August 19, 2019

Arcus: Kick-Ass Software for Service Based Businesses

The purpose of this post is to make the case for a new software product targeting the
home services industry: Arcus.

The home service industry is a massive industry... Angie’s List, the 20-year-old subscription service that offers reviews of local service providers to members, estimates the home services industry is $400 billion++.

To make our foray into the home services industry, I want to target a niche with the niche: Software for Lawn Maintenance and Landscape Design Companies.

The Business Opportunity

The lawn and landscape business is a specific niche within the larger home services industry. The majority of lawn and landscape companies are cash rich businesses that manage their accounts with paper, excel spreadsheets and email.

It’s safe to say this industry is still catching up with the digital world.

By focusing on this sub-niche, we can get a product into the market faster and prove the business. This initial foray is simply a test to find a repeatable, scalable and sustainable business model.

Most memos begin with a problem statement, then an interesting argument to solve the problem. I’ll flip this and start with the FAQs.

FAQs

Q: Why another startup?
A: Innovate baby. The only true work is creating something from nothing. It’s exhilarating. I think everyone wants meaningful work and meaningful relationships. Let’s make it happen.

Q: Why the service industry?
A: The software that’s out there right now isn’t very good. And, it’s expensive. Service
businesses are not going away... everyone needs to cut their lawn, get their heater fixed, replace a broken toilet, etc.

Q: What’s the time frame for Phase 1?
A: 18 months. If we can’t get something out and into the market in 18 months, we got some problems.

Q: What’s the $$ goal?
A: $120,000 monthly recurring revenue.

Q: Why 120?
A: It’s a tiny amount in the software industry. It’s highly attainable. And, after expenses, it’s a ton of dough. To put it another way, that’s almost 3 Audi TT’s per month.

Q: How are you qualified?
A: I started and grew 2 software businesses from zero to one. I’m taking all my previous mistakes and successes and leveraging them into Arcus.

Q: How much money are we going to raise?
A: Zero. If we can’t make it by bootstrapping, we’re not very talented. Plus, the minute you take venture money, the company is no longer yours.

Q: What’s the key to success?
A: There’s no “one” single key. But, one of the most important success factors is critical thinking in the product roadmap. This strategy requires the product roadmap be architected such that new features are added into the product early and often. Building a product for a long time without customers starves the business of revenue. The other important success factor is capital efficiency.

Q: What do you mean by capital efficiency?
A: Being smart with money. For example, we could use Mapbox instead of Google Maps, because Mapbox is drastically cheaper. Software operating expenses should be a relatively small portion of the income statement... if we are smart about our decisions.

Q: Why go into a space that already has competition?
A: If we look at the competition in the marketplace, none of the currently operating software have a specific feature that we will build.

Keys to Building a Profitable Software Business

Reliable, easy-to-use software products are the true winners in the software-as-a service space. If something is easy to use–and actually does what the marketing material says it will do–that product will advance as the leader in the space.

One needs to look no further than Stipe as an example of a software company that has gained an enormous foothold in the SaaS space, specifically in credit card processing. Stripe’s software and product offering are easy to use, scalable, and it simply works.

For Arcus, the competitive advantage will focus on three strategic areas:

  1. Design. The design and user experience will be exceptional.
  2. Technology. Solid technical architecture and business logic. It will “just work”.
  3. Customer Service. Informational videos, posts and content.

What is the Long Term Vision?

The long term vision is to develop a repeatable and scalable business model. Creating this 1st product for lawn and landscape companies is the starting point to prove the business. But just the beginning...

If the initial product works, we will develop clones of it for other service based markets: HVAC, Plumbing, General Contractors, Carpet Cleaners, Pest Control, Janitorial Services, et cetera.

Each service business is relatively the same... they have sales, customers, work to be done, appointments, dispatching, etc. All of these companies want an easier way to work and keep track of their business.

The goal is to design a product that will work for a landscape company. Then build another product that will work for a plumbing company. Then a HVAC company... and so on.

Sales and Marketing
Sales of the product will be done initially by direct marketing and digital advertising. Then, we’ll use the power of the network to continue to produce sales.

To do this, we’ll create an affiliate program offering commissions on referrals.

The goal of the affiliate program is to generate sales by incentivizing our current customer base, thereby turning them into outside sales reps. Doing webinars with our affiliate partners will be a great method to help them drive more sales.

Customer service will play a massive role in our affiliate program. If we treat customers really well they’ll refer a few more of their friends.

What is affiliate marketing?
Any sales person who makes a “cut” or commission from selling a product is, in a sense, an affiliate for that product.

The affiliate is acting as the agent or representative of the product or company they are selling. Think of travel agents, insurance salesmen or MLM direct sellers.

Current Competition

I'm not going to talk too much about the competition. But, there are 2 giant players in this space.

The biggest weakness for both, is their size and age. Big, old companies move slowly and are stuck in their old ways. Their technology stack looks to be fairly labor intensive and, for one of the businesses, the set-up requires extensive labor.

How will we compete?
Our competitive advantage is the one feature. No company utilizes this feature as their main interface.

The end users for this software are not technically savvy individuals. I see this as an
opportunity for design and technology to converge, making a product that is stable
and easy to use.

Idea vs Execution

Most people think the idea is the most valuable part of a business. To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.

The hard part now is execution.