Why I am leaving my thriving software business

October 2020 by Thijs Scheepers

Exactly ten years ago this month, I founded the software consultancy Label305 together with my business partners. Over the years, I have had a lot of fun and learned an incredible amount about software, design, marketing, business operations and especially about people. Truly, this venture is the greatest adventure of my life. Yet, two years ago, I started to realise that I would not stay at Label305 forever. It took me a lot of effort, but at the beginning of this year, I bit the bullet. 2020 would be my last year at the company. But of course, one month later, the pandemic broke out 🙈.

In this article, I would like to tell you something about my motives to leave. In a nutshell, I mainly get my energy from learning new things, and I realised that I have finished learning at Label305. This may sound silly—having finished learning when running your own business—but allow me to explain.

Running a small software business is hard but rewarding

Label305 is a bootstrapped business, i.e. it has grown without investors or financing. This is possible if all you need to start is time and a laptop. We now have a profitable SaaS product, seven figure revenues, a healthy bottom line, and a diverse customer base for our consultancy business. Moreover, our processes are well suited for working remotely. So, fortunately, we will get through the pandemic 🤞.

I have a lot of respect for all small business owners who find themselves in a more difficult situation now. Being one myself, I know very well how stressful situations beyond your control are. In a small team, you empathise with everyone, you witness all the problems up close.

In the case of a software consultancy, you have to constantly ensure that there are solid assignments, that there is a pleasant working atmosphere, that fantastic work is delivered and that clients understand the peculiarities of the software development process. For me, this is a wonderfully challenging responsibility that gives great satisfaction. But it can also be exhausting at times. And it is hard for me not to feel a little lonely every so often, since nobody seems to truly understand all of it. These are things I underestimated before starting the business. Being your own boss is certainly not all sunshine and rainbows. Nevertheless, I have the opportunity to work with a magnificent team, and get more than enough rewarding experiences and pride in return.

Early aspirations and role models

When my co-founders and I shaped Label305, we had some grand aspirations, which did not make things any easier. We expressed our desire to keep the company small and independent. A place where it would be a pleasure and a privilege to work. We wanted sufficient variety and to remain curious. In other words, we did not want to get stuck with one problem. This meant no investors and not becoming a company with only a single product. Opting for a consultancy was the logical choice. This way we could slowly build towards our dream of small-scale, varied and meaningful work.

If you are reading this story and are familiar with the software industry, it may not surprise you that 37signals is an important example to me. I am also inspired by Sofa, Panic, Cultured Code, Envy Labs. Every single one of them is a small, independent and resolute company that makes beautiful things.

Balancing the process

Another quality that my role models have in common is their attention to detail. I myself can also be enchanted by structured code and pixel-perfect interfaces. I have always felt that consistently matching my role models’ attention to detail was particularly difficult for our software consultancy—in contrast to companies that focus on their own product. An important precondition for potential clients with great assignments and sufficient budget for detailed work is a portfolio filled with such work. Label305 now has this kind of portfolio 🎉, if I may say so myself. Getting there was not easy. Once you have an assignment, it is not possible to just start designing and developing. No—you first have to truly enthuse the team, make sure everyone understand the full context of the problem and give everyone time to empathise with the end user. Only then can the team work effectively on new software that deserves a place among the other portfolio entries. What’s more, sometimes things go wrong. The team has made the wrong decision in hindsight, which needs to be revised. Convincing a client in these situations, such that there is still enough time to deliver something beautiful, is not always easy. At a consultancy you have to put a lot of energy into enthusing, inspiring and convincing if you want the ultimate work to be of a high standard. Compromising on details will feel tempting at times. But these could prove vital for attracting the next wonderful client.

We have often messed up. In the first years, we did many projects for a flat fee. Profits regularly evaporated because we really wanted to create something exquisite. Later on, we overadjusted. We went too far in embracing an iterative approach, where we delivered something every week. As a result, we often forgot to establish a good plan upfront. We were too narrow-minded and researched too little due to the weekly deadline. All focus was on getting tasks into the done column. In the beginning, a project would run smoothly, but at a certain point, you would see it reflected in the result. Plus, this style of working is really not pleasant at all.

To ensure that we could still enjoy working and that we would serve our clients well, I began writing a new business process. Considering all nuances, we were able to strike a better balance with the new process. I admittedly spent a lot of time on it. But it paid off. After implementation it really felt we had taken a big step towards becoming a better company. The same was true after devising an actual HR process. With it, I tried to ensure that everyone in the team could get the best out of themselves. Implementing improvements in business operations is very interesting because you run into all kinds of problems that are not mentioned in the heap of textbooks. If your team continues to grow, I think you will constantly keep changing processes to reflect the changing business. We consciously choose to remain small-scale and we, therefore, do not want to expand the team a lot further. After the latest improvements, I felt that the processes do not need anymore drastic overhauls anytime soon. Everything just runs smoothly.

The problem, of course, is that I get a lot of satisfaction from coming up with these processes. And because everything was well sorted out, this satisfaction gradually faded. Realising this triggered the first moments in which I thought that I might not stay at Label305 forever.

Working on our own product

Earlier I mentioned that a consultancy brings a lot of variety. No matter how great the variety was, I have always kept my eye on product companies. Especially because I felt that, if we made something truly for ourselves, we could spend as much time as we liked on all the fun little details. Similar to how I believe many of my role models work. At one point, I was able to convince my co-founders to start investing some of our profits into our own software product. It gave me the opportunity to put myself in the shoes of a client, to learn more about marketing, and to design and develop with the ultimate freedom.

Keeping became a tool that solves a problem that we initially had ourselves by providing intuitive time tracking. Currently, the product is steady as a rock. All features, including native apps and browser extensions, have been developed with great attention to detail and are available to our users 🚀. In the beginning, we fiddled a bit with support and a clumsy pricing strategy. Now, we are finally making a profit with Keeping after some significant marketing efforts. Leading the product development process from the beginning to profitability was immeasurably satisfying for me. Despite the fact that software is never finished, it feels a bit like that to me by now. The other day I was working on our new iPhone app and it was hard for me to shake off that thought. I got the same jitters as when completing all the process improvements. The most interesting phase, in which I learned a lot of new things, was over.

Not all interesting diciplines match small-scale consultancies

In the past years, in addition to my work for Label305, I have obtained both my undergraduate and my graduate degrees. Despite the fact that I was regularly overloaded with work, I always enjoyed tackling a new problem for a course, with a group of fellow students. When I finished my studies in 2017, I was very relieved at first. I thought: "Now I can finally focus on a single thing for once." In a small business, you constantly work with the same people in the same way. That is nice if you want to get a lot done. Still, it did not take long for me to miss the buzz of the university.

When I was working on my master's in artificial intelligence (AI), I learned everything about computer vision, information retrieval and natural language processing. I wanted to apply my newly gained knowledge at Label305. Here, I quickly ran into a disadvantage of a small consultancy. It is very difficult to land AI assignments. Our clients are mainly medium-sized companies. These companies often have insufficient data. The benefits that AI can bring often do not outweigh the costs when it is applied to such a small scale. Moreover, you can never guarantee whether it will actually work. For every client, an expensive assignment without guarantees is unattractive. My colleagues have little experience with AI. If we got an assignment, I would have to work on it all by myself which I did not find an attractive thought either. I finally accepted that we would not be doing much with AI for the time being. I secretly pitied this.

AI is often applied in large-scale distributed systems. One of the few large systems I have worked on myself is Partyflock. This website once peaked at 500 million page views per month. Unfortunately, the one fairly large system I worked on was designed with outdated methods. In addition to Partyflock, I have also set up a lot of backend infrastructure for our apps, but so far, we have not encountered the problems that arise when a system becomes truly huge. Solving these kinds of problems particularly appeals to me. I would still love to delve into modern methods for running enormous distributed systems. The work at Label305 has so far given me little opportunity for this.

Making the decision

At the end of 2019, I started putting everything on paper: "I get energy from learning new things, doing new things and a bit of excitement." Thinking back is something I do not do enough. I constantly feel occupied with the problems of today and tomorrow. When I did start thinking back and looked at what we have achieved, it dawned on me that everything is now going quite as we had originally envisioned it. Label305 has grown into the small-scale consultancy with a wonderful work environment and is able to continuously deliver work with great attention to detail. In order for me to keep learning new things, I could persuade my co-founders to change track completely and overhaul the business. That does not seem like a good idea to me. After 10 years, Label305 is the company we wanted. I do not want to change that.

Slowly but surely, I realised that it might be better for me if I left. Label305 can continue without me, and I can start to do something new again. Maybe something with AI or with an enormous distributed system?

I am not under any illusions. The grass is not greener on the other side. And I could certainly long for Label305 later. Nevertheless, I am convinced that this is the right decision.

In preparation for my departure, I have already handed over many of my tasks. I will leave everything in very capable hands. My co-founder Joris Blaak will continue to manage and lead Label305. Olav Peuscher and Zgjim Neziraj will take over the responsibility for Keeping together. November is my last month at Label305. After that, I will first take some time to rest. I am sure that I will really miss everyone, but I am also looking forward to a new adventure.

I want to thank all our users, clients and partners, who have been so important for me and without whom my adventure would never have been possible 🙌. Likewise, I want to thank all the wonderful colleagues I had the pleasure of working with over the years—especially my co-founders: Xander, Joris and Olav. I've learned so much from all of you ❤️.