"Zero to Beta" in less than 100 days. What is this worth to you?
My firm is about to launch a new "Zero to Beta" service offering. Want to solicit the LI community for pricing input......
Okay all of you entrepreneurs and intrapreneurs. Here's the scenario....you have an idea for a new web-based product or service offering. Along comes a consultancy that claims that they can help you go from back-of-the-napkin scribbles to a working, production-ready, beta version in less than 100 days. What is this worth to you?
The components of this "Zero to Beta" service would include:
- 2-day Business Modeling workshop
- Persona development
- Lo-fidelity wireframing of the user experience
- Logo design
- Full-color UI comps & image asset creation
- Implementation and coding of the web app/site using open source CMS & DB
- Deployment of the app at your data center or on Amazon EC2
The goal of this offering is to (a) focus on the user experience (one of the few true differentiators), and (b) quickly deploy a working prototype.
So back to the question....."what is it worth" to be able to go back to your VC or Angel investor and say "we hit our first milestone in less than 4 months since you stroked the check"? How much would you pay for this service? $100K, $200K, $500K?
Clarification added May 15, 2008:
Based on the first responses, let me clarify/expand upon the original post....
"Zero to Beta" means that we are moving their business to a beta launch event in less than 100 days, not just building their app. Building the app is one part of the offering, but "Zero to Beta" also includes other components such as product strategy & definition, user experience design, and pre-launch preparation.
There are indeed app dev shops which offer some form of "app in a box" offering. These firms use frameworks (such as RoR), pre-built widgets, and components to bake an app in a compressed time frame. These firms can (and in some cases actually do) deliver a fine app. In other cases, they result in a complete disaster (we've rescued a couple of clients from these implosions).
Over the past year, we have seen new web offerings flounder due to:
- A lack of understanding into which customer segments the app is supposed to serve
- Unclear value proposition and no mapping of product features to the segments' wants/needs
- Little effort to envision an engaging user experience for these segments
- Not enough talent
"Zero to Beta" ensures that you are building the right app, with the right features, targeted at the appropriate segments, delivered in an accelerated timeframe. It is aimed at the entrepreneur or product manager that has raised seven figures in seed capital to provide a 12-18 mo runway for their startup. They know that if they can demonstrate a track record of delivering upon milestones, they will trigger future rounds on investment.
Please keep the comments coming. Thanks!
Answers (13)
Medium to large businesses will do this in-house. Anyone using VC will probably be put in contact with 'their' contacts. privately funded startups would I think be looking at $10/20/50k rather than $100/200/500k.
I'm just not sure how many small businesses would even contemplate a cool half a million for a web site these days.
Where is your added value proposition - is it the elapsed time? 3 months to build a web site is average for test marketing - many do it in 3/4 weeks.
I think you might struggle if you positioned this towards the medium to large business market segment - for the reasons Colin states above and more. There is IMHO however a huge opportunity in offering a service like this to individual webpreneur wannabes - those who see all the cash apparently being made/raised by the many so called web 2.0 companies and think they have a great idea of their own that could do just as well or better. They have one or several ideas but little money or technical know-how to develop them.
Of course going after these little guys will affect your pricing - bringing it down several notches from your starting point above of $100k. See hashrocket for example who claim that they will help you launch an app in 3 days for $30k, which is more like it in my opinion. Good luck!
Links:
Hi,
"Zero to Beta in 100 days"? I'm afraid I have bad news for you Darrel. This is worth 0. change it "Zero to Beta in 10 days" and maybe you'll succeed
No startup will be interested. They are creating websites using agile methodologies, releasing after few weeks and then adding more functionality.
Unless you will be building some huge systems for governments, banks or huge corporations. I cannot imagine how one can spend 100 days on building website. Is this 100 man days or are you planning to have the whole team working for that time?
Good luck!
Regards,
Lukasz
Travis V
Information Architect & Creative Technologist
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The problem is when talking about short timelines and rapid agile development, you're generally talking about tight groups that are deploying their own ideas. They can easily adapt, cut features to meet deadlines, etc.
If you try to apply the same things to large or medium businesses that want to be "zero to beta in 100 days" you're assuming they're going to do all this and be on your side during the process.
That's just not the case.
I hate to be the cynic but when you deal with large clients there are almost always delays. Large businesses that are paying $100k+ are usually unwilling to really go barebones and cut the fat to make it happen in a crunch if the only benefit is the accelerated timeline.
Andrew L
Director at TechFoundry
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Experienced web entrepreneurs contract work out themselves, so don't need a full service consultancy adding an extra layer of communication and cost, and offering advice on basics like target markets.
New web entrepreneurs typically have very small budgets, so cannot afford a full service consultancy that must charges rates over and above the rates of the individuals contracted to do the work.
So I'm having a hard time seeing the market for a full service pre-packaged 'zero to beta' service among 'web' entrepreneurs - maybe for established businesses webifying themselves to look cool and trendy who can afford this sort of full service.
Also, I wouldn't use all Flash for your website, that's just bad for so many reasons...
Tim W
Security Architecture Lead at Trusted Borders
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In short, it makes great sense for many reasons to buy/sell professional services in '100 day' packages: it allows for projects with a reasonable scale/compexity without introducing excessive risk on customer or supplier side, it aligns naturally with corporate financial budgeting/success reporting, it promotes good staff performance (not overworking for more than 12 weeks); it aids forward planning of consultancy staff resourcing/recruitment; and it allows time in the consulting year for business development, training, vacations etc.
However what you are proposing as the 'service concept' is all wrong.
Essentially you seem to be relying on customer ignorance/incompetence to make what you are proposing seem be better than their current state.
You are also focusing (wrongly in my view) on very high risk projects, namely externally facing software development projects. Such projects would not only be high risk for your company but high risk for your customers.
Smart customers would I believe be much more interested, at least initially, in hearing about much lower risk, but potentially equally valuable, service packages targeted at internal process improvements e.g. improving information and process flows between departments.
Such projects may have a software development element, but this should be a small proportion of the total effort, probably no more than 15% of the total effort. Such internal software/utility development would not generally leave your company with onorous SLA's to meet. You should also be able to agree with your customer that business continuity and disaster recovery arrangements will be manual and operated by them.
Once you have successfully completed one more more successful internal projects with a new client, you may find opportunities related to external web site development activities. However with this scale of assignment, you should seek as far as possible to keep your service revenue linked to agreed input hours.
It would not be a good template for a services business to create a situation where the customer can reject paying for your time because they did not like the software product you created.
Hoping this helps you to develop a new and improved service concept.
Clarification added May 17, 2008:
One other thing that has struck me after reading all the other excellent answers is that your did not tell us how you were planning to 'go to market' ... what are your thoughts about sales channels? direct? indirect? face to face? telesales ... what are your thoughts about sales lifecycle? how long will it take to close deals? how will you close the deals? will the initial commitment to buy always cover the whole deal? will customers have any contractual (or de facto) break points where they can back out? e.g. after the intial requirements workshops? ...what are your thoughts about business development? ... will you aim to get more from the same customers? or will you constantly be chasing new customers? ...when will you be doing the new business development? in parallel with execution? .... will there be dependencies between deliveries? e.g. needing one 100 day delivery to execute successfully to provide the reference for the next?... what are your thoughts about the billing/collections lifecycle? when will they approve the quality of your deliverables? when will they pay?
Underlying my earlier response were implicit assumptions about services business drawn from my own personal experiences of services businesses, both large and small, that I feel it is worth sharing.
My view is that services businesses are potentially a great type of business to start up. If you have the right people on board, they can quickly generate surplus cash with relatively low initial investments.
However they are more difficult to grow because diseconomies of scale often apply (e.g. local shortages of right staff). It is also more difficult to sell/float a services business mainly because the balance sheet is generally smaller than a product-based business and there are fewer protective barriers (e.g. intellectual property rights) around the business to protect the future income and profit streams.
Bearing in mind these factors, I would strongly recommend that you develop a business model that allows you to generate surplus cash even when things are not going as well as planned.
One good way of doing this is to stick to time-charging based models. If the customer cancels after n days you can still walk away with some profit. Your liabilities/costs don't extend further into the future. If you are effectively delivering a 'software product' (albeit a service in name) you may have warranty claims/defects running on long after the customer has indicated they want out.
Another way of ensuring you stay cash positive is to link your revenue/charges to known, stable cashflows of an established business (e.g. charging percentage of income/expenditure). Charging a percentage of 'savings/benefits' would tend to extinguish revenue from existing customers quickly, so the percentages need to be much higher when working in a risk-sharing model.
In short, if you can come up with a compelling value proposition suppored by a business execution model that allows you to sell service packages of 100 days (13 weeks) in duration without taking up more than a handful of days (certainly no more than 2 weeks of elapsed time) in sales/business development time you will probably be make a profit and grow. If your sales cycles are longer (say because what you proposing does not fit naturally with the procurement and approval processes of larger organisations, or because it is not obviously affordable and valuable to owner/manager type decision makers in smaller organisations) then I believe you will find it difficult to sustain and develop your business.
Hoping this further commentary on your proposal is useful.
This seems to me to be geared toward very small businesses. I've done a lot of work bringing off-line businesses on-line and depending on MANY factors, anywhere from $3k-$10k is "typical". But again, that is for smaller, localized businesses with little national pull. A larger business with a national product portfolio would be charged more.
Arnie M
Experienced Technology Executive
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Darrell --
First of all, great question and great use of LinkedIn -- I'm surprised you don't have more answers - but you probably will before the question closes.
I understand your premise - and believe there is true value in what you are doing here. But the market price is completely dependent upon the "beta" you putting together, how it is funded, and it will be sold. Also, the premise of 100 days - could be a false expectation - you might be able to actually get all the work done in 30 days.
What I am saying is your concept of Zero to Beta is very sound - and yes there are lots of things to consider beyond just the pure coding of the "app" to be placed on the web. But the value [and therefore the price] is completely dependent upon the project and scope.
I would suggest looking at this from a different perspective -- both you and the other party collaborate. I believe people work better if they have "skin in the game" so yes, they should pay you something. But what if you got a piece of their action - speed them to some level of revenue and took some percentage on the back end. There is possibility to make a much larger return in the long run -- why sell your expertise for $100K or $200K when you could possibly make $1M or $2M?
Just a thought.
Allan T
innovation architect, globalization guide, entrepreneur
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Darrell, I haven't seen an experienced angel or VC fund a startup without the ability to execute their idea since '00. What distinguishes Web2 entrepreneurs is an ability to architect, build, and deploy their ideas rapidly for little money. They're a little light on the ol' business strategy and revenue side, but they can build stuff themselves ! And if they can't, they should wither on the vine.
For many Web2 startups, the 100 day model they need is represented by YCombinator, Techstars, and others.
It seems like this model would make some sense for mid-to-large organizations without significant web2 skills in-house, that need to launch/rel-aunch customer facing web apps. But you'd have to price it so that the build vs. buy decision is a non-issue.
Diana Z
Senior Web Developer at Turner Broadcasting
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Here is a great presentation from SXSW discussing the figures behind some of the top Web 2.0 apps coming up lately. http://www.readwriteweb.com/archives/sxsw_the_figures_behind_top_web_apps.php
It may give you an average figure for the market you seem to be targeting.
A general weakness of cookie-cutter web development shops limiting themselves to the initial stages of development in a project (irregardless of platform independence) is quality. The business model you are suggesting would benefit from more projects completed in less time, but if your clients are planning on developing continuous ventures, an out-of-the-door-fast approach may not breathe in much trust. What should happen at the post-beta stage? Proving credibility, quality of code, and follow-up support should be important points to consider for this business model.
Links:
Jim R
President, MCSD, KKT INTERACTIVE & FlamboroCanadaSystems
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I agree wholeheartedly with the answers here that say that the 100 day timeline is WAY WAY WAY too long....we've built 3 startups in 21 days or less!
If maybe the name was Zero to VC Cashout in 100 days - that might work a lot better!
:-)
Jim
On the surface a nice idea and concept Darrell. By all logic, it should work. You should even be able to wrangle a little piece of equity from them in addition to development fees.
But we tried something very similar in our early days, and just couldn't find a real pool of customers. And that was when everyone knew their idea was just a little web site away from retirement riches (denominated in dot-com dollars). In other words, there should have been plenty of POTENTIAL customers then. But most had too little money. The entrepreneurs that had money ... well they felt pretty self sufficient, even if they had no reasonable basis for such feeling :-)
Best of luck. But I think you'd be better served playing your own customer. In other words, bring your own idea from zero to beta in some niche market. Heck use your IP to launch 2 or 3 at a low cost, and see what sticks.
Let us know what happens ....
Diana J
President, Omega Marketing Group, Inc. Direct Response Advertising & Marketing Co. / Open Networker
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Hello:
Personally, I would have no interest as my sources now can turn this type of project around in less than a week and for about ninety to ninety five+ percent less. All businesses are different so perhaps there is one that this may fit but in my case I am seeing a lot of providers running lean and mean and providing great service fast at a great rate. I hope this helps and wish you the best.
Regards,
Diana Jadin
