From zero to twenty people in five years: our story of transitioning from service to product

Writing from an agency perspective, we're also trying to go down this path and are exactly at the "we'll do it in our free time" stage.

The idea of setting aside two days sounds logical but how did the cash flow side go? How did you keep the team together while revenue was dropping, could you elaborate on that?

Let me explain. The revenue drop was about one-third in the first six months. We covered this with three things.

First, we scheduled product days during our least busy period. Second, we stopped taking new clients during that period but renewed maintenance agreements with existing ones; this recurring revenue bought us time. Third, as partners, we cut our own salaries for six months. We didn't touch the team's salaries, that was a conscious decision.

Let me also say this: this isn't a sustainable model, it's a transition period tactic. If it goes beyond six months, something will break.

I've been doing this for twenty years, I've seen many companies trying to transition from service to product. The common trait of those who succeeded wasn't technical.

Those who succeeded had assigned a separate person responsible for the product. Not one of the partners, a separate person. Because a partner always drifts towards client work, that's natural. When there's a separate person in charge, the product has an advocate.

Let me look at it from an investor's perspective. In companies transitioning from service to product, the number I look at most is: the share of recurring revenue in total revenue and the growth rate of that share.

Fifty percent isn't bad but the real question is this: how many customers does this fifty percent come from? If it comes from three customers, this isn't product revenue, it's service revenue with a new name.

I disagree with you on this point. When you try to change everything at once, nothing settles.

If you post the result here, it will help others too.

Timely topic.

My question might sound amateurish, sorry about that. The first thing to break as you grow is communication, not the numbers.

Thanks, this was very helpful.

Three different views emerged, they all complement each other. Pausing growth to breathe is also a strategy, nobody says that.

Good luck with that.

There is something to watch out for. The moment you depend on a single client, you no longer set the price.

Of course, it varies if your situation is different.

To get into the details: When making decisions, write down the worst-case scenario too, not just the best.

Proven by experience.

This thread is archived.

you're right.

Quick summary for newcomers: The biggest time-waster for us was not knowing who had the final say.

When you try to change everything at once nothing settles. Hope this helps.

following. the real issue isn't the number, but what it's based on.

the real issue isn't the number, but what it's based on. i'm also curious if anyone does it differently.

I think differently. Just because everyone does it doesn't mean it's right.

This is my opinion, I'm not claiming it's absolute truth.

Let me speak from the other side; Im on the supplier side. Second-time founders dont make the same mistakes but find new ones.

I'm also curious if anyone does it differently.

We got stuck at the same point for a while. The reason for failure isn't one big mistake, but the accumulation of small decisions.

I'm also curious if anyone does it differently.