Friday, June 01, 2007

Product Development Lessons from an MVP

A few weeks ago, at SMB Nation East, I had a long chat with Dana Epp.

If you don't know Dana, check out or

The only background you really need to know about Dana is that he's successful. He has a great product, and it's not his first. Dana has started and sold a few companies.

My chat with Dana was very interesting because he kept mentioning something I rarely hear in the SMB space -- except from Robin Robins and Perry Marshall. What is that thing?

Test your ideas.

Test. Test Test. Test Test Test.


Dana didn't think this was as interesting as I did. He would casually mention that "While I was trying to define the product, I talked to a lot of potential customers."

Or "Once we had a prototype, I rolled it out to a handful of people."

Or "When we survey people to see which features they like . . .."

Get the picture?

Most SMB consultants don't get the picture. In fact, most of them resist the picture.

Listen at the next user group, SMB Nation, IT Pro conference, etc. Listen for how many people say

- My customers wouldn't like that.
- My client won't put up with it.
- I can't sell that.
- It won't work in my market.
- I tried that once.
- etc.

It is far more important for small businesses to test and talk to our clients than it is for larger companies.

The first time I ever read about the concept of flat-fee pricing for I.T. services was Harry Brelsford's 2003 book SMB Consulting Best Practices (page 5-41). My first reaction "There's no way my clients would go for that."

But by mid 2004 I'd heard and read about this concept several times. Finally sat through a lengthy seminar on the concept at SMB Nation (September) 2004. So I started asking my clients.

Here's what I found: The larger clients liked the idea, but didn't personally want to pursue it with ME. They did admit that it would be appealling as a way to structure a future relationship with another I.T. firm.

After I heard that a few times I realized that selling flat-fee services would be easier with "strangers" than existing clients. Today, when I look at my largest clients, five of the the top ten are managed services -- and only one of them was my client three years ago. Right now, 44% of our revenue comes from flat-fee "managed services."

Here's another case in point: Hardware as a Service. I announced the "idea" in my client newsletter a month ago this week. No details except that we were looking at one monthly price for hardware, software, and managed services.

Charlie, my customer service manager started calling around. He struck gold! We have one client on HaaS and two more eager to get going. We're trying to slow it down enough to make sure all the numbers are right.

The key to success was to ask questions, talk, ask questions, test pricing, ask questions, . . . and listen. In very short order our clients helped us figure out where they found value and what they're willing to pay.

I have an appointment with an accountant client who will sharpen his pencil and tell me why he's willing to pay a premium to have regular monthly payments. The result will be a complete draft of our marketing materials going forward.

Going forward, we're going to try to be more like Dana: ask and test, test and ask.

One of the lessons I learned from Robin Robins and Perry Marshall is to put out two different offers and see which one gets a better response: ask and test, test and ask.

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