In Part 1 of this blog, I shared one scar and one badge from running a tech company. In this blog, I’m going to share two more badges and one more scar with you.
The badge: punching above our weight
I would say that at Cake we consistently punched above our weight and I’m going to tell you about the first occasion when we demonstrated that we could punch well above our weight because of the people we employed and the way we promoted ourselves.
This was probably about three years into the Cake journey and we were a company of around seven people. Over the two to three years that we’d been running, we consistently submitted bids for public sector projects with both local and central government, but we never won anything. That was despite, in quite a few cases, being eminently capable of delivering a high-quality service to the brief that would have provided a good value option.
Now, I’m sure government departments play by the rules, but in my view, the problem is that there are just inherent biases in some of these systems where there is already a preferred choice almost built-in. Quite often, no matter how good you make your pitch or how solid your bid is, you’re just never going to win that particular project. I think the other big problem with the public sector, certainly back then and I think this probably still exists now, is that civil servants are often by nature quite risk-averse. This is in contrast to entrepreneurs and the private sector in general, who are more willing to take risks just by virtue of the type of people who work in those organisations and the way they’re run. In a private company or your own company, it’s your money and your company’s money, whereas in the government it’s public money that’s being spent.
This comes back to the old adage that you’ll never be fired for hiring IBM. What that means is that, even if the project goes wrong, people can fall back on the excuse that they hired the best in the market – or the perceived best in the market! I definitely think this becomes an issue that affects smaller companies winning public sector contracts, especially larger ones. However, it’s a shame because that kind of culture prevents the more agile, innovative and eminently capable smaller organisations pitching for work. Quite frankly, I also suspect it would save tens of millions, if not hundreds of millions, of pounds a year if departments were a little more open to working with some smaller companies. There are initiatives to try and help this and I do think the situation has improved, but it is still a bit of an issue.
What all of this meant in the early years at Cake was that we became a little disheartened with regards to the public sector and therefore concentrated on private sector contracts because we felt that we had much more chance and the time and effort that went into our bids would be better invested in pitching for private sector projects. But that changed overnight.
Competing with the big boys
We received a phone call from someone in the public sector who had read one of the books that we had published. I talked about how my co-founder at Cake Rob Harrop got involved with the Spring framework when it was an open-source project in my last blog about badges and scars. He had become a core contributor and was one of the key people within that project. At the point that we received this phone call, the framework was becoming increasingly popular. By 2009 it got to a point where it had been downloaded a million times. As I said before, it was a very popular framework that simplified software engineering with Java.
Rob and another of our technical guys Jan Machacek had written a book on the Spring framework called Pro Spring, which was published by Apress and translated into 17 languages. It was one of the best-selling Java books on the market at that time. In 2006, we received a call to say that there was a government project being tendered and that they were looking for companies who specialised in Java and the Spring framework because they wanted this modern, lightweight framework to be the technology that powered this system. It was quite refreshing to see this from a government department. The project was being headed up by a very technically competent person in that government department.
To cut a long story short, we submitted a bid alongside some sizeable professional services outfits who were far bigger than us by factors of 1,000, and we won. This had the potential to be the largest project we’d worked on to date. We were incredibly grateful for the opportunity and we were completely focused on making it a success. That’s actually another reason why I believe the government should make more effort to engage with small companies where these projects mean an awful lot to them and they have the talent and agility to deal with the kinds of changes that these projects sometimes come up against. Those changes often floor bigger organisations or cost the government millions of pounds extra in change costs. The upshot of it all was that the project was a success.
We then won significant business over the next few years with that department and every single project was a success. It was a win-win. We were focused on making them a success and it was cost-effective. We proved that engaging with small, specialist companies is very often far more conducive to providing value for money and success, and it’s a lot less risky for the taxpayer.
The message from this is that I don’t think we’d have been taken seriously if it wasn’t for the fact that we had published this book. We were seen as the experts because we had written a very technical book on a specific technology and our CTO Rob, who was also the co-founder of the company, was one of the key contributors to this technology. Our expert status was spotted and although we still had to win the bid and demonstrate value, it was clear that we were the kind of company they wanted to work with.
A platform for growth
This was an absolute badge for the company and gave us our first platform for growth. Working with that government department over a few years on a few projects meant that our cash flow was consistent during that period. Of course, we ran other projects concurrently, but the projects with the government were certainly the biggest ones and they provided a really solid platform that enabled us to stabilise the business, take on more people and begin to grow.
Winning that piece of business with the well-known government department also boosted our credibility, which then helped us win other pieces of big business. It was definitely a stepping stone both financially and from a reputation point of view, but it started with having the credibility of the book.
The scar: losing a business partner
I started the previous blog about badges and scars with the old adage that you learn more from your mistakes and the issues you face than you do when things are going well. I think that’s absolutely true.
Cake was formed in 2001 and my business partner Rob was the technical side of the business. I had no technical expertise. I still don’t class myself as technical, my brain isn’t wired that way. Even though I am not a software engineer, I understand what is going on and I can have an educated discussion with someone about it. I bring other things to the business that perhaps the technical guys don’t. But in 2006, Rob left Cake. Because he’d been so involved in the Spring framework, the guy who led the project wanted to form a consultancy around the framework. That consultancy would be responsible for continuing to develop the project, as well as providing consultancy service, which is how they generated revenue. Rob was made an offer that, at the time, Cake just couldn’t match both in terms of salary, equity and the potential of the company.
Rob and I had a very sensible conversation and, you know, if I was Rob I would have done the same thing. He made the right decision for his career at that particular point and there’s a whole other story around the outcome of that, which was a very positive one from Rob’s point of view.
What I want to focus on is the fact that this was a major change for the business. It was a body blow. Rob was a key part of the technical side of the business. Looking back, it could have been catastrophic. I could have given up, said how can we carry on, but I didn’t and when I think back on it, in all honesty, I never for one-second thought of giving up. I had the mindset of, ‘This has happened. I understand why it’s happened. Now I need to look at how I deal with that and how we make this company a success.’
Although Rob leaving was a negative thing, it actually ended up being a positive and ultimately benefited the company. Of course, when something like this happens you don’t see this at the time. All you see is that a big piece of the jigsaw is missing and you really need to find a way to replace it. At that particular point, we had a few really good engineers and for one of them, our senior engineer Jan Machacek, it was a real opportunity to come to the fore and take over where Rob left off.
Jan was a different character to Rob but a very capable software engineer/architect, and because of that, he went on to become an inspirational CTO. At this stage, we had to really think about how we moved on without Rob. Technically, Rob put us on a really solid path. The technology we were using was cutting edge at that particular juncture. The Spring framework had only just gone into full 1.0 production. It was new and innovative, and there were lots of companies beginning to look at it but we were ahead of the game.
We continued down that road, carried on staying ahead of where we felt technology was going and made sure we continued that ethos. Although we had lost Rob, we had Jan at the helm, which worked out really well even though we lost our business partner who was pivotal to the company. It was a blow, but it wasn’t an automatic nail in the coffin. It let other people in the company step up and allowed them to actually fulfil their potential.
Finding the positives
One of the positives of this situation was that it allowed people like Jan to do things that they wouldn’t have done if Rob was there. It was good for their development and, as I said, it allowed them to fulfil their potential.
Interestingly, it also allowed me to take a step forward. When Rob left, I became the only one in charge. There weren’t two of us making every decision and that was good for me. It helped develop my confidence that I could do this on my own. I realised that the reality was that the way Rob and I ran the business was different and if we’d run businesses individually we’d have run them in a different way. But when Rob left I was able to run it in the way I wanted without the need to compromise to accommodate his way of doing things, and visa versa.
What this taught me was that in every really crappy situation, you’ve got to think how do we deal with this? Instead of dwelling on what’s happened, you need to take action.
Losing Rob was most definitely a scar, but I think we turned it into the badge in the end because we came out stronger and the team members who were probably under Rob’s shadow a little bit came to the fore and really did their bit to help take the company forward. That was probably a slightly different direction to the one we’d have gone in if Rob and I had continued to run the business together, but we got to a positive place in the end.
The badge: the largest cheque
One of the KPIs I used to measure to show how well we were doing was the size of the largest cheque. Quite often in a company’s development what typically happens when you do well and you grow in double-digit percentages is that the companies you’re dealing with and the projects you’re working on getting bigger and bigger. This was absolutely the case with Cake throughout our evolution. The cheques just got bigger and bigger.
It happened slowly at first. We gained notoriety initially through the technical books that we wrote and that notoriety grew, driven by what we introduced further down the line with the personal branding we developed and the team we built. One of the byproducts of this is that when you’re perceived as an expert, you can increase your day rate, which is always a really nice thing to do. People often worry about increasing their day rate. But what I found was that when we increased our day rate, not only did we not lose business, which is always a fear, but we actually won more business. There’s a balance to be struck. If you charge too low of a fee, you’re perceived as maybe a lower value supplier. When you charge a higher fee, you’re often perceived as a higher value supplier. Often businesses are willing to pay this higher fee and quite often will approach you with bigger projects.
Don’t get me wrong, there’s a point where that tips the other way and if you go over the top and charge a ridiculous day rate that isn’t justifiable then you will undoubtedly lose business. So you’ve got to find that tipping point. I think most people worry about it, but I also think that most people will be pleasantly surprised to find that the tipping point for their day rate is probably higher than they’re expecting if they’re really good at what they do.
Looking back there were probably four or five notable occasions when the size of the largest cheque rose substantially and every time that happened we used it as a platform to improve our financial position, not just with that project, but to enable us to hire more people and deal with more projects and bigger projects. We took a gamble.
To give you one example, we worked with one of the large price comparison websites for a substantial amount of time and a large proportion of our company at that point was working on that particular project. We took a calculated risk, where we said, ‘Yes, we’re going to go through a period of a few months where 80% of our company is going to be working on this one project.’ Now, if something went wrong with that project, there was a real danger to the company, so you have to be very careful. But we felt it was a risk worth taking because we had a long agreement in place and we felt things were well within our capability. That meant the risk was actually relatively low.
But after taking that gamble, we very quickly found that with the extra money coming in from that project we were able to hire extra people. The 80% very quickly became 40% over a period of six to 12 months, because we hired and hired and hired. That then set us up for bigger projects more often. We did this on a number of occasions.
This is about using these opportunities to your advantage. Rather than just putting the money in the bank, you can use the profit you’re making from the project to grow the company organically and you can reach high growth very quickly by doing that. The key is to never lose sight of the sales part of the business. You might be safe for 12 months with a big project, but you need to be working on winning more business and hiring more people from day one of that project. That was how we grew. And in the last six or seven years of Cake, we grew ten times every parameter, quite often considerably more than ten times.
I think business success is all about taking calculated risks. You need a little bit of luck, undoubtedly, but there is another old adage: The harder you work, the luckier you become. I would say that the more you take these calculated risks, the quicker you can grow and hopefully those risks pay off.
The largest cheque wasn’t just about having a big payday, it was also about increasing that largest cheque many times on a yearly basis and we never went backwards. So that was definitely a badge.
Remember also that we hit a recession in 2008. But even then, and it was quite good timing from our side, we had a couple of quite big projects in the 2008-10 period. Again, that led to us winning more business and in 2010 we carried on growing, even during a recession. We didn’t withdraw, we didn’t decrease our activities in the marketplace. In fact, we did the opposite; we increased them. The thing with recessions is that quite a few companies withdraw and try to hold onto their cash. They are less active. But that just means there’s less noise in the market.
That time is, in my opinion, when you should be spending some money, shouting about what you do and why you’re good at it and really making a noise in the marketplace. There are two reasons. One is that you have a better chance of winning any business that is available because no one else is making any noise. The second is that, as you come out of the recession, your company is perfectly placed to grow because you’re on the tip of everyone’s tongue to win business as companies start spending again. This comes back to what I believe is part of the true entrepreneurial mindset, which is taking a positive view of even the most difficult times.