The 37signals Secret to Success: Sell Your By-Products

Last Updated Jun 10, 2010 1:01 PM EDT

Chicago-based software company 37signals has become famous for two reasons. First, its user-friendly web apps like Basecamp and Backpack have enabled collaborative work for small businesses around the world. Second, the company itself has become a showcase for an alternative way of running a business. Owners Jason Fried and David Heinemeier Hansson have now co-written a book, Rework, which shares their unconventional ideas.

A key tenet of Rework is that every company creates by-products. "When you make something, you always make something else," the authors write, using the analogy of sawdust to argue that you should sweep up your know-how into saleable products. Of course, that's been the story of 37signals' success: The firm started out ten years ago as a web design agency. Basecamp was an in-house tool that the founders built to manage their projects, but friends in the industry liked it so much that they developed it as a commercial product. Basecamp launched in early 2004, and within two weeks 37signals had exceeded its Year One revenue projections.

Now the company's business experience has been packaged into another by-product: best-selling books. Rework explains that the experience that came from building a company and creating software was the "waste" from actually doing the work. Fried and Heinemeier Hansson say that by-product books have made the company more than $1 million, and another by-product, their very popular tech-industry job board, has brought in an additional $1 million.

Heinemeier Hansson believes lots of small businesses out there have by-products they're not aware of, waiting to be discovered. "It's almost impossible to do just one thing," he told me recently. So how can you spot those by-products and monetize them in the marketplace? Heinemeier Hansson's advice is to get over the traditional business fear of sharing company secrets. "Start thinking of yourself as a famous chef," he says. "How do they become famous? By sharing their recipes in cookbooks and on TV."

Sawdust image by Flickr user waldoj, CC 2.0