I’m part of a few incubators where I mingle with future startup founders and pretend to have knowledge on how to build a startup. Generally speaking, I perceive myself as being relatively clueless, but then again, when the founders ask me some questions, I briefly think that I actually have something useful to share.
One of those things is how to build a consulting company with no investment. For whatever reason, many founders believe that you always need some sort of Venture Capital (VC) investment, regardless what you’re building. This is wrong. Even more than that, I’d argue that most companies out there didn’t require investment and were bootstrapped – just look at your local electrician or Kebab shop. My guess is that those people didn’t send around a fancy pitch deck before setting up shop. They bootstrapped.
In that vein, the consulting (and now software) company which I build, OpenRegulatory, is more akin to a Kebab shop than a fancy Silicon Valley software company. So, today, I’d like to share how I built this company with no investment. I believe that this is generally possible for consulting companies, so maybe after this, you can go off and build your own? But please don’t name ot “OpenRegulatory 2” or so.
Also, I’m fascinated about how businesses got started, specifically how they went from 0€ to 1€ of revenue. That’s way more interesting than how to scale a business up once it works.
So this is the story how OpenRegulatory went from 0€ to.. 60k€ actually, that was the money I made in my first year. It all started with me wanting to quit my job.
Quitting My Job, Because It Sucked, Kind Of
I was one of the first team members at Vara, where we developed fancy machine learning – based software for breast cancer screening (cool!). I learned a lot there, developed a ton of software, hired software engineers and did the so-called medical device certification – that’s essentially a bunch of paperwork which, when accepted, allows your company to sell medical software.
We passed this certification with flying colors and I thought to myself “well, it was painful and we literally created hundreds of pages of mostly-useless documentation, but it wasn’t hard”. I thought it wasn’t hard because it was similar to writing a Bachelor’s Thesis – you don’t really need hard skills, you mostly need to get organized and good at structuring your work.
Turns out, many companies, just like students writing their Bachelor’s Thesis, are terrible at getting organized and structuring their work. Accordingly, many companies have a really hard time getting their medical device certification done.
But I only learned about that later.
Meanwhile, at Vara, I was growing unhappy. Looking back, it wasn’t the company’s fault, it was mostly just me wanting to break free of the shackles of employment and constant salaries. I wanted to do my own thing. That, and I was still stuck with maintaining the medical device compliance paperwork, a job which unsurprisingly no one else wanted to take over unless you’d hold their dog hostage (not an option). Quitting my job seemed like the only way to finally hand it off to someone else without having to take any animal hostages.
So I quit, without having any plan for what to do next. I spent time flying, working towards my pilot’s license, lots of fun.
On the side, I started to develop an “applicant tracking system” (ATS) which is a fancy word for software with which you can manage your job posts and applications. The system at my past job sucked and I thought, if I develop a better one and make it cheaper, I’ll instantly get lots of customers and, overnight, I’ll end up with that sweet, passive SaaS income, right? Wrong.
But I only learned that later.
Finding My First Three Customers
In the meantime, three startups reached out to me to ask whether I could help them with their medical device certification. Ugggghhhh. Pain! I actually didn’t want to touch this sort of stuff any more. Wasn’t that the reason why I quit my last job? I wanted to code my sweet ATS software instead.
But the customers kept on pushing. They were like “if you don’t help us, we’re lost. money is not an issue. can you start tomorrow?”
That got me thinking. Maybe I can just do this as a side hustle to pay off my pilot’s license. And I could still code my fancy ATS SaaS on the side. Okay, let’s do it!
If people approach you and want to pay you to solve their problem, if in doubt, say yes and try it out. There’s like a 99% probability that a viable business is around the corner.
The elephant in the room was why the hell they approached me, given that I had only done this certification thing once. Turns out, they had worked with other consultants in the past and hadn’t made any meaningful progress. As I later learned, regulatory consulting is often not really about regulation, but more about project management and actually telling engineers which sort of mostly-useless documentation they need to write today. Most other regulatory consultants are not good at talking to engineers.. actually, they’re often not good at talking at all as they get sidetracked easily.
Okay, so we’ve established that those companies chose me because I appeared more promising than other consultants out there. But how did they find out about this? Two somewhat random coincidences:
- There was a regulatory meetup group in Berlin, and I had decided to host one of the meetups at our company’s office to maybe recruit a regulatory person which would take over my painful regulatory work (wishful thinking, I know). I did a talk at that meetup which was well-received because I showed many real-world examples (vs. useless abstract concepts of other consultants). I also ranted a lot. People liked that.
- I had posted two blog posts on the company’s Medium account about regulation (same style, lots of rants). They were buried deep in the Google search results, but surprisingly one company unearthed them, loved them and got in touch with me. Wow!
So that’s how I found my first three customers. I provided a fresh new perspective on regulatory work and made it seem simple.
Now.. the only remaining problem was that I really didn’t like regulatory work.
At best, it can be described as mind-numbing, at worst it is actively soul-crunching. A bit like doing tax returns?
So I didn’t want to do this. But then again, it was an opportunity to start my own business. I thought, even if I don’t do this long-term, I could do it for a while and learn a lot about the business bureaucracy in Germany, how to do consulting, and use that money for my ATS software.
Sounded good enough to convince my half-asian brain. So I signed on my first three customers.
Negotiating The Consulting Fees
My first customer was also the biggest one. We went on to negotiate my pay. Mind you, I had no clue how to do any of this. In retrospect, it was hilarious. It went like this:
They were like: What’s your hourly rate?
I: Hm. Other consultants charge 200€/hr. So that’s my rate, too.
They: Don’t be ridiculous. We’re your first client. 100€/hr.
I: Okay.
So that was settled. 100€/hr. This still seemed like crazy money to me, given that I’d be working nearly full-time for them for a few months. My prior salary was around 5k€ / month before taxes, and this would be 16k€ / month (= 20 days * 8 hours * 100€). Insane!
Transparency & Expectations
By coincidence, I learned something which would end up being very useful to this day – transparency.
I felt a bit uneasy about being paid 16k€ / month while literally not having any sort of consulting experience – remember, I had done this certification thing once at my past company.
I decided I could just try to be as transparent as possible, and then leave the decision up to them. I told them “Look, I have no clue if I can help you at all. I did this once at my old company and I have no idea if I’ll be useful to your company. Let’s abort this project early if you notice I’m useless.”
They responded really favorably to this and were like “sure, sounds good! let’s check in every week or so”.
Fascinating. I feel like in high school and med school, transparency always was associated with negative outcomes (“don’t talk about what you don’t know!”), but here it was positive all around. That’s something which I saw many times over when running OpenRegulatory.
And was I really as useless as I had cautioned my client? No, I actually was quite helpful – they passed their certification audit a few months later. But a lot of that wasn’t due to my compliance hard skills (= nearly none). Instead, again, it boiled down to regulatory consulting often not being about regulation, but more about project management and actually telling engineers which sort of mostly-useless documentation they need to write today.
I was an engineer myself, and I was good at working with other engineers, so this was easy.
Benefits Of Running a Small Profitable Business
In the meantime, I learned a lot about the administrative side of things: Registering as a freelancer in Germany (it’s a pain), writing invoices, creating a business bank account, etc. All of this things sound super boring, but, in retrospect, learning these things while having a profitable business was extremely useful. Because many founders nowadays only attempt to learn these things after their bank account has been topped up to a few million Euros by investors, and then.. I’m just not sure if you learn things the same way. A bit like trying to teach a child about financial responsibility while also handing them a few thousand Euros. Not sure if that works.
Lessons Learned
So what are the lessons learned here?
Start with people who have a problem and how you can help them: To say I got nudged into this direction is probably a huge understatement – I had three startups chase me down and repeatedly try to convince me to work for them while also throwing money at me. So I guess I was lucky. The lesson still stands though!
You need to seek out people who have a problem and they should be willing to pay you to solve it. Oh, and you should be capable of solving it, haha..
While this might sound simple (it is?), turning this around and thinking about what you shouldn’t focus on becomes much more interesting. Because.. wait, what actually happened to my fancy ATS software I was building on the side?
Lessons Learned: What Not To Do
After starting my one-person regulatory consulting business, I would talk to my friends about it. Here’s how the dialogue usually went:
I: So it’s going well – I have three clients, they’re paying me good money and apparently I can help them a lot, they’re super happy.
Friend: Cool. So what’s next?
I: Stopping all of this and building my ATS software of course, because I’m looking forward to that sweet, passive SaaS income.
Friend: Wait what? And who will purchase that software, anyway?
I: Not sure. Everyone?
I was quite stubborn about the ATS software. I actually ended up finishing it, then registered a separate business for it in Germany (pain again), only to be faced with.. well, the “marketing problem” of having a product with no customers at hand. I tried some Google Ads but noticed they were super expensive. I was too tired to write blog posts to attract attention or even to reach out to companies directly. It fizzled out. That’s because I didn’t start with people who have a problem who are willing to pay me to solve it.
So the continuing development of the ATS software was a bad idea, because I was building something which I thought solves a problem, yet I had no paying people lined up. I call this the “software engineer’s trap”.
Which other traps are out there?
- Wondering what type of company to found, abstract legal ramifications, how to build a company website (I still didn’t have one!), getting a fancy company logo, etc. I call this the “narcissistic founder’s trap” – typically, those are people on LinkedIn who proudly post photos of themselves incorporating their company, sitting at the notary and signing an important piece of paper. Dude, if you’re busy signing pieces of paper in front of the camera, you clearly don’t have any customers lined up yet. The good news is that if those paper-picture-people are your competitors, you can assume they’re never become serious competitors for your business.
- The “I need investors or EU grant money” trap: Assuming that, just because you’re building a company, you need some sort of investor money to get started. My set up costs were a few hundred Euros which were the initial bookkeeping fees of my tax advisor.
I’ll write up a longer list of those soon!
Finding Customers & Problems
The next question could be: If you can’t think of any people who have a problem you can solve, how do you find them? This is a much more tricky question. I can think of two solutions:
You’re likely already exposed to suitable problems, but you’re just not noticing them. Here are three problems I experienced today: There’s no gym close by which opens before 8am, scheduling doctor’s appointments in small cities still means you have to call them and they often don’t pick up the phone, and setting up apps on my parent’s phones often requires my help. Not sure whether anyone would pay me for any of those things (chuckle), but I hope you get the idea – if you notice three problems like this per day, you should get some ideas after one week.
Or, you’re really not exposed to problems at all – rather unlikely, but this was my situation when I just graduated from University. My friends were mostly other students, and I just wasn’t exposed to many real-world problems. I “solved” that by working in a startup where I was exposed to many problems and met many people. If you’re similarly not-well-connected and unemployed, consider working at a startup. You’ll meet lots of people, and even more problems.
Wrapping Up
That’s it! My bootstrapped consulting business was well underway. I had three paying clients who I was working for, and they were happy. My revenue in my first year was a bit more than 60k€ which was more than my prior salary as an employee. Sweet!
But what’s next? Regulatory consulting was still super boring for me. The big question was: Should I continue down this path? And, if so, how would I find more clients? Or, if not, what else should I do? Definitely not ATS software, haha..
Stay tuned!
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