days.
15-30 extra days doesn’t sound like that big of a deal but that slight delay makes it difficult to predict cash flow. For several months we were floating our personal expenses on our credit card to the tune of several thousand dollars a month. Admittely, if we had more cash in the business account, this would have been less of an issue. But we’re a new business and we simply don’t have enough reserves right now to float for 2 months. To remedy this, I cut my wage by 10% and am actively using that money to build up our reserves.
Conversations with a venture-backed company in San Francisco for a payments-related project fell through when they couldn’t get their recruiting team to sign off on a semi-remote consultant, even when I offered to cover my own travel expenses. This was disappointing as the rate was fantastic and the project was expected to be 3-4 months long.
Monthly Revenue: $4,531.25
One of my goals in trying to scale the business this year was to find a great dev shop to do the software engineering work so that I could focus on business development.
In February I decided to run an experiment with a client I’ve had for ~3 years. We’ve mostly done part time work for this client, generally netting us $2.5k-$5k/month. Budget constraints prevented us from doing much more work than that. I love this client but the work was preventing me from taking on other full time clients. To free myself up for more consulting and get my client more bang for his buck, I partnered with a fantastic development company in Barcelona who I met while on a trip to San Francisco.
We did a lot of planning during January but kicked off the transition in February. I’m happy to report that this arrangement has worked out quite well. I stepped back from the engineering and left the project in their capable hands. I went from spending ~40 hours/month on this project to ~5 hours. This freed up some time for managing the business and doing more billable work.
It was this month that my anxiety level was the highest. While we were waiting for payment on those invoices from our holiday client, the credit card bill was steadily growing. We’d never had a credit card bill this high before and it was making me nervous. We did a good job racheting down our spending but some expenditures are simply unavoidable. On some level I knew our client was good for the money but it still didn’t sit well.
One byproduct of this anxiety was that I decided that we would switch to weekly invoicing. Now, it should have been obvious. I know a lot of folks in the consulting business who do this and I’ve read tons books and articles about invoicing schedules; weekly invoices should have been obvious. But I’d simply never had a client who didn’t pay within 30 days so I never had to insist on a different invoicing schedule.
Another byproduct from all this anxiety was that I decided I didn’t want to work five days a week. By chance my wife and I had a number of Friday’s off of work during January and February that allowed us to going skiing, hiking, and do some home improvement projects. Part of the whole point of starting a business was to take back my schedule. And I’ve read enough books about company culture and management to know that habits (bad and good) established early on are difficult to change. I’ve always admired Ryan Carson at Treehouse for sticking to this policy, even when it would have been very easy to cave and require folks come in on a Friday during a bad week.
It was also during this month that I started looking for ways to generate revenue beyond agency-type engagements. I toyed around with building a product but honestly that’s a lot of work. Having built several products that nobody wanted, I wasn’t totally confident in my ability to do the requisite research, build a prototype, then go out and sell it. However, I was pretty confident I could build a landing page for a productized service, and try to sell that. Inspired by WPCurve, the support service for Wordpress, I decided to try to sell a Ruby on Rails support service. Those of you who follow me know that I attempted to sell this same service last year, however I did a terrible job of it.
As February came to an end, our holiday client brought on a developer, obviating the need for our services. We wrapped up the project we were working on and I began having converstations with another consulting company based in Chicago about working as a subscontractor. This lead was a referral from a good friend. The rate was good but still part-time and not the ideal arrangement for my business. Nevertheless, the gig went well and paid on time.
Monthly Revenue: $7,362.50
We missed our Janurary and Februrary monthly goals and I was annoyed. I had hoped to be doing $20k+/month or more at this point but we weren’t quite there yet and I was beginning to wonder what I was doing wrong. Thankfully, March made up for it in spades. We hit a number of goals that really made me proud.
I started having conversations with a consulting company in San Francisco about a gig in the Education Tech space. The gig was particulary interesting because they were primarily looking for engineering leadership, a niche that I had tried to sell last year but didn’t have much success. I wrapped up the job with the Chicago client and inked a deal with this new client for 3 months of work at a very nice rate.
The arrangement with the team in Barcelona also paid off. We launched a number of features for this client that I wouldn’t have been able to do on my own, nor would the client have had the budget for. This was our first experiment with subcontractors and fantastic validation that the model could work. This client recently hit a dry patch and we had to scale back development. Fingers crossed that business picks back up for them.
A large invoice from our holiday client closed, totaling $10,160.00.
The payments integration partnership with my previous employer started yielding real fruit in the form of solid leads forwarded to us from their Customer Success and Sales teams. We picked up a short payments consulting gig from a subscription business doing $100k/mo and helped them sort out their payments integration. We had some initial conversations with several other referrals that could turn into big contracts as well.
I successfully worked out the details of the Ruby on Rails support product, dubbed RailsCare, and launched a landing page for potential customers. I was also able to find a handful of spare hours to write some lead generating scrapers to generate and qualify leads. We have cold emailed approximately ~60 potential customers so far; no nibbles yet but it’s also very early.
Monthly Revenue: $26,846.25
Q1 2016 was good for Epsilon Eight, but only because March made up for January and February. It feels a bit disingenuous to suggest that in March we did $26k in revenue when in fact we only hit that number because a couple invoices closed later than we expected. Nevertheless, I think hitting $20k in a single month is an important milestone to celebrate. More importantly, we’re developing a solid pipeline of clients.
Looking towards the future, we’re on track to do very well in Q2. I’m hoping to sell 2-5 subscriptions to RailsCare and continue to nurture the integrations partnership we’ve built with my previous employer. Landing several RailsCare customers would also go a long ways to validating the product and help smooth out revenue.
As always, thank you all for your love and support. If you find these useful, or have any questions, don’t hesitate to comment!