When to Stop Consulting and Build a Product - The $200M Basecamp Question

The question I get most since publishing "The Anti-Unicorn": "George, I've built a successful consulting business. When do I stop consulting and actually build a product?"

After three years building consulting revenue while almost killing SimpleDirect twice, I have some hard-earned answers.

This episode breaks down the exact three-stage framework for transitioning from services to products without going broke in the process.

Key Topics Covered

The $20,000 Debt Wake-Up Call (2:30)

• How SimpleDirect went from profitable SaaS to nearly bankrupt
• The cold-calling disaster with Steve (our San Diego salesperson)
• $1,000 MRR that couldn't even cover one salary
• The consulting pivot that generated $8,000 in one week

The Basecamp Blueprint (8:15)

• How Basecamp transitioned from web consulting to $200M SaaS
• 60 employees vs. KPMG's 128,000 - the scaling difference
• Why you can't make $200M annually with consulting alone
• Internal tools becoming external products

The Two Fatal Mistakes (12:45)

• Mistake 1: Transitioning too early (lose revenue stream)
• Mistake 2: Never transitioning (high-paying job, not scalable business)
• Why most founders get this wrong
• My expensive lessons from multiple pivots

The Three-Stage Framework (15:30)

• Stage 1: Consulting First (Months 1-12)
• Stage 2: Hybrid Model (Months 13-24)
• Stage 3: Product First (Months 25+)
• When product revenue consistently beats consulting revenue

The Three-Stage Framework Breakdown

Stage 1: Consulting First (Months 1-12)

• Goal: Prove market demand and generate cash flow
• Charge premium prices ($1,800-$2,500+ per engagement)
• Focus on cash flow, not scaling
• Document everything for future automation

Stage 2: Hybrid Model (Months 13-24)

• Goal: Build product while maintaining revenue
• Keep high-value consulting clients
• Start automating service components
• Develop SaaS product gradually
• Pitch product to existing consulting clients

Stage 3: Product First (Months 25+)

• Goal: Scale beyond personal time
• Self-service product for most customers
• Consulting only for enterprise clients
• Product revenue beats consulting revenue
• You're now a product company that does some consulting

Key Numbers & Metrics

George's Personal Finance:

• Lives on $48,000 annually post-tax ($4,000/month)
• Frugal lifestyle creates strategic freedom
• 36-48 months runway across SimpleDirect and ANC

Transition Milestones:

• Minimum $100,000-$200,000 annual consulting revenue before transition
• Key metric: When product revenue consistently beats consulting revenue
• Current status: Month 36 of consulting model

SimpleDirect Case Study:

• From $1,200 MRR to $8,000/week consulting revenue
• $45,000 in first 90 days of consulting pivot
• Multiple transitions: SaaS → Consulting → B2C

Quotable Moments

"Starting consulting is easy - you just start charging people for your expertise. The hard part is knowing when to stop.""If you can't get consulting clients, you probably can't get product customers either.""The goal isn't to choose between consulting and products. The goal is to use consulting to fund the transition to products that actually work.""When you know your personal 'enough' number, you can make strategic decisions instead of desperate ones.""Consulting gave me the freedom to experiment with SimpleDirect without going broke.""Life isn't a binary choice. You can keep consulting longer than planned if it feels financially safer."

Key Takeaways

1. Prove demand with consulting first - Validate that people will pay for solutions before building products
2. Don't jump too early - Need significant consulting revenue before transitioning ($100K-$200K annually)
3. Use the hybrid model - Maintain revenue while building product, don't go cold turkey
4. Document everything - Turn your consulting processes into product features
5. Personal runway matters - Know your "enough" number to make strategic vs. desperate decisions

Stories Shared

The Steve Disaster:

• Hired salesperson calling from San Diego
• High hang-up rates on cold calls
• $1,000 MRR couldn't cover his salary
• Had to draw personal money to pay him

The $8,000 Week:

• Pivoted to direct mailing consulting service
• Called contractor with $2,500 service, offered at $1,800
• Two customers signed immediately, two more that week
• $8,000/month vs. previous $1,200 MRR

Current Transition:

• Month 36 of consulting model (planned for 24 months)
• SimpleDirect pivoting to B2C
• ANC staying focused on consulting
• Using consulting revenue to fund product experiments

Common Mistakes to Avoid

1. Binary thinking - Assuming you must choose 100% consulting OR 100% product
2. Premature transition - Jumping to product too early without sufficient runway
3. Staying too long - Never transitioning and building a job instead of business
4. Ignoring cash flow - Not maintaining revenue during transition period
5. Skipping documentation - Not systematizing consulting processes for product development

Action Items for Listeners

If You're Building SaaS and Struggling:

• Try the consulting-first method
• Sell services before software
• Validate demand with high-touch consulting

If You're Consulting and Considering Products:

• Document your current processes
• Identify what can be automated
• Don't jump to product too quickly
• Build systems for the hybrid model

The Transition Checklist:

• Hit $100K-$200K annual consulting revenue
• Have 12+ months personal runway
• Document repeatable processes
• Identify product opportunities from consulting work
• Plan gradual transition, not overnight switch

Connect with George

• Free Ebook: "The Anti-Unicorn: The Consulting Model" at founderreality.com
• Newsletter: newsletter.founderreality.com (insider insights not shared on podcast)
• Twitter: @TheGeorgePu (daily insights)
• Email: For specific transition questions

Get the free book: https://georgepu.kit.com/

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