Part 7 of the Shugo Story — the best decision I made

I was riding a high…we just had our first “sale”! Even though we were giving the product away free for a period of time, it felt like a major accomplishment.

It’s funny how “forces” work in mysterious ways but that meeting with Payroll Network altered the course of Shugo. Not even a few months old, we took a ninety degree turn.

2009 tax season feedback

Initially, our grand plan identified accountants as our target market. We’d revolutionize the accounting world by providing a simple, easy and secure way to send tax returns…or at least we thought.  My 2008 tax returns were delivered by my accountant through FileGuardian.  In fact, his office actually used FileGuardian to send a number of returns in early 2009.

In May of 2009, I went back to our FileGuardian early adopters and solicited feedback.  Most were extremely positive identifying its ease of use and how customers really bought into the security aspect. All were in agreement though of not seeing the necessity of FileGuardian throughout rest the year. They weren’t exchanging that much information outside of tax season with clients where a secure mechanism was warranted. Many were asking if there was a way to have free or discounted usage from May through December since they’re wouldn’t be any volume (and keep in mind, they were already using FileGuardian for free).

Ugh…this wasn’t exactly what I wanted to hear.  In fact, it actually scared the daylights out of me. These were close friends and colleagues and they were already minimizing FileGuardian’s use. I wasn’t sure what to do now: Close up shop and give up? Disregard their comments and plug on? Pivot and find a new market?

Hello payroll

I was still reeling from the feedback our accounting early adopters shared but determined to still press on. The good news is that we were preparing for our first conference sponsorship – the PayChoice 2009 Users Conference.

This conference was attended by approximately 100 licensees of PayChoice’s payroll software, one of them being Payroll Network who was our first payroll client. I rushed to get “marketing material” together. Being that I wasn’t a graphic designer, I did what any techie would do – looked for Microsoft Office templates online I could use to create our first product slicks. Lucky enough, I found a few templates I could use.

I was actually pretty proud of what I quickly threw together but looking back at them now they were terrible. You can view a few of them here and here and here. Pretty crummy eh? But at least I had something to put on the table in our booth sharing what we did and how Payroll Network was already a client.

The Best Decision I Ever Made

During this time, I also realized I couldn’t continue to push forward with Shugo myself. Sure I had some employees from the consulting company but they were focused on consulting now and actually one went AWOL. And I truly mean AWOL – just ended up moving his family hours away in the middle of the night. He never let me know and never told anyone.  I only found out days later and by that point my trust in him was lost and we parted ways.

So I needed someone to take the wild ride with me and I knew exactly who to engage. For the past few years I had worked closely with Rob Bacher at one of my consulting clients.  In fact, I was part of the reason he was hired by this client. We were interviewing for a position and Rob was one of the candidates. He didn’t fit the position we were looking for but after speaking with him for a few minutes you could see his talent and intelligence. We convinced the powers that be to create a position for him and bring him on board which to their credit they did.

They didn’t regret it as he instantly proved his worth. See Rob was the kid growing up that was toiling with calculators at a very early age writing programs. Back then I didn’t even know what a calculator was but Rob was the total opposite. To this day I always say Rob is the most intelligent and talented developer I’ve ever met.

I approached Rob in the summer of 2009 to join me. He was intrigued and after a few conversations agreed to join Shugo. At this point I had been the sole owner of Shugo but with Rob coming on board that was going to change. Owning a business is difficult and sometimes giving up equity is even tougher. For me the decision to bring Rob on as an equity partner was not difficult though. I knew I’d rather have a smaller piece of a big puzzle versus a big piece of a small puzzle.

Some people didn’t agree with that thought though and challenged me. They forced me to really think about my willingness to give up equity. I knew they didn’t know Rob though and the tremendous value he brought so I stuck to my guns. Rob was joining Shugo as a second owner in the business.

To this day it was the best decision I made along this journey. We wouldn’t be half of where we are today if it wasn’t for him. As I’ll share later, the things he does daily are astonishing. Some of the twists and turns we took would not have been possible without him. Sometimes things work in mysterious ways and that first interview with Rob is evidence.

A great decision but still no revenue

Still, Shugo wasn’t generating a lick of revenue as we approached the end of summer 2009. Consulting was still our financial support but we were hopeful as we prepared for the upcoming PayChoice conference. We would engage over 100 potential clients and start to see the fruits of our labor…or so we thought.

Part 6 of the Shugo Story — a meeting that altered our course

Our first deadline was looming and we had early adopters waiting in the wings.  We were hard at work getting the initial version of FileGuardian to market.  On the business side, I was starting to formulate our pricing model.  I knew it wouldn’t be needed immediately since our early adopters were going to receive free usage for a period of time, but many were asking what FileGuardian would cost after.

Our internal alpha review was a … disaster

I had given our employees free reign when it came to application design and architecture. Therefore our internal alpha review had two key goals:

  1. Verify the chosen application design
  2. View the current state of FileGuardian – we called it alpha mode since it still wasn’t ready for our early adopters to beta.

There are many parts to application design and most were spot on to what I expected (in fact, many still live on today within FileGuardian).  One in particular though was so far off it’s what deemed the initial review a disaster.  I probably had given one employee a bit too much leeway when it came to development. The way he coded the first version of FileGuardian would end up making the application a nightmare to maintain.

It would also require specialized programming skills which I knew were in short supply on the market. This had a huge impact on #2 above since the current state of the FileGuardian was based on this design decision.  It was early November and I had to make a decision: stay with the current path or kibosh it.  If the latter was chosen, we’d need a complete redesign which could severely impact our end of year deadline.

Back to the drawing board

I knew we couldn’t live with the application the way it was initially designed. I figured the risk of going back to the drawing board and potentially missing our deadline was necessary. As the old saying goes “you never get a second chance to make a first impression”. Plus I had worked on previous software projects where a poor choice in the beginning affected the software for its entire life. Since this was going to be my future (or at least I hoped), we needed to do things right from day one.

It was risky though. We needed a version and a version soon. I had lined up some early adopter previews for the middle of November which now needed to be pushed back.  I felt keeping our initial users in constant communication with the “state of the sate” was important.  As my wife can attest, I’m a big believer in setting proper expectations and if you screw up, being honest about it. When I screwed up on a project I was the first to admit it and I think my peers respected me for that.  I wanted Shugo to follow that same philosophy: open and honest communication especially when we goofed.

As a result I shared with our early adopters what had happened and how we needed to go back to the drawing board. We were still committed to our deadline and would still hit it but our initial review would need to be moved back two weeks. All were very understanding probably because I was “selling” them vaporware still and probably because they were close friends or family.  Nevertheless, we were back to the drawing board charting a new course.

Version two…full steam ahead

Version two proved much better. Standards were followed and we were well on our way. FileGuardian would guide the user on a five step process to securely send files.  Here’s our actual UI mockups’ showing each step. Step 1 002003 004 005 Boy how FileGuardian has changed since these days.

Deadline time

It was early December and our initial early adopter previews went smooth. One occurred in their office, another back at the Grey Lodge, one in our office and the last at Panera. I think their lack of using a system like FileGuardian is probably why we received positive feedback. We were showing them a new way to do things. Think about the iPod. It showed us a new way to purchase and listen to music. Was it the optimal way? Who knew but it was new and different so we accepted it as such.

In December of 2008, FileGuardian was “unveiled” to the world. Pretty funny saying that since we’d find out that an early adopter wouldn’t start using it until February 2009 but we hit a major accomplishment.  If you went to www.myfileguardian.com you could sign in and use the system even though it lacked some key features:

  1. FileGuardian lacked a signup process – so any new early adopter would need to contact us personally and have their account created.
  1. If you did have an account and forgot your password, guess what you had to do: contact us! We released without the standard password reset process (what were we thinking?).
  1. FileGuardian lacked a bulk method to send email alerts. Our initial design included the capability for our clients to send bulk email alerts like a Constant Contact or MailChimp. We didn’t have time to include this so it was 86’d (I never worked in a bar or restaurant but learned the term from Gordon Ramsey from his countless TV shows).

I didn’t want to miss the deadline so removing features like these, and others, were not deal breakers.  The important piece was our clients could send files securely. We were proud and knew there was much work left. I personally was anxiously awaiting receipt of my first secure file since two of the initial early adopters were my accountants (personal and business). My 2008 tax returns would be delivered through our application and I was excited.

A meeting that changed our course

If you remember back to part three of our story, I kept our consulting company open even though I was fully committed to this new venture. This turned out to be a key decision for our future.

One our consulting clients was Payroll Network, an esteemed, established and thriving payroll company in Maryland right outside of D.C. I had a great relationship with a number of employees and was asked to join their technology group as consultant years prior. I jumped at the chance since it would diversify our consulting client base a bit. Plus, I thought we could charge a premium for our consulting rate since they were located in an affluent area; just don’t tell Rex I said this.

Each year we would hold a technology summit down in their office. We’d spend two days together locked in a room identifying major initiatives for the year. I was more of a development sounding board bringing new ideas and technology to the fold. I really enjoyed it since it allowed me to interact with other IT professionals who thought a bit different than I did. Honestly, it was a great match and I still do minor consulting with Payroll Network today. And, I haven’t raised our rates.

In February 2009 our annual summit was being held. You know how people say everything happens for a reason and sometimes things just fall into place? This meeting proved these points true.

During our two day huddle, the team identified the need to securely transfer files to clients and vendors outside of the payroll system. Payroll Network was very progressive and developed their own internal systems to extend the functionality of their payroll software. Part of these systems generated files which needed to be sent securely to clients since they sometimes contained personal information such as SSNs, bank account numbers or other financial information. How could we accomplish this? I mentioned FileGuardian and how it was being “used” by early adopters.

I remember having a bit of anxiety since I fired up my laptop and walked them through a demo. I had sent files securely through FileGuardian many of times and even demo’d to our early adopters but this was different. It was the first time I was truly “demo’ing” the application and trying to “sell” someone on it. The demo went smoothly and as a technology group, we decided Payroll Network would start using FileGuardian. Of course it helped when I shared we wouldn’t charge Payroll Network for a period of time since it was so new but heck it was our first “sale”. More importantly, they were first client in the payroll industry…

Part 5 of the Shugo Story — our first deadline

It’s October 2008 and we’re starting our initial FileGuardian development plus we’ve named our venture Shugo. Optimism was sky-high as we’re well on our way to greatness, or so we thought. Our near term agenda was booked solid: finalize a logo, create a corporate website, continue to build our early adopter relationships and get a beta version of FileGuardian in place.

Finalizing a logo

If you remember from part 4 of our story, I wasn’t all that enamored with the original design of the Shugo logo.  Something about the shield and the connect the dots S inside just didn’t sit well. I loved the colors and understood the concept but it may have been to “abstract” for this logical fellow to appreciate. Nevertheless, I gave it some time to sync in and shared it with a few close friends and colleagues.

Shockingly (well at least I was shocked), I seemed to be in the minority. The overwhelming response was positive. In fact, I believe I was the only one who wasn’t 100% in love with it. Based on our initial goal of providing small businesses (accountants) the ability to securely exchange data it fit perfectly.  Heck, even some of my accountant friends understood it and I thought I was more creative than they were.

I don’t know if I caved but after a few days of consideration I decided to keep the logo. Part was from the initial response received. Part was from my belief that we had bigger fish to fry and we could change it later if we wanted (though it would prove costly at that point).

I wanted to concentrate on our corporate website and FileGuardian itself. The hope was to have a beta FileGuardian version in place for the 2008 tax season.  This meant we needed to be able to have it in our early adopter hands and train them before 1/1/2009. If not, we’d miss the beta opportunity (and I sure didn’t feel like waiting another year).

Building a websites is easy…or so I thought

How hard could building a website be?  Just place some text and images inside of a static HTML website and you’re set – or so I thought. I mean come on: I’ve designed and built huge web applications to handle large amounts of transaction processing and to process payroll. Building a simple static website should be a breeze.

If you’ve ever built a website yourself, you’ll know that’s pretty naïve thinking. Besides nailing the overall design aesthetic, the next hurdle is filling your website with intriguing content. Plus the web was changing: SEO, blogs and social media were starting to come into play and you needed it integrated into your website as well.

Honestly, I wanted to concentrate on keeping it simple.  I’d tackle all that Web 2.0 fun another day. Our initial goal was not only to provide valuable content about how important it is to securely exchange data but in the end entice our website visitor to sign up for FileGuardian. So we had two main objectives:

  • Educate our website visitors on the necessity of securely exchanging personally identifiable information (PII) and share the latest on government legislation requiring services like FileGuardian
  • Guide visitors to sign up for a free trial of FileGuardian

Our website needs to look clean and professional

Before I worried about enticing content, I needed an overall design.  It had to be simple, clean and easy to use. Ugh, not my forte but my marketing friend once again came to the rescue. Good thing I had done a few things for him in a previous life as now he was repaying the debt. Honestly, he’s a great guy and even if I hadn’t worked on things with him the past, he would’ve offered to help anyway.

After a few iterations back and forth, we had come up with a look and feel. I was pretty proud and remember setting up a meeting with my own accountant to get his thoughts for our design unveiling. He and I had known each other for years and were friends before our professional relationship. So like any good accounting/client relationship, we decided to meet at our favorite watering hole, The Grey Lodge.

He’s actually the one to introduce me and my group of friends to The Grey Lodge.  It wasn’t the sexiest of places but featured one of the best beer menus of any bar in the area. Sure you can find the mainstay beers in bottles (Miller, Bud, Coors, etc…) but their specialty was the selection of microbrews on tap and in bottles. Seems like commonplace today but back in 2008 finding a bar with a great microbrew selection was difficult. We’ve stayed loyal to the Lodge and still frequent it today.

It felt pretty funny walking into the Lodge with my laptop since I don’t believe I ever entered it before with anything but a full wallet. The unveiling was taking place and here’s the design I was sharing.

Original-ShugoWebsite

Not bad eh? At least back on 2008 we thought it was pretty damn good.  Funny enough to this day I and many others can’t stand the stock image of that lady.  There’s something pretty creepy about her.

But I digress as overall the response was very positive and now the hard part of any website was upon us: filling it with intriguing and fresh content to make our visitors sign up for a FileGuardian trial.

Easier said than done and if you know me you’ll also know I’m not one who likes to read long paragraphs. I like bullets that summarize information since they catch my eye (it’s why I’ve carved the Shugo story up into many different posts and inside of each post there’s a few sections) . So the job was not only enticing content, but in summarized bullet points!

Finally, FileGuardian development

If you’ve never been on a software development project before you may think the first step is to get coding. In reality, that’s far from the first thing you work on. For FileGuardian, there were two main tasks to start:

  1. Create our development and QA environments – this is actually a pretty big undertaking and is way more complex than what I can get into here. There’s a few important items though that are worth mentioning like choosing our source control environment and creating our internal quality assurance area.  For the former, we chose to use Subversion and still run it today. For the latter, we had a few servers purchased previously so one was designated for our internal testing environment.
  1. Complete a full application design/architecture – building software is much like building a house. You first identify the needs: how many bedrooms/bathrooms, how many windows/doors, etc….  You then rely on an architect to create a blue print of how the house will layout based on your needs.  This blue print describes all the rooms in the house, how big each is, how they connect, etc… After the blue print is approved, you’ll then start gathering material and workers to take it from paper to a reality.  Software follows a similar set of steps (plus a few more).  I was busy identifying all our FileGuardian needs (what it was meant to do) and my colleagues (the two employees from the consulting company) were creating a software architecture/design to support these needs. We’d review it all together before writing a stich of code.

The clock is ticking

It’s October 2008 and our timeline is approaching.  We need the beta version of FileGuardian available to our early adopters well before 1/1/2009 or we’ll miss out on this year’s tax season.  Time to put the pedal to the medal.  Oh and I forgot, still do enough consulting so we can feed our families.  No pressure at all!

Part 4 of the Shugo Story – Finally a Name

So I decided to keep the consulting company in business and I laid out the immediate plan moving forward with our team.  But again, we still didn’t have a stitch of code written nor did we have a company name.  If you missed any of this, check out part three of the Shugo story to get up to speed.

First thing on my agenda was a company name and I had tasked a friend who was an expert marketer to help.  Luckily, we had a great relationship so he helped for free and he was about to send me a first round of his thoughts.

Would the first time be a charm?

Rarely is the first time a charm, especially when it comes to something creative and when you have too many people in the decision process.  For our company name, I kept the group small: just myself and my marketing expert.  I still remember the anticipation I had when I saw his “first stab” email.  The only question was if his thoughts would be on point or be a dud.

Remember, my marketing expert was one of the original three partners we were going to have in this venture or so we thought.  This meant he had intricate knowledge of what we were trying to accomplish and probably had already been thinking of our branding long before I asked for his help.

He not only shared with me a company name but also a logo he had designed. First the name: Shugo – a Japanese term he derived from the term Shogun.  In the past, shoguns played a key role leading and securing different regions of Japan.  He felt this connotation fit perfectly into what we were trying to do: leading and securing small businesses on the latest in industry best practices. The funny part is that he went into Japanese history even though he was Indian!

Typically I like to take a little bit of time with big decisions but for this name I thought he hit a homerun.  It felt perfect.  It was short and unique like Google and Yahoo.  It was something people wouldn’t forget.  You could use Shugo as a noun or verb (you should “Shugo” that file). Shugo.com wasn’t available, but myShugo.com was.

Pretty rare feat on a creative project for the first round to produce an extraordinary result without any feedback or change, but he did it.  I have to say to this day I still love our name, what it stands for and the response we receive when people hear it.  I’m sure there are some people who don’t like our name, but they haven’t shared it with me yet.

We have a name, but now we need a logo

Second part of his email was an attempt at a logo. I say attempt loosely.  He’s an expert when it comes to digital and graphic design, but I’m VERY picky when it comes to how things look and feel.  I’ve had no formal training but I know what I like and I’m pretty stubborn to have every detail the way I think it should be.

You may think he was a little presumptive creating a logo since he just presented me with a name.  What If I didn’t like the name then the work on the logo wouldn’t matter? I think deep down he knew I’d love the name Shugo so he went ahead and created a logo complete with a tag line.  Here it is.

ShugoLogo-white400

My initial gut was “eh”.  It didn’t blow me away nor was I completely turned off.  I loved the font used on the word Shugo and I even liked the tag line “Guarding your business information” (you’ll find out soon that we’re actually looking to change this since we do much more than that).  The colors were OK even though they reminded me of the New Jersey Devils which is a pretty big pill to swallow if you’re a die-hard Philadelphia Flyers fan.  But red and black did match the Japanese culture which made sense because of the name Shugo.

I think the one part I wasn’t sold on was the shield with the funky “S” inside. Let’s break that down:

  • Shield: denotes security which makes sense since FileGuardian was going to help businesses securely exchange data
  • “S” inside the shield: the circles are points with lines connecting each point. This was meant to display securely moving data from point to point which is why it lived inside of the shield

After hearing the explanation, I understood it a bit more but I still wasn’t in love with it.  It was once again, another thing I wanted to stew on for a few days but heck, we made progress.  We finally have a name and part of a logo.  At the very least, I can now replace all the [businessname] placeholders inside of the business plan.

Let’s start coding…

Finally, we could concentrate on what we did best and start development on FileGuardian. It’s obviously the area I felt most comfortable in since I spent my entire career building software.  It was October of 2008 and much had changed:

  1. The buyout of my consulting partner was complete
  2. The architecture and original design of FileGuardian was finalized
  3. We’d scaled back consulting for one of our employees to concentrate on FileGuardian development

I look back at this time and think about one of the best decisions we ever made when it came to FileGuardian.  We knew as usage of the application grew (well we hoped it would grow) there would be a large number of files we’d be storing securely on behalf of our clients. Trying to manage all those files ourselves on our own servers and have proper backups and disaster recovery plans would be a nightmare.  Heck it would probably be more work and cost than supporting our users.

As a result, we chose to use some well-known third parties for file storage. They had first class facilities with backup and disaster recovery plans in place. Their security was top-notch. Why re-invent the wheel when we didn’t have to? Honestly, we couldn’t do it better than they could.  They have dedicated teams and we had three people.

To add a layer of security though, we’d encrypt each file stored with these content providers.  Each file would receive its own unique encryption key though.  This meant that it would be encrypted differently than the next and we’d store the keys in a separate location than where the files were stored.

To this day, it’s been one of the best decisions we’ve made along the way.  We’ve gotten many decisions wrong, but this was a grand slam. I’d say it probably was the best decision throughout our history, but there was one other one that proved to be even more valuable.  I’ll share that soon enough but for now we were on our way.  Coding had begun. We had a small group of early adopters already identified.  We were marching toward a beta toward the end of 2008. I finally had a smile on my face confident in the decisions I made but scared to death on how it would all work out and how I’d continue to support my family.

Part 3 of the Shugo Story

In case you missed it, with part two of the Shugo story I shared how my consulting partner left it on me to keep the consulting business afloat or close the entity.  It threw me for a monkey wrench since it wasn’t the response I had expected when I shared I was the one who was going to walk away to concentrate on this new venture.  So once again, back to a few days of thinking: what was the best course not just for me, but for the two employees we had as well?  Honestly, the decision would’ve been easy if it had just been the two owners.

I couldn’t do it…so it remained open

I can honestly say the main reason I decided to keep the consulting entity going was for our employees. They had always poured their heart and soul into their work and represented themselves and the company to the fullest.  They didn’t deserve an immediate “termination”.

I knew they were both super talented and could get other jobs immediately, so it wasn’t about them not having work and income.  It was about their loyalty through the years.  I enjoyed working with them and learned a number of things from each.

I felt having them with me on the start of this journey would be a benefit. It would help:

  1. Minimize the risk by continuing to have consulting income as we started this new venture.  Wouldn’t you want to know that you at least had “x” dollars coming in than nothing at all?
  1. Expedite the first version of FileGuardian.  Remember this was mid-year 2008 and we still didn’t have a single line of code written for the application.  Heck, we didn’t have anything but a product name (we still didn’t have a company name).

Point #1 is an important one to review. Remember I had a young and growing family I needed to support. My wife was a teacher but once we had children, we decided she would stay at home.  It’s a decision we both felt strongly about but that meant fully supporting the family financially fell on my shoulders. Pretty big burden as I had this brilliant idea to start a new venture and change the course of my career!  Like I said before, if she had known the revenue we were generating with consulting, I’m not so sure she’d be 100% on-board with me!

Side Tidbit: I have the utmost respect for any stay at home parent.  It’s more work than I do on a daily basis and is worth a much higher salary than most in the workforce make. I could never do what my wife does daily; she’s an absolute saint with a great deal of patience, something I severely lack.

Ok, so what’s up next?

I now had two main items to complete immediately…one was something I had no clue how to approach but that’s why you surround yourself with good people:

  1. Buyout my consulting partner – we were 50/50 partners in the business so I needed to buyout his remaining ownership.  This was the item I had no clue on what to do, but it’s why we have lawyers to help. As much as I’ll b!tch at the hourly cost we’re invoiced for their services, they’re  really a huge help.  So I immediately called up Kevin our business attorney and shared the situation.  There’s some legal stuff I don’t need to share but he helped us get through the process rather quickly.  Since the business was cash rich, I didn’t have to pull anything out of pocket to buy him out so it was relatively painless.
  1. Share the news with our employees – all this was going on with our employees oblivious to the fact. Obviously they needed to know so they could decide if they wanted to continue on with me or find other opportunities elsewhere.  I’d support then in either path, but had hoped they’d stay and support my objectives.  For this conversation, I prepared a PowerPoint sharing my vision moving forward and how each of us fit into the plan.

One employee would be responsible for defining our network architecture (servers and other hardware) we needed to support FileGuardian and participate in the application design and architecture.  He would still consult a high number of hours per week as well.  The second employee would scale back his consulting hours and concentrate on FileGuardian’s overall application design.  His goal would be create a prototype within a few weeks.  Scaling back his consulting work back a bit would provide him more time to concentrate on FileGuardian, but this put some pressure on me since it would reduce the revenue he was generating.  I knew I’d be taken a pretty big loss on his time, but felt hey, this would be my investment into the beginning of this new venture.

I would still concentrate on consulting – much to my chagrin – and I’d start building the business plan for this venture.  I’d also share the FileGuardian concept with a number of local accountants and other professionals I had known to start spreading the word.  I knew we wouldn’t have a large marketing budget (frankly we didn’t have one at all) and that word of mouth would be our guerilla tactic.  We’d offer perpetual free usage of the product in return for their feedback.  Luckily, I had a couple bite even though we hadn’t written a stich of code!

But we still didn’t have a name yet

As I was starting to craft the business plan, I kept putting in placeholders for the name of the business.  You’d see paragraphs in the business plan with “[businessname]” embedded since I still didn’t know what we were going to name the company.  I knew we needed a name and that I wasn’t the right person for the job.  I didn’t have dollars to spend on hiring someone either to help.

I thought why not ask the original marketing partner (remember from the three amigos) to help.  He and I were still great friends, there was never any bridges burned and marketing was his specialty.  Luckily he agreed to tackle the task! My only preference for the company name was that I wanted it to be something short and catchy like a Google or Yahoo.  Remember I wanted something like that for the product name but he thought better of it based on our target market but agreed we could be a bit creative for the company name.

Within a few days he emailed me sharing a concept and wanted to see what I thought.  Would this be it? Would our company now have a name or would we be going back to the drawing board?

 

Part 2 – Uh-Oh, Tacos…what happened next?

If you missed part one, the headline about tacos may not make sense. If you have five minutes, you can read about it here.

If you did read part one, let me explain what happened after that infamous lunch. Like any big decision, I didn’t rush but instead followed my 24 hour rule.  This situation though fell into the “sometimes longer” category. I honestly wasn’t sure what to do next, but was more convinced than ever that I needed to lead the charge on this new venture.

After a few days of going back and forth, I was sure of my path.  It was time for me to go out completely on my own, move on from the consulting side and build a product business. More importantly, I needed to do it on my own terms without initial partners. The hard part though was sharing my decision the other “amigos”.

Sharing my decision…marketing partner first

I thought it would be easier to start with my marketing partner since he and I were on the same page of me leading the charge. He also had a marketing firm he was still running and deep down I wasn’t sure if he was 100% committed to this new venture.

Just as I suspected, he completely understood and agreed that he wasn’t 100% all in. He had some plans to “product-ize” his marketing business already and would concentrate on that. We both agreed that was probably the best path for him since it’s where his passion lied and it’s showed.  He’s done an amazing job; his business s is thriving with a nice list of clients. Many of them are folks you see on TV today since he works with a number of food industry and celebrity talents.

I did leave that meeting with one request for him though: could he help me name this new venture (remember we had a product name in FileGuardian but still not a company name)? He’s more creative than I and that’s his specialty: marketing.

Sharing my decision…my consulting partner

Of the two, I knew sharing my decision with my consulting partner would be a bit more difficult. Not only were we “in bed” together with an existing company, but we had worked together for years prior to that. I met him when I was interning in college so I had known him for close to ten years. In fact, he was one of the few that helped me learn technology when I was starting my career. I had picked up a number of best practices and early programming techniques from him.

Since we were both actively consulting, I asked him if we could chat at the end of the day at our office. We had a small 650 square foot office space we worked at while not at a client’s site. Being away from a client’s office would be best since I didn’t think it would be an easy conversation. Plus I wasn’t sure how long of a conversation it would be.

I wouldn’t say I was nervous since I was confident in my decision but I was anxious for the conversation. It’s one of those things that you just want to happen so it’s over with and you can move on.

Like I do with most things, I was thinking about my approach. Going over and over in my head how I would share that I would leave the consulting company to start this new venture on my own. As I shared, it was a difficult decision but was made more difficult because we had two employees. I was close with them and really enjoyed working with both, but I knew for my own happiness it was time for me to chart the new course.

The conference room…the scene of the crime

Part of our small office space included a conference room. It was approximately 250 square feet where we had a table we bought from Ikea and a few small chairs. Sure I had some butterflies as we entered the room but again but I was confident in my path.

No matter how many times I practiced that day, I didn’t follow “the script”. I just blurted it out: I was going to leave the consulting company to start this new venture on my own. I didn’t share the details of the “tacos” lunch, but focused more on my thoughts and feelings. It was my dream since college to run my own company and build a great organization. Sure we had a consulting company, but that was really building something great for others not myself. I wanted something more, something “tangible”. I was ready to take the risk and go all-in even though my life was changing day by day and I was expecting another child.

Looking back now I may have been foolish and boy would it have been easier if I made the decision a few years prior. Unless you’re a parent, you don’t understand the time, effort and money each child requires. Luckily, I knew I had the support of my wife. Since day one she’s always said she trusts what I’m doing, though I keep the gory details away from her. I’m not sure she’d been 100% on board if she knew the success the consulting company was having and that I was ready to walk away from it all.

The reaction and unexpected twist

The reaction to my decision wasn’t what I expected. I knew he’d be professional, but I didn’t know he’d be so agreeable. I guess deep down he was feeling the way I did, not 100% happy. I also think the prospect of a new venture was a bit scary. See he had done something on his own before but it didn’t work out as planned. I think that experience plus the pressure of starting a family himself made the “safe” route more appealing.

One thing did catch me off-guard though and it’s the twist I’m referring to in the headline of this section:  he wanted to walk away and leave the consulting company to me. He was going to pursue a full-time job, again for more security. Plus, I think deep down he had genuine concern for our two employees and he would’ve closed the consulting company if I had left leaving these guys without a job.

Most of the consulting contracts we had were from relationships I had built so it made sense on his part, but left me scratching my head since I wasn’t expecting this. Time to go back to the drawing board, clear my head and decide what I was going to do: keep the consulting company or shut it down?

What do I do, keep the consulting company?

Well this decision I now had to make wasn’t one I was expecting. What made this more difficult is that we had two employees who gave their heart and soul to us and our clients for years. Since my partner was exploring the full-time route, it was on my shoulders to keep the consulting company or close it for good.

It was another decision I didn’t want to rush into so I took a few days to mull it over.  On one side it did bring in revenue since most of our contracts were open ended.  On the other side though, the business was extremely profitable with zero debt and a nice sized bank account.

Part 1 – How did Shugo come about…

Seems like yesterday, but it was six years ago when the idea for Shugo hatched — though the vision then is much different than where we are today.  Yep, six years ago we started devising the initial business plan and design of FileGuardian, our core product that was going to change our lives.  I thought it would be helpful (and amusing) to share how it came came about.  Give you the background on where we started, how we tried to minimize the risk as much as possible and where we are today.

Why create a start-up…my dad thought I was crazy

The question I was asked over and over again: why create a start-up when we were already running a successful consulting company?  We had a nice client list paying us well over $100/hour for our software development expertise.  In the late 2000’s, we had four employees and the business was generating revenue of over $500,000 annually.  We were extremely profitable and had long term commitments of additional consulting work year after year.  In fact, many of our consulting contracts were open ended with no end date because of the tight relationship we had with our clients.

Then why rock the boat?  Why disrupt what we built over the years?  Why take an unnecessary risk?

Yep that’s me, I rock the boat

It was mid-2008 and my life was great but changing.  My wife and I had married in 2007.  We welcomed our first child (Taryn) in January of 2008 (we didn’t waste any time eh).  We were expecting a son (Brayden) in March of 2009.  So why risk a business generating revenue of a half a million dollars a year for a start-up?  My dad, a banker his entire career, thought I was crazy.

The answer: I wasn’t happy.  I enjoyed building software, but not building software for other businesses to profit long-term from.  Sure I received near-term profit but my client received the long-term reward.  It may sound selfish but I poured my heart into the work we did for our clients.  Our entire team did.  We treated it as if the software was our own and the clients of our clients (the end users of the software) we ours as well.

What really tugged at me was when I’d hear about the level of support the end clients of the software received from our consulting clients.  We’ve built this great software only to see it not supported all that well. It bugged me…the software that we spent hours developing wasn’t receiving the level of support I felt users deserved.

But we were generating revenue of half a million dollars a year, shouldn’t that have made me a little bit happy?

Well it didn’t.  I dreaded leaving the house every day (ask my wife, she could see it in my face).  I wanted something more.  I wanted to control my own destiny, even if that meant I failed.  Of all times, newly married, one child with another one the way, I was ready to make the jump.

The three amigos…

In June 2008, I broached the idea of starting a SaaS based business with my partner in the consulting company and a good friend who ran his own marketing firm.  Gone would be the days of hourly billing.  We’d welcome recurring monthly revenue with unlimited scalability.

I came up with idea of allowing small businesses to securely exchange data.  Wouldn’t every accountant in America want a simple and secure way to send tax returns back to their clients?  Wouldn’t they also enjoy the idea of being able to securely receive QuickBooks backup and other setup files from clients as well?  And yes I explicitly say accountant since it’s who we felt our target market would be — the low hanging fruit my father always mentions.

We had to think of a product name and I wanted something fresh like Google or Yahoo.  Something unique that no one would’ve heard before but would stick in their mind. Well our marketing partner decided that probably wasn’t the best approach, especially if we were marketing to accountants (of course he was right).  We needed a name that was simple to easily describe the product.  His idea: FileGuardian.

What — no business plan?

So we had a concept and a product name.  We had our target market defined so let’s start crafting a business plan.  It was the next logical step since I went to business school for Entrepreneurial Studies (graduated with my MBA in 2001 and had written a few).  At least I thought it was the next logical step but my two partners didn’t agree.  They both thought it was a waste of time but I held true and started my market research and crafting the plan.  I thought at a minimum, we at least needed an Executive Summary.

Part of what we needed to decide would be the structure of the organization, specifically who was going to responsible for what and what our titles would be.  More importantly though, we had to define who would be the leader, the end decision maker of the three, the one who would be the face of the business moving forward, for better or for worse.  My marketing partner and I both felt I should be the one.  My partner in the consulting company disagreed and felt he should be the leader.

Typically, I would’ve figured out a way to work out a compromise but this was one situation where I knew I couldn’t.  See, I already had some reservations with my consulting company partner from the years of being in business together.  We thought differently, but overall I felt that was a good.  We had varying viewpoints which helped challenge us both.  But, there had been a few moments when he completely dismissed my differing view.  Those moments really tugged at me.

How Tacos changed my life

Randomly, I decided to take one of our employees in the consulting company out to lunch.  I hadn’t had a chance to interact with him much in the recent months since he and my partner worked tightly on a contract and I was busy on another part of the contract.  I thought it would be good to catch up and learn what was new in his life and ensure we were offering him the opportunities he needed.  It was a lunch that changed my life.

We entered the restaurant and sat down waiting for our food to arrive.  I asked this employee how things were going in life and how things were going working with my partner.  Immediately (even before we had a glass of water on the table), he pulls a piece of paper out of his pocket.  It wasn’t just a 3×5 or 4×6 piece, it was the full 8.5×11 variety with bullet points from top to bottom, left to right covering the entire sheet.

He reels off point after point at the difficulty he’s had with my partner, how my partner takes credit for all his work and how unhappy he truly is.  Point after point I could see and understand where his frustration lied.  He concluded by sharing how he appreciative he was for my ear so he could share his viewpoint.

The light bulb really turned on for me after this experience.  Some of the concerns he had with my partner I shared as well.  It was these reasons and this lunch that sealed it for me: I need to be the leader of this new company no matter what.

I hope that doesn’t sound selfish but I knew if we were going to shake up our lives, I need to lead the charge.

 

Part 2 to come soon…