Episodes

Rob Walling:
Welcome back to Startups For the Rest of Us. I’m Rob Walling. This week I talk with Mike Perham, the founder of Sidekiq, the solo founder with no employees who is doing single digit millions in revenue as a one person software company.
Mike’s story is pretty unique and that he started an open-source project and later monetized it by selling features that aren’t available in the core product.
As you listen to the interview, you’ll hear me ask Mike about how much luck factored into this. We talk about how he’s had this amazing success and then we talk about how it was 10 years to overnight success because he launched a bunch of different open-source projects and none of them succeeded. And then finally, Sidekiq did. And Sidekiq is a tool we used at Drip. I know a lot of folks in the Rails community use it as their queuing mechanism, but realistically, if Mike hadn’t had this amazingly successful opensource project, then none of the rest of this works.
So it’s an interesting and I think a pretty unique story on today’s episode. But before we dive into our conversation, I want to let you know that we have several open podcast sponsorship slots on this here very show. We’ve run a few ads on this show over the last couple years, and our sponsors have received amazing results from being in front of this audience of ambitious, bootstrapped, and mostly bootstrapped SaaS founders. If you’re interested in learning more, send an email to sponsors@microcom.com and ask about the podcast sponsorship options. And with that, let’s dive into our conversation. Mike Perham, welcome to Startups For the Rest of Us.

Mike Perham:
Thanks for having me. Rob.

Rob Walling:
What an incredible story, sir. You started Sidekiq 11 years ago and it’s an open-source project that you have monetized through premium support. And I knew of Sidekiq because my last startup Drip, when we went to start building it, my developer who later became a co-founder said, “We’re going to use a queuing mechanism,” a queue, a thing, a job thing that does jobs, a worker thing. And he’s like, it’s called Sidekiq. And I was like, “Huh, never heard of that. Is it like Rabbit MQ?” I had these older references, and he is like, “Exactly.” And this is 20, so it was, it was probably January of 2013, December, 2012.
So it was not like he’d been around for a decade, but we were building it in Rails and he said, “This is what we’re going to do.” And so we were on your free plan or I guess just the open-source plan for quite a while. And then eventually when we started sending tens of millions of emails a month, it became obvious we want whatever paying money got us, which I think was maybe escalated support is that it, I don’t even know. We were paying a thousands dollars a month and I felt like the value we got was tremendous.

Mike Perham:
I think the business model that I have, I think is typically called Open-Core, which is to say that the core of the system is open-source and freely available. And then what I sell are packages on top of that core, that wrap around that core, which is the Pro package and the Enterprise package. Those add additional features that people can build on their own if they wanted to. But what I do is I collect a dozen of these features together and support that package so that people can either build it themselves or they can pay me for my batteries included type commercial package.

Rob Walling:
Right, and obviously if you’re building some free tool somewhere, then you might build it your own if you’re hacking it on the weekend. And we were doing about half a million or a million a year in revenue at this point, team of six or seven. And my co-founder came to me and said, “I think we need to start paying for Sidekiq.” And I think it was like you have grouping into jobs, and there was some visibility into the queue. I don’t remember exactly what it was, but I’m like, how much is it? And he said, “A thousand dollars.” And I said, “A month?” And he said, “No, a year.” I think that’s what it was. Is that, am I remembering that, that eight or 10 years ago? And I was like, really? That’s it?

Mike Perham:
Yeah, that’s still the price too. The pricing I have, like I said, I have two packages, the Pro and the Enterprise. The point of the Pro package is to bring together a couple of features and provide a pretty low price that the majority of the community can afford.
So I have to try and walk that fine line between making it too cheap so that no one really values it and making it too expensive that only 1% of the companies can afford. So I settled on a thousand dollars a year only because so many companies have the credit card policy where anything over a thousand dollars requires a VP sign off or something like that. So I was just like, “Well, let’s get it under the VP sign offline, and hopefully the vast majority of corporate customers can afford this and won’t have an issue paying for it.”
And so yeah, Sidekiq Powers, is that layer, is designed to get me as many customers as possible, and so to spread the load across lots of different customers. So I never have to worry about one giant customer churning out and my business going bankrupt because of it. Instead, I’ve got a thousand small customers all which provide this very predictable, steady income that I can always depend on.

Rob Walling:
And that’s the beauty product income rather than consulting where you have a one big client. And the reason you got on my radar, again, I knew of Sidekiq, but I didn’t know your story as someone who started this open-source project and is now in the single digit millions, I want to say that again. Multi-millions in revenue.
You recently did an interview with Code, Code Ship codecodeship.com. We’ll link it up in the show notes, and then there was a hacker news thread around that, and it was cool. You were chiming in, people were kind of guessing at your revenue. You said, I’m closer to 10 million than 1 million in annual revenue right now I have 2000 customers. And you were generally just chiming in and you’re a single founder, no employees, is that right? Do you have any contractors?

Mike Perham:
The company’s just me. I have no contractors. I have a designer that I contact maybe once a year to help me out with a graphic here and there. I have a lawyer, which I contact once a year with any red lines I need to discuss or custom licenses that customers request. But 99% of the time is just me.

Rob Walling:
And that for many developers, especially developers who want to be entrepreneurs, is the Cinderella story. It’s the dream of I just want to be me. I don’t want to manage people. I don’t want to deal with people. So how did you get here? How did this happen when you started Sidekiq in 2012, I believe, were you planning to monetize it long term or did you start it and it caught on and then you realized, “Oh, I should make money from this?”

Mike Perham:
I had been doing open-source for 10 years before I even got involved with Sidekiq or started the Sidekiq project. So I had been around the open-source world and I knew how the typical open-source project works. You start it with lots of excitement. You get your first couple users and you’re super enthused, and then the bug reports come in. You start fixing those in your nights and evenings. And if you’re successful, you get more and more and more bug reports and more and more support requests, and you find yourself devoting more and more free time to supporting this community that you’ve built, but you are not making any money from it. You are just giving free support to the world, and the end result is always the same. It’s burnout. And so I’d seen open-source project after project burnout and the developer’s rage, quit, and I knew that Sidekiq would follow that exact same path if I didn’t do something different.
So that was it. I just pledged to do something different. I thought that no matter what, you’re always going to have to support your project. And so I thought, well, if I can make money somehow off offered the support, then I could just make it into a job and I can work 40 hours a week on it. No problem. I mean, it’s a project that I create. It’s technology that I love. And so as a developer, why not turn this into my dream job? And so that’s what I set about doing is turning it into my dream job.

Rob Walling:
And how quickly after releasing it into the wild did you start charging for something?

Mike Perham:
Let’s see, I started Sidekiq in February ’12 or January ’12, and then by August or so I knew that I had something happening. I knew that Sidekiq was looking like it was going to be successful, and I had a lot of people telling me, “This is a lot better than the previous thing and it’s valuable.” And that’s when I knew I could charge for it, right? If you’ve got value, you can charge for it.
So the only question was how do I charge money for it? I originally licensed Sidekiq as, it is licensed, I should say as LGPL, and the GNU licenses are famous for being somewhat corporate unfriendly. And I thought, well, maybe I can sell a commercial license that would allow the corporations to get out of having to use the GNU license with Sidekiq that didn’t sell very well.
The reality is most of the people making these technology decisions are developers, and developers don’t care about the licensing as long as it allows them to do what they want to do. And so what I then said was, “Okay, well maybe I can charge for additional features?” And that’s when I started planning Sidekiq Pro and thinking, “Okay, what features haven’t I built yet? What can I build and package separately and how do I sell that thing?” So that’s really where it became, okay, how do I this? Because I think there was maybe one other person who was selling Ruby Code at the time, and that was the Passenger team, the people that built the Passenger app server, they introduced Passenger Enterprise a couple months before I did. And so I saw them trying it and I said, well, I’ll try it too. And so I created Sidekiq Pro, I figured out how to distribute it. I signed up for a payment service, which provided it a checkout shopping cart kind of on top of Stripe, and just started using that and opened for business, so to speak.

Rob Walling:
And for folks listening to this who think they may want to go down this path, I believe that the hardest part of your journey of becoming the success you are today is not everything that’s happened over the past 3, 4, 5 years, but it’s that very first step of you built something people wanted. That’s hard to do. You and I could collaborate and build 10 open-source projects and throw them up on GitHub or wherever else, crickets. But finding something that people want and building it and having it catch on and having that momentum. And as you said, I knew I was onto something right from January to August already I’m imagining downloads or accelerating, I’m imagining five-star ratings or reviews or whatever it is in the ecosystem. And then once you have that, it’s not easy, but it is, okay, figure out a way to monetize it. You tried to license, didn’t work, tried features. Oh, that works.
If features hadn’t worked, you’d have tried something else. I think you could have eventually monetized it with a big enough audience that while that is a challenge, that’s not the hardest part of it. It’s the initial, how do I build something that just a bunch of people are using starts to becoming a little ubiquitous in the default. And then you can piggyback on that to create a revenue stream.

Mike Perham:
I mean, what I left out in that history lesson, there was the previous five years where I had been blogging about Ruby. So I was consistently blogging every month about various Ruby topics, and my blog was getting popular. Fellow Ruby developers were reading my blog and where I was talking about various really arcane, really technical topics. And so they grew to trust me as someone who was really technical and sort of knew how this tech worked and had a vision for where I wanted it to go. And in doing that, I built up my audience, and once I started Sidekiq, I was blogging every week about the Sidekiq project and what I was going to do, and here’s the various things I’m going to try.
And so you build up this audience and that audience starts to trust you and they see the logic of what you’re trying to do, and all of a sudden they’re saying, “Well, I want to check this out. I want to try it. And I love what he’s doing here. Everything makes sense.” And “Yeah, let me throw some money his way to buy this tool because we need it too.”

Rob Walling:
I mean, over the next few years, I think you were making a full-time income within a couple of years of either launching or monetizing, I mean, they’re so close together it almost doesn’t matter.

Mike Perham:
Yeah, it was about 18 months.

Rob Walling:
18 months, okay. So I mean, that’s obviously relatively quick. And again, I think that ties into the popularity, the fast popularity. You had overnight success. So we might say it was 10 years to your overnight success. That’s how I think about it. Because a lot of the stuff that you did prior, all the open-source projects and all the blogging and all that, would you agree with that, that you kind of needed all that to make it work?

Mike Perham:
Well, if you think about it in the term sense of a band, that’s an overnight success after touring for 10 years, I would certainly say that was true of me also. I mean, I was doing open-source work. I was blogging regularly. And so it was only after those five, 10 years of industry experience and know-how that I started this project and said, “I’m going to take it up a notch and start charging for this thing.” So yeah, and to your point, it was maybe six months until I monetized it. It was another 18 months after that to where I got to a full-time salary. And then a few months after that, I started, I incorporated, and started my own business, I quit my job, and just started doing it full time. I mean, I think I probably reached my success point once I was making five X my previous annual salary because that just becomes life changing money at that point.

Rob Walling:
Right, especially when it’s going to continue, right, when it’s like, “Oh, this is actually building and I can count on this for the foreseeable future.”
So over this journey then, this decade long journey, have you had a point where you were like, “This isn’t going to work?” The example I always use is when I ran an email service provider and Russian hackers sent a bunch of phishing emails one night, they kind of broke in and sent them overnight, blacklisted all our IPs, and I showed up Monday morning, I was like, “Well, that’s it. We had a good run. We’re done.” And turns out we weren’t done.

Mike Perham:
Wow.

Rob Walling:
We figured it out. But there were a few moments like that along the way that were just, “Oh my gosh, I don’t know if I can keep doing this.” Did you ever have a moment like that?

Mike Perham:
I consider myself pretty lucky. My business has just sort of skyrocketed up. The Sidekiq business has for sure. I’ve spun off new products as I’ve tried to diversify my business. I created a product called Inspector, which just didn’t sell well and didn’t have the demand, and so I shut it down.
I’ve created another background job system, which is not based on Ruby because the one thing your audience may not know is that Sidekiq is specific to Ruby. You can only use it with Ruby. Whereas I created a new background job system called Factory, and that can be used by any language. And so I’m also selling that as a product in my company. It’s not as successful as Sidekiq. I mean, Sidekiq was a rocket ship up. Factory is growing nicely, but it’s not the sort of exponential growth that Sidekiq has really seen.
So that’s kind of where my less successful aspects of my business would be is in the very different products that you launch that don’t quite become that big hit. And it’s kind of like a band with their first album is a huge success, and then their follow-up is a huge dud, but such as life.

Rob Walling:
And those are the risks you take to try to diversify your just risking time at that point, right? Because your main business is already so lucrative.
One question I did have about that, piggybacking on that is all technology has a life cycle. We look at programming languages, classic ASP, and even Pearl for use on the web, CGI scripts, whatever. I’m going way back here, I’m going back 23 years. And they come up and then they get replaced with a .net or Rails. Ruby had been around for a long time, but Rails became a dominant framework. And then even Django and Node, I would say are newer in the life cycle.
As an entrepreneur who makes, is generating incredible wealth from essentially the Ruby ecosystem. Do you have concerns that Rails, Ruby and Rails have been around now for, what is it 15 years, however long they’ve been popular, but that there could be a decline in the ecosystem that would cause your business to shrink? Have you seen any of that? Just curious about your thoughts?

Mike Perham:
Yeah, I mean that’s a concern, but at the same time, I always fight back against the need to have a venture capital need for growth at all costs, right? I’m happy with the lifecycle, whatever lifecycle Ruby has, I’m making more than enough money. I don’t need to make any more money. You know what I mean? I very much believe in sort of the Buddhist mindset where desire is a root of pain and wanting more and I don’t need more. I’m happy to support my customers.
I also look at tech like FORTRAN or Cobalt that have been in existence for going on 60, 70 years now, and they’re still out there. There’s still people making money off of it. You just don’t hear about it. And to me, what I’ve always pledged is that I’m here to support Sidekiq for the long term. And so if Sidekiq’s around 10, 20 years from now, hopefully I’ll still be around supporting it too. I don’t have hundreds of employees and venture capital backing that demand, endless growth in profits and margins. I’m doing great and I’m lucky enough to where if I need to, I can hire other people to help me support it. But at this point, that has proven not to be necessary.

Rob Walling:
That was actually leading to my next question is I feel like if I were in your shoes, there would be some things about my job, your entrepreneurial job that you’ve created that I wouldn’t like, probably support would be my thing that I would want to hire someone to do. You obviously have budget for that. You haven’t hired anyone. I know that your support must be incredibly technical, but look, you could hire someone for a quarter million dollars, some amazing senior developer or some amazing, I mean, if we go to Eastern Europe, you could hire an amazing senior developer for 150, you know, have budget for that. Why haven’t you done it so far?

Mike Perham:
Well, if I take myself out of the trenches, the technical trenches, so to speak, then I lose that sense of pain that customers might be feeling that would then go into the next version of the product. I need to have that boots on the ground knowledge so that I know, “Okay, what are the customers asking for? What are they suffering with right now? What features are painful and what features do they love?”
And so I don’t want to put a layer of abstraction between myself and that sort of feedback. You’re right, support’s not necessarily the funnest thing. I constantly get emails from lesser technical customers, customers who aren’t quite as savvy, technically asking, “Oh, the memory on our psychic process is going crazy. How do we solve this?” So I do have these constant support pains that I do my best to document to people and to the community. How do we overcome these issues?
So I am incentivized to make my Wiki documentation as good as possible and to make error messages as clear as possible and that sort of thing, because that literally makes my day-to-day life better because I get less and less of these emails asking the same questions over and over. So I do my best to document things thoroughly to make the code as smooth as possible and to sand down any rough edges so that I have as little support as possible. But at the end of the day, that support does inform a heavy part of the changes that go into Sidekiq.

Rob Walling:
Yeah, I could see that being close to your customers is an incredible advantage. One thing I’ll say, so I used to be in your boat too, and I was like, I did all the support for my products. What I eventually did was I hired it out and I realized I could read through all the tickets at the end of the day, and I didn’t have to respond to them myself, but I still felt the pain of the customers. And then we got to the point we were at what, 10 employees and then we got acquired and we were a hundred employees eventually. And I know that’s not the path you’re going, but then I had someone really smart who would read through the tickets, who would then create a brief for me that here’s all the major issues coming up. So it was a summary.
I wasn’t right on the front lines, but I felt like it was important to me that I too, as a product maker, didn’t lose that familiarity and that the pain, as you said, the frontline feel. So there are ways around it if you decide to do it, but it’s your business. You can do whatever you want. If you want to keep doing support, you can.

Mike Perham:
Yeah, I mean, Rob, at the end of the day, one of the decisions I made when starting my business was that I didn’t want to hire people, period. I don’t want to be a manager. I don’t want to deal with the administrative overhead. And so I said, “Well, what is a developer business like Sidekiq look like if you can’t hire anybody?” And so all of my business policies, all of my support policies all are based on the fact that how do we treat Mike’s time as valuable and not allow the customer to take too much of my time.
And so some of my policies are rather harsh. You can’t pay for Sidekiq Pro with anything but a credit card. And that’s because I don’t want to deal with the billing and the invoicing. Everything is all automated for Sidekiq Pro, and that’s how I keep the price low. But yeah, at the end of the day, it’s what policies and what’s the type of business that you want to build, and what I decided isn’t necessarily right for you or anybody else.

Rob Walling:
Yeah, it’s a great way to think about it as you own your own destiny as someone who has bootstrapped it right, and own all of the IP.
Question about competition. See, I’m imagining in this decade that you, 11 years you’ve been building this, has no one come along and tried to build a better Sidekiq, a competitor that would take market share for me. That’s what normally happens. And if they have, why have you won? Why continued to succeed in the fashion that you are?

Mike Perham:
There have been a few what you might style as competitors to Sidekiq competing projects. They all use different technology. Some of them use technology like Kafka, which is a lot more complex than Redis. So Sidekiq is based on Redis. Redis is quite simple to start and to manage, at least I think it is. Maybe others disagree, but Kafka is a order of magnitude more complex to manage. Another one used MongoDB as it’s backing store, and MongoDB of course, is this kind of niche data store that never really is, it’s kind of out of fashion now.
The current, what you might call a competitor to Sidekiq is another project called GoodJob, and it uses Postgres as its store. So other competing projects have come out. The thing to note is that they usually don’t have a commercial side. They usually are just open-source. And that goes, leads you right back to what I said earlier, which is every successful open-source project either grows to a team that can survive it or that the founder burns out over time. So yeah, I think I have competition, so to speak, but I don’t have any commercial competition, so to speak. Well, I think my commercial competition would be like SQS.

Rob Walling:
Amazon, which is it?

Mike Perham:
Right? It’s an Amazon web service that does queuing. It doesn’t have anywhere near the breadth of features that Sidekiq offers, especially the commercial packages. But it does have the Amazon name, and if you’re going all in on on AWS, it makes sense that you’d use that instead. It’s like pay per use though. So as you scale up, the price just keeps going up. Whereas that’s not true in Sidekiq. So you can pay a thousand dollars for Sidekiq Pro and then you can process a trillion jobs through it for that same thousand dollars. So there’s various different competitors and different offerings out there, but the Ruby community and the Rails community seem to trust Sidekiq as the best choice right now, at least.

Rob Walling:
As we wrap up, I want to ask you a question. I don’t know that I’ve ever asked anyone on this show before, but it’s about the fact that you’re open-source.
I’m curious, there are open-source purists who think no one should ever pay for software. It should all be free, more the, I don’t know there, it’s an extreme-ish viewpoint, but I’m wondering if you’ve had any run-ins with folks where your success story appears on Hacker News or you do an article and interview and basically haters come in and are shocked and appalled that you are monetizing an open-source project in this fashion?

Mike Perham:
That’s a constant worry of every open-source developer I’ve ever met. And the reality is that I hit very few, I mean one or two occasionally, but the vast majority of people that chime in on these threads are usually saying, “We’ve been a customer of Mike’s for five years now, and the product’s been amazing. He’s answered issues and questions within 20 minutes.” Someone had filed a security issue a couple of weeks ago with Sidekiq and I had it fixed within two hours of the report coming in.
So individual people who are maybe hobbyists and don’t have any budget, they may be a little bit upset that they do not have access to the commercial features and that I don’t just give it away, but a lot of businesses understand that if you’re in business, you have insurance, you have insurance, you pay your vendors because you want that support, you want that dependability of always being there. And this is no different. You’re buying a tool, you’re buying the commercial insurance to ensure that that tool is going to be around forever.

Rob Walling:
And at a thousand dollars. It is, and was, a no-brainer for business that’s doing well.

Mike Perham:
Enterprise is a little more expensive.

Rob Walling:
I’m sure it is. Yeah, no doubt. No doubt. Well, Mike, thanks so much for coming on the show. If folks want to keep up with you, your Twitter handle is getajobMike, which I think is hilarious, and of course Sidekiq, S-I-D-E-K-I-Q.org if they want to check it out.

Mike Perham:
Yeah, I don’t use Twitter anymore. I’m on Mastodon with the majority of the Ruby community now.

Rob Walling:
Okay.

Mike Perham:
But it is, it’s GetajobMike@Ruby.Social.

Rob Walling:
Perfect.

Mike Perham:
My Mastodon handle is on my Twitter pro.

Rob Walling:
People can find you there. Amazing. Well, thanks again for coming on the show.

Mike Perham:
Of course, thanks Rob.

Rob Walling:
Thanks again for joining me this week, and thanks to Mike for joining me on the show and taking a half hour out of his busy day. Another reminder that we have sponsor slots open for the podcast sponsors@microcomp.com. If you want to learn more, I’ll be back in your ears next Tuesday. This is Rob Walling signing off from episode 661.

Rob Walling:
In my opinion, the wrong way to go about it is to have this magical thinking and to think that, much like me, my customers will want certain things and if your customers are not you, if they’re not developers, if you’re selling to school teachers, or to realtors, or to construction firms, they’re very unlikely to be like you. So know that going in, and this is where talking to your customers and learning how they think and how they buy is critical to your success.
Welcome back to another episode of Startups For the Rest of Us, I’m Rob Walling, and today I’m doing another solo adventure. I’m going to talk about the trade-offs of hiring a team of contractors versus hiring full-time folks. I’m going to talk about not raising funding if you want to be a lifestyle business, talk about the danger of thinking your customers are like you, and maybe another topic or two depending on time.

Before we dive into that, MicroConf Mastermind matches are happening again, we do them two to three times per year. If you want to be matched up with like-minded, bootstrapped and mostly bootstrapped SaaS founders at about your stage, or maybe slightly ahead of you, head to MicroConf.com/masterminds. This episode goes live on May 9th and applications close on May 12th, so you will want to head to MicroConf.com/masterminds, if you are interested. We have had amazing success matching hundreds and hundreds, we’re approaching a thousand matches and 150 to 200 million in total ARR across many countries. You’ve heard me talk about it before. It’s one of our most successful offerings and if sometimes you feel like you’re wandering through the desert on your own and you’d like some other folks along for the journey, MicroConf.com/masterminds.

So I want to start with a topic of this idea of hiring a bunch of contractors and instead of having full-time employees because you know the quote, unquote, “headache” of having full-time team members and contractors are plug and play, right? It’s simpler, it’s easier. I have seen maybe a handful of folks actually make this work in a sustainable way and it’s when the founders themselves are extremely talented in the things they need to get done and the founders are willing to either pay for really expensive contractors or the founders are great at being project managers and they’re fine with being that bottleneck. Because that’s what happens when you hire five or 10 contractors who are essentially, I call them black box contractors, where in essence you want to think of them almost as a black box, a deliverable, right?

Here’s a summary of an article, please create an SEO article and publish it based on this topic. Or the task of set up Facebook pay-per-click ads or set up Google AdWords and we want trials and customers on the other side of it, where folks are individual contributors and they have a deep knowledge of a specific thing they are doing. Once you get five, 10 of those, even if it’s like, well, someone’s working five hours a week and some are working 10 and some are working 20, it sounds like this amazing kind of lifestyle business of everyone just does their thing and it happens. The problem is things sometimes stumble. You lose a contractor, you need to replace them. You have a lot of project management and approvals and reviews to be done, in a way that if you hired full-time people who took ownership of those areas, you can delegate a lot more and you can trust them to get things done without you needing to weigh in on every decision.
It comes back to what I’ve talked about a lot, task level versus project level versus owner level thinking, and when you hire a bunch of contractors, you typically get a bunch of task level thinkers and that’s not bad as long as you have a project and, or, an owner level thinker at the top able to manage that. And if that’s you, just know what you’re getting into.
I have yet to see a multimillion dollar, like an ambitious SaaS product that wants to grow quickly, follow this model. I have seen people try it and talk about it on Twitter, and I do know of a couple examples where someone’s doing a couple million dollars, but they are not going after fast growth. I’ll say it’s a mix of that ambitious and lifestyle bootstrapper, but again, those founders are exceptionally gifted in what they’re doing. I did this in the past before Drip, when I had HitTail, and then when I had the whole portfolio of products, I did have a team of contractors, I had nine in total. They all reported to me. And that’s what I did, was project management and approval, and I really didn’t do any individual contributor work.

There was a time there where I was working, that was about, between 10 and 15 hours a week. I kind of was living the four-hour work week. It was a pretty amazing time and I actually think back to it fondly, but what wasn’t happening was my businesses weren’t growing very fast and that was okay. They were throwing off a lot of profit and it was, again, it was that amazing lifestyle business where I barely had to work on anything, but if I had been ambitious about growing it, I would’ve been smart to hire full-time folks, which is what ended up happening with Drip, right? Drip started off and it was like, “Well, I’ll hire Derek as a part-time,” he was a part-time contractor for six, seven months until things started to ramp up and I was like, “No, I need to go all in on this because I want to grow this company in a way that is much more ambitious than this approach of having a bunch of folks who kind of care, kind of don’t have ownership, kind of don’t have buy-in who are just doing tasks can do.”

I believe I’ve actually covered this topic on the podcast before, perhaps on a listener Q&A episode, but someone brought this up to me the other day and I heard someone talking about how they were trying to do it and they were frustrated with the results, and so I wanted to come back and circle back on it, because I think this is something that is worth saying because it’s this siren song. It’s like every year or two, someone comes up with this, quote, unquote, “new idea” to do this and frankly, we’ve been doing it for at least 15, maybe 20 years, and it’s not that it never works, it’s that there are these trade-offs. And it’s like know your skillset and know where you want to go because if you do want to grow fast, this is probably not the path for you.

Second topic I want to cover is this danger of thinking that your customers are like you. I was eyeballing some auctions for collectibles as I am sometimes known to do, and I saw a listing for a Dungeons and Dragons adventure. It was called a Dungeon Masters Kit I believe, and it was published in 1976, and the seller said this was the first ever adventure written for Dungeons and Dragons, and I thought to myself, “That’s very odd because it was not published by the creator of Dungeons and Dragons.” TSR is the company who created Dungeons and Dragons. I thought to myself, “Why didn’t TSR publish the first adventure?” By the way, I’m going to sometimes say module and adventure, they’re the same thing. I just interchange the two words. But TSR had created Dungeons and Dragons, and I know they published a ton of adventures in the ’70s and ’80s because I used to buy them, so I was puzzled by this.

And what happened is TSR had a stance, and most notably it was the president and CEO and founder, Gary Gygax, who said, “No one will want to buy pre-made adventures. All the dungeon masters will want to make their own.” And he thought that because that’s how he felt, right? He was a creative, he created the game, co-created the game. He wrote a lot of the early adventures and that was a big part of the stimulation for him, was being able to create the adventures.

What he didn’t realize is there were people out there, it turns out a lot of people out there, who maybe didn’t have the creativity that he had, maybe didn’t have the time that he had. And these days that’s me. I buy adventures at discounts on Humble Bundle, I’ll back them on Kickstarter. You don’t want to see my Kickstarter history. I’m almost up to 300 projects backed, and a lot of it are these D&D adventures or STL files for 3D printing miniatures. But the thing for me is I don’t have the time to come up with something amazing from scratch, and if I can pay $5 or $10 for a PDF that someone spent hundreds of hours thinking through a whole storyline with characters and twists and turns and puzzles and just the whole deal, it’s a no-brainer for me.
But back in 1974, ’75, obviously Gary Gygax didn’t think that was the case and he was a bit myopic in this and in fact, so Palace of the Vampire Queen comes out, that’s the 1976 module, and then this whole company springs up called Judges Guild that puts out a bunch of adventures before TSR catches wind and realizes, “Oh, we can’t just sell rules to everyone. We’re going to sell rules to dungeon masters, but the real money in this space is in selling new adventures.” And that became a new cash cow for them.

Luckily, they had the cache, and the brand name, and the distribution, and the partnerships that it didn’t end the company. Feasibly, if you were a startup and you missed something this big, it could feasibly cause you to go from first to second place in a space and really lose the race, so to speak. The reason I bring this up and turning it back to SaaS and startups is I especially see this with the developer founders who think that software should be cheap or software should be free, it should be self-serve, that you shouldn’t do cold outbound, that my people don’t want to do sales demos, that everyone wants to pay $10 because it only took me a weekend to build this software, whatever it is.

I think the developer mindset, and I had this too and kind of had to shift my thinking over many years the longer I was in business, to realize that, no, some people do want sales demos. And in fact, once we started implementing sales demos, we either doubled or tripled, I forget the number, but we doubled or tripled our conversion rate on Drip sales demos versus people who are just signing up by themselves.

And one of the biggest realizations for me in my entire entrepreneurial career was realizing that great products do not market themselves and that marketing is important, and that as a developer, we don’t want to have to market because Basecamp didn’t market and, oh, “I heard about this $1 million homepage that didn’t market, it just came out and it went viral.” It’s this myth, it’s this dream. We just want to build Flappy Bird and have it go viral. And realistically, I’ll say it never happens, obviously it happens one in 500, one in a thousand, one in 10, there’s some number. It’s just so unlikely to be you. Do you have time in your life to put out 500 apps hoping that one of them goes viral?

So that’s what I want to call out today is, if you’re a developer and you feel like you don’t want to market, you don’t want to have to market, you don’t want to bother people with cold outbound outreach, everything should be self-serve, you shouldn’t do a demo. It’s kind of these tropes. I would encourage you, I’m not saying you have to do all those things. If you really are against, let’s say, cold outreach and you don’t want to do any of it, then just pick an idea where that doesn’t need to be the marketing channel. Pick an idea where there is a lot of inbound and then learn SEO and learn content marketing.

There are ways around this, but in my opinion, the wrong way to go about it is to have this magical thinking and to think that, much like me, my customers will want certain things. And if your customers are not you, if they’re not developers, if you’re selling to school teachers, or to realtors, or to construction firms, they’re very unlikely to be like you. So know that going in, and this is where talking to your customers and learning how they think and how they buy is critical to your success.

My next topic is going to seem random, because it kind of is, but I was thinking the other day, this is how I think about buying souvenirs when I’m traveling, and I promise that the fourth topic I cover today will be related to startups, but I realized years ago that as a kid I would go somewhere, to Santa Cruz or whatever, to the boardwalk, and I would buy something that I would take home and sit on a shelf, a little trinket, a tchotchke if you will. And I realized pretty soon I had a bunch of clutter and that didn’t make me happy. It just made dust everywhere and it meant I had to maintain things. And the more things you own, the more your things own you, right? I’m sure someone much smarter than me said that before now.
But I have a loose rule now. I hold to it pretty tight. Every once in a while I will break this rule, but if I’m going to go someplace and buy a souvenir to remind me of that trip, I want to either be able to consume it or wear it. And so consuming is buying chocolate when you go to Switzerland, it’s buying wine, it’s buying whiskey in Scotland. It’s some type of thing that I can take home and enjoy, but then it essentially moves out of my life once I have shared it with friends and enjoyed that. Or wearing it, so I’m big into T-shirts. I have T-shirts with nerdy sayings on them, T-shirts with logos of the companies I run, on and on. And so for me getting a shirt or a T-shirt, even if it’s not a T-shirt, even if it’s a collared shirt or just something to wear that reminds me of that, then that’s something I know I will put to use.

Now for my wife, Sherry, she might buy jewelry, right? Earrings, necklace. I could see buying a watch, although the only watches I’ve ever bought while out and about are the fake Rolexes that you get in Europe that last you for a month or two before they rust out and you pay €8 for them or whatever on a blanket in Pisa. But I think that counts. So is it a hard and fast rule? Do I never buy something that I can’t consume or wear? No. But in general, I try to shape my thinking through that because I think for me it’s a healthier way to think about it and I have enough clutter on my shelves as I think most of us do.

My fourth topic is about raising funding if you’re a bootstrapper. This really wasn’t a thing 10 years ago, and I kind of started hearing about it with Customer.io, I believe they actually raised a bit in 2012. And then of course with funding like TinySeed or our syndicate Indie.bc, they’re obviously more bootstrapper friendly funding avenues around, crowdfunding has also added to this, but here’s the danger, and I think here’s the pitfall we’re starting to see some people fall into. And it’s that if you want to be a lifestyle bootstrapper, actually let me step back and define terms. You know on this podcast I talk about the venture track and then I talk about lifestyle bootstrappers, which is that amazing business, just throws off cash. And whether that’s 10 grand a month, whether that’s a 100 grand a month, you don’t necessarily want to grow it. You’re not super ambitious to be like, “I got to grow this thing and I’m going to have a multimillion dollar exit.” It just throws off a bunch of cash and you have exactly the lifestyle that you want. Okay, that’s a lifestyle bootstrapper.

Then there’s the ambitious bootstrappers, and that is, “I want to get to one, five, 10 million and have this amazing, usually it’s a life changing exit.” Maybe you run it for the long term, but frankly for growing that fast, the enterprise value, the sale price you can get out of a SaaS HEP is so extravagant, it’s so incredible, that you would almost be foolish not to take that money. It can be a once in a lifetime, literally create generational wealth at that point.
So those are my three categories. And what I’m saying is I think we’re seeing some folks who really want to be lifestyle bootstraps, but they are raising funding thinking that it’s free money and that it doesn’t come with some type of responsibility and some of the mistakes I see, and there are several folks who I’m either affiliated with or I just see it online, but they still want to take a couple months of vacation a year and take funding and are frustrated when they’re in a competitive space, because they took funding to go into a competitive space, and they’re not making progress.

And so it’s like, “Look, I get it. I like taking a couple of months of vacation each year,” but then I’m not going to delude myself into thinking that things are going to keep moving as fast as if I was involved. If you want to be ambitious and move quickly, then in the short term, I believe that you do have to make some sacrifices. Another person I saw had raised money and wanted to work part-time on the company, and I don’t know of a single investor who’s willing to back a company where the founder is not willing to go part-time or the founder wants to work on a myriad of side projects when the main project itself is not succeeding yet. And so I’m not saying any of those things are bad. If you are a lifestyle bootstrapper, don’t take money, take months of vacation, work on side projects.
I’ve had times in my life when I’m doing that and it’s amazingly fun, but once you take investment from someone, even really nice investors who are not putting a ton of pressure on you to grow, there is still an implied agreement that you will focus and that you will do your best to grow the company. That you’ll work hard to build yourself an amazing business and to provide an amazing outcome for you and some kind of a return for investors since, if you think about it, huge amount of risk with writing an angel check. The odds are it’s going to go to zero and they are taking risk with tens of thousands of dollars.

So this is my public service announcement for this week of the idea of raising funding has become more palatable and certainly more favorable to bootstrappers. And I, obviously, as I run an accelerator and venture fund myself, I think this space needs it, and I think there is a subset of bootstrappers that can and should raise money, but before you dive into that end of the swimming pool, so to speak, I would ask myself, “What are my goals with this? And am I willing to go all in on this project and give it a few years to see if I can really grow this?” Because to me, that’s the implied contract that you’re going to want to have with your investors.
My next topic is this great quote from the Comic Lab podcast, and I feel like I need to thank Dave and Brad, they’re the hosts of Comic Lab, because Dave Kellett has just dropped some amazing quotes that have got me thinking so much about their applicability to startups. And Dave and Brad are cartoonists. They write comic strips, not comic books, but comic strips that they put online, and then they do Kickstarters for the books themselves, and then they have Patreon and such. So they’re professional cartoonists who don’t appear in newspapers. But the thing that Dave Kellett said, and it was about career progression, he said, “You want your career to be a series of ever-increasing and manageably sized mistakes.”

And I love the careful wording here. You can tell it’s someone who writes a lot, right? He writes punchlines, because he writes things that are funny, and so, “… ever-increasing and manageably sized mistakes.” This lines up so well with my career and what it has been and the amount of risk and the size of the risks that I could take when I was in my 20s are so dramatically different than where I am today. And if I was still having to take those same small risks, I think I would be pretty bored, and I think that would be a career that had not progressed very far. And then I can imagine that there are folks out there who maybe took some risks, had some rewards, but they didn’t increase the size of the risk they were taking. And so maybe they’re continuing to make mistakes, but they’re not getting larger, and so therefore the gains don’t get larger.

When I put a chunk of money into crypto back in 2016, I viewed it as an angel investment. It was going to go to zero or it was going to a hundred X, and I couldn’t have made that bet in good conscious. It was a chunk of money that would’ve been foolish for me to risk even 12 months earlier. But we had sold Drip, but I realized that this was a manageably sized mistake that I could manage now with this newfound wealth, but it was also a lot larger than something I could have done six to 12 months prior. That bet wound up paying off in a way, obviously, because crypto went up. Even in the crypto winter and crypto is down right now, it doesn’t matter because I just made the bet really early on and put in more money than would’ve made sense before that.

Now, have I made some bets that have not panned out? Of course. And those bets were always manageably sized. That’s the genius of this quote, is that if you’re just starting out today, then make some bets and realize that the six months of nights and weekends you spend building your first product is a manageably sized mistake. The first two or three products I launched were three months or six months of nights and weekends hacking on it, and that was the risk, and they all failed. And then acquiring DotNetInvoice, spending that $11,000 scared the crap out of me, and that was a bigger risk than I had taken prior, but it was manageably sized because if it had gone to zero, I’d have been okay, and in fact, I bought it, didn’t have the revenue I thought, my back was to the wall and I just ground it out and figured it out, and then HitTail was a $30,000 bet, and there were a bunch of bets in between those two.
But I love this quote, and I’m going to say it again, “You want your career to be a series of ever-increasing and manageably sized mistakes.” And I like it because I think it’s a reminder to each of us, no matter if you’re just starting out, if you’re mid-career, if you’re later in your career and you’ve had some amazing successes, not to sit on your laurels and to continue increasing the size of the risk you’re taking while keeping the manageable based on where your life is at at that point.

Okay, last topic for the day. This is to know what you’re bad at. I see founders with this. I also used to have an assistant who had this blind spot, and what’s a trip is I notice a lot of things that I’m bad at, and so therefore I either ask for help or I delegate them, or I spend extra time and attention on the things that I’m bad at. So if you’re bad with numbers and you can’t get someone to spot check your Excel spreadsheet or your math on something important, then you double check it, triple check it, check it multiple days, and frankly, you find someone to spot check it for you.

The problem with not knowing what you’re bad at is it becomes this blind spot that almost can look like self sabotage, but you’re not doing it on purpose. I’ve known founders who just cannot get out of their own way, and a huge part of that is they don’t know what they’re bad at. They don’t understand that they have this limiting belief, whether it’s they’re not super creative, so they shouldn’t try to be super creative in their startup, or whether they’re just too much in the weeds of development, so they really need to find a co-founder, or they need to go into a space where the marketing is just all left brain, SEO, pay-per-click ads.

Or it’s someone who doesn’t realize that their fixed mindset isn’t going to allow them to maybe achieve the goals that they want, or it’s like the assistant I used to have who was just not good at booking travel, but he thought he was. And so there were just mistake after mistake, whether it was, I’m flying from here to there, and he would book the ticket the opposite way by accident, or book the wrong date, or book 9:00 PM instead of 9:00 AM, or not put it on the right card so I got miles. It was just always, travel was such a hassle, and it’s like, “Realize that you’re not good at this. You screw this up all the time.”

He was a great assistant across all the other domains that you could ask someone to be an assistant for, but this one thing they just weren’t good at. And so eventually I had to start delegating to someone else or doing it myself. But I often say, “Know thy self,” as a founder. Knowing thy self is such a big part of the game because managing your own psychology is the majority of being a founder, I believe. And you can’t manage your own psychology if you don’t understand yourself. And I think this is one component of that, is there are some things that you’re probably really good at, double down on those. Know the things you’re bad at, you can improve them, you can try to improve them. I tend to lean more into strengths myself, but in the meantime, if you know what you’re bad at, then you know when to ask for help and you know when to delegate if you can, and you know when to spend that extra time and attention when you have to tackle that task.

That’s it for this week. Hope you enjoyed this solo adventure. This is Rob Walling signing off from episode 660.

Rob Walling:
Welcome back to Startups For the Rest of Us. I’m Rob Walling. Today I sit down with Courtland and Channing Allen, the co-founders of Indie Hackers, to talk about their newfound independence. They are no longer owned by Stripe. They also turned the tables on me in this interview, and we spend probably the first 30 minutes talking about my new book as well as sharing theories about entrepreneurship and just all the tasty goodness that comes when I sit down with really smart people who are thinking about entrepreneurship on a day-to-day basis. This episode will go live in both of our podcast feeds. If you haven’t checked out the Indie Hackers podcast, you definitely should. It’s a great companion podcast to Startups For the Rest of Us. But if this episode feels like kind of a cross between an episode of Startups for the Rest of Us and an episode of Indie Hackers, that’s because it is. Because essentially we have all the hosts and we were interviewing one another on the important topics of the day.
So we let this intentionally run long. There was just a lot to talk about. To be honest, we hit stop on the recording and talked for another 20 minutes about things that we probably should have recorded. We started talking about AI and about angel investing and a few other things, but that just goes to show you the content was flowing and it was one of those magical moments that you do want to capture. So I know I keep episodes between 30 and 40 minutes typically, and this one’s a little longer, but I hope you enjoy it and agree that it was worth doing. Before we dive into the episode, MicroConf Mastermind Matching opens on April 3rd. That’s just the day after this episode goes live. And realize you can head over now to microconf.com/masterminds and get on the wait list to be notified.
Every time we do Mastermind Matching, we have people contact us after the deadline closes begging to be included and unfortunately we can’t. There’s a reason there’s a deadline. Because we start matches. So we only do matching two or three times a year. We have matched more than a thousand founders across dozens of countries, dozens of time zones with a combined ARR somewhere approaching $200 million across all the companies. It’s been a very successful offering from MicroConf. One of the most successful offerings we’ve had in years. We’ve only been doing it three years, but it has just taken off and I’d really encourage you to check it out. Whether you are in the idea phase. Or whether you’re doing 10 million ARR, we have a match for you. And we match you up in these small groups of like-minded founders. If you apply between May 3rd and May 12th, which is the deadline, we’ll have your match sent by May 17th.
In addition, if you’re interested in chatting with me at an upcoming MicroConf local or you have a strategy or a framework that you think other bootstrap SaaS founders should hear, we are always looking for founders to come out and share their expertise during all of our conferences and events. If you’re interested, head to microconf.com/pitches and share your idea with us.
And with that, let’s dive into my conversation with Courtland and Channing.
Courtland:
Anyway Rob, welcome to the show. We sort of already introduced you in our preamble, and I’m sure anyone who’s listened to the show for a while also knows who you are. How you been, man? It’s been a while.
Rob Walling:
I’ve been good. I’ve been working on MicroConfs. I’m leaving tomorrow for MicroConf Denver in the US here. And then I got my book going. That’s my big project I’m heading up right now.
Courtland:
Nice.
Rob Walling:
Yeah.
Channing:
Wait, how many MicroConfs are there? There’s Denver, there’s Vegas.
Rob Walling:
Yeah, well so-
Courtland:
No, there’s not Vegas anymore.
Rob Walling:
There’s a US.
Courtland:
Oh, okay.
Rob Walling:
Yeah, there’s a US MicroConf and it used to be in Vegas, and then we moved it. It was in Minneapolis last year, it’s in Denver this year. I don’t know that we’ve announced the city for next year. And then there’s a Europe, and those are our flagship events. And then we do the locals, which are these just one day almost afternoon events where we get a big name guest and hang out for a few hours.
Courtland:
Channing and I were just talking about getting back in the game when you’ve felt kind of out of the game. And I know that we’ve been out of the game because we haven’t been doing MicroConf in a couple years.
Channing:
Yeah.
Courtland:
Part of that is because of the pandemic, but part of that is just out of the game. So next year Channing, we should bend our company budget to come.
Rob Walling:
Yeah, I was going to ask if you guys were going to make it to MicroConf next week.
Courtland:
Not next week, but next year. As soon as we know the city we’ll be there. Because it’s been a while and MicroConf has so much energy.
Channing:
And also we’re underwater actually becoming a real business again. So I feel like next year we’ll actually have the systems and the processes in place where we’re running it as opposed to-
Courtland:
It is nice to put everything on Stripe’s tab. That’s something we’ll miss.
Rob Walling:
Yeah. To not burn 10 grand a month of your own money.
Courtland:
Yeah, yeah.
Rob Walling:
It’s like uh-oh.
Courtland:
When it’s your business, it’s like, “Yeah, I could pay this. This could be my salary.” So you got to be way more judicious with business expenses.
Rob Walling:
Totally.
Courtland:
But MicroConf, of all expenses, I think is worth it.
Rob Walling:
Yeah, it’d be great to have you guys back. It’s been a while.
Courtland:
Yeah. It’s been so long. You are writing a book or have written a book. How far are you in your new book? It’s called the SaaS Playbook.
Rob Walling:
It’s all done.
Courtland:
Well done.
Rob Walling:
I finished that months ago. Four or five months. Yeah. I have a hard copy. Got some digital print copies. Yeah, it’s a hardback, which is like-
Courtland:
Wow. Look at that. That’s a beautiful book.
Rob Walling:
Thank you, man. I paid a lot for this. My first book, Start Small Stay Small, has a black cover. I don’t know if you’ve seen it. It’s ugly as hell.
Courtland:
Yeah. Yeah. I have it.
Rob Walling:
Because I had no budget, no money. Because I knew myself. This one, I was like, all right, I’m going to go all out and hire a legit designer, legit layout person, actually get an editor this time and not edit my own work.
Channing:
So you put that together your yourself. I was curious about the publishing process. This sounds like independently published and you kind of put together a team of the editor and the designer and all that stuff.
Rob Walling:
Yeah, exactly. So this time I hired a … I didn’t remember how much work it was, but I knew it was going to be a lot. So I went and found a book project manager who used to work for a publishing company.
Courtland:
Book project manager.
Rob Walling:
Isn’t that crazy? It’s very niche, but I was like I want … I went out just seeking if I can find any type of project manager, I’m sure they can do this, and if they have publishing experience, great. And turns out she had worked for a publisher for three years, so she knew everything. She’s like, “Oh, you can buy 10 ISBNs for the price of two so you should …” Just all the little internals. “Oh, and I already know four different printers in Hong Kong and in the US, and I’m going to tell you.” It was that type of stuff. So it really took a lot of load off of me.
Courtland:
How much money does it cost to basically do a book right? Self-publishing. You’re hiring a book project manager, you’re hiring an editor, you’re hiring someone to design the cover, to make a video for you on Kickstarter. How much all in does it cost to produce a book in 2023?
Rob Walling:
At this point, I bet I’m in 30 grand. 20 to 30 grand for all the labor. That’s before printing costs or any fulfillment.
Courtland:
Wow.
Rob Walling:
Yeah, it’s a trip.
Channing:
And so that’s all mostly upfront to get the thing produced by the different people.
Rob Walling:
That’s right. And that doesn’t include, obviously, I spent a bunch of time writing it and I had a writing coach who was busting my chops. I haven’t included her in that price because this is the first book where I’ve used a writing coach.
Channing:
What is a writing coach? I want to write a book, not nonfiction, but I’m curious about all these details.
Courtland:
Yeah. What does a writing coach say to you? Does she just say write more?
Rob Walling:
Yeah. They can have a bunch of different roles. If you want to write every word yourself, then you get the writing coach … He or she will be almost a developmental editor where … Well, it’s two things. Accountability and developmental editing is really what it is.
Channing:
Which is big.
Rob Walling:
Yep. So it’s weekly call. I know that I have to show up with X thousand words written, and if you don’t, then she was like, “So I guess we’re going to ship late.” And I’m like, “Oh no, I feel so guilty.” Taking advantage of my guilt complex. So accountability was a big thing for me. The second thing was she would just read through and be like … Not even copy editing, but like, “Yeah, it’s not hanging together.” So she’d reorganize pieces. And then the third thing for me that I needed was I didn’t have time. It’s 45,000 words in this book.
I didn’t have time to write every word, but literally, I had someone go through and scrape it for an AI project. Like close to a million words spoken on my YouTube channel, on my individual podcast episode. Just incredible. So I would pick topics and be like, I recorded a whole solo episode around just this topic, and I want that to be a section. So she would take that, transcribe it and turn it into a section. So she would write the words, but they were my … So you could say she’s a ghostwriter, but I always struggle with that because it’s all my thoughts.
Courtland:
It’s your ideas.
Rob Walling:
Yes. And then I would come back and put my voice on it. So she would do a first pass-
Channing:
That reminds me. Sorry, go on, go on.
Rob Walling:
No, that was it. So it cut a huge amount. In fact, I stalled. I got about halfway through the book and then I had about a year where I didn’t write a word, and that was when I realized I need someone else involved in this because I just can’t push it through with the other stuff I’m doing.
Courtland:
So there we go, content reuse in action. It actually works for books. And I’ve seen this before too because I interviewed for my other podcast, James Clear, who wrote Atomic Habits, which was literally the number one bestseller on Amazon for weeks. And Mark Manson who wrote The Subtle Art of Not Giving a … And they both did the same thing where instead of repurposing their podcast, they repurposed their blog posts and then just edited it and put it together in a book. And that actually works. And it doesn’t make the book any worse. It makes the book better because you’re picking the best ideas that you’ve already put out into the world, already tested on an audience. Now you’re just putting them in print format where they’ll just live forever.
Rob Walling:
That’s right. And I did that. So my second book … I’ve written four books. Start Small Stay Small. My second book is exactly that. It’s a collection of blog posts and it’s called Start Marketing The Day You Start Coding. I give that one away for free on my site. Third one I co-wrote with Sherry, Entrepreneurs Guide To Keeping Your Together, and then this one. But the second one is exactly that. It’s my favorite blog post. Because I had almost 200 blog posts at one point, essays and such. And compiling that into a best of was … I still get positive feedback about it.
Channing:
I just had a conversation actually with Josh Kaufman who wrote The Personal MBA. He’s sort of a regular at these MicroConf events. And he specifically mentioned that he’s struggling. He’s working on a new book, it’s going to be a followup to Personal MBA. And he’s like, “Well, I’ve got a lot of other stuff, a lot of other balls in the air as well.” He’s working on a website where he’s going to have courses and he wants to keep in touch with his email list. And he’s like, “Yeah, it’s kind of hard to figure out a way to work on any of these individual projects.” And that idea of, well, why don’t you figure out the topics? Because he’s still brainstorming for his book. Why don’t you figure out the topics that are going to go into your book by testing things out, going out to your email list and getting information. So it’s not just a way to save time once you decide you want to put the book together, but it’s also a useful way to figure out what goes in the book.
Rob Walling:
And that’s a big thing that I did. I mean, we really leaned into YouTube about a year ago on MicroConf. And so I’ve been putting out a YouTube video every week of unique content. And it’s a grind. It’s a ton of work in addition to the podcast and all that. But the topics that resonated the most there, I was pulling those in to this book. And the other book that I haven’t mentioned to anyone yet that I accidentally wrote that is also 40,000 words, and it’s a prequel to this. So now I got to figure out am I going to publish another book later this year? But there’s a lot of content.
Channing:
Before you came on, we were talking about your accolades, and Courtland was just going down this long laundry list. And I was like, it’s easier just to start from the negative. What hasn’t he done? And now we get to add to that list that you accidentally wrote a book. What does that even mean?
Rob Walling:
Yeah. I had this outline and I’m like, I want to cover everything in the SaaS Playbook. And it’s all the way from, I don’t even have an idea all the way to talking about exits and mindset, the whole lifecycle. So I start at the beginning and I’m writing about ideas and how to come up with them and how to validate and how to evaluate and how to find your first customers and just all that pre-product market fit. And eventually the book, it was just too damn big. And I realized the weaker part … Or maybe weaker is not the right word, but the more amorphous part of it where it’s kind of hard to be super prescriptive is everything before product market fit. Because product market fit onward, that’s what I do every day. I’m in it, right? TinySeed, that’s a lot of the higher end MicroConf founders, and that’s what the SaaS Playbook focuses on is at least some weak product market fit. One to 5K, one to 10K MRR and how do you then go from there. Rocket ship it.
Everything before that I had about 25,000 words and I was like, this just doesn’t belong here. So I just put it in a Google Doc somewhere. And then when my writing coach and I got done writing SaaS Playbook, she’s like, “Do you want to circle back on this stuff?” And I was like, “Yeah, we could flesh that out. Let’s just add it. I think if we add a few thousand words, it’ll be done.” And now it’s like 45,000. I mean that’s a 210 page book. Right now that tentative title is Idea to Traction. And I don’t know what I’ll do with it. Maybe I’ll publish it later this year, early next year.
Courtland:
Well, you did something with this book that I rarely see in our niche, which is you launched a Kickstarter. You’re only the second Kickstarter that I’ve ever backed. You and one other project in the last 10 years. And it’s crushing it. I mean, you’ve got I think another week to go on the Kickstarter and it’s already at $80,000. So it’s more than recouped your initial investment. It’s basically like you’ve paid yourself an advance that an author would have to go beg a publisher for usually, but you’ve done it through Kickstarter, which is super cool. And I’m wondering why you did that because I’ve just never seen anyone do that. Usually people launch on their email list or they just host their own presale. But you’ve used this platform that is super popular, but what’s the advantage? Why launch on Kickstarter?
Rob Walling:
Yeah. It’s a good question because I really went back and forth on it all the way up until the week we launched because all the books I’ve launched prior have been exactly what you’re saying. Set up a landing page, put a Stripe buy now link and have a few tiers. There’s one with a video and one with a blob that’s more expensive. And that’s how I’ve always done it. This time around, there were a couple reasons. One, I really wanted to be able to offer a bunch of tiers. Seven different things. There’s a live talk to Rob option. And that starts to feel weird on a landing page, but in Kickstarter it’s native. It was just really obvious that I … Because I don’t do one-on-one consulting ever. One-on-one advising outside of TinySeed. But I was able to offer, I don’t know, I remember five, six, seven slots of that.
Courtland:
Dude, you sold out for hundreds of dollars. You sold out immediately. You should have charged thousands.
Rob Walling:
I think I should have just offered more slots. So I really did want to have that option of just doing it, of seeing what happened. The second thing was I like learning. I like doing new stuff that I’ve never done. And doing yet another launch to my email list, that’s fine. I’ve done that a lot. But actually trying to do a Kickstarter, I was like, I don’t know. What does this entail? How hard is it? What goes into it? And the learning that I’ve had from that I think has been really cool. So there’s a bit of personal satisfaction there. The other reason is I’ve never had a hardback book. It’s always been soft cover because hardbacks, you got to order a 1,000, 2000, 3000, ship them over. It’s like a bunch of work and oftentimes it’s a four to six month delay. And so Kickstarter’s kind of designed for that.
It is a pre-order thing. I could have ordered two or 3,000 books and paid for them, but I didn’t want them sitting in my garage. So this is a way to do that. And lastly, I view Kickstarter as a community/ it’s not quite a social network, but it’s kind of. And I have exposure on Twitter. I have exposure and podcasts. I have exposure on YouTube. I’ve backed 275 Kickstarters, but I’ve never run one on my own.
Courtland:
Whoa.
Rob Walling:
Yeah, dude, go to my page. It’s embarrassing.
Courtland:
Good lord.
Rob Walling:
It is nerdy as hell though. It’s all not video games, it’s like tabletop gaming and stuff I play with my kids. And there’s certain slider belts and watches that I back to, but it’s a lot of nerdy stuff.
Courtland:
What’s your favorite thing you’ve bought on Kickstarter?
Rob Walling:
There’s a game. I think it was a kick … It was a crowdfunding. I’m not sure it was on Kickstarter, but it’s a game called Kingdom Rush Rift in Time that is based on … Kingdom Rush is one of the best iPad games, and it is a tabletop version of that with these … It’s like 125 bucks when I backed it. And it’s these great minis and endless-
Courtland:
You’re not messing around.
Rob Walling:
And my kid painted them. My 16 year old painted them and we’ve just had endless hours of fun playing with that one.
Channing:
That’s awesome. You have kids that you can have an excuse for you to get those things, but I would just get them and just be a 36 year old man with tons of tabletop games.
Rob Walling:
Totally. I know. I’m so glad that … It’s like having kids is tough, but this is the best time was when my oldest-
Channing:
It’s the excuse.
Rob Walling:
Exactly. It’s an excuse to like, I’m going to learn to play Dungeons and Dragons again. I hadn’t played it since the ’80s. I’m going to get into comic books and Star Wars stuff. I would never make time for that stuff if I was-
Channing:
I need a kid. I need a kid for the sole purpose, I have this omnidirectional virtual reality treadmill in my gym in the other room, and whenever anyone sees it, they go, “What the hell is that? Are you an adult or are you not?” I just need just a kid that’s just not even really my kid. A neighbor just to come and be like, “No, no, no. I got it for this kid. It’s like a charity thing. It’s not really my thing.
Rob Walling:
You need a nephew or a niece. Yeah.
Channing:
A nephew. There you go.
Rob Walling:
That’s awesome, man.
Courtland:
Thinking about Kickstarter, I wonder if … If you look at our niche, Indie Hackers, Bootstrap Founders, there’s not that many places where we launch products. It’s like Hacker News, Twitter, our own email list, product hunt. There’s only a few. And I feel like that number hasn’t changed in years. It’s kind of just the same. Especially if you want to launch to your customers, of course there’s lots of different channels. Some people are really good at SEO, some are good on YouTube, some are good on TikTok. But internally, when we want people in our own niche to support us, there’s those four places. I feel like I’m blanking on any others. I wonder if there’s room for another one. Channing, maybe we should build this. A Kickstarter for Bootstrap Founders that’s slightly different than Product Hunt that is a different model, but something that people understand so we can kind of support each other and invest in each other’s launches in a way that’s easy.
Channing:
Yeah. And just have more surface area for the discovery function.
Courtland:
And I like this idea of putting a credit card into it. One of the reasons why Kickstarter is good is because people like Rob who’ve already backed hundreds of Kickstarters when there’s a new one. There isn’t all this friction of, okay, I got to sign up and create another account and yet another website, et cetera. It’s just like, boom, click a button, click pledge, already in there, payment’s gone and it’s super simple.
Rob Walling:
I think that’s a really intriguing idea. There’s obviously all the logistics of well, what if they don’t deliver and all the same crap Kickstarter has to deal with. But the idea of bringing it to our space I think is … It’s kind of a novel way of thinking about it.
Channing:
I’m to say, Rob, also the idea of you going into Kickstarter is really smart. We just had Wes Kao on. She runs Maven, the online course platform, and she had had this idea where she’s like, “Look, there’s a pyramid of ways that you can deliver content to your audience and the higher up the pyramid you go, the more high touch and profitable you can get and obviously there’s higher stakes.” And she placed a book toward the top of the pyramid. The bottom is maybe sending a quick tweet where you don’t have to defend the things that you say, but then above book, she’s like an online course or you’re actually live with your audience. And with your Kickstarter, you actually get to segment out. You don’t just have this book that’s something you’ve already written, there’s nothing you can really add. You get the ability to have those tiers. So I really like that idea as well.
Rob Walling:
There was a MicroConf talk by Ryan Delk years ago who used to work at Gumroad and he had the typical launch for a book like this is you have a 1X, 2.2X and 5X price points. So if your 1X is 40 bucks, 2.2 is about 90-ish or 100 and then 5X going to be around 200 and maybe do 250. And then you figure out what’s worth 40 bucks, what’s worth 100 and what’s worth 200? And that is kind of how I approached it, but also I realized I don’t want to get on a one-on-one call for 200 bucks. I just can’t justify that. So yeah, there’s an $800 tier and then there is a $5,000 tier to come for two days to Minneapolis this summer and actually do an in-person thing, which I think in your pyramid would just stack on top of that. It’d just be up. I’ve never done one of those aside from MicroConf, so it’s certainly going to be an adventure.
Channing:
Are you open to sharing how many people have taken you up on those offers? How are you doing so far?
Rob Walling:
I had five slots and I think three are booked for five grand a piece, which would be a great … I mean anywhere between three and five is a good number. My fear was A, it would be zero or one. And it’s like uh-oh. Me and this person are just staring at each other for three days in Minneapolis.
Courtland:
Do you know who the backers are who got those slots?
Rob Walling:
Not yet.
Courtland:
Ooh. Total mystery.
Rob Walling:
I don’t think we learned … I know. It’s a trip. And what’s funny is my brother who lives out in California sent me a text and he’s like, “Hey man, if I bought back one of these in-person retreats, does that include a trip to Parler Burger,” which is a famous Minneapolis place. And I was like, “Heck yes, it does.” So I honestly don’t know if … One of them might be him. I have no idea.
Courtland:
It could be us.
Rob Walling:
It could be you.
Channing:
Here we are.
Rob Walling:
Could be anyone. I’ll know in nine days I guess.
Courtland:
So let’s talk about the book itself. You described it as what to do once you have product market fit. And obviously you have a pretty good perspective on this. You run TinySeed. You seed dozens and dozens of companies that you work with personally every day to help them basically grow their startups. How do you figure out what goes into this book? I’m sure there’s a lot of people listening, us included, who want to know what do you do once you have a big audience and your product has struck the market and you kind of have this elusive product market fit. What now?
Rob Walling:
Yeah, no, it’s a really good question. And it’s one I had only been through once or twice before running TinySeed. And I had been had in conversations and affiliated with folks at MicroConf. But you’re right, I’m really inside a bunch of businesses now and so I’m seeing the patterns. The book really starts off talking about, hey, even if you have weaker product market fit, here’s how to think about talking to customers and strengthening that. And it’s some stuff people have heard before and it’s also some of my unique thinking. But then I went through all the advice that I have emailed to founders. Every time I would post to Indie Hackers, I would take that post if it was a response to someone’s question and I was throwing this all in a Google Doc. And I realized there were patterns.
Talk about content reuse. There were patterns to what people were asking. Like, should I compete in a really competitive niche? How do I compete with big competitors? That’s a topic in the book. Pricing. The number two chapter after market is pricing because most founders screw it up. We under price our products and I talk through my psychology of pricing, what I see people doing well, what I see them doing poorly. And then of course marketing’s a huge one. Little different for Indie Hackers because your community much MicroConf. I don’t necessarily think about marketing beyond the content we produce, but if you’re a SaaS app, a B2B SaaS app, the hardest thing is what do I do? What do I try? What do I try in what order? And I have a whole chapter on that. I have a three factor framework of speed, scalability, and cost I think. I forgot what the third factor is, but it’s a whole mental map that I’ve developed of, hey, there are only about 20 B2B SaaS marketing approaches. These are the ones you should try in this order based on what you want to accomplish. And then I talk about hiring, building your team, tracking metrics. That’s kind of the high level.
Courtland:
I have a friend who’s an investor who who’s telling me his theory that it’s basically becoming harder and harder to build a successful SaaS business. And his idea is here’s why. There’s more competition than ever. 10 years ago, not that many people were building SaaS businesses, not that many people knew how to code. Tech startups seemed like a difficult thing to bust into, especially if you’re self-funded. Today, there are dozens of businesses for every product idea. The playbook for starting SaaS businesses is out. You literally wrote the playbook. Other people have written the playbooks. People have mapped this out and they kind of know how to attack a different distribution channel, et cetera. But he argues even as there’s more and more competition and more people starting things, the number of channels for marketing your product is not really growing as quickly as the number of people who are trying to do this thing. So everything’s becoming more competitive. Ads are becoming more expensive, the bar is getting higher and higher to do good SEO. Every company’s inundated with sales calls because there’s so many people doing sales. In your experience, is this true? Is it getting harder to start a SaaS company?
Rob Walling:
I would say yes, but it’s not hopeless. Is it slightly harder than a few years ago? Yeah. I honestly think everything that you’re saying is accurate. The content bar, especially with AI now, but even before that. 10, 15 years ago, I could hire someone to put out articles and just build links, almost buy links from what were they, blog networks or whatever. And you could rank in Google and you can’t do that anymore. So it is more challenging. I do think that’s where raising a bit of funding has become more and more in my head. I think if you get traction, it’s probably something you want to think about. Even if you’re a hardcore bootstrapper like myself, it just becomes hard to organically grow a business in the ways that we used to. With that said, there’s a flip side to this. We still see tons of companies apply to TinySeed that are competing in spaces where the competition is much less.
So Builder Prime is a CRM for home improvement contractors. And when I first heard the idea, I was like, “Ooh, that’s a tough market to sell into. How are you going to find them and how are you going to close them? Customer pain, right? Oh, nontechnical, and all this.” And he’s crushing it, just absolutely crushing it because he’s executing really well. So it’s the people. There are a lot of people starting, a lot of people trying things, but I still see Ruben Gamez with SignWell. I see Derrick with SavvyCal. A lot of folks we know and then a lot of folks you haven’t heard of that are in TinySeed, like Iran is the founder of gymdesk.com. And that’s another one where it’s like, well, aren’t … It’s booking scheduling software, management software for a gym, martial arts studios, all that. Wouldn’t you think that’s a solved problem? And yet, the dude is growing like crazy. But it comes down to you have to execute probably at a higher level than you did 10 years ago, but it’s still completely possible.
Channing:
There also seems like there’s a huge out of that challenge is finding a smaller niche and not just sticking with a market as it seems to declare itself to at first. There’s a really good anecdote about Gary V, who had some conference, he gave a talk somewhere and there were 400 people at the conference. And he goes, “Well, hey, listen, at the end of this conference, I’m going to give a one-on-one one hour coaching session to somebody. And this is an auction for charity. The bid starts at $500.” And at first all 400 people in the room were like, okay, well, we’re bidding it up maybe $50 at a time and then everyone started to fall off except for two people at the end who just really, really wanted it. And they just kept going up by $100 to the point where everyone was so restless that he was like, “Okay, well you’re both at 4,000. Would you both just pay me 4,000 and I’ll make it each of you get that. Can we just settle this here?” And so in a way, you could say, well, look, the market was everyone in the room and the supply and demand placed his little coaching session at whatever, $800. But really the market was two people.
Courtland:
At that price point. Yeah.
Channing:
Right. At this new price point. And so I kind of feel like one easy way to miss out is to go, oh, well, we can’t build a SaaS in this space because it’s so overcrowded. Because you’re just looking at the market as it’s been designated by everyone who’s come before.
Rob Walling:
I just recorded, or I think I released a podcast episode this week about positioning, and I was talking about positioning really is figuring out where there’s a gap in the market. Where is the corner of the market between … Sometimes it’s like, oh, there’s tools out there, but they’re too expensive and they’re hard to use. Is there an opportunity for a Drip or a ConvertKit to come in and kind of swoop in under. And we both got a lot of traction because of that. Or we see it with another electronic signature tool? Isn’t that a solved problem? And yet, SignWell’s crushing it. And there are reasons. Because he found out some unique angles, but also because he positioned himself well against the incumbents and people are a little tired of them. So I agree with you. I think the other thing too is it is more competitive, but the markets are all growing.
The market for email service providers compared to 10 years ago has got to be two or three times what it is. So there are more customers in these spaces, even though the marketing is more competitive, the channels are competitive. But I think that’s where people need to have some type of differentiation. The biggest mistake I see is someone trying to build the exact same thing as a bigger competitor. And they’d be like, “Well, the market’s huge. I just need 1% of it.” It’s like, no, no one’s going to sign up. You have to be opinionated and either have unique feature set or unique positioning and be like, we are really good for this subset and not good for everyone else.
Channing:
Exactly. Yeah.
Courtland:
I watched your video on Kickstarter where you’re marketing the book and you go through a list of different things that are included. I want to talk about a few of them. You have mindset, you have product market fit, you have marketing, you have new ways to differentiate and compete. You just mentioned that last one. New ways to differentiate and compete. So how do you do that? You said have an opinion, you can’t just be the same as the incumbent. What works in terms of differentiating yourself and what doesn’t work?
Rob Walling:
Usually early on, everyone says, “We’re the simpler version of this.” And that-
Courtland:
We’re that with no features.
Rob Walling:
Is kind of a cop out. Exactly. It’s usually-
Channing:
We’re the cheaper.
Rob Walling:
Right. We’re cheaper or simpler. And it’s like, okay, maybe for now, but really that’s not a durable advantage. There’s a couple angles. The one most of us think of is to pick a vertical. I’m going to be scheduling software for hair salons or for gyms instead of scheduling software for everyone. That’s kind of the most obvious. There are a couple others that if you’re in a big space with hated competitors, what you’re trying to look for is where are their achilles heels or where are their weaknesses? So as we were building … I’m going to use Drip as an example, even though it’s older because I did exactly this. We were undifferentiated and we were plateaued. We did not have strong product market fit. And then what I found out was these marketing automation providers were pretty expensive and they were hard to use and their sales process sucked.
They made you go through multiple calls, they made you pay a $2,000 onboarding upfront. A lot of them made you pay annually. And so I kept saying, is there a way to make not simpler software, but much easier to use software to remove that frustration? Is there a way to just have self sign up if you want it? And is there a way to still be super profitable, but under price them? Right? I’m not going to be Walmart. I’m not the low price leader. But they were charging outrageous. I mean, the cheapest one was $400 a month, and most of them were two grand a month and up. So this is a way to do it is how can we take something that enterprises are using now and paying a lot of money for and make it more accessible to the masses? So I think those are two. There’s other tactics there, but-
Channing:
And it sounds like if you reduce your operating expenses, so if you have an option where you don’t have to provide all of this onboarding, then that’s a way where you can build that into a lower price without cutting into your margins.
Rob Walling:
And it also becomes, if you’re competing against big hated competition, oftentimes their cost basis for everything, including their software. They were not on AWS because they launched 15 years ago. There’s I think a lot of opportunity there.
Courtland:
What about mindset? This is a big topic that I think a lot of people underestimate when they first become founders. What have you seen that helps people have the right mindset to basically succeed with their business?
Rob Walling:
I mean, there’s a lot to it. It depends on your own psychology. Some people like me are naturally more stressed or anxious. When I was running my last startup, I was like, “Ugh, I’m stressed. Everything’s going to be a deal ender.” And I had to learn to not make speed bumps into roadblocks. So some folks need to hear that, hey, it is not going to end your business. Most things are not going to end your business. Take a deep breath. We’re almost trained in life to go to school and then get a job and then go to … Well, you go to school and go to college and get a job. And you’re not faced with crises on a daily basis. But as a founder, you kind of are. And sometimes I find it’s hard to pick which of these crises are catastrophic and which are just not that big of a deal. And so I think that’s a big thing that I help founders with these days is I will do a call with a TinySeed founder and just say, “I know you’re stressed and I can tell this is a big decision. You’ll figure it out. Just know that you’re going to figure this out. It’ll work out.” I think being able to roll with things that feel difficult, but actually realize that they’re not business ending is a big one.
Courtland:
Where’s your mindset at nowadays? I mean you’ve been in the game for 15, 20 years, you’ve got a million things going on. Do you ever get disillusioned? Do you feel like you have more energy? How are you feeling?
Rob Walling:
I feel like I’m living my best life, and it’s because I’m working on what I want to do. And I do not take that lightly. I worked hard to get here. I got a little lucky to get here, but the best decision I made after selling my last company was to take six months off and say, what do I really want to do? Because I do see entrepreneurs sell their businesses and then start another one and do the same thing, and they don’t really want to do that. And that would’ve been a mistake. If I was running hardcore right now, pushing on a SaaS app, I would not be happy. It’s just not what I need to be doing at this stage and age and with the age of my kids. So for me, I looked back at what have I been doing for free forever? And it was writing about entrepreneurship and it was having a podcast about startups, and it was writing books, and it was starting a MicroConf, which made no money for several years. I almost walked away from all that at one point. Got a cash offer for MicroConf, and I was like, oh … This is 2018. I was like, “Oh, I could just walk away from all of it.” And then I realized, what am I doing? That’s like my legacy.
Channing:
That’s what you love. Yeah.
Rob Walling:
Yeah. So that’s what I’m doing. I mean, that was one of the reasons. It was like, okay, well what if I double … I did a what if. What if I double down on MicroConf? What if I double down on the podcast? What if I double down on all this stuff? And that’s where TinySeed started percolating as I talked to people of like, yeah, could you run an accelerator for bootstrappers? And it’s like, what would that look like? So I feel great these days.
Channing:
Courtland, you just quote tweeted someone. Someone mentioned, and no hate on them, they were like, “Look, now that Indie Hackers is independent again, if I were CS Allen and Channing Allen, I would list on listen on MicroConf,” or MicroAcquire. MicroConf. “And sell it again to someone else, this time for 10X. Could be a great success story.” And Cortland cheekily quote tweets this guy and goes, “The best success story is finding work you enjoy for a lifetime. Even if you sell and get a big payday, what’s next? You start experimenting and trying to build a life you enjoy. Of course. That’s always the end goal. Money’s a tool for that and not a destination.” And in a sense, I think of two things that you just said, Rob. On the one hand, you had the experience or the privilege or whatever to take a step back, take a satellite view and say, well, what do I actually want before I just jump into something?
But then the first piece, which is if you have a little bit of a temperament for being anxious and everything is a fire, well, when the house is on fire, you don’t have time to stop and navel gaze. And so putting those two things together, if you’re able, and it’s all in the how ultimately, but if you’re able to see a small fire raging, a little bit of an ember, and go like, “All right, I could put that out, but I really need to think about what I’m going to do after I put this fire out and then I put the next fire out. How do I build a system, for example, where I’m not really dealing with fires?” That’s the really difficult balance to strike.
Rob Walling:
That’s right. And it’s something I didn’t do well until I left Drip, until TinySeed, MicroConf. We have budget, but I also have experience to put the right people in place, such that producer Xander runs MicroConf day to day. And Tracy Osborne does a lot of the running of TinySeed. And that allows me to work on exactly what I want to work on, which is not a luxury you have when you’re bootstrapping a SaaS. You just have to do everything until you have money to hire it. And if you’re bootstrapping, you never have enough money to hire, which you really need.
Courtland:
There’s this, I would describe it as a scarcity mindset around coming up with ideas, where a lot of founders, myself included, for the vast majority of the time I’ve built stuff online, think that it’s very hard to come up with an idea for something to work on that can both make money and that can align with things that you enjoy doing. And so you got to choose one or the other. And if you’re a broke ass founder, your first time out of the gate, you choose the one that makes money. And so you see a lot of people starting companies that they would never want to do a second time after they sell the first time. Do you think that that is kind of a true dichotomy? Do you think it’s reasonable as a founder to think, okay, what am I going to enjoy running for the rest of my life and what will make money? Or do you think you have to go out there, build something that’s successful, and then once you’ve got your nest egg, then figure out what you want to do and build a company that aligns with what you want to do for the rest of your life?
Rob Walling:
I think that you have to enjoy the process of building a business, and you probably want to like your customers, but I don’t like the mindset of I have to build something that I don’t really like in order to make millions so that I can work on what I want. Because you got to enjoy the journey, but also the journey sometimes is not very fun. And so what are you going to hang on to during those not fun times when you’re grinding it out or when Russian spammers get all your IPs blacklisted on a Sunday night, as happened to us in 2014. And I wake up and I’m like, “Well, guess we had a good run. We’re done.” I literally was like, “I think we’re done. I think we’re going to have to shut down.”
Channing:
That’s it.
Rob Walling:
That’s it. Drip is no more. So do I love dealing with email deliverability and IPs and blacklists, and-
Courtland:
Is that your dream?
Rob Walling:
No, don’t. But I really love building businesses and thinking about them and solving hard problems creatively. Because there was constantly hard problems that we’d have to sit down and say, whether it’s how do we get our IPs unblacklisted? Or it’s we have these 50 feature requests and they’re all kind of related, but they’re all asking for different things. How do we turn this into a visual workflow that answers all of them? That was a super hard creative, almost engineering mindset problem to solve. That’s the part that I enjoyed the most. And so I think that’s what I’ll say is I could have run a business for gyms or for hair salons or whatever. It’s still creative problem solving. But I think the two things you want to love is building a business, creative problem solving and your customers. I do enjoy working with entrepreneurs, and it’s like if you don’t want to deal with hair salon owners, then don’t start a business for them. Because Patrick Mackenzie talks about this with Appointment Reminder.
Courtland:
And Bingo Card creator.
Rob Walling:
And Bingo Card, where it’s like he did it for the money and he learned a lot, but as he quickly learned, these are not the people I want to talk with every day. I think that’s something that a lot of people make a mistake around.
Courtland:
There’s this book, Channing, remember you recommended to me from Strength to Strength?
Channing:
Yeah.
Courtland:
And it kind of starts off by saying, look, if you’re reading this book, you have made it, you know are at the top of your field in some area, you’ve been a success. Congratulations. But what do you do now? This book is for people like you trying to find their second peak in life. And he studied all of these famous people from Charles Darwin to Johann Sebastian Bach and recognized a certain pattern that when people are younger and they’re sort of getting their first success, that’s when they seem to have the most energy sort of grind it out and to do this very hard, often creative or even mathematical work to try to figure it out. You’re trying to figure out how do I combat spammers? How do I push into this new market?
But once people get older, if they keep trying to do that same thing over and over, they tend to meet with less success. Like Charles Darwin, everybody knows him because he created the Theory of Evolution, but people don’t know is that he died tremendously unhappy because he kept trying to top that success and come up with new theories, which no one ever really knew anything about when he sort of died alone and unhappy. Versus others, which is tragic. I don’t why you’re laughing.
Channing:
Because it’s so tragic.
Courtland:
But I think that’s common. But I think the more successful approach that he talks about is as we get older and we have gained all this knowledge from our earlier wins, is to move into a much more social role, a much more teaching role, a role that aligns with our strengths, which as we get older is the fact that we have a ton of experience and wisdom and knowledge, much more than anyone younger has because they just haven’t been out there. Whereas at the same time, our horsepower’s slowing down quite a little bit. We’re a little bit more resting on our laurels. And so it’s not surprising to me to see this transition of a lot of people who do this crazy SaaS startup at first, and they’re fighting through all these thorny problems that aren’t really their life dream. And then later on when they look back and see what they enjoy when they want to get started again, it’s running conferences, doing one-on-ones and office hours and talking to people and just generally giving back and helping other people. And once you’ve sort of achieved that nest egg, you also have the clout to do that and make money from it because people will pay you $5,000 to go on a retreat with you because you have those wins under your belt.
Rob Walling:
Yeah. I’m really honestly impressed or surprised by the people who do just keep starting and starting. David Cancel’s on his fifth, I think company. And even AD PNR did Woo Themes, which became WooCommerce and then did Conversio and sold that to Campaign Monitor and now is on his third or fourth. And he had a couple that failed. And I’m like, I respect that, but that’s not me. But I’m also a lot older than AD, I think. So David Cancel is just an anomaly to me. I’m like, this guy’s unbelievable.
Or even, I guess Jason Cohen had three and he had a small success up front and then a bigger one. And then WP Engine has been the last 12 years. But I couldn’t see him doing another one after WP Engine, but maybe he would. But exactly to your point, I see a lot of entrepreneurs doing that. I mean, there’s a reason that TinySeed mentors … The mentor list is a lot of founders who have exited because they want to participate and give back and still be in the game, so to speak. But they don’t want to be the … They know, it’s a cliche, but I’m too old for this … That’s how I feel of actually being in the heart of it. I’ve done it for too many years and it doesn’t sound fun. Could I do it? Could I pull it off? Yeah. Do I want to do that? No.
Channing:
And see, that’s the big change. What the author of that book talks about is in the beginning, whatever, in your first 30, 40 years, you have a lot of fluid intelligence. You’re really creative. It’s easier for you to come up with the ideas and then eventually you have crystallized intelligence so it’s easy for you just to kind of … The wisdom that you’ve gained. But you’re saying for you, it’s not that you couldn’t, you’re just like, nah, I’ve been there, done that.
Rob Walling:
Or maybe I couldn’t and I just don’t know it. I do know that running TinySeed and MicroConf is still … When I first meet people and they say, “What do you do?” I say, “I’m a startup founder. I run startups.” That’s what TinySeed and MicroConf really are. TinySeed happens to have raised funding to invest in other startups, but internally we have engines that we’re building. We have marketing engines in MicroConf. It is different than running a SaaS, but is still a lot of problem solving.
Channing:
These days, I’m curious about you. What drives you? Are you driven by making more money a lot? Is it just the process?
Courtland:
Yeah. Because I think everyone has their own formula for what brings happiness, what motivates you. When I was younger, I wanted to be a success. I think now we’re sort of talking about the second peak in your life and it’s a lot more driven for most people by what makes me happy. What’s on your checklist for what makes you happy?
Rob Walling:
It’s a really good question, and it’s one that I grew up my whole life wanting to be able to work on whatever I wanted. I wanted freedom. The money never mattered, but I needed money to be free in my day job. I mean that’s-
Channing:
Like a constraint, not a goal.
Rob Walling:
It is. Exactly. And so my goal since I had my first job when I was a teenager was like, I want enough money that I never have to work again. That was it. And I don’t need more. Some people do need more and they’ve driven by the money and I haven’t been. The money’s nice. I have a house and a car and that’s great, but I achieved that point in 2016 in essence, where it’s like, okay, I literally never have to work again, but I’m going to work. So what am I going to work on? And that was the big come to Jesus moment, so to speak, of I went on a founder retreat and was like, I think I’m going to step away from all this. And I actually started talking to the number two board game/tabletop gaming website in the world in terms of traffic and reach, and I was going to acquire it from him.
And I was like, how much revenue do you have? I was going to go all in on tabletop games and all this. And then I had that moment I talked about earlier where I was like, no, that’s fine, but I’m going to regret this if I do this.
Courtland:
Would you?
Rob Walling:
Oh yeah. I would get into tabletop gaming and be happy for a couple of years and then the margins are terrible. You know what I mean?
Channing:
Sure.
Rob Walling:
Money is still a scorecard. It is. That’s something I think is a pro and a con or a strength and a weakness of me is that I have a tough time doing things that don’t involve money, even though the money doesn’t motivate me per se. But just doing things … Even my hobbies, I collect collectibles. I have this Beatles gold record back here. And I bought it, and it’s worth more than it used to be and it’s like, I’m never going to sell it, so that doesn’t matter, but somehow the money … It is.
Courtland:
Gives you a little jolt.
Rob Walling:
Yeah.
Channing:
I have to say, I want to write a novel, I’m working on a novel, and I feel like the fact that I’m trying to write a novel must mean by a logical extension that I don’t really care at all about the money.
Rob Walling:
Totally.
Channing:
But the thing about that though is one of my strongest convictions … I think that one of the things that I root for for everyone is to get to a point where they make the amount of money where they don’t have to think about money anymore. Not because, oh cool, now you’re going to have money, but it’s like every single time I’ve seen someone have that transition, they then have to stop and say, “Okay, but what do I want for myself besides money?” And it’s like this self realization that I feel like you can’t ever have good clarity around that until you reach that goal.
Rob Walling:
Yeah. And that’s the thing is the people I know who are doing it for the money, when you get there and you make 10 million bucks, 15 million bucks, what next now? Are you just going to do it for more money? Because I don’t know that you’re going to be happy. I think probably all of us know decamillionaires who are really unhappy. That sucks to have worked all that time and to be a whatever, a one percenter, a three percenter. Some of the most wealthy people in the world have that luxury and yet still not be happy. I think that’s a travesty.
Courtland:
Yeah. I know on my checklist, I’ve got four or five items on there that tell me I’m going to like working on this. And one of them is that there has to be some number that goes up. I don’t know why. I don’t know where that comes from. If I was a writer, Channing, maybe it wouldn’t be money. Maybe it’d be the number of readers or copies sold or something. But if there is no cumulatively growing thing, then I just get this weird feeling in the back of my head that I’m not really building anything. What’s the purpose? And so money in a way, when it ceases to become the primary motivator, it’s no longer, I need more money to be free, does become this scorecard. But there’s healthy and unhealthy ways for that to happen I think.
You’re the Scrooge McDuck character and you’re just collecting more and more money, but you’re unhappy because you have no idea what you want to do with it except put it in a room and swim through your vault of gold coins, then that’s unhappy and that sucks. But if it’s like, okay, well this is a way for me to measure my progress and feel good like I’m accomplishing something, then I think it can be healthy. And then you can always spend your money to do other things. Invest in other entrepreneurs, pay it forward, help out friends and family, et cetera because it’s not about spending it on yourself that matters. It’s just a motivational thing.
Rob Walling:
Yeah. I think that’s a big one. A number going up is something I think about a lot too. And this is going to sound maybe contrived or cheesy or whatever, but I realized at a certain point I really like making an impact. I really like impacting people. And the more people I can help or impact the happier I am. And that’s not just bull talk. If you look at my history, I grow the podcast so that more people … Every time I get an email it’s like, thank you. I get these emails and It’s like, “You changed my life. I had no idea what I was doing, I built an MVP, I just sold it.”
There was a guy in Romania or somewhere, very little cost of living who’s like, “I just sold it for half a million dollars. I can almost live the rest of my life on that and it was basically following your advice.” I made no money off of … They’ve never come to a MicroConf. I don’t care. I care that his life is better. Is that a bit of a luxury? Yeah. I have that. I don’t need to make money off him. But that’s where the numbers that go up these days are YouTube subscribers or podcast subscribers. If those are stagnant, I’m just like, so who am I helping then? What good is this? How am I making a difference in the world?
Courtland:
Yeah.
Rob Walling:
I wanted to ask you guys about the whole Stripe thing. Is it a weird transition to do this?
Courtland:
Yeah. No. No. No. We can talk about whatever you want. That’s why I love interviewing another podcast host.
Rob Walling:
Because we can just turn the tables. Yeah.
Courtland:
Exactly.
Rob Walling:
So I listened to your last episode. I saw the announcement Indie Hackers is Indie Again. I listened to your last episode. And I know you can’t divulge details of the deal, which I’m not going to ask about, but I totally get why you guys would do this because I would feel the same way. I know even no matter how good the parent company-
Courtland:
But why would Stripe do this?
Rob Walling:
That’s the question. And I believe Stripe approached you about it.
Courtland:
Yeah.
Rob Walling:
So is it a focus thing? I have my own theory of, well, markets are going down, I know they took a haircut on valuation. Are they just trying to focus? What’s the logic there?
Courtland:
I think it’s tricky to talk about. You’re right.
Rob Walling:
Yeah.
Courtland:
But I think at the end of the day … I know this also sounds cheesy, but people at Stripe are just really good. They are not very miserly. They’re not penny-pinching trying to save every nickel and dime. And I think Patrick in particular is pretty wise about the overall concept of branding and reputation. Compared to other big unicorn startups of its size, Stripe has remarkably small number of bad press stories, et cetera and that’s deliberate. It comes from the top because everyone at Stripe is conscious of making sure … We have what’s called the front page test. If what you’re doing appeared on the front page of a magazine, how would you feel about it for the company? And that takes precedent over, okay, how much money do we save this quarter or this half or something?
And so I think for Patrick, he’s just looking at Indie Hackers and looking at who we are and what we’re motivated by and how we feel. And a large part of it is like, hey, are you guys happy? Are you doing what you want to do? Do you still have the same fire? Do you still have the same drive? He’s asked me that question every single year that we’ve been at Stripe. And I think we could have stayed. We could have just continued doing exactly what we were doing. And Channing and I had to also go back and do some soul-searching and be like, well, are we happy? Would it be better if we owned Indie Hackers? That was never an option before. What would we do in that case? And what would we need to feel like it was even a fair deal or a good deal because Indie Hackers burns through a lot of cash. I don’t want to jump ship and then suddenly be losing money every month. And so I think it was just a hodgepodge of, it was just convenient for both parties to figure out a good deal for that. And here we are in this crazy situation where we owned this time last month, 0% of Indie Hackers, and now we own way, way, way more than that. And it’s just cool. It’s cool to be here.
Channing:
But I was going to say another thing from Stripe’s incentive perspective just aligns with the weird circumstances around them acquiring us in the first place, which is that if we do what we are … If we inspire a lot of new entrepreneurs and we help to educate a lot of entrepreneurs to be more successful, that’s a common rising waterline that lifts all the boats. And so that’s what we were doing at Stripe. We weren’t making a lot of revenue. It wasn’t a financial acquisition where we were raising their bottom line in that way. If we are healthy and happy and inspiring more entrepreneurs and doing what we are really designed to do better, then that helps with what Stripe actually wants from us. So us being cut loose, us being independent and having the energy to go 100% on Indie Hackers is directly in Stripe’s interest.
Rob Walling:
Yeah. And that’s a really mature way of thinking about it, and I would expect Patrick or Stripe in general to think about it that way. It’s a long-term way of thinking. It’s as you said … I know they talk about raising the GDP of the internet. And if you’re able to do that better independently … I was going to say before you said it of I know Stripes not making buckets of money off Indie Hackers.
Courtland:
No. No.
Rob Walling:
That was not the play. The play as I saw it years ago was, hey, we want Indie Hackers to stay alive and or … I think at the time you were running ads, and I think Patrick was like, “Ah, it’ll grow faster without ads.” That was my mental model of why they acquired you. Is they want MicroConf to exist. They want Indie Hackers to exist. I don’t know if you guys were there at the MicroConf where I was either talking to Patrick or John Carlson on stage, and I said, “Raise your hand if …” SaaS companies all abounding. And “Raise your hand if you use Stripe.” And it’s like 90% of the … Yeah. It was crazy, right?
Courtland:
Yeah. Yeah.
Rob Walling:
I totally get that it’s good for them. Companies don’t think that way and that honestly is one of the reasons I have respect. Tons. Just loads. They run it. I have similar respect for Ben Chestnut at MailChimp. There’s only a handful. Dharmesh at HubSpot. There’s a handful that I’m like, you are super legit and you are very wise, and you make decisions that are very mature.
Channing:
Also, Cortland, do you remember? I think it literally was the week before Patrick reached out to you via email to ask about acquiring us, you and I were posting on the forum about new business model ideas we were thinking of, and one of those ideas, and this was at the top of the forum, was pay gate Indie Hackers. I don’t know what the name of the post was, but we were like, okay, why don’t we do a membership thing? Because we were just looking at revenue and a lot of our revenue ideas-
Courtland:
You own a community, you have to at least consider that.
Channing:
Yeah. A lot of our really public facing revenue ideas that we talked a lot about were 100% going to limit the impact that we had and probably be good for us in the bottom line. But yeah, if you’re a Stripe and you’re like, “Okay, well this thing is really useful for us,” all of those types of ideas are going to be good for them maybe in the short term, but they’re not going to help raise the GDP of the internet.
Rob Walling:
When Patrick approached you about this and said, in essence, would you prefer to be independent, did the two of you have any hesitations around that? Was it actually a decision?
Courtland:
Oh, yeah. Yeah. Yeah. Yeah.
Rob Walling:
Oh, really? What were the hesitations?
Courtland:
It’s nice to get paid a steady paycheck every single week. It’s really nice. It’s expensive to run Indie Hackers. We haven’t been focused on cutting costs that much, nor have we been focused on generating revenue in six years. So how are we going to turn that ship around? It’s risky. What if Indie Hackers dies if it’s on its own? There’s just a lot of considerations. Also, okay, this is an inflection point. What’s our opportunity cost? What if we just quit Indie Hackers and went and did something else? What if I became an investor? What if I decided to go start a different company? What would that look like? Is our heart really in it I think it was a big one for me. I think to some degree the answer is getting to be a little more leaning towards no for me. I’m just not as passionate about this as I once was.
I think the peak passion that I had was probably the very first year where it was like, hey, I have to make this work or I can’t pay rent. And then the next year it was like, hey, I just joined Stripe, I want to be a success and impress people. And those are the two years where Indie Hackers grew by far the most. And so the question was, okay, well if we are Indie again, is that passion going to come back? Because if it doesn’t, this is probably the wrong decision. And so it wasn’t something we just decided overnight. It took us literally a month of talking and figuring out everything we wanted and opportunity cost before we decided we wanted to do this. And now we’re still in the process of, okay, what’s next? By the end of this month, Channing and I were super excited.
We’re like, holy, this is going to be … I feel energy flowing into me that I haven’t felt in a while. So now the question is, what’s next for Indie Hackers? What do we do? The sky’s the limit. There’s a million and one things that we could do to make money, and also to do what you’re saying. To have a positive impact. And then the third thing, which is to enjoy our lives. To wake up every day and be excited about what we’re going to work on, which I think it’s not worth doing anything if I’m not excited to work on it at this point.
Rob Walling:
Yeah. I have a mental model, but it’s just borrowed from other things. Jeff Bezos has the regret minimization framework when you come to a decision. Which am I going to regret least? In my head, it’s usually if I come to a hard decision, I pick the path that will let me either learn more or that’s riskier within reason. Not risky like putting my house on the line, but that scares out of me. Those are the ones that I tend to lean towards. I wasn’t able to do that in my 20s. I was too scared. And then as I matured, I was like, oh, risk actually brings fun. It brings a little a little bit of-
Courtland:
Stakes in there.
Rob Walling:
Yeah. So the two of you as founders, as entrepreneurs, I feel like you would’ve regretted not going independent.
Courtland:
Oh, definitely.
Rob Walling:
I just can’t imagine not doing it. Even though it’s scary and you have to work through it as an emotional process, it doesn’t even seem like a decision to me. It’s just a foregone conclusion that you would do this.
Channing:
Yeah. The risk point reminds me … Have you ever read The War of Art by Steven Pressfield?
Rob Walling:
Yep.
Courtland:
Yeah.
Channing:
In his way of seeing the world, if you look at something and you’re terrified of it, you almost should just assume, I need to go do that thing because I’m terrified. Obviously, this doesn’t apply to all things. It typically applies to … You clearly say, this is a way that I want to express myself. Whether it’s through writing something or creating something. Like Courtland said, I don’t think that there was an option where we didn’t go and do something that in a sense scared us. It was like, do we want to do it with Indie Hackers? Is this the best platform? And ultimately I think, obviously the answer ended up being yes, which I want to now leverage the fact that you just wrote a book called The SaaS Playbook. It sounds like you heard our last episode where we talked about some of our ideas, but we have a lot of ideas. And I feel like it, we’d be remiss to not try to use you to give us a thumbs up or thumbs down on some of those ideas. Courtland, do you have that list up?
Courtland:
Well, I’m curious, off the top of your head, Rob, what would you do in our situation? What do you want to see us do if anything?
Rob Walling:
Oh, that’s so interesting. It’s interesting because MicroConf and Indie Hackers are very similar, but I’ve seen Indie Hackers as definitely more early stages maybe not, but it’s definitely folks who maybe want to work on multiple projects at once. Yeah. There’s a tie in there. I’m not sure I have an idea off the top of my head of where I think Indie Hackers should go. And there’s a big reason for that. Is while you’re a community and MicroConf’s a community, you’re different. You’re like a social news site for bootstrappers. And I’ve never run one of those. So I actually don’t know where I would take it aside from … We can come up with revenue ideas and all that stuff, but I liked your idea of the Kickstarter before. I think that’s clever. But that’s got to be on your longer term. You need a shorter term of ads and or pay gating, right?
Courtland:
Yeah. Right now it’s ads, it’s pay gating. We were thinking of almost a Indie Hackers VIP. A little bit like Amazon Prime. You’d be like, sign up for Amazon, you get Prime. And they just stuff a whole bunch of features into Prime that have nothing to do with each other. Hey, do you want to stream videos? Do you want faster delivery? None of these things are related, but the more value they put in Prime, the more of a no-brainer it is to not only sign up, but to not churn. And I think running an online community, it feels like, well, there’s lots of different things you want to do. I want to have these new cool Indie hacker profile pages that people will actually link to on their Twitter. But is anybody going to pay for that? And if they do, it’s just going to be a super low price point.
Well, if we stuff that into some sort of Indie Hackers Prime subscription, or we add a few features, gradually over time as we build more and more things just makes that more and more valuable to opt into. And there’s lots of different things we can build that are just generally helpful for the community and impactful that don’t have to on their own be this amazingly killer SaaS idea. That appeals to me a lot because I just want to build small things. I don’t want to build some gigantic hairy SaaS that’s going to take eight years.
Rob Walling:
And you have a luxury of the community trust you. You have such a strong brand that people will … If you say, “Hey, this is what we’re launching and we’re going to keep building,” it’s going to be a bunch of people like myself who are going to throw their credit card in and be like, I’m sure they’re going to deliver.
Courtland:
Right. Yeah.
Rob Walling:
So here’s Breaking news that … Producer Xander’s probably going to be mad at me for saying this, but this is already in the works for us. We have MicroConf Connect, which is a Slack channel. It has 5,100 founders and aspiring founders. We are going to be offering a premium paid version of that, which just has five or 10 perks and premier access to MicroConf videos and you get a bunch of private channels in the Slack and whatever else. There’s a whole list of it that I actually don’t remember. So if you’re asking me what you would do, that’s what I’m doing.
Courtland:
Yeah.
Channing:
Yeah. You’re like, why yes, that is a good idea, Courtland.
Courtland:
It’s a no-brainer to some degree. If you love MicroConf, you’re part of the community, you’re going to go. Why wouldn’t you pay some small amount more to get all these extra features and things that allow you to not only support the community, but also get access to more benefits.
Rob Walling:
Right. And that’s the same with Indie Hackers. And your community itself is much larger or a bit larger than ours. And I think you have … It’s a no-brainer that you could make some money there.
Channing:
A little bit easier when you can add someone as a member of your community by them clicking a few buttons on the internet than having them come all the way.
Courtland:
I’ve got some other ideas on this list. One thing that a lot of people have asked me about is this idea of … You know we have this giant directory of products on Indie Hackers, Rob?
Rob Walling:
Mm-hmm.
Courtland:
A lot of people have asked about Indie Hackers investing in other Indie Hackers. In fact, Erik Torenberg DM’d me. Three months ago, he started On Deck, which is this … I don’t know how to explain. A school for people in the tech industry to help each other with these different topics. And he’s like, hey, why isn’t there a way for people who love these small Indie projects to basically support each other financially and invest in each other? I’m not sure how it would work, but why haven’t you figured that out? And it’s been in the back of my mind for a long time, but I haven’t just sat down and thought, how would that work?
And Rob, you’re the best person to talk to me about this because you actually invest in “bootstrapped” startups. You see what are the returns like? How does it actually work? And I think no one’s really cracks this. Not because generally speaking, people invest in tech companies hoping for a unicorn. And the average Indie Hacker is not trying to make a unicorn. They’re trying to pay their rent. And so something that I’m noodling on is there some way to financially … Because partly it’s just fun. If I could go to a giant directory of Indie Hackers and see all my favorite people building their stuff, and I could throw money at them to help them be able to take off work and launch earlier, et cetera, and expect not some huge return, but something that makes it somewhat worthwhile, that would be dope. I’m not sure what the numbers are like for that though. Realistically, is that even possible to get a return?
Rob Walling:
Yeah. That’s the complex … So there’s two complexities that I’m going to introduce. I love this idea as well because I would love to go to a directory of Indie Hacker Projects or MicroConf project and just be like a hundred bucks, 500 bucks, whatever. This is great. This is super fun. I think there’s two things that are going to get in your way or going to make it complicated. Number one, return drivers. Making your money back will be very, very difficult. Even if you go across all these Indie Hacker projects … As you said, people are trying to make their rent. Maybe they get to 20K or 30K. The money that’s thrown off from there just isn’t a lot. So the valuations would to be very … I’ll say they’d have to be very reasonable compared. It’s like if you raise at a million dollar valuation and you put in a $1,000, you own 1/1000 of that company.
And so as you throw dividends off … We can do quick math is nothing. So you can’t raise at a million. So you got to raise at maybe a hundred thousand valuation. And will people allow that? Will they say, “I’ll sell 20% of my Indie Hacker project for 20 grand.”? So that’s one thing. To make the economics work it will have to be different than … Certainly than Silicon Valley, but even then, the TinySeeds and the Indie VCs, you would be at I would say, a level lower just in valuations in order to make the economics ever work.
The other thing is on the … My God, the laws in this country. The securities laws. We spend so much money on lawyers, and we are literally lobbying Congress to try to get the 99 investor rule changed. We’ve raised a fund. We can only have 99 investors. They all have to be accredited. They’re already accredited. These are millionaires. And yet I can’t have more than 99 people in that fund. It’s ridiculous, right?
Courtland:
Yeah.
Rob Walling:
We’re working with a group to try to get that changed. But all that said, in your case with Indie Hackers, I think you’d want to go more the red CF. The crowdfunding route, right? Because then you can just put in a few hundred bucks. Because if you were to try to raise from accredited investors, A, there’s just only so many, and B, if you raise a thousand dollars from an accredited investor, the legal fees alone to just put that together are cost prohibitive. So I think with crowdfunding, I would then logistically want to go out to one of the crowdfunding platforms and partner with them.
Almost like you’d have a crowdfunding syndicate. Like a syndicate is, you go on AngelList and we run this, We get a SaaS deal, and they’re outside of TinySeed, but they’re in the TinySeed syndicate. And we can raise 100 grand, 200, 300 grand to help them raise a round from our investors. Now in a syndicate, they all have to be accredited. And I don’t know that that’s the best idea. I don’t know that’s the best option for Indie Hackers. But I’ve never seen a crowdfunding syndicate and I don’t know if that could exist. Because you don’t want to deal with the legal, trust me. It is mind-boggling. It’s expensive and time-consuming. Talk about stuff we don’t want to deal with. It’s the worst. It’s like-
Channing:
Yeah. It just seems like crowdfunding sidesteps so many of those issues. You get to invest. Let’s say you get to … Let’s call it invest, but you’re not necessarily only just buying equity. You allow for say, the founder of a company to innovate what they want to give people such that maybe there are way easier returns. Like, hey, if you invest this much money … They can do the tiers. Then you can be someone who has access to these features for my product. We’ll always have you on this page. Who knows, right? But it just allows-
Courtland:
Some benefit that’s not equity.
Channing:
Right. It just allows for some innovation on the kinds of returns. And we talk about markets and the personalities that go into markets. Well, it just so happens that if this happens on Indie Hackers, you’re dealing with people on the supply and the demand side who have a lot of initiative, have a lot of creativity, and have a lot of goodwill with one another. So that’s something that I’m … It’s a really fascinating idea.
Rob Walling:
If you remove equity, it becomes a lot simpler.
Channing:
Exactly. Exactly.
Rob Walling:
And if you go to the more … You talked about doing a crowdfunding model that isn’t equity. More of a Kickstarter model built into Indie Hackers, right?
Channing:
Yeah.
Rob Walling:
That’s where you get back to, I could see people needing … It would be a brand. The most famous Indie Hackers who … Like John Yong Fu. He’s big on the side. And I actually don’t … Is Pieter Levels a big Indie-
Courtland:
Yeah. Pieter’s on there.
Rob Walling:
So if they came on and we’re raising, a bunch of us would throw in money. I think people who have done less work and who have less of a following might struggle a bit more but that would be the game, right?
Courtland:
Yeah. That’s the game. Can you discover the diamonds in the rough? Can you be there when no one else is? Anyway, Rob, thanks a ton. I appreciate your ideas and your feedback.
Rob Walling:
Absolutely, sir.
Courtland:
I feel like we can work together in ways that we haven’t been able to in the past, which is cool. We’re just in a whole different playing field now and so excited to go to MicroConf next year. Excited to stay in touch. Excited to talk to you about being an investor because I think I might be an investor going forward. Stripe just did their tender offer and so my money is no longer just all on paper which is cool.
Rob Walling:
I was going to say. Yeah. Now you’re rolling. That’s great.
Courtland:
Yeah. Yeah. So life’s exciting. I’m excited for your new book. I ordered, I think the option on Kickstarter to give me two hardcover copies so I can give one away. And then I think the audiobook or the ebook. And then I’ll probably buy whichever one I didn’t get afterwards because I want every format possible.
Rob Walling:
All the formats. Yeah.
Courtland:
What’s your-
Channing:
And you know how I can tell that we’re beyond the Stripe tinder offer?
Courtland:
What?
Channing:
For once you’re not wearing your robe. You’re wearing an actual shirt.
Courtland:
I can afford clothes.
Channing:
It’s either the money or you just have a lot of respect for Rob because you really dressed up.
Courtland:
He just need to see my [inaudible 01:08:00].
Channing:
You have a whole T-shirt on.
Rob Walling:
Got dressed up.
Courtland:
I subjected Wes to my robe book the other day.
Rob Walling:
Epic.
Courtland:
So Rob, you get to see me fully clothed.
Rob Walling:
Appreciate it.
Courtland:
Thanks a ton for coming on, dude. What’s your parting advice for people listening who are trying to figure out what to do now that they’ve hit product market fit? This is where your head’s at nowadays. Besides just buying your book, which of course they should go out and do, what’s something you want founders to take away from your learnings?
Rob Walling:
I think founders should … There’s so many, right? But man, one thing I really regret is I didn’t delegate more.
Courtland:
Oh yeah.
Rob Walling:
That I didn’t hire more senior people. I hired a lot of junior people because I didn’t have money and I was always the bottleneck. Managing junior people. And I think one thing that’s on my mind these days is the luxury that I have, we talked about earlier of being able to work on what I want is because we have very senior people. And so the moment you can, hire someone who’s really good, even if they’re expensive, and that will allow you to 10X your business.
Courtland:
Love it. Feels amazing hiring somebody who’s good and then suddenly all this stuff is getting done and it’s getting done better than you would’ve done it and you’re just like-
Rob Walling:
It is. Crazy.
Courtland:
Yeah. It’s nice.
Channing:
It’s really a matter of inertia too. I say that to go from zero to one as a founder, you have to learn how to wear all the hats. But to go from one to two, you have to learn how to take them off. And it’s really a question of habit. But that’s awesome advice. Where can people go to find more about you?
Rob Walling:
Startups For The Rest of Us if they want to listen to podcasts or Twitter, @RobWalling.
Channing:
Boom.
Courtland:
Startups For The Rest of Us, highly recommend it. One of the longest running podcasts in the space. Super good. Rob’s silky voice coming through every episode. Like what you heard here.
Channing:
This is a three host episode.
Rob Walling:
It really is. Well, and people listening to this on my feed, Startups For The Rest of Us, should go check out indiehackers.com. These gentlemen need some more signups so they can get some ad revenue.
Courtland:
Survive.
Rob Walling:
And of course, the Indie Hackers podcast, which I’m glad you’re back because there were a few months there that were touch and go.
Courtland:
Glad to be back.
Rob Walling:
And I was like, what’s happening? They need to keep producing this.
Courtland:
All right. Thanks Rob.
Rob Walling:
Absolutely. Great to be here. Thanks so much to Courtland and Channing for joining me this week. You can find them on Twitter at CS Allen and Channing Allen. That’s A-L-L-EN. As well as obviously @IndieHackers. It’s always great to have them on the show. The conversation flows very naturally. So I hope you enjoyed this episode. This is Rob Walling signing off from episode 659.
 

Rob Walling:
Welcome back to another episode of Startups For the Rest of Us, I’m Rob Walling. Today I sit down with Geoff Roberts, co-founder of Outseta. He wrote a 4,400 word article on global sales tax remittance, and I joke with him in today’s conversation about how it’s one of the most boring topics, but it’s something that people should be aware of and that’s why I titled this episode As a SaaS Founder, when Should You Care about Sales Tax?
Because the answer is likely not on day one, but there does come a point when you need to start thinking about sales tax, not only within your own country but globally. And that’s what Geoff and I dig into today. He’s done a ton of research on this topic. We define merchant of record, we talk about when you might want to be your own versus using a third party. The pros and cons, and we hear a little bit about Geoff’s own story as a founder of Outseta.
Before we dive into that, MicroConf Mastermind matching starts in just a week or two. Our applications open on May 3rd, and we’ve had incredible success connecting nearly 1000 founders around the world over the last three years with approaching $200 million in combined ARR. We have founders in the idea stage all the way up to making millions low eight figures, literally $10 million a year.
So whatever stage you’re at, if you’ve ever wanted to be connected with a small group of other like-minded founders who are likely at your stage or maybe just a little ahead of you for support and guidance and accountability, head to microconf.com/masterminds to learn more and to get matched. Applications open May 3rd. They close on May 12th, and we send matches by May 17th.
We only do matches two, maybe three times a year. And every time we do it, we have someone a protest after the applications close and beg to get in. And unfortunately we can’t do that. So make sure if you want to be matched in a mastermind that you hit microconf/masterminds before May 12th. And with that, let’s dive into my conversation.
Geoff Roberts, welcome to the show.

Geoff Roberts :
Thanks for having me, Rob.

Rob Walling:
It’s great to have you on, man. I’m looking forward to hanging out next week or by the time this goes live, I think it’ll be last week at MicroConf US in Denver. But today we’re going to talk about one of the most boring topics that I can think of, but we’re going to make it interesting, right? I recorded it YouTube video a couple weeks ago about SOC 2 compliance, and I started it by saying, yeah, you think this is going to be boring, but it’s really important, but so is global sales tax compliance and remittance.
You wrote this article on your company blog, so you’re a startup founder at Outseta.com and it’s all in one membership software, but you’ve obviously had to deal with some global sales tax compliance and remittance because you wrote this article, subheading, “what I’ve learned over the last 18 months about when to use a third party merchant of record versus when to act on your own”.
So first question is, hey, why is this so important? Why should people listen to this episode and learn about it?

Geoff Roberts :
Yeah, I think the reason it’s important is an obligation for any SaaS founder to figure out what they need to do around global sales tax compliance and remittance. And more importantly, nobody understands it. It is completely confusing. Everybody that I’ve spoken to, even people that think they understand this subject well, don’t understand it a hundred percent, myself included. And it really came to the forefront for us because we are a SaaS company ourselves. We need to figure this out as a business ourselves, but we are a billing system.
We do process payments and we need to productize a solution to this problem for our customers. And we spent the better part of 18 months evaluating every option on the market from using a third party merchant of record to all of the different tax software products that are out there. And during this 18 month period, we had customers kind of asking us for solutions and asking us for solutions and asking us for solutions. And I felt guilty. I was like, we’re a billing system. We need to have a good answer to this problem.
But the conclusion that I’ve come to after spending so much time thinking about this is there really isn’t a good solution to this problem today. So it’s kind of a pick your poison scenario and that’s what the article I wrote is all about.

Rob Walling:
And if I’m a startup founder running a bootstrap business, doing 10 grand a month, 20 grand a month, can I just ignore all of this? Do I need to pay attention? Or I guess what I’m asking is does it only hit you at scale? What is the downside and when do you think it becomes important?

Geoff Roberts :
Yeah, so I would say first of all, the legal advice that anyone would give you is there are different revenue thresholds in each country after which you need to worry about this. Some of them are when you process your very first payment in a given country, others are hundreds of thousands of dollars of payments processed.
So the technical legal answer is, it kind of depends. That being said, I think that you really don’t need to worry about this particularly on your way to 10K in MRR. I think it’s much like all other aspects of building a startup. You need to create good problems. And I would turn my attention to this personally, probably somewhere between 500K and a million dollars a year in revenue. I think that’s a point where you will be processing enough payments that you’ll have sort of a significant tax obligation in a number of jurisdictions that warrant’s actually figuring this all out. Before that, I think it’s honestly not something you need to worry about too much.

Rob Walling:
And I should caveat this whole conversation with, neither you or I are lawyers, we’re not accountants, we’re not legal nor tax advice. These are just opinions of two people on the internet who happen to have read some stuff, right? I mean, this is it, but no, I agree with you. So when I was growing my startups, it was always, it’s like I don’t need insurance early on, I didn’t have an LLC for a long time because I was a sole proprietor until I hit about 70K, 80K a year. There were just certain moments where it’s like, of course it’s risk tolerance. Of course if you talk to the most strict lawyer, then they will say, do all this stuff up front. And it’s like, well, that’s 20 grand in fees and I don’t have a business yet. So it’s like you have to take this with a grain of salt.
In terms of this post or this essay, which is a 19 minute read you have at the top, which is a warning like, slow down, if you really want to do it, do it. But otherwise. It’s global sales tax. So is this about country to country stuff or does this apply, let’s say I’m in the US there are 50 states, different counties have different sales tax, all that. Do you address any of that in this post?

Geoff Roberts :
Yeah, it’s all discussed in this post. Basically at this point you probably have a tax obligation in any country where you have a customer at least to some extent including your own country. But the part that is really crazy about this topic to me is these are not taxes that your business owes. These are taxes that your customers owe and it is you, the small business owner who is supposed to keep track of all this stuff and remit taxes on behalf of all of those customers.
The whole system is kind of crazy if you ask me. And one of the realizations that I came to in writing this post is just the frequency in which the actual tax rates and tax laws change even within your own country. So within the United States in 2021, there were 600 plus different tax rate changes that went into effect that year. And to get just keep track of that within your own country, let alone every country in the world, every municipality in the world is kind of ridiculous. And even the companies that do this full-time, like that’s what their products are based around the idea that you would ever be fully in compliant at any point in time is sort of a ridiculous notion in and of itself.

Rob Walling:
Obviously with Outseta, you are a membership website platform and so I could go set up a membership website for MicroConf for example, and then I could charge folks in MicroConf to pay a membership fee. In essence, money would be flowing through Outseta to me, and that’s when this becomes more complicated. Is that right? Because I’m imagining, let’s say I had a email service provider like Drip or MailChimp, my customers are not charging their customers for anything, they’re just paying me money. How is that maybe more or less complex than the situation you’re dealing with?

Geoff Roberts :
I think the only thing that is more complex is we have to pay taxes ourselves as a company, but we provide tools to our customers to do the same thing. That’s the only additional level of complexity here. But within our customer base, we have hundreds of companies that are looking to us and saying, what is this global sales tax remittance stuff? Do I need to worry about this? When do I need to worry about this? Is Outseta a merchant of record? Can it be a merchant of record? Do you integrate with other tax software products? So we’ve just been barraged with these questions and we’re trying to provide some clear cut advice to our customers so they can sort of wade through the scenario that they find themselves in and have a workable solution.

Rob Walling:
So that begs the question, can you define what a merchant of record is?

Geoff Roberts :
Yes, A merchant of record is who you are actually interacting with. If you’re processing credit and debit card payments, it’s the person or the organizations that’s going to show up on your bank statement. It’s the person that is sort of liable for those transactions.
So most SaaS companies today, ourselves included, will use Stripe for payment processing. They set up their own what’s called merchant account with Stripe, and they’re basically responsible for all of the transactions processed through Stripe on behalf of their business. If that’s the case, that means you do need to be applying tax to your invoices and remitting tax and all these different jurisdictions where you do business.
But a third party merchant of record is a newer option that’s become quite popular. The popular merchant of record products out there today are Paddle, Lemon Squeezy Gumroad, those sorts of customers where essentially they create one master merchant of record account for all of their customers and they’re actually processing payments on behalf of your business.
Your customers aren’t interacting with your business, in that case, they’re interacting with the merchant of record and the merchant of record then sort of issues a payout to your company after they’ve remitted all the taxes that are required.
So there’s sort of this perception that if you use a third party merchant of record, your problems are just solved. And to some extent that is true. You don’t need to think to the same level about global sales, tax remittance and compliance because the merchant of record is doing it for you. But there are downsides ranging from higher payment processing fees to platform risk that you need to consider. So I don’t think one is a clear cut better option, frankly.

Rob Walling:
Got it. And at Outseta, are you a merchant of record?

Geoff Roberts :
We are not a merchant of record. Part of this post was me just kind of being honest with our customer base saying, we’ve been thinking about this for 18 months, we still don’t have a great solution to this problem. And I think the article, I hope I sort of bring some credibility to the discussion because we’re not trying to sell you anything. We don’t have a great solution at this point in time.
But where we’ve landed as a company is we want to offer both options. I think most SaaS businesses will probably opt towards continuing to use Stripe. And I know for a fact since publishing this article, there is a huge influx of remittance related products and services that are being built right now that aim to make this whole process easier for companies that do use Stripe.
But we also sell to a lot of more creator focused businesses where I think a merchant of record maybe does make more sense for them and we are looking for a viable partner to offer a merchant of record solution ourselves too.

Rob Walling:
I imagine it’s pretty complicated to be a merchant of record.

Geoff Roberts :
It is. It’s a lot of administrative work. I mean, you look at the companies that have done this, Paddle’s raised 300 million in funding largely because they need to figure out how to do all this on behalf of their customer base. And I think it’s even telling that Stripe has not prioritized their own merchant of record solution, at least at this point. I suspect they will at some point, but there’s just a lot that goes into it, frankly. So it would be really hard for a small business like Outseta to become a merchant of record ourselves.

Rob Walling:
Yeah, I would imagine. Is Outseta bootstrapped or if you raised funding?

Geoff Roberts :
We are.

Rob Walling:
Okay. Yeah, that would make it especially difficult. I remember back in the day, Gumroad raised money, they raised like 7 million bucks in whatever the year was, 2013, 2014. And their head of growth, Ryan Dell came and spoke at MicroConf and I asked him why didn’t Gumroad bootstrap was number one, and then why did they raise so much money? Because it just seemed like a big amount for what they were doing. The software wasn’t that complicated, I just didn’t get it and I’m not anti funding, but raising half a million dollars makes sold sense, but raising 7 million was like, what is happening? And he said one of the reasons was that they needed to become their own. The way he said it was credit card processor, payment processor. But I think it really was merchant a record.
And in order to do that, you need to work directly with banks in a fashion where they need to have confidence in you, in your company and they need to trust you, the company. And that was one signal they could say, well, we raised this much money from these top tier VCs. I think you’d have a pretty challenging time. Maybe today it’s a little easier, but I think becoming a merchant of record when you’re just a little bootstrap company no one’s heard of I think could be challenging.

Geoff Roberts :
Absolutely. Yeah. I think the path for us would be an integration with a Paddle, Lemon Squeezy, et cetera. Those platforms charge pretty high payment processing fees for being a merchant of record. And that’s part of our revenue model too. So everything we’ve looked at so far would just result in, at least in my opinion, payment processing fees that are prohibitively high. And the other concern for a company like us is we’ve built all of our own UI around signup forms and whatnot. If we go with one of these third party merchant of records, you almost definitely have to use their own UI on the front end.
So we’d have two different implementation paths for our product, one focused on Stripe, one focused on whatever merchant of record solution we integrate with. Long story short, we haven’t found an option that we think is really viable and a good solution for our customers yet.

Rob Walling:
So you wrote this post, which I’m doing a word count on it as we speak. It’s a lot. It’s what, more than 4,000 words. It’s like a book chapter.

Geoff Roberts :
It is.

Rob Walling:
It must take me a lot of time. Why did you do it? Other than just to be a nice person and help the internet and helps SaaS companies was there other motivation?

Geoff Roberts :
I wouldn’t say there was any particular motivation other than trying to bring sense to this topic for our customers. I mean, our support inbox is filled with people asking questions, do I need to worry about this? Do I not need to worry about this? And frankly, we wanted our own customers to know we’ve been looking into this, we’ve been exploring it from all angles.
My own perspectives have changed on this topic. When I really all of 2022, I was talking to our product team saying, I think we need to be a merchant of record. We sell to early stage companies. Let’s just take this topic off their plate completely. But the further I went down this path, the more founders I spoke to, the more I actually started kind of backtracking on that perspective and I just wanted to share everything I’d learned on the topic and also communicate that. I think ideally for a payment processing company like us, offering both options and giving your customers that level of optionality is the best solution.

Rob Walling:
And something you say in the article is if you’re a SaaS company that’s just starting out, I would act as my own merchant or record. In fact, I wouldn’t worry about global sales tax remittance at all yet. Which I think ties into what we said earlier of, hey, if you’re trying to get to 10K, 20K, quit the job. Again, not advice because you should be a hundred percent compliant with all laws at all time, but it’s like realistically, that’s just how it works.
But what’s funny is, you have this really nice diagram and it says the question of merchant record using a merchant record, pros and cons, the only pro is convenience. That’s it. There’s one, it’s because it’s more convenient. The cons are slower, approval process, customer confusion. You want to define that on why customers could be confused.

Geoff Roberts :
So customer confusion, I think it’s one of those things you’re going to see a lot of initially with new customers if you are using a third party merchant of record. So if a customer looks at their bank statement and you are buying a product from a company that uses a third party merchant of record, they’re not going to see the company’s name on their bank statement. They’re going to see paddle or they’re going to see Gumroad or they’re going to see Lemon Squeezy, the name of the third party merchant of record. And a lot of times that causes customers to kind of freak out and say, why am I getting charged by this business I have no relationship with. All these companies have addressed this in various ways. It’s something I think once you receive an invoice and are confused, you probably figure it out and it’s not that big of a deal, but it is certainly something to consider.

Rob Walling:
That makes sense. And then the other cons are significantly higher platform risk, which is pretty obvious. Imagine if your merchant a record went under that would be devastating. And then high payment processing fees, then you have a nice headline, I think kind of a nice summary of it. You’re like you say, if you’re just starting out, I wouldn’t worry about it yet. If I was a creator that sells one time fee digital products, I would recommend using a merchant or record. I can live with a extra 5% fee once, but I don’t want to live with it on an ongoing basis.
And then you say if I’m a SaaS company doing over a million a year, I would act as my own merchant record, which makes a lot of sense to me because again, it’s SaaS and so you’re getting all that recurring revenue and figuring it out was probably worth your time. Then should you deal with the global sales tax maintenance? Because it sounds like it’s a big fricking fiasco to figure out. I’ve heard of Stripe sales Tax or Stripe Tax or something, is that the kind of thing you would do?

Geoff Roberts :
Yeah, what I personally think is the best option and what we’re going to do in the context of our own business and also probably the first thing we’ll productize for our customers is I do think Stripe Tax has solved this better than anybody else when it comes to tracking the actual tax that you owe. And Stripe Tax will also tell you specifically what jurisdictions you need to remit taxes in.
So if there’s a particular sales threshold in a given country and you’re over that threshold, Stripe Tax notifies you. It says you’ve sold 50K worth of product in this jurisdiction, you need to remit taxes there. So I think the first step for any company is just going to be turning on Stripe tax. That’s what I’d recommend at least. So you at least have insight into where you owe taxes and you are starting to collect taxes as well.
The problem then becomes remittance, which is actually filing your taxes with all of these different countries, different geographies, et cetera. Stripe does have some partners that they recommend. They have Taxjar, their partner in the US. There’s a couple options in Asia, a couple options in Europe that they recommend, but for me it’s, turn on Stripe tax, start collecting tax, and then I would start to gradually remit taxes in any jurisdiction where I’m really processing significant volume, I would probably start in my home country. For most companies, I think you’ll probably go to Europe next, that that’s kind of a guess.
But I would sort of do it incrementally and over time, if you have a 50 million a year business, yeah, you’re probably going to be remitting taxes all over the place, but the cost of remitting these taxes doesn’t scale up dramatically and that’s why I’m uncomfortable saying I’m going to pay 7% or 10% or whatever it might be and perpetuity on every single recurring transaction. I would rather optimize for the lower payment processing fees and then just remit taxes as it sort of makes sensible sense to do so.

Rob Walling:
I can imagine someone doing a million or 2 million in ARR or even 5 million, it’s just still such a small business compared to the world and they’re domiciled in California, they’re California LLC or whatever, or Oregon llc, and they have some customers in Europe and it shows by their calculations that they owe $5,000 or $10,000 in taxes to England or the UK or whatever.
I can imagine someone thinking, I’m not going to pay these, what are they going to do come after me? But is that a sensible way to think about it or is it if you go over there, they scan your passport and then they’re like, haha, we got you. How does a European government come and get an American small business?

Geoff Roberts :
Yeah, so I would say one of my other learnings as I’ve explored this topic is I was not able to find a single person who had a horror story about a foreign government coming after them for some sort of sales tax that they did not remit. Now does that mean that you should not remit those taxes? No, I’m not advocating for that whatsoever. I think you probably should try to do the right thing, but I think from a sort of risk assessment standpoint, part of the reason small businesses like us are being asked to collect these taxes in the first place is these governments haven’t figured out how to do it on their own in any sort of scalable fashion. I don’t think there’s any great way that this is consistently sort of enforced.
So I’m not saying don’t do it. I’m saying use your own common sense when you think that number is large enough that it makes sense to be remitting tax in these jurisdictions permanently start to do so. Before that, I think your actual risk is extremely low.

Rob Walling:
Yeah, I can imagine the risk may increase someday. Don’t know. Some countries may get their act together and do it. The other thing is, I haven’t heard this either, but I could imagine if you went to raise a funding ground or sell a company that depending on who was investing or who was acquiring and how much money was involved, there could potentially be a liability there. And my guess is it wouldn’t scuttle an acquisition, but it might be a hold back type situation.
When you sell a company for $10 million, usually… I forget what the number is, if it’s 10% or 15% of that amount is held back for 18 months, two years just in case something happens. And I can imagine that might be something people would think about.

Geoff Roberts :
Yeah, it’s a concern that I hear all the time. Probably the number one case for a merchant of record that I’ve heard, at least from people that are kind of freaked out about this topic is what if there is an acquisition of my business someday and I haven’t done this, is that going to kill the deal? And I think it could certainly happen.
I will say in the context of writing this article, I talked to a founder who sold a business for between $500 million and a billion dollars, so a big acquisition to a publicly traded company. They just disclosed during the acquisition that they had never paid global sales tax and they didn’t know how the acquiring party was going to react to that. And they were sort of surprised. The acquiring party almost laughed it off and said to them, we would’ve been really surprised if you had paid global sales tax.
And maybe that’s going to change a little bit over the years to your point, but I think that’s very much the norm, and if someone is trying to kill a deal over this, they’re probably not like that serious about acquiring your company anyways.

Rob Walling:
It’s not where the market is today. Yeah. Well cool. If folks want to check out the post, obviously we’ll link it up in the show notes so they can go to Outseta.com/blog to see it. Before we wrap up though, I want to hear a little more about Outseta. So you’re bootstrapped, how long you’ve been in business, how many founders, how big’s the team, some idea of scale.

Geoff Roberts :
First of all, yes. You’re a hundred percent correct. It is membership software. We use membership software as a little bit of a broad catch all because our target market has switched a little bit, but we set out to build an all-in-one tech stack for SaaS founders building SaaS companies. We sort of built Stripe billing before Stripe billing was a thing. And then we said, you know what? All these SaaS founders need authentication and CRM and transactional emails. And the basic premise of the company is it’s just all the kind of table stakes functionality that you need to launch a SAS business.
And we also sell to less technical founders building membership sites that need comparable functionality today. But we’ve been at it for six years now. We’re a hundred percent bootstrapped. There are three founders and six people on the team at this point.

Rob Walling:
Wow, good for you guys. Did you get any type of Covid bump when that happened and how’s it been going since then in terms of growth and traction?

Geoff Roberts :
Yeah, it’s been interesting. We actually did get a little bit of a Covid bump. As everybody started getting laid off, everybody started launching their own companies and Outseta sort of a inexpensive way to do that. We really started to grow in earnest kind of through Covid and I would say since then, just in the last few months in terms of new customer signups, we’ve definitely felt the economy a little bit.
We’re still trending up into the right, but our growth in terms of new customers has slowed a little bit the last few months. But what we’ve seen is our real revenue model is we take a 1% fee on successfully processed transactions. So as our customers grow, we grow. And we’ve been growing pretty aggressively over the last year really based on the growth of our customers, more so than new customer signups, which is pretty cool.

Rob Walling:
Yeah, that’s interesting because when I went to the homepage the first time, it says membership software and I was thinking, oh, this is for membership websites, the information marketer, the knowledge marketer who has a personal brand selling, but then your H2 talks about monetize your website, your SaaS product or your online community. So there’s more to it. And you have billing, you have CRM, you have email automations, like you said, you have help desk, so you have some type of support and authentication. So there’s quite a bit here.

Geoff Roberts :
Yeah, we have a interesting marketing challenge in the sense that our customer base is roughly split between very technical founders building SaaS companies and no coders building membership websites. They all need CRM, they all need billing, they all need authentication. They’re sort of controlling access to their feature sets or their content based on your subscription. So they’re actually very similar, but how we speak to them and even the implementation process is quite different between those two target markets.
But for SaaS founders, the thing that tends to get them interestingly enough is not that your billing system and your email tools and your CRM is integrated, they’ve got the technical skill set to integrate best in class point solutions if they want to. It’s more all these little workflows that you typically need to write custom code on top of Stripe to support.
So things like if a subscription payment fails, do you want to lock the user out of their account and prompt them to update their payment information on login? Those are little workflows that we’ve built into Outseta, so you don’t need to code the stuff yourself. And because we offer both authentication and billing, it all just kind of works out of the box for you.

Rob Walling:
You have a neat little Twitter thread on Outseta.com/billing and it’s Derek Reimer asking SaaS developers, what was your last experience like integrating Stripe billing with your app and then Ruben Gomez who comes on this show all the time. Annoying, sucks. We did this twice, two different apps in the last few months, standard SaaS tier and monthly yearly billing options for all the hype about how easy it was. It took longer than it should have, and some parts were confusing.
Then Ben Orenstein, friend of the pod chimed in, I’d guess we’ve invested more than a hundred hours and we’re definitely not done. So it is interesting, like Stripe innovated, right? I mean before Stripe I used PayPal web payments pro and fricking authorized.net and I hated both of them. And so Stripe just did an amazing job there and then they built Stripe billing and they built all this stuff, but it’s still not there. And it sounds like you’re trying to build another layer on top of that.

Geoff Roberts :
Yeah, there’s two ways that people have described what we offer that I think are generally helpful. The first one is people will express a lot of frustration with Stripe because Stripe hasn’t sort of built this end-to-end solution for a SaaS business. But frankly, Stripe is a payments company and they have a lot of focus outside of SaaS. So a lot of people will say Outseta is sort of the tech stack Stripe would build if Stripe just completely focused on SaaS.
The other parallel we hear a lot is you are sort of Shopify for SaaS businesses. It’s an easy way to get up and running. It gives you all the core tools that you need. You go on to build a $50 million business, you’re probably going to want to integrate best in class tools and build sort of the picture perfect tech stack, but we’re more than enough to get you started and really how we think about ourselves and from a design perspective, what we always keep in the back of our minds is we want to take SaaS companies from zero to somewhere between $5 million and $10 million a year in revenue. We think we can support that journey really, really well. And if you get beyond that point, you’ll sort of outgrow Outseta.

Rob Walling:
Very nice, sir. The folks want to keep up with you. You are Geoff T. Roberts on Twitter. It’s G-E-O-F-F T Roberts as well as Outseta.com. And I wanted to thank you for being such like an active participant in MicroConf Connect. I actually was telling you before this, I hadn’t read your post about global sales tax remittance, but someone in MicroConf Connect pulled it to my attention. They said this would be a great topic to hear on the podcast. And so thanks for writing the piece, essentially giving back to the community and for being such a contributor to connect.

Geoff Roberts :
Yeah, thanks for having me today and looking forward to seeing everybody in that community next week in Denver.

Rob Walling:
Amazing. All right, sir. Thanks.

Geoff Roberts :
Take care.

Rob Walling:
Thanks again to Geoff for joining me today on the show. Can obviously read the article linked up in the show notes. I look forward to connecting with you on Twitter. I’m @robwalling. Thanks for listening this week and every week. And this is Rob Walling signing off from episode 658.

Rob Walling:
And so that’s where it makes sense to invest time into something, and I just mean labor, human hours into something that can build that flywheel. That’s what SaaS is, right? It’s building a flywheel slowly over time, and if you have high churn, it’s hard to do that. If you have low churn, then it’s how do we throw everything we can afford at it in order to be able to onboard more people?
Welcome back to another episode of The Startups For the Rest of Us. I’m Rob Walling, and today I’m answering listener questions. We have a great funnel of listener questions coming into the show. Our first four questions are going to be audio or video, and then if we have time, I will dive into a text question or two to try to get through the backlog. Thanks as always for sending your questions. You can email them questions at startupsfortherestofus.com or head to startupsfortherestofus.com. Click ask a question in the top nav, and if you send an audio or video question, it goes to the top of the stack. My first question comes from Mike all the way from France.

Mike :
Hey Rob, Mike here, all the way from France. I love your podcast, so thanks a lot. I created a SaaS software company called typedesk, which is a template builder slash text expender for entrepreneurs and small teams. My main challenge right now is that we have a low churn, high stickiness once people actually spend time creating their templates and the feedback we get is usually, “Well, I can’t just live another day without typedesk.” Which is great to hear, but getting to that point is really challenging because I can provide new users with boilerplate templates. Each company’s unique. I mean, everyone has a different needs and also it’s quite a technical product, so right now working on making sure that we get to the value as quickly as possible and trying to demonstrate what the product does as quickly as possible in the onboarding, but I was wondering if you had any best practices or recommendations in my case. Thanks a lot.

Rob Walling:
That’s a good question and one that I have given a lot of thought, to be honest. I know of several companies like this where your churn is so low, but that barrier to getting folks to getting value is maybe a little further than an app that is easy to onboard. I think of SaaS apps like SavvyCal and SignWell, which are scheduling link and electronic signature, and those are pretty simple to get value from. You log in, you have a link five minutes later to allow people to schedule you, or if you’re in SignWell, you log in and you can send a doc within two, three minutes. There really isn’t much to getting onboarded. First is a tool like typedesk like you’re talking about, or think about an email service provider where you have the… There’s so much set up and importing subscribers and there’s just a lot to be done before you get to value.
The thing that I would be thinking about in your shoes is how can I handhold as many people as possible? And what I mean by that is manually getting on calls with folks doing weekly group webinars, and whether that’s you as the founder or whether it’s someone you hire, I don’t know where your revenue is yet. I would look at investing in person hours, non-scalable, you can add all the tool tips and the onboarding flow into the app that you want, that will improve it. But to truly get to the point where you are dramatically increasing the number of folks who get onboarded with a tool, that does take some time. This is why customer success exists, right? This is why that term, which what, 15 years ago, I never heard it. I don’t think it existed in 2008, 2010. The first time I started hearing about it was probably 2012, 13-ish.
And this role exists to get people onboarded and to get them getting value. And I see that your price points are low, but per seat, $5 per seat. So, if you have a hundred people at a company and you’re trying to get them on board and it’s $500 a month, is it worth having a customer success person get on a one-on-one call with folks? Yeah, it is not all 500, but a group call at that company is what I mean. Or is it worth holding a webinar twice a week to any and all of your customers to help them get onboarded? I do think so. So that’s what I’d be looking at. Now, you have to have the annual contract value or the average revenue per account or the lifetime value mean these things are, it’s all about price point. You have to have a price point that justifies that.
So, in your case, I wouldn’t offer concierge onboarding and setup to anyone that has less than make up a number, 10 seats, 20 seats. It’s $5,200 and you’re going to automate this, right? You’re going to automate it in code to basically say, if number of seats is at least 20 or if price point is at least a hundred, then in the app they can click a button to book immediately, use your SavvyCal link and they can get on your customer success person’s calendar. Or your email onboarding sequence is letting them know, “Hey, we can help you get set up.” “Hey, we can help you get set up and here’s a seminar, here’s a webinar.” And maybe what you do is for folks who are on the five, 10, $20 plans, they only have a few seats, maybe those folks who do push towards a group webinar that again, is once a week, twice a week, whatever makes sense based on your customer volume.
But the accounts where whether it’s 20 seats or 40 seats, I mean, there’s some number where it makes sense for you to invest the time, especially if your churn is super low. This is something we hardly encourage with TinySeed companies. It’s something we did at Drip. My first hire that was not a developer was a customer success manager, and she dramatically improved the number of people who not only converted to customers but who got onboarded and stuck around because the price points were worth it. We were charging hundreds of dollars a month, most months we had net negative churn. Talk about low churn. I’m guessing you might have the same thing with expansion revenue and all that. And so that’s where it makes sense to invest time into something and I just mean labor, human hours into something that can build that flywheel. That’s what SaaS is, right?
It’s building a flywheel slowly over time. And if you have high churn, it’s hard to do that. If you have low churn, then it’s how do we throw everything we can afford at it in order to be able to onboard more people? And this is such an interesting use case. Again, I don’t know where your business is at, but this is a point where if money is a limiting factor of like, “Well, I can’t do it,” or, “I can’t afford to hire a customer success person.” If you have an engine that’s working and over time you can put a dollar in and get two, three, $4 out over the next year or two, this is where funding is the ideal solution, that’s really what funding should be used for. I hate it when people raise VC on an idea. I hate it when they raise $5 million when they’re at 20K a month and they still don’t have product market fit and they’re just going to burn through the money.
Versus if you have a repeatable business model where you can insert a dollar and get three, four, $5 out over time, but you’re constrained on the front end with cash, then that is an interesting time to think about raising an angel round, raising through a syndicate like our TinySeed syndicate. Or if you have friends and family who can invest, that’s where you… Or even frankly, depending on where you are, you can take out revenue-based financing, you can take out a striped capital loan or go to one of the RBF providers and you take that cash out, allows you to scale the business faster and then you pay it out over time. So, thanks for that question, Mike. I hope that was helpful. My next question is from Kyle about branding and new business.

Kyle:
Hey Rob, my name is Kyle. I’m a software product owner on an agile team on a large company. Just want to say, first off, thank you for all the content. I’m a long-time listener, first time caller, as they say, I’m trying to break into the sass world, and I think I finally have an idea with some real potential. I’m creating a product for tattoo artists and tattoo shops that has a few features that pretty significantly differentiated, I think from the products that are already out there on the market, which are mostly just products for barbershops or hair salons that are re-skinned for the tattoo industry, validated the idea with a few artists. So, I think there’s really something there, building it on low-code and no-code solutions right now, and I’m trying to start thinking about branding and marketing to really get something out into the world, into the public to try to get some other feedback and potential signups.
So, what I’m wondering is, well, I’m doing, so I’m not really finding any standout search terms or search keywords that I can use to incorporate into my branding or my company name or URL. So, what I’m wondering is should I care about that, or should I just let my H1s landing pages and ad campaigns do that that work for me and focus right now on building a brand that stands out and is unique, easy to remember and might resonate with my target on the audience for another reason. So again, that’s basically my question. Love to hear what you think about that. Thanks again. I’ll be tuning into the next episode of course, and I look forward to hearing from you. Thanks a lot, Rob.

Rob Walling:
It’s a good question, Kyle. It’s interesting. Certain industries or verticals care a lot about aesthetic and care a lot about branding. And when you sell to designers, UX/UI professionals, tattoo artists, people who are into visual things, the aesthetic means a lot and brand is part of that. In a perfect world, you could have a cool name for the product with great design, logo, colors, fonts, and have some type of searchability. But the thing is, you don’t need keywords embedded in your company name or product name. Go to tinyseed.com/portfolio and assume that most of these companies are successful doing tens of thousands, if not hundreds of thousands of dollars a month. Obviously, ones that are more recent or a little earlier. But in general, a lot of the companies that are successful and look at the brand names, look at the company names, they are not keyword stuffed.
And yet there are still companies on that list. Many that are doing SEO and content are getting incredible amounts of search traffic. They’re not doing it on their product name, but they’re doing it on peripheral terms. So instead of trying to rank for it, I’m not emailserviceprovider.com, yeah you call it Drip. And then you have your blog, and you have your videos, and you have whatever that is covering topics and questions people are asking about. So, obviously in a perfect world you could have a mix of those two, but I really think those days, those days are more difficult now because there’s so many names and domain names are taken. But also, if you’re going into a space like tattoos, where again, it’s a real nod towards strong brands and aesthetics, for those who don’t know, my entire left arm is tattoo sleeve. It took me years to get it done. Many tattoos that weave together.
So, I’ve been in tattoo parlors, and you’ll just notice that everything they have from the needle to the thing that they wrap around your arm to… I don’t know, all these different things, a lot of them do have unique names or unique brands and brands is not just about colors and fonts in name, it’s more than that. But in this case, if you’re doing it from scratch, then you do have to start with the name does say something about it. So, all that to say, if I were in your shoes, I would go more towards a unique name that draws attention. You think of Monster Energy drink, Red Bull. These are things that where you hear and you’re like, “Wait, what? Why is it called that?” It was very different than saying hype it up, energy drink, although that’s actually not a bad name either, but it’s something that’s a generic version of that coolenergydrink.com or whatever.
It’s like, “Yeah, nobody cares. That’s not a great brand name, even though that may be an SEO keyword that people search for.” So, I would go with something that stands out, is easy to remember, and I think that will… It’s going to make it memorable and that’s going to be helpful in a space like this where word of mouth plays such a big part. The tattoo folks, they talk to one another in the same city, they all know each other, and that’s what I’d be looking to do here, right? It’s like while SEO can be a play and is something that I’ve used in pretty much every business I’ve ever done, that’s just going to be one kind of one leg of your stool in this. And I think being in the Facebook groups or wherever tattoo folks hang out online, I think is going to be a piece of that.
And just embedding yourself in that community. I call it hangouts, and this can be Quora or Reddit, /r/tattoo. And I’m sure there’s like tattoo parlor owners, it gets so defined versus people that are into tattoos versus people that actually own tattoo shops. Tattoo parlors are a business. So, that typical B2B SaaS marketing approaches can work. And these are things I would think about. I call them my big five. It’s content, SEO, cold outreach, integrations and partnerships. And that’s going to be with either other people making tattoo software or anybody that’s selling anything to a tattoo shop, how can you try to get some type of co-promotion going with them? And then of course, advertising. This is the instance where people say, “Should I advertise on Instagram, or should I start a TikTok channel or advertise on TikTok?” And for hardcore B2B, If I was an email service provider. I’m like, “Nah, usually not.”
Usually it’s Facebook, Google AdWords, LinkedIn, those are the three. And LinkedIn’s tough to get to work, but in this case, since all the tattoo people I know are on Instagram, I imagine there might be room here on Pinterest since it’s such a visual medium and you probably know this already. And then TikTok, which is so kind of a question mark to me, I’m not really on it, but I would imagine that that is another avenue. So anyways, you didn’t ask for my list of marketing approaches. I would try with this software, but that is where my head goes. And none of those really require, and aside from true Google SEO, which I think you should obviously target the terms you need to target. Aside from that, none of them require you to have keywords in your product name itself. And I think the memorability and the intrigue of your name is going to go much further than that.
If you haven’t read the book Fascinate by Sally Hogshead, I’d recommend it when thinking about naming because she goes through these, I think there’s seven different factors that you can have. It’s like trustworthiness or intrigue or kind of sensuality. I forget exactly what they’re called, but there are different facets that a brand can have, and I think you’ll want to figure out what it is and then base the name on that. So, it’s a great question. Thanks for asking and I hope that was helpful.

Speaker 5:
Hi Rob, love the show. Appreciate all that you do for the SaaS community. So, thank you so much. My question today is around cold outreach. I’m currently running through the 5:00 PM framework for a tool I’d like to build for speech language pathologist. This has already proven extremely helpful for me as I’m on my third iteration of the idea as my first idea was really providing a vitamin. And I think now I’m getting… I have an aspirin that I’d like to build. One of the challenges I have during cold outreach is A, either getting responses back from people. My question is how do I introduce myself to up the likelihood that someone is willing to engage with me? And then furthermore, if they do decide to engage with me, it seems that I can only hold on to them for about one or two exchanges. If you have any techniques on how I can better engage with those who are responding and how I can better get higher engagement with my cold outreach, I would love to hear those techniques. Thank you.

Rob Walling:
When I read this subject line to this question, it says cold outreach and engagement. And I thought it meant, “Hey, I have a product and I’m trying to sell things.” But this is actually kind of doing validation. And the cool part about doing validation in this way is you’re not just validating. Is there a need for what I want to build? You’re validating, “Can I find customers?” Because marketing risk is real. It’s way more of a risk than this software aspect to this. We know you can build what you need to build or pay someone to build it, but do we know that you can find enough people fast enough that you don’t lose interest and plateau at $200 a month after a year of working on it? No, we don’t. So that’s a big deal. I want to start off by saying if anyone listening is in this situation, they’re like, I just can’t get anyone to engage.
The question I always have is then how are you going to get them to engage? Once you have something to sell, it’s even harder. So, this is a good learning I think to have upfront. I like the cold outreach because you’re in control. The other things I’d be thinking about and things that I’ve done to validate ideas when in conjunction with cold outreach, I’m also, or warm outreach, to be honest. I am also putting up a landing page and then referring people to that page to try to get interested emails. I have run ads on Facebook and Google and I’m trying to think of what else. I mean these days I would consider Instagram if your folks are there and you send them to a page with a value proposition that says, “Are you trying to solve this problem? I’m building software to do it, please enter your email and I’ll be in touch.”
So, there you have outbound with your cold email and inbound through your pay-per-click. In addition, you can start doing SEO, you can… There’s a number of ways every marketing approach that you can do, once the product is live, you can do now, it’s just a matter of time. And we know that SEO’s going to take time to go. And the reason I say pay-per-click is nice is because it’s so fast to get going, and even if you’re spending money, you’re not trying to make money on this campaign. All you’re trying to do is get input and feedback at this point. So, if you have budget, those are usually the two things I do is the cold and warm outreach plus some type of paid acquisition in a sense, sending to a landing page. And I’m not just looking at how many people enter their email, but then I’m reaching out to those people like, “Hey, I saw you opted in, so you’re curious about this. I’d love to get your input on XYZ.”
Okay, so that kind of level sets how I would think about this. Next thing I would say is, if at all possible, try to get warm intros. Work your network. If you’re on whatever social media network, Facebook, Insta, TikTok, whatever you are on, just try to get warm intros because that’s going to make it so much easier. The next thing is when you do outreach, you say, “I’m a founder. I have nothing to sell you. I’m thinking about starting a company to solve this problem. Do you have it?” That’s what you do. I have nothing to sell you. I’m not a salesperson. That can help make it easier. The next thing to think about is how can you make it the most efficient for them? So, you can say, “I’d like some feedback. I have a few questions. Here are the questions. If it’s quickest for you to just respond, please do. Or you can click this link and fill out this survey with multiple choice options or I’d be happy to jump on a 10-minute call if that’s easier. Here’s my SavvyCal link to book that.”
So, you give them options. One, it can be a paradox of choice to be honest, but I think if I got an email like that, to be honest, I might just crank up a loom. I love recording just videos because it’s quick and you can do exit and I can just talk, and it’s done. I might go through your questions in a loom and then just send you a link to that. So, it’s like none of the options you offered, but it’s the way that I often like to communicate, especially when it’s more nuanced or when it’s more complex, a complex subject matter.
But I think what you’ll find is some people will click through into your survey and other people will just respond to the email. I think if people are dropping off after a couple, then that tells me they feel like it’s not a good use of their time or maybe they don’t believe that you’re going to build something that will help them. And that’s a problem is they’ll donate their “time” for one round, but to get them to go two, three, four and to really invest, it almost feels like you really need to be solving an aspirin problem for them. And if you find that you’re telling them the problem you’re going to solve and they lose interest, that’s not a great sign. It doesn’t mean it won’t work, but it’s definitely not a burning take my money problem if people stop responding to your emails. Last thing I’ll say is you might be asking for too much.
I haven’t seen your emails, but I’ve certainly received emails where someone will say, “Hey, can I ask you a quick question?” I say, “Sure.” And then I get a wall of text back and it’s like several questions and hundreds of words of context and I’m like, “Yeah, I just don’t have time for this.” And so, I’m sure you’re thinking about that already, but to be as succinct as possible and really only ask the critical things, I think is pretty important. Bottom line is getting someone on a call is going to be the highest fidelity and the most valuable. It’s just a big ask for busy people. And so, I have often done a lot of my warm slash cold outreach slash customer development purely via email where I send an email, people respond, and I go from there. But I usually haven’t had a lot of back and forth.
If you’re going to need to do a lot of back and forth because you’re still so early. Honestly, I think you might need to think about doing calls instead of focusing on email. I know that Jason Cohen, when he was vetting WP Engine, he would actually pay consultants or agencies, or he would offer to pay. He’s like, “I know your rate is a hundred dollars an hour and I’ll pay you for a half hour or for a full hour of your consulting rate. I just want to pick your brain.” Now, I obviously don’t know if you’re in the position to be able to do that. That takes budget, but it is another option. So, thanks for the question. Hope that was helpful. My next question is from Spencer on prioritizing product improvements versus funnel building. It’s the inevitable question. It’s features versus marketing. It’s product versus sales.

Spencer:
Hey Rob, my name’s Spencer Henry and I just acquired a micro-SaaS for art museums. Very small. We have 15 active customers. Some of them have been there for years though, and so it really solves a problem for those select few. One customer said, if I were to raise the prices, he can’t really do anything about it because they just can’t go back to not using the software. So, it was built by a non-technical, like a museum employee with an offshore dev team, and there’s a lot of product issues. There’s a lot of small wins and there’s a lot of larger things that I could fix. But I’ll just give one example. If you want to import data instead of entering it from scratch from a CSV, there is no example CSV for you to download or no way for you to know what the column should be titled. So, things like that where it would make the onboarding really rough.
I started working on fixing the landing page and setting up the drip email campaign. But when I ran into these issues as I was setting up guides and such, I’m not sure how to prioritize these product fixes versus marketing. My idea was to come in, get some new customers, and then start working on the product once I could show that I could get new customers. But I’m worried about really high churn with this rough onboarding experience. Thanks for any advice.

Rob Walling:
And Spencer comes through with a unique twist on this. It’s not just about marketing versus product, but he acquired a product, and it has issues in it. I actually had this exact situation when I bought HitTail in 2011. Product was a mess. It was actually crashing constantly. So, I spent think a month or two doing no marketing because I didn’t want anyone to come into that product while it was going down. Basically, every several months, it would have a day outage, two days outage. So, I stabilized it, moved it to new servers, and I fixed a bunch of bugs. There was just a bunch of craft in there. I did nothing visual, and I spent about two months fixing all of that before I then had a designer come back, redesigned stuff. I put a new coat of paint on it and shrink the signup form, which was like 10 or 12 fields down to two or three, and then started marketing it. Okay, so that’s what I did.
Now, was it the right choice? Yes, but it was only the right choice because I knew I would be able to find more customers. It was an SEO keyword tool. I knew the space well. A lot of people need it relatively easy to find traffic and send it and convert. It was low price point, et cetera, et cetera. So, I didn’t really have that fear that if I went out and marketed it that no one would show up. I knew that I could get some people to the website through all the methods, right? SEO and pay-per-click advertising and press and partnerships and integrations and all that stuff, and that is in essence what I did. And I did a nice talk about that at MicroConf a few years ago. Actually, I think it’s one of my better talks of my career because it was just a really nice story that also had a bunch of actionable takeaways.
But here’s the difference in your story. You don’t know if you can find new customers, that’s a challenge. For me, I would have a tough time bringing new customers in and setting them loose in a product that has bugs that I know about that are pretty clearing. So, there’s a couple options here. Number one, go try to find new customers through marketing, through sales, whatever, and manually onboard them, and that might be the best way to do it. It de-risks this idea of can I find new customers? But it also means that if you manually onboard them, then you don’t need to fix the CSV thing because you will know how it works and you can just help them do it. This is something that doesn’t scale and it’s not going to make sense to do long-term, but that doesn’t matter. All you’re doing now is trying to learn.
So that might be the way I would think about it is start marketing. Actually, you know what I would do? I would start marketing and start doing sales, and I’d probably make it demo only and concierge onboarding for free and all that, even if the economics don’t make sense for now. And if I had any downtime or any time when I was say burned out on marketing for this day, I would fix one or two of the higher priority things or one or two of the smaller things. Get a list of everything that’s broken, get an hour estimate for each of them, and then probably a severity level for each of them, and then kind of weigh that and start knocking off one of those a week, two of those a week, whatever it is your schedule allows. So, I would do kind of a mix of it, but with an emphasis on that sales and marketing.
Now, if you start getting so many people interested that it’s like, “Well, I can’t afford to spend the time to do the concierge onboarding anymore. You’re in a great position. That’s a great problem to have. Then it’s like, “All right, I’m working this weekend to fix all this stuff and then I’m going to open the floodgates.” I don’t think that’ll happen immediately, but that’s kind of how I would be thinking about is it’s not an either-or. It’s do both, but prioritize the marketing and sales and just do everything manually to work around the bugs that you currently have while in the back of your mind thinking, “I’m going to knock these out one by one.” Alternatively, you could do what I did with HitTail, and you could spend a month right now fixing all the bugs or two months or whatever, and there’s risk. The risk there is that you can’t find new customers and you’re wasted all your time.
And that’s where this does come down to risk tolerance. If you feel like as a founder, as a CEO of this company, you need for all that to be fixed. That’s okay, it’s your prerogative, right? You’re in control. You’re a mostly bootstrapped or bootstrap company I presume, and you can do that, but I think to de-risk it a bit, I would take the first approach that I mentioned. That was a fun question, Spencer, thanks for sending it in. I hope that was helpful. And those are all the questions we have time for today. Thanks again for joining me this week and every week. It’s amazing to be here with you. As always, this is Rob Walling signing off from episode 657.

Rob Walling:
But at a certain point, no matter your taste, no matter how high your taste is, you do have to balance that with shipping things into the world. And this is a really tough balance I think for a lot of people. What I think it comes down to is knowing yourself. If you are the type of person that sits and works on something for way, way, way too long, you need to ship way earlier than you think. And if you’re the type of person that ships stuff too early, then you need to wait longer and you need to perfect it and make it better. And if you’re shipping a lot of things and none are resonating, you probably need to ship fewer things, not more, but you need to spend more time on them and make them better.
Welcome back to Startups for the Rest of Us. I’m Rob Walling, and this week I’m walking through a couple Rob solo topics. I’m going to revisit that concept of having taste and what that means and how to balance that with shipping. I’m going to talk about being remembered for something or being the best, and I’m going to talk about getting clearer about what each of us is seeking. All of these, of course, with a bent on building software companies or really just being an entrepreneur and trying to change our lives in our little corner of the world. Before I dive into those topics, I have a special guest correspondent, my remote correspondent, Michele Hansen, who many of you may know from the Software Social Podcast. And she is campaigning to get awareness out about the change to the US laws around Section 174, which greatly impacts software companies. So with that, let’s hear from Michele.

Michele Hansen:
Hey everyone, it’s Michele Hansen. You may have heard Rob and Derek talk recently on this show about the changes to Section 174 of the US tax code, which make it so that software development and other research and experimental costs may no longer be expensed and instead have to be amortized, which is to say spread out over many years. Now, you may have heard about that and said, “Well, I don’t have any employees, so that probably doesn’t impact me, or I don’t file for the R&D tax credit, so this doesn’t impact me.” The more I talk to experts about this issue, the more it becomes clear to me that Section 174 as it stands right now is an existential threat to any business that builds and sells software. This is not only about new product development but also adding features to existing products. It’s not just about salaries, it’s also about the staging server that you use while you are building a new feature.
This stands to have catastrophic impact on the software community in general and especially our community because many of us cannot stomach a tax bill that is all of a sudden hundreds of times higher than we would’ve otherwise paid. The thing about this is that Congress never intended for this to take effect, and there is broad bipartisan support for fixing it, but they don’t feel any urgency about it. It’s been seen as a big business issue and people assume, you know what? A big business, they can manage an extra 10, 20 million in taxes for a year or two. While we sort this out. Small businesses can’t. Small businesses are seeing their tax bill go from $75,000 to $225,000. This is a massive impact on small businesses and we have to do something about it because as long as this stays a big business issue, it’s not going to have any urgency.
But this is impacting indie founders right now who are putting their taxes on their credit card, taking out lines of credit, scrambling, laying people off, freezing their hiring, doing everything they can just to pay this tax bill that Congress didn’t even intend for them to have in the first place. So what you can do about it is go to ssballiance.org and sign the letter that we are sending to Congress about this. These coalition letters are incredibly effective. A group of 500 small biotech companies sent one to Congress recently about Section 174, and a senator mentioned it in a hearing recently. This letter is going to get delivered directly to Congress people and will help them understand the impact that it is having and help our supporters in Congress bring more people on board and communicate that this is an urgent issue that small software businesses and other small businesses need a solution to. So if you are a US citizen with a US software business, go to ssballiance.org and sign the letter. Thank you so much everybody, and together we can fight this.

Rob Walling:
Thanks so much to Michele for chiming in on this critical issue. And again, that URL if you want to sign this letter if you’re a US citizen is ssballiance.org. I want to revisit this concept I talked about a couple episodes ago in my last solo episode where I talked about having taste and I talked about that quote from Ira Glass. Where he talks about each of us developing taste over time, and I talked about how to develop taste and why you may or may not want to do that. And then he talked about how when you first start creating things, it’s below your taste. And either someone asked me on Twitter or maybe I just thought of this randomly because I have it here in my trustee Startups for the Rest of Us solo topics Trello board. And it says, “I talked about taste, but how do you balance that with shipping?”
And I think that’s a really important thing to call out is that you can develop your taste to the point where you care so much about the details, you’re overly perfectionistic and it keeps you from ever shipping anything into the world. You endlessly tweak that one blog post and never hit publish. You endlessly tweak and edit this single podcast episode and never go live. You endlessly tweak and edit your book and never put it out into the world. That actually reminds me today when I’m recording this is the day that my Kickstarter went live and what an adventure. It’s been quite a journey already. I had a funding goal of $20,000, which made it worthwhile doing a print run of hardback books. And we blew past that in under three hours. We just passed 32, 33000 and I’m really excited about it. So if you haven’t backed that, it’s at SaaSplaybook.com and there’ll be a link to the Kickstarter.
I believe when this episode comes out, there’ll be a few more days to back it and it’s called the SaaS Playbook: Build a Multimillion-Dollar Startup without Venture Capital. And it’s pretty much everything that I could think of that you need to do that. So I hope you’ll check it out. Now, back to taste versus shipping, really the balance here is to not be overly perfectionistic. And I think of examples from artists and musicians who talk about how they put something into the world that everyone likes and then they point out that it has mistakes or that they no longer like it, that they screwed up x, y, z part. I’ve heard an interview with Kurt Cobain talking about how Smells like Teen Spirit, which is certainly one of the most popular songs of the nineties, and I would say change the course of music from hair bands to more of the grunge sound and is still a song that is played on the radio today.
Where he talks about not liking Smells like Teen Spirit, that the arrangement was off, that he’s written songs that are so much better than that, and yet that was the one that became popular. And you can imagine that if he didn’t love that song that he could have kept it to himself, not pushed it out in the world. I think of The Beatles, I believe it’s the last verse of She Loves You. Where the two of them, John and Paul, sing a lot in harmony and they say different phrases at a certain point, and they’re supposed to be one voice, right? They’re supposed to be saying the same words and they just kind of left it and they knew they didn’t want to do a retake. And George Martin, who was their producer, said, “You know, life’s too short. It’s good enough.” Or I think of the person who writes a book and ships it to the printer and gets it all ready to print, maybe me. And then they reread it and they realize, you know what? I want to add more to it already.
I really do. I’ve finished this book maybe three months ago, four months ago, and already I feel like, well, I have more to say about that. Or I would say that slightly differently, and this had been happening for the two years that I was writing this book. That when I would revisit a topic, I’d realize I could go deeper on that. I can add another example. I can add more thinking or different thinking to it. And every time I would do a YouTube video or another MicroConf talk, I would realize that that should really be pulled into the book and it would change that section of the book. But at a certain point, no matter your taste, no matter how high your taste is, you do have to balance that with shipping things into the world. And this is a really tough balance I think for a lot of people.
What I think it comes down to is knowing yourself. If you are the type of person that sits and works on something for way, way, way too long, then you need to ship way earlier than you think. And if you’re the type of person that ship stuff too early, then you need to wait longer and you need to perfect it and make it better. And if you’re shipping a lot of things and none are resonating, you probably need to ship fewer things, not more but you need to spend more time on them and make them better. People all the way from the greats like Beatles, I’m sure Picasso. I haven’t heard of him commenting on this, but you know that the story I told of being in the Picasso museum where he had 20 or 30 different takes of the same subject. So 20 or 30 different paintings that were basically all the same and just redo and redo and redo. So you know he didn’t think any of them were perfect. It was never done for him, and yet it was done eventually, right?
Eventually he stopped painting it and one of these paintings would sell for a jillion dollars and he’s known as one of the greatest artists of all time. But for him, given his taste in art, it was never done. And yet he would ship his paintings into the world even though to his taste, he knew they weren’t perfect. And that’s what I encourage you to do as well is you’ve probably developed pretty impeccable taste on certain elements of your craft and that’s great. And you have a name that you’re tying to, you’re tying your name to the product that you’re putting into the world. Whether that’s a podcast, whether that is a video on YouTube, whether it’s software, whether it’s marketing copy, whether it’s a support response, whether it’s a book. Whatever it is that you’re shipping into the world as your art, be proud of it, but don’t be such a perfectionist that you’re not shipping things into the world that frankly can help your business or can help other people.
You kind of owe it to the world to get them out there. My next topic comes from a quote or a sentence that was said on a podcast I’d listen to. The podcast is called Comic Lab, and it’s where two comic strip artists talk about their craft. These are not folks who write and draw for newspapers, but they are independent comic artists. So they sell on the web and they do Kickstarters and they have Patreon and they make their money being entrepreneurs. And one of the hosts, Dave Kellett was quoting someone and he said, “If you want to be remembered for something, you either have to be the first or the best.” And especially in, I’ll say, imagine being an artist or being an actor, you either have to be the first with that style. Think of it like James Dean or an Arnold Schwarzenegger, right?
They’re remembered because they were very unique when they came on the scene. I said, very unique. It’s funny, unique onto itself is as unique as it gets. You don’t need very, but you get the idea. They were unique individuals. No one had seen folks like them before, that archetype. Or we can think about folks who are the “best” actors that we might think of, folks like Dustin Hoffman or Robert De Niro, Kevin Costner, if you like his style. I mean, those folks maybe weren’t so unique that folks like them had existed before in Hollywood and have since, but they were so good that they’re memorable. And this instantly clicks something in my mind because I thought about the three unfair advantages for faster SaaS growth that I’ve brought up many times. One is being early, one is having an audience and one is having a network.
And so this kind of fits in at least the being first part fits in with being early, right? And in SaaS probably is with being an actor or an artist, there’s quite a bit of luck involved in being first or being early. I don’t think you need to honestly be the number one, but if you’re in the first few, that probably counts pretty well. But I was trying to think of the metaphor of like, well, what does it mean to be the best in SaaS, in software, in entrepreneurship? And I think a big part of that actually is not only execution, just getting there and building a great product and marketing well and doing all that. I think that’s a big part of it. I think that’s part of being the best, but I also think part of it is positioning. It’s this underrated thing that is so amorphous and hard to understand.
And even after April Dunford’s amazing book, which is Obviously Awesome, even after she’s defined it for us. I think a lot of people still miss this and don’t fully understand what positioning is and how it allows you to communicate that you are the best for people seeking X, but anyone who’s not seeking that, you’re not the best. That’s how I view positioning is you can enter a super crowded space of CRMs, ERPs, email service providers, whatever it is, but as long as you carve out a corner and you say, for anyone who wants the low-priced really easy to use version, that’s our position. Or if you are a realtor and you want this type of software, that’s our position and we are the best for that. And I think as bootstrapped and mostly bootstrap founders, we can’t compete head-to-head with these big behemoths that have raised a gazillion dollars.
And if you think about, let’s look at being first, let’s look at email service providers. MailChimp was super early, right? And they’re huge and they didn’t need to raise funding, and you could also say they’re one of the best. They executed very well. Now the product these days, yes, it’s a 23-year-old product or something. So is it the best product? No, no, it’s probably not. But realistically, they were first or very early and they executed well, and you could say that about Basecamp too, right? They were early and there’s a bit of luck in that. But also they did some things right. Now, if you come 10 years or 15 years after MailChimp and after Basecamp, you can’t just build what they’ve built and expect to succeed. This is where the idea of being first is gone and you have to think about, well, how can I be the best?
Well, can you be the best against MailChimp, against that brand, against the strength of what everyone knows about MailChimp? Can you compete with a decade’s worth of software development and tooling and all the stuff that they have built into their product as a bootstrap or mostly bootstrap founder? It’s unlikely. So that’s where we have to think, maybe head to head, I can’t beat MailChimp or Salesforce or HubSpot or Basecamp or insert name of a dominant player in a dominant space. We’re not going to be first. We can’t be the best head to head, so how can we be the best in our little corner of this market? And that’s positioning. That’s where we think, I’m going to be lightweight marketing automation that doesn’t suck because my corner is, we don’t need heavyweight marketing automation. Those exist out there, but we’re a lighter weight version of that.
And also we’re fun and easy to use and easy to interact with, and that’s the corner that we carved out with Drip, and I see the same thing in a lot of TinySeed companies that come on the scene into competitive spaces. Think of [inaudible 00:15:50] competing against all the other scheduling links that have come before them. Think of GymDesk competing against all the other gym and martial arts studio management software that has come before them, including some pretty large companies. These are folks that have carved out an angle. It’s a unique position. It’s every time Mike Taber comes on the show. What do I ask him about Bluetick? I say, are you marketing enough and how are you different? How are you different? And not only how are you different, how are you communicating that you’re different? That’s a huge part of positioning.
I don’t shy away from competition. I actually have a section in my book that says, how do I compete head-to-head with larger competitors? And I talk specifically about this, about using their weight and their motion against them and looking at their biggest weaknesses and saying, how can we be not that? How can we be the opposite of that? If you are the same as other large competitors and they have more money and more brand name recognition and a stronger brand, you will be a commodity. You will not grow. Just because it’s a huge market doesn’t mean that anyone will sign up with you. It means people won’t stick around. They’re going to go for the big player unless you carve out some type of unique position in the space that you are known for and that people say, you know what? This tool is the best for X within this broader ecosystem.
Last topic of the day is actually spurred on by another quote from Dave Kellett, who is one of the comic artists on Comic Lab. We should give him a shout-out on Twitter when this episode goes live. But he creates, writes and draws couple really good comic strips. One is called Sheldon, and we have all the books. I think there’s like 10 books. And I tell you, if you haven’t read these, they are hilarious. There’s one that is Sheldon’s take on pop culture, and it’s just all the pop culture strips and there’s a bunch of stuff about Microsoft and there’s stuff about Lord of the Rings and Star Wars and all this nerdy goodness, that one’s amazing. Then the other strip that Dave focuses on more now is called Drive, which is science fiction slash fantasy epic, but it’s amazingly well drawn and really funny and humorous as it goes along.
And so he has a successful career who is working for himself, making a full-time living, and it’s everything he’s always wanted. But on a recent episode of Comic Lab now it’s probably three, four months ago, but he said, “I have friends who’ve won a bunch of awards that I have not, but I would much prefer my career than theirs.” And he’s talking about a couple of things. One, he’s talking about his financial success, but he’s also talking about his creative freedom because he owns his characters and he owns his own destiny and doesn’t have to work for anyone else. And he also was talking about his closeness to his audience because I think, I don’t remember the context, but I think some of these friends are newspaper columnists and they’re kind of beholden to the syndicates and they aren’t close to their audience in the way that Dave Kellet is.
And this made me think about the lifestyle bootstrapper paradigm versus being a more ambitious bootstrapper versus wanting to change the world, so to speak, and become a billion-dollar startup. There’s all these different paths, and if you’re not clear on what you want from the start, it’s easy to copy the wrong person. That’s the thing is if you think, I want to build an amazing business that does half a million dollars a year and travel the world and just have incredible amounts of net profit going into my bank account, then don’t look to Silicon Valley, right? Don’t listen to inventor capitalists say, “Oh, it has to be a billion dollar market.” Or don’t listen to Y Combinator talking about how to start a company, how to build the company, how to find great ideas, because those ideas and those paradigms won’t apply to you because they’re talking about a completely different type of company.
Likewise, if you want to build a SaaS company and mostly bootstrap it to 5 million or 10 million a year, you probably don’t want to listen to the lifestyle business folks. I mean, truly the folks who are like, “Look, I just want 20 grand a month and I’m going to go travel Europe.” Usually those two business types are not the same. In fact, start small, stay small. My first book covers lifestyle businesses and it’s older now. It’s 13 years, he’s looking a little haggard. Don’t make fun of him. But frankly, it holds up and people still buy that book. And probably 75% of what’s in that book is still valid today for that true lifestyle business entrepreneur. And that’s where I was in 2009 when I wrote that book versus my new book, The SaaS Playbook, is about building that 5 million, 10 million, 20 million SaaS app, and it’s very different.
If you compare these two books and the focus and what’s in them, they’re not just different because they were written a little more than a decade apart. They’re very different because the approaches from the start have to be different. And if you don’t have an idea of where you want to go, and I’m not saying you need to know where you want to go with your whole life. I just mean with this single startup you’re working on. If you don’t, you may chase the wrong things. You may model yourself or listen to the wrong people. You might do the whole, you chase the audience when you really want money, or you might chase money when you really want the popularity or you might chase funding when what it really is you just want an amazing bootstrap business that provides you with freedom. I’ve talked about it on this show in the past, but my own rule for when I will listen to someone on social media and follow them and follow their advice is if they’ve done something that I want to do, and usually if they’ve done it twice.
So in terms of I want to start multimillion-dollar companies, have they done that a couple of times or am I pretty confident they didn’t get lucky with the first one? So if I want to build a $5 million company, do I want to listen to the person who’s spouting off about startups where the only thing that they ever did was build a company that quarter million dollars a year and sell it for whatever, 750,000 or a million or whatever the number is? No, I don’t because they don’t know what they’re talking about. They think they do, and they might sound like they do, but I’m not going to listen to that person. I’m going to listen to people who’ve been there and who’ve done it at least once, and who I see have a pretty methodical approach and who don’t rely on luck and who do things that are repeatable and are teachable.
So much of what some folks do when they have a success as they get lucky and then they try to teach what they did, but it turns out you can’t teach luck. But the other thing I want to add to that criteria of who to listen to is are they talking about the type of business that you want to build? Because again, the person who says, for example, something we hear a lot, which is build an audience and then sell something to that audience, that’s amazing for information products. If you want to write a book about building a SaaS company, if you want to start a YouTube channel and a podcast and then you want to sell courses or you want to sell whatever, and it’s information, build an audience by all means. But if you want start a SaaS company, look around at the people who have started successful SaaS companies and how many of them had an audience before they started.
So with TinySeed, for example, we have, I believe it’s about 107 companies that we funded, and I think we’re going to fund another 20-25 here in the next month or two. It’s a lot of companies, and less than 5% of them had an audience before they launched, less than five. And even of those handful of companies, the audiences were not huge. It was folks like Derek Reimer, he’s one that I counted as having an audience. And of course, did his audience help him in the early days in certain ways? Sure, it probably helped him get better feedback and get some guidance, but I’m going to tell you, Derek Reimer was going to be successful with or without that audience. It’s just something that I know in my bones, having worked with that guy for more than 10, 13 year, whatever the number is. I’ve known him since he was a wee lad. Derek would’ve been just fine on [inaudible 00:23:32], whether he had his podcast audience or the Twitter audience or whatever else he has.
But put that aside and realize that whatever it is, four or 5%, it’s a very small number of TinySeed companies had an audience. I’m not saying an audience is not an advantage, but it’s not worth the time to build if you’re going to build a SaaS company. There are so many other ways, so many better ways to spend your time than to sit down and write the blog posts and tweet. Look, if that’s in your wheelhouse and that’s what you want to do, that’s who I am. I had to start blogging. I didn’t blog and podcast because I wanted to. It’s because I had to. That’s just the person I am. So if that’s you, that’s cool, but what I don’t do is tell everyone that they need to be doing that because not everyone wants to do that. And in fact, I don’t think it’s the best use of time.
When I look at the thousands and thousands of hours that I’ve spent podcasting and blogging and tweeting and whatever, if I had invested all that into SEO in a hugely competitive space, I would be worth 10 times what I am now. No joke. There are so many better ways to use your time. So again, if that is in your wheelhouse, then by all means, feel free to do it. But if it’s not or if it’s not something you’ve already done, then I would not be following this, build an audience thing. I like to think that we pick companies that are successful or are going to be successful in TinySeed. And again, the super, super vast minority, less than 5% built an audience before they built a SaaS company. So that’s the kind of thing where try to get clear on what you’re seeking and figuring out who to listen to in order to get there. So that’s going to wrap us up for today. Thanks so much for joining me again this week and every week. I’m Rob Walling, signing off from episode 656.

Rob Walling:
I will admit that taught me a lot about how to interview, how to get jobs, how to present myself, and also how to work with a lot of different people and oh, this is a good one actually, a lot of different code bases. And this might be one of the reasons I was never scared to acquire companies or SaaS apps in essence, because I knew that no matter the code base, I could get in there and figure it out because so much of my career had been going into existing code bases and either refactoring or improving or adding on, and so I would’ve to learn the code base quickly. Sometimes I would’ve to learn the language, and so I knew that I could buy a SaaS app or a software product in a language that maybe I knew, maybe I didn’t, and that I could figure it out.
Welcome to another episode of Startups For the Rest of Us, I’m Rob Walling and I’m stoked to be here today. We got some great listener questions I’m going to comb through today covering pricing, idea validation, enterprise pricing, what you can learn as a consultant and more. This is the show where we dive into bootstrapping and mostly bootstrapping software companies, SaaS companies, but honestly, there’s a lot of listeners that are doing hardware info products. It really is just being an entrepreneur and trying to change your life and those around you through entrepreneurship. Whether you raise a bit of funding, whether you raise a lot of funding, it’s just about being motivated, not sacrificing your life or your mental health to get where you want to go. Before we dive into the first question, I have a new book. It’s my fourth book. It’s coming out in the next few months.
I’m actually doing a Kickstarter probably the week this comes out. It’s at SaaSPlaybook.com That will get you a link to the Kickstarter. If you’ve gotten value from me over the years, it’d be amazing if you could back one of the tiers. I have tiers starting at $30 for the book, plus either an audio or an electronic version of it, a PDF, all the way up to several thousand dollars for an in-person small group founder retreat with yours truly in Minneapolis this summer. I hope you’ll check that out and support me in the Kickstarter.
And with that, let’s dive into my first listener question from David.

David Canes:
Hi Rob. My name is David Canes and I have a SaaS business called WellPrept, which helps doctors send their patients homework. I’ll tell you about that in a second. But first, I wanted to thank you for Startups For the Rest of Us. I think I probably binged at least 600 episodes at 2.5x like a crazy person, but you’ve given me the language to understand SaaS in a way that has helped me communicate with my developers in an efficient way. You’ve helped me dream up a roadmap, you’ve changed my opinion on many different topics and really just wanted to thank you for doing this. I don’t know how I would’ve been able to become educated on these topics without your podcast. It would’ve been challenging. I know there’s a small violin playing for well-paid professionals who have struggles on the job, but one of the struggles that doctors deal with is that they have to explain basic concepts to their patients over and over, and WellPrept lets them set up customized education pages with their favorite resources they can easily share with patients.
My question has to do with individual plans versus team plans and how software can protect itself against the abuse of individual plans by teams. Sort of like how Netflix somewhat knowingly lets people share their passwords even though they lose money from it. Maybe there’s other examples of software where people use one seat but they somehow surreptitiously let many people use it. In my case, we allow individual doctors to set up really cool customized profiles, and while this is a selling point for most of them, we’ve had some groups say, “Yeah, we’ll forego the customization and we’ll just have a page for our whole practice and all our doctors can use it.” We want to set up team-based pricing, but to some degree, we don’t want this to completely be an honor system. What are the things that we need to be thinking about, either tech safeguards or otherwise, to help minimize the abuse of individual plans by teams? Thanks for everything that you do.

Rob Walling:
You binged 600 episodes? Well, that is a huge compliment and I’m sorry that I had to put you through all that pain, but hope you enjoyed the journey. It’s 13 years at this point, and that’s pretty incredible that you went back and listened to all those. I’m glad they were so helpful. To answer your question, I’m not sure I fully understand all the nuances of it. I think the basic piece of how to avoid login sharing is usually that if two people log in from the same company, they need to see something different in order to charge by seat. If you think about logging into a CRM like Salesforce or Close, or even like Trello, if I log in, I see my tasks, and if my co-founder logs in, they see their tasks, that makes it really easy to charge per seat. Versus let’s say you have an email service provider like MailChimp or Drip, if two people log in from the same company, they see the same thing.
There’s no customization. That’s like let’s say the standard rule for when to charge per seat. And it sounds like you have something like that. You have a public facing page that is customized per doctor, and so in that case, it should be pretty easy that if they have 10 pages and you charge 10 seats, but I hear you on the fact that it sounds like some do the entire practice. The only thing I can think of, I can think of two things. Number one, don’t let them do that and make them create a page for every doctor. That’s a little weird, but that’s one way to do it. Another way is to think about is there anything on the backend that’s not public facing that would allow you to charge per seat? Meaning they log in and they see something different, the leads go somewhere, whatever.
It doesn’t have to be a public facing aspect. It can be much like a CRM or whatever things are assigned to people. I don’t know if that’s happening. It’s hard to say. The third option is, I guess it is kind of honor system, right? If you do want to allow one page per practice, then yeah, you would ask them, “Well, how many doctors do you have? Because that’s how we charge.” Or you say if you want to do that, it’s this really expensive plan to discourage people from doing it. I’m not sure I can think of a brilliant way to achieve this without making it honor system or having this mechanism, the public or the private mechanism that means they can’t share logins. I mean, I guess the other way is that the way Netflix enforces it, right? Which is simultaneous logins or you’re like logging which IPS log in at different times, but if they’re all in the same office, how are you going to tell?
Then you start looking at IP and browser and you can fingerprint things. To me, that’s just a rabbit trail, man. I can’t imagine enjoying building that system. That sounds like a terrible waste of time, but that is a way to do it, right? There are technically ways that you can try to fingerprint individual computers based on browser settings and the computer, the laptop itself. And there are libraries that would try to allow you to look at how many people are either simultaneously logging on or logging on in a given week or a given month, and you could use that. I wouldn’t use that as a hard and fast. I personally probably wouldn’t bother with it. It sounds like a waste of time, but if you decide or if I’m misunderstanding and you do want to implement that, I would use that as more of a reporting to you, to your team of like, “Bing, they’re paying X amount, they said five seats and it looks like 20 computers are logging into this in a given week.”
Then you would have to reach out and say, “Hey, it looks like your usage varies.” I wouldn’t use it like I think Netflix literally blocks you or forces the other account to log out and you can do that. Again, it just feels heavy handed and a bit anti customer, and I think this entire path feels cumbersome to me. And I’m just wondering without trying to take a technical stand on it, because it just feels like a rabbit trail. You’re going to go down and waste a bunch of engineering time. I would try to think of more of a business solution to it, which I think is what you’re doing. It’s obviously a challenging problem and I appreciate your question and I hope that was helpful. My next question is from Karol from Slovakia on how to validate a business idea before committing to it.

Karol:
Hey, Rob. Karol from Slovakia here. First of all, thank you for your podcast and everything that you do. It’s been really inspiring and my question today is how do you validate business idea before committing to it? I know it may sound like a cliche question, but I’m really struggling here. How do you go about finding that niche specific problem that people want to be solved? If you haven’t experienced hands-on, some very specific problem, your or your friend’s work or personal life. I feel like it’s so hard to get a customer without at least some sort of basic MVP, but at the same time, it’s difficult to commit to an MVP if you don’t know for sure that people will be willing to pay for it. I’m starting to feel like it’s a vicious circle and I can’t get out of it. Any insights would be highly appreciated. Thank you very much. Take care.

Rob Walling:
Yeah, so this is a good question, Karol, and a common one. The thing to keep in mind is you’re never going to get to 100% validation. I say that all the time. When you come up with a brilliant idea, you’re probably at 10% out of a hundred that anyone else needs this. And then as you have conversations or as you drive traffic, collect emails, whatever smoke test you’re going to do, that slowly creeps up, oh, maybe 20%, 30%, 40%, and then you show an MVP and people start using it and that slowly climbs up. But until you launch and people are paying you money and not churning, you will never be at a hundred percent. In fact, I don’t think you can get much more than 50, 60%, whatever. It’s a arbitrary number that I’m throwing out. But that’s the idea is you will at some point have to make the decision to move forward because being an entrepreneur is making hard decisions with incomplete information.
And this is a great case in point. With that said, we actually released a YouTube video, which is just, it’s me talking to a camera for 12 and a half minutes. It’s called Validate Your SaaS Idea Fast, Step by Step SaaS Validation Process. And in it, I walk through the two methods that I typically see for people to validate. One is to put up a landing page. This is if you have a low-touch funnel, you’re going to have to drive a lot of traffic at a lower price point. For this, you put up a landing page, you start driving that traffic, you do SEO, you do pay per click, you do whatever it takes that you would be doing if the product was all done, and you’re basically asking people to opt in for interest. That’s like this landing paid smoke test.
Another approach, and I’ve used both of these by the way, is to have conversations, and these can be email, they can be Zoom, they can be in person, but this is where if you’re charging a hundred dollars, $500, a thousand dollars a month, maybe it’s not such a high traffic business, maybe it’s going to be one that relies on individual sales with demos. And for that, a lending page smoke test is a lot weaker, just doesn’t give you the right signal. That’s where you have to cold call, cold email, cold LinkedIn, or warm for that matter. If you have a network in the space, which it’s an unfair advantage if you do so, certainly take advantage of it.
But that’s where you have a bunch of conversations and you basically say, “I’m a founder, I’m a software developer, I’m not a salesperson, I don’t have anything to sell you, but I’m thinking about solving this problem.” I guess I’ll back up and say, do you even know what problem you’re solving? Are you going to go out and try to find a problem? Because that is hard on its own, but if you do already know the problem and you do know that say psychologists face this problem in their professional career, then you can approach them.
“Do you have this problem?” And if they say no, you move on. If they say yes, then you ask them the questions from the mom test, right? You say, “What are you doing today to solve that problem?” And you get on the list and then you get 5, 10, 40 people who are interested in your solution. Sometimes a solution is software, sometimes a solution is productized service. Sometimes a solution is that they should keep doing what they’re doing in their Google sheet or Excel spreadsheet. But if you realize that software could solve this problem, then you move to the next step.
With Drip, I got 11 yeses. With WP Engine, Jason Cohen got 40 yeses before he started coding. And when we did Drip, I did landing page validation and I did conversations, I did both. And here is a list of other things I validated using landing pages. Two books, MicroConf, TinySeed, Drip, and I believe my original online community was like a precursor to MicroConf. It was an online community and a bunch of content like information. I think that was also a landing page. These things are very versatile. Now, I did want to call out a couple pages in the 2022 State of Independent SaaS, and it’s page 15 and 16. We’ll link up to the State of Independent SaaS, which we do through MicroConf and we survey many hundreds of independent SaaS, non venture backed SaaS founders.
And we ask them a bunch of questions about MRR, and this and that. But we do have a couple questions about ideas, how they came up with them and about validation. Under how did you discover the idea for your business? 46% of respondents said it was a problem that they experienced. Another 24% said it was a problem they saw customers experiencing. 10% said it was a problem they saw at their day job. 7%, so pretty small, got it through research. 8% said it was a problem, friends and family experience, and then 3% acquired the business and 3% had other. You can see the vast majority is basically a problem they experienced, problem they saw customers experiencing. This was oftentimes like an agency that had clients who were experiencing something or they already had a product and they had customers experiencing this problem, so they built a different product, right? Between a problem they experienced, customers experience, day job or friends and family, that’s like 85% of the way people have discovered ideas, at least according to this survey.
And then in terms of validation, how did you validate the need for your solution? 33% built a prototype or an MVP. Almost 10% did pre-sales where they actually took money. Almost 10% had verbal commitments, which is the way I did with Drip. 8% said they did no validation, 20% said they asked their audience, and then 7% put up a landing page, like I said, and 7% copied a competitor. That gives you an idea of how folks are doing. It doesn’t necessarily comment on the effectiveness. In addition, what I’ll say is if you build a step one business and you can Google the Stair Step Method if you don’t know what that means, but if you’re building a step one business and you can just get something out there quick in under a month, that’s where personally I don’t know that I would be validating. If I’m going to build a Shopify app, a Heroku add-on, a Salesforce add-on a HubSpot add-on, and I can just code this thing nights and weekends, four weeks, six weeks, that’s validation unto itself, right?
Because validation alone is going to take you weeks to research and evaluate and then validate. And if you can just get an actual MVP into people’s hands, that’s also one way to do it. Lastly, I want to call out The 5 P.M. Idea Validation Framework, which I’ve mentioned on this show. That’s to take an idea and just run it through a filter. That’s not validation, it’s pre-validation. It’s just evaluating an idea from multiple perspectives to get an idea of do I want to tackle this? And then the next step after that of course would be validation. Thanks for the question, Karol. I hope that was helpful. My next question is from Gokul and it’s about enterprise pricing.

Gokul:
Hi Rob. My name is Gokul and I’m a longtime listener and a huge fan of the pod. My question today is related to pricing. A lot of your videos on the past have really great pricing frameworks for the low to medium touch funnel sort of businesses at a slightly lower price range. I was wondering if you had any frameworks or strategies to think about pricing for the higher monthly price enterprise customers, seat based pricing, feature gating, flat monthly price. How do you decide what’s the right pricing strategy for your product? To give you a little bit context on the product that I’m building, I work in deals analytics.
Typically when a company goes through a deal, so a divestiture, IPO, acquisition, they hire a lot of accounting consultants to help them prepare their financial statements, and I work with these accounting consultants a lot, and what I’ve found is on all of these projects, these accounting consultants spend a lot of time doing the same steps and processes multiple times, and it’s very manual and it’s done in Excel, so it’s very time consuming and it’s prone to error because it’s manual Excel formulas.
The tool that I’ve built basically automates a lot of these standard processes and reduces all the errors and improves efficiency by a lot. Now the problem is my customer is an accounting consulting firm, and so while it is a manual process for them, all of those hours that they spend are billable hours for revenue for the consulting firm. My tool basically greatly improves their efficiencies, but may reduce their billable hours, but at the same time, it could help improve their margins because they need less people to the same amount of work, and so they could increase their billable hours or billable rates. How would you think about pricing for something like this on the enterprise scale where you’re charging over two to $10,000 a month? Thank you.

Rob Walling:
Thanks for the question. This is a good one. My rule of thumb is charge a lot because enterprise customers are a pain to deal with in terms of procurement and all that. I think minimum 25K, 35K on the bottom end for these types of deals. In terms of seat based feature gating and all that, I laid out almost everything I know about it in The SaaS Playbook. I realize that doesn’t help you today, but hopefully that’s an entire section, it’s a sixth of the book is all about pricing. In addition, I did a talk at MicroConf Europe that is on YouTube and we’ll link it up in the show notes, but it’s called The Fundamentals of SaaS Pricing With Rob Walling, and if you watch that, that can also give you some ideas of how I think about it.
In terms of the specifics of your customer, that’s a very challenging question because this is selling to lawyers where if you make them more efficient then they bill fewer hours. Unless you’re dealing with fixed fee folks, and it doesn’t sound like you are, I don’t know that the value is there. When I did have an agency and I billed per hour … And that’s not true. I personally wanted to be more efficient just because I wanted to be, so I would buy frameworks and build them to help me be more efficient, and then I would usually just raise my hourly rate at that point. But I don’t know how you get around the you are going to make them pay you for the software and then that’s going to shrink their contracts. I mean, I think the only way would be to convince them like, :Well, this is a flat fee add-on to each project,” right?
Or if they bill on a fixed price basis, then obviously they become more efficient, they make more money. If truly they are making money per hour and you’re going to reduce that, that doesn’t sound like a great approach to me. Yeah, I don’t know an easy way around it. I think, again, if I were selling to these customers though, I mean, this sounds like 50 to $150,000 a year type price points because they are probably charging a lot and anytime you’re in the investment banking, the financial areas, there’s liability, there are long sales cycles and there’s things, there are things like that that make it a requirement that you charge that much in order to make the deals worthwhile. My next question is from Phil.

Phil Daniels:
Hi, Rob. This is Phil at PhilDaniels.io. I’ve heard you talk about your journey acquiring and building small products, about Drip, about starting TinySeed, but I don’t recall you talking about your early days as a consultant building your client base, quitting your 9:00 to 5:00. Being someone who loves startups and freelancing, I’d love to hear a little about that along with anything you might have learned along the way. Thanks.

Rob Walling:
Thanks for the question, Phil. Yeah, it’s not something I talk about so much because it was a less interesting part of my journey. I learned a little bit from it. I just didn’t enjoy building things for other people and also, I don’t know, man, the clients, you’d get these clients who didn’t know how to build software and they wanted to tell you how to build software. And you’d have this great UX designer you’re working with, and we’d wire it up and it’d look amazing, and they’d be like, “Well, can we move this around?” And it’s like, “No, this person knows way more than you do about how to build a user interface.” It got old. I’ll say I learned how to run a business. I will say yeah, I quit the 9:00 to 5:00 to kind of start this micro agency.
I was a consultant and then I would have other contractors helping me to fill in the gaps. It was a great living. I was making, I don’t know, two or 300 grand a year. I was working from my home, and that was just unheard of. This is early 2000s, right? But what I found was it quickly became a 9:00 to 5:00 because now I had to bill clients and do all the things you do as a consultant or a freelancer, and then I was also trying to write code and be in these remote meetings and phone calls. I learned to run a business. I learned to market. I mean, the way it was all content marketing, right? That’s one of the reasons I started the blog, although I started the blog because I really liked Paul Graham and Joel Spolsky, and they were writing essays, and I started learning enough as a contractor, a developer, a project manager, just a manager of people.
It was early still, but I was like five, six years into my career, and I was like, “I think I have some unique insights,” which that’s debatable. But at that point, then I started blogging about everything I was up to and theories I had on becoming a better manager, and I’d read a book and then I would kind of summarize that or I would incorporate it into my own thinking. I think I learned a lot more from perhaps books and other blogs than I did from the actual consulting. But some things I did learn are obviously content marketing and that blog, I transformed it into an entrepreneurial blog. As I started having products and having success with them, that’s what became Software by Rob, and then it’s now at RobWalling.com, all my essays from back in those days. That was one piece. Another thing, I did learn how to manage and outsource because I didn’t want to write all the code and I was billing a hundred, 125 an hour, and I could hire people for less.
That was an early learning curve. That was challenging for me, but that helped me once I had these small products that I did know how to basically hire people and not have to do everything myself. Now, the thing I learned is that I didn’t want to work for other people for the rest of my life. I was really constrained both by the demands of the hours where they would say, “Oh, we really need this out,” so then I just have to crank over a weekend, and I don’t mind working weekends if I’m making myself do it. But the moment someone else asked me to, it makes me mad. I think it’s that phrase unemployable, right? I learned during that time that I was kind of unemployable and that I should figure out a way to make my own path, because while I did a great job and I was usually one of the better team members, I didn’t enjoy it.
That’s where, for me, entrepreneurship was so much about freedom. It was not about changing the landscape of the Silicon Valley. It was not about becoming a gajillionaire. It was about being free enough that I could do what I wanted when I wanted. And I did learn that and those early years, because originally I thought being a salaried employee would be cool because I was coding and it was creative, and it was cool for about a year, year and a half. Then I got bored and I got frustrated. Then I said, “Well, I’m going to be a freelancer then I’ll control my own destiny. I can work from home.” And it was great for about 12 to 18 months until I got bored of it and got frustrated. And as I said before, clients were sometimes challenging, and so it was helpful to learn those things along the way and to learn the skills of dealing with a lot of different people.
That’s the other thing. I would have a job for a year, year and a half, then I’d get bored or be unhappy, so then I’d go freelance and then I’d go back to a job. I think I had two or three salaried jobs as a developer over the course of six or seven years, and then I’ve filled that in with this consulting work and essentially running the micro agency. That was probably pretty helpful for me. I was concerned early on that I would be viewed as a job hopper, and that just became irrelevant at a certain point. I don’t need anyone’s permission now to get a job, but I will admit that taught me a lot about how to interview, how to get jobs, how to present myself, and also how to work with a lot of different people and oh, this is a good one actually.
A lot of different code bases, and this might be one of the reasons I was never scared to acquire companies or SaaS apps in essence, because I knew that no matter the code base, I could get in there and figure it out because so much of my career had been going into existing code bases and either refactoring or improving or adding on. I would’ve to learn the code base quickly. Sometimes I would’ve to learn the language. When I first started, I knew Pearl, and then I had to learn on the job ASP. Then I learned PHP, and then I learned ColdFusion, and then I learned .NET. I mean, this was all within two years. And as a consultant, you basically work in the language that the client asks. Oh, Java as well, Java for the web. I knew that I could buy a SaaS app or a software product in a language that maybe I knew, maybe I didn’t and that I could figure it out.
And I don’t know that if you’ve worked at a job for five or 10 years in the same technology, same code base, I don’t know that you have that malleability. I think maybe that was an advantage that I had having worked in so many code bases. Thanks for that question, Phil. Honestly, it’s something I haven’t thought about in a really long time. I started working in construction in the late ’90s. I did that for about two, two and a half years, and I taught myself Pearl. I had a coding background, but I didn’t know modern languages.
I taught myself Pearl and HTML nights and weekends by checking out library books, and I got my first job professionally as a programmer in 2000, and then I became essentially a contractor within about two years of that. Then bounced back and forth a few times and then really had my first product success in like ’05-’06 with .NET Invoice. And then I quit the day job and by that I mean, consulting and salaried employment, working for anyone else. I believe it was late 2008, and that was the last time I worked for anyone. I appreciate that question. It’s just not something that I’ve thought about in a while. My next question is about finding a role fit in the SaaS world. It’s from Nick.

Nick:
Hey Rob, Nick here. I’m a co-founder of a hardware startup and we’re trying to sunset it/sell it off and just try to get some value for the hard work we’ve put in over the last three or four years. I’d like to consider moving into the SaaS world. I think it’s really interesting. I’ve been listening to your podcast for a long time. I’m a non-technical co-founder, but I do have some technical chops. I have some coding experience, but I’m certainly not a programmer. I would consider myself a non-technical co-founder, and I am looking at co-founder options in the SaaS world, but I think I might want to consider a smaller team with maybe a little bit of traction as well. I think my question to you is for someone who has a co-founding experience, and I’m sure as you know, when you’re a founder, co-founder, you’re kind of a jack of all trades.
I haven’t really developed a mastery of let’s say sales and BD or marketing or anything like that. And when you’re a co-founder, you have to do a little bit of everything, and that’s perfectly fine. But when you’re a small team, I feel like generally speaking, small teams look for specialized people to come in and take a particular role and really elevate it like a chief revenue officer or a chief marketing officer or something like that. My question to you is how would you view my experience in the context of a small team, and then how can I better position myself to small teams that might be looking for a third, fourth, fifthish member of their team? Thanks for everything you do. I’ve been listening for a while and I just got back from a run, and I often listen to your podcast before I run because it gets me excited, it gets me juiced up for the day, and it helps me run faster. Thanks for all the advice and thanks for helping me run faster occasionally too. All right, take care.

Rob Walling:
Yeah, this is a really interesting question, Nick. I think the way I about it is what do you like doing the most and what are you really good at? And you might be evenly good at a bunch of things. Then I would say, well, what do you like doing the most? Where do you think you could provide the most value? The nice part about knowing you want to get into the SaaS world is that there are only 10 departments in a SaaS company, right? And in a SaaS company of five people, not even departments, but it’s just roles. There’s product who decides what you build and how you build it, at least from an experience perspective. There’s design, there’s engineering, there’s marketing, sales, customer support, customer success, human resources, legal, finance, and I would just combine all those into ops, frankly.
I think for you, if you’re not an engineer, it’s like do you want to manage engineers? Are you good at making product decisions? Are you good at marketing? Everybody needs marketing. If you’re good at that, that’s one thing. Or are you better at sales, customer success or operations, right? I disagree with you that in a four-person company that people are hiring specialists. That usually doesn’t happen until … It depends. You’re hiring engineering specialists, they’re developers who write code, but in marketing, you’re not hiring specialists. And even I heard my first customer success person and they did customer success and sales. There’s a lot of these roles that are combined, and I actually call them out, not to do a callback to my book again, but it’s top of mind because I just wrote it. I talk about the most common combined roles at SaaS companies, and it depends on inbound or outbound leads, but customer success plus salesperson is a role that I hired for.
Customer success plus support is one that I see often. Product manager plus designer, engineer plus product manager, engineer plus designer, and then there’s some marketing combined roles and legal, finance and HR combined into operations. I think that’s what I would be asking myself if I’m going to join as employee number two through 10. I mean, the TinySeed companies, the MicroConf companies, and even when I was two through 10, always wanted people with multiple skill sets. They were like the unicorns that I looked for because I couldn’t afford to hire an individual for each role, and yet all the roles had to get done. I actually think it is an advantage for you. In your shoes, I would look at the two things that I’m most excited about and best at, or maybe three if you want to stretch it.
Like me personally, let’s just say hypothetically I had to go get a job at a startup today. I haven’t thought about this in forever, 15 years or something, but I could do operations. I would just hate it. It’s just not in my wheelhouse of fun. It is in my wheelhouse of capability because I’m Type A enough, but I just hate all the details and just having to take care of everything. I could absolutely run an engineering team. I could run product, I could do both. I could do a mix of product plus engineering. That’s essentially what I did at Drip after the acquisition, and we grew that team up to 20, right around 20 people, I think. I could also be involved with marketing and I could probably run a marketing team. I’m not, especially now, not the best marketer. I would need to get back at it because of the tactics change and these days getting into tactical SEO and tactical paper click advertising.
I just haven’t done that stuff in six or seven years, so I would have to get back to it. But I think the more valuable part anyways, this strategic thinking and the project management aspects, and I could definitely do both of those. Those would be the things I’d be thinking about. But obviously Nick, you’ll want to ask yourself the same questions. Hope that was helpful. My last question of the day is a text question. And man, this is from September, so it’s been a while. That’s the problem. The text questions are getting beat out by the audio and video questions. If you want to submit a question and get it answered soon, go to StartupsForTheRestOfUs.com. Hit the ask a question button at the top of the screen, and then you can record an audio or a video clip there in your browser, even on your mobile.
Or if you just want to record something and send an MP3 or an MP4, you can send in a Dropbox or a Google Drive link to questions@StartupsForTheRestOfUs.com. But Nick at BeeLine Reader asked several months ago, “I have two questions. The first is it possible to have a churn rate that is too low? I’ve heard you talk about what a good churn rate is and how a churn rate can be bad if it’s too high, but I’m wondering if it’s possible to have one that’s so low that it indicates you’re not charging enough. At BeeLine, we’ve never lost a B2B customer, and I wonder if this means we’re being too conservative in our pricing or annual increases.” Yes and no. I think when I first read the subject line of can you have a churn rate too low, I thought, “No, that’s impossible.”
But I do think a churn rate that low indicates that you’re probably not charging enough. Yes, Nick, I do think that’s something I would play around with. I’d probably start not by raising prices on existing customers. Usually when I think of pricing as an experiment, I change it on the pricing page first, make sure it doesn’t break the business, and then if I want to raise it more, then I do that again. Otherwise, I go back and decide am I going to grandfather people or not? There’s Rob’s rule of 15, which is if you’re not going to make at least 15% more MRR by raising prices on existing people, then it’s not worth a headache because people get mad and there’s a bunch of support, and it’s just a lot of effort. But if you’re going to make, honestly, it’s between about 10 and 15% more MRR just by raising prices on existing, then I start to think, “Ah, this is worth it.”
And really at any MRR level, that kind of holds true for me. That’s something I’d be thinking about. Nick’s second question is, “On a recent episode, you had a conversation about founders paying themselves versus plowing money back into the business. Given the disparate tax treatments of W2 wages, dividends, and capital gains,” this is in the US, “especially if it qualifies for qualified small business stock exemption, might be useful to have a conversation about how to weigh different factors related to compensation. I happen to be aware of some of these aspects since I was a tax lawyer in a former life, but I’d love to know what you or others who have gone through the process have found. I know there are also very fruitful ways to use SEP retirement accounts. Any chance you could have a guest on to discuss this topic, both for folks who plan to independently run their business for many years or those who are hoping to sell?”
This is a good question. Obviously, I’m not a tax attorney, can’t give tax advice. The way that most people do it in the US is you put your salary at a reasonable amount that you can defend to the IRS, nd then if you run an LLC, you can then take additional money out as owner’s distributions, withdrawals, dividends, whatever you want to call them. And on those, you save on the payroll taxes. Now, I know in the UK you can make your W2 equivalent wages very, very small. I think you can make them some ridiculous amount, like 10,000 pounds, and then everything above that you don’t pay any payroll tax on. And that just seems like a big loophole. But if it is and everybody’s doing it, then that’s what you do. In terms of plowing money back into the business, for me, I always knew the enterprise value was a multiplier.
It was so much more than any salary that I could take out. If I took a hundred thousand dollars out, my business is doing a million a year, and I could sell that business for $5 million, which is totally reasonable in the SaaS world, especially if you’re growing halfway decent. I knew that every 5,000 MRR was 60,000 in ARR, which times five is 300,000 in net worth. To me, you want a balance. You want to be able to live comfortably, but know that every dollar you pull out, if that negatively impacts growth, you are negatively impacting your outcome. So much more than that. If every thousand dollars you take out means you can’t put a thousand dollars of new MRR in place, that’s a 60 times multiplier. Now, that’s not super reasonable. I don’t know that you could put a thousand dollars into a business and get a thousand MRR, but just think about that 1000 times 12 times five gets you 60,000 in enterprise value.
Even if it’s half that, even if it’s a fifth of that, it’s still for every thousand I pull out in salary, maybe it’s 30,000 of net worth that I’m giving up, or it’s 20,000. It’s some number that’s larger than a thousand dollars. As long as you’re paying your bills and not trying to live on nothing, which I know some entrepreneurs do. I think that’s how I think about it. The other thing, yeah, SEP retirement accounts you mentioned, definitely talk to an attorney. My attorney has moved me from a simple retirement to a SEP retirement. And then at some point to individual 401ks, because those were most advantageous and those, I just don’t know all the details of those. And to your point, I could get someone on here to talk about it. I may do that. In all honesty, I think it would be an unfortunately very boring, I know it’s applicable, but these types of things are just so boring for so many people, and they’re not at that point where it’s like this matters.
I will give it some thought and see if I want to cover something like that. Oh, in addition, I want to tack onto this. Think about this. If you pull a hundred grand out of your company as a salary, you pay income tax on that, right? You’re in whatever, the 25%, the 35% bracket, you pay a lot of money. When you sell that company, as I said, let’s say it’s a million, you can sell it for five million. You pay long-term capital gains on it. Again, this is in the US, assuming you’ve owned it for at least five years, your tax bracket is, it’s 15% or 20%. If you sold it for five million, you pay 20% plus whatever state tax.
It’s way less. In addition, if your stock qualifies for QSBS, if it’s a C corp, you’ve held it more than five years, and there’s a couple other things, you pay no federal income tax on it. Just think about the difference between taking a wage out that, again, taking that thousand dollars out as a salary, and you pay a quarter of that to the government versus 20, 30, 40 times more in net worth, and you pay somewhere between zero and 20% tax to the ISR. It’s an incredible difference. The taxes are more advantageous if you sell the business, and the economics are more advantageous if you later sell the business rather than trying to pull it out as a revenue stream.
I’ve had businesses that are both, I’ve had amazing lifestyle businesses where I was pulling two, $300,000 a year out, actually more than that, and it was great. But the life-changing income that I’ve received has been from selling my own companies and from angel investing in companies like WP Engine and a few others that had these massive returns on my investment or on my time, and the tax advantages were there as well. Thanks for that question, Nick. That was a really good one. Hope it was helpful. Thanks for joining me this week and every week. It’s always great to be on the microphone. If you keep sending in questions, I will keep answering them. This is Rob Walling signing off from episode 655.

Rob Walling:
Welcome back to Startups For the Rest of Us. I’m Rob Walling. Today, you get to hear me have a conversation with Tom Merritt, the host of Daily Tech News Show, Cordkillers, Current Geek, It’s A Thing, Sword and Laser, Know A Little More. He has more podcasts than any five people I know, and this episode is a little different. Tom Merritt is not a SaaS founder. He has not written a book for SaaS founders, but I’m fascinated with people who are able to ship something every day for years, in fact, decades as you’ll hear us get into it. I asked him about his thought process and then the physical process of how he has shipped Daily Tech News Show five days a week for a decade. Talk about grind and discipline to get it out.
He’s a tech pundit, a journalist/pundit, but he’s very balanced and I’ve always admired his ability to summarize complex situations and then talk about both sides of them. He doesn’t get so far out in left field or out in right field like so many pundits do. They do it for the shock value and he doesn’t. So, if you know who Tom Merritt is and you’ve heard him on one of these shows, I’m sure this will be fun for you. If you haven’t and you came here today for some SaaS-focused tactics, this is not your episode and you can obviously feel free to skip this one. But I really enjoy the conversation and I do think that there is a lot to get out of someone like Tom Merritt who has been so successful and shipped so much amazing content into the world.
Before we dive into that, if you’re not subscribed to our YouTube channel, we’re putting out really incredible content every week, at least one video, sometimes two. Recently, Einar Vollse and I did a livestream about the SVB Bank collapse. Then every week, I’m recording something to deal with SaaS. It’s almost like 10 to 15 minute Rob solo adventures, but you get to see my smiling face on the camera, microconf.com/youtube if you want to check that out. With that, let’s dive into my conversation with Tom Merritt. Tom Merritt, it’s an absolute pleasure to have you on Startup For The Rest Of Us.

Tom Merritt:
Hey, Rob. Thanks for having me, man. This is super fun.

Rob Walling:
Yeah, I’m excited to dig into your experience and we are talking offline that you’re maybe not a typical guest for this show, but I think there’s a lot that you bring to the table in your experience that folks can learn from. First question I had for you is part of your career, your early career was at CNET hosting Buzz Out Loud with Molly Wood from like 2004 to 2010 and then you left and went to This Week In Tech, which is actually where I first discovered you on. There was a show that was Tech News Daily, and I actually forget the name of it now.

Tom Merritt:
It was Tech News Today.

Rob Walling:
Tech News Today. That’s right.

Tom Merritt:
Ever since Buzz Out Loud, I tried to name shows as boring as possible. It’s the Microsoft approach to naming.

Rob Walling:
Well, the SEO is great because then when I type into Apple Podcast today, because it’s a Daily Tech New Show is your show today, they showed you.

Tom Merritt:
Right, that’s the current one.

Rob Walling:
It is a daily tech new show, but in 2013 and this is on your Wikipedia page, so it’s not as if I’m exposing anything, but you had moved to LA because your wife started working for YouTube. So, suddenly, you’re remote. On your Wikipedia page, it says that you were let go because Leo, the head of the network, wanted people who were there local. I remember thinking to myself at this time, because I heard about it, “What’s he going to do?” There aren’t that many tech podcast networks in the world. At that point, you made a shift to basically go into business for yourself. You want to talk us through that?

Tom Merritt:
Yeah, I did that for a number of reasons that some were intentional and some were not. On the one hand, I still do a show called Cordkillers with Brian Brushwood, who was taking his own things independent and had been for years, who was encouraging me, gave me a lot of great advice, and helped me along that path. At the same time, I was also planning to start Daily Tech New Show with someone else who was going independent. So, I thought I was not going to be alone, and I did get severance from TWIT. So, I was able to have a little bit of runway. I sat down with my wife and I was like, “Well, I’ve got this much. Why don’t I just try all this stuff on my own and see how it goes?” But mostly, I just wanted to do things my way.
After having been at Tech TV, CNET, and This Week In Tech, I felt like I had gathered enough intelligence and the tools online had gotten good enough that I could make a go of it solo. So, I gave it a gamble. I decided to try it out. My motivation was I want to do my own show and I don’t want to have to mess with anything else. I just want to do my show. Things like Patreon and at the time, I was using Google Hangouts on Air made it easy to do that without having to put a bunch of capital outlay, to hire a bunch of producers or have a studio and all of that.

Rob Walling:
Well, and that’s the thing is 10 years later, you’re still doing it. So, it’s obviously worked out. You were the first person I believe I ever heard who mentioned Patreon. I had never heard of it. It was early. It feels like if you had perhaps left TWIT five years earlier that it would’ve been such a different road. I don’t know how you would’ve asked for donation. It just wouldn’t have worked, right?

Tom Merritt:
Yeah. I had been doing independent podcasts. One of the reasons I left CNET to go to This Week In Tech was because I wanted to do podcasts that were independent. Because CBS owned CNET, they would let you do it, but they made it hard. You had to go get them approved. There were certain ones, they were like, “Well, you can do it, but you can’t make money off of it.” But I was doing some and monetizing them with ads, but it wasn’t a lot. So, I thought, “Well, I could try to make a go of this by boosting the numbers and doing ads.” I was going to take ads on it, but like you say, Patreon had launched just about six, seven months before. It was Brian who said, “Let’s do our show,” which we had been doing on This Week In Tech as well.
He’s like, “Let’s do our own version of it independent. Let’s do it on Patreon.” I had messed around with Patreon and almost applied it to a different show because I do way too many shows. We almost use Patreon when it launched for a show I do called It’s A Thing, but we decided against it. So, when Brian was like, “Let’s try it with Cordkillers,” it worked like gangbusters immediately.
So, even though I launched Daily Tech News Show without a Patreon, with the idea of just building an audience and going advertising, Cordkillers was doing so well with it. By January 23rd, I was like, “Well, you know what? I should launch a Patreon for DTNS and see how well it can do with just Patreon.” Like you said, if I had launched it a year early before Patreon, I probably would’ve been doing an ad only model. You’re right.

Rob Walling:
A couple things on that. In SaaS, people try freemium and it usually doesn’t work. If you’re funded, you have buckets of money, you can do it, but freemium is like, “Well, you can use that up until a certain point.” Certainly, asking for donations wouldn’t work, costs and all this stuff to acquire customers, blah, blah, blah. So, I remember when you were talking about Patreon, it sounded to me like either a freemium model or a donate to help support the show. I remember my heartbreaking and thinking, “Oh, this isn’t going to work,” but how wrong I was, right? I mean, because is it public? If I went on to Patreon, does it show how much you make from DTNS?

Tom Merritt:
Not anymore. It was back then by default. They don’t show it anymore.

Rob Walling:
I remember 10 or 15K a month was the last I remembered. It was years ago. I’m not going to ask how much you make, but that’s the level. You have a very large audience and it’s obviously a broad audience because a lot of folks can listen to it. But you pretty quickly, it seemed like, were making a full-time income. Then you would hit a mark and then you’d bring on a co-host who I assume you were able to pay at that point.

Tom Merritt:
Yeah. In the earliest days of Patreon, they even don’t do this anymore, but they let you set goals to say, “Well, if we get to this amount of money or maybe this amount of patrons, we will do X.” So our first goal was we’ll stay ad free. We won’t go and get ads. Now, years later, I did create an ad supported free feed for people who weren’t patrons to say, “Look, if you don’t want to support Patreon, here’s your option. You can listen to the one with ads.” That exists now too, but in the beginning, it was like, “We’ll just go ad free for everybody.”
So, once we hit that mark, I was like, “Well, if you like this person that I have on, what if I had them on once a week? If we hit this mark, we’ll bring this person on once a week.” So we did that with Veronica Belmont, who I had worked on Buzz Out Loud with, Patrick Beja, a French tech podcaster, Darren Kitchen, if you know Hak5, you know Darren Kitchen, Scott Johnson, and Justin Robert Young. Eventually, within a year, I had set enough goals and met enough goals to bring on one person every day to help me out.

Rob Walling:
Was there ever a sense of doubt or fear? Because a lot of folks who make the leap are like, “Well, I used to get a paycheck and now I don’t.” You’ve mentioned your wife Eileen was very supportive and she has a full-time job, so that makes it little easier.

Tom Merritt:
Which was huge.

Rob Walling:
Yeah, but what was the emotional aspect for the first three, six months?

Tom Merritt:
Well, I think the fear that this was not going to work at any moment, it could all just fall apart, finally left me last year.

Rob Walling:
Really? Whoa.

Tom Merritt:
I’m saying that to be funny, but also it’s true. Those first five years particularly, I constantly hit marks where I’d be sitting at my table preparing for the show, just thinking, “I should probably just go get a job. This is too hard.” But it was so rewarding when I did it and the audience was so supportive that it always turned me around. Those moments became less and less, but I still kept thinking, “Well, I can’t go on forever.” At some point, it’s just going to fizzle out. It really is only in the past couple of years and we’re now in our 10th year where I’m pretty sure that even if it’s fading out now, it’s not fading out fast enough to ignore it and we can be serious about this. It’s a going concern, not just a thing that I’ll do as long as it lasts. It took a long time for me for that to sink in.

Rob Walling:
You mentioned that some days, you would get up and say, “This is just too hard, but you would do it anyways.” What was hard about it? Is it just putting the show together? Is it grind sometimes to find the stories and do it?

Tom Merritt:
Yeah, well, there’s that, right? I have a bigger staff now than I did in those first five years, but I had a producer, Jenny Josephson, for those first five years, who is very experienced in television, not as familiar with the tech world. So, I wasn’t relying on her for content. I was relying on her for production support. That was incredibly helpful, don’t get me wrong, but the vast amount of content preparation was on me. 95% of it was on me. My co-host, of course, brought in part of it, but I wasn’t making them spend all day with me when they were on. They were just coming on for the show.
So, writing and researching and deciding, “Okay, what are the things that are going to keep people interested? What are the things that are important to people?”, and then reading enough about them to make sure I don’t get it wrong. Then running into people who were critical, who were dismissive, who were saying, “Oh, well, you didn’t do this well enough. You screwed this fact up.” A lot of times, those were people where I’m like, “No, you’re misunderstanding,” or “You didn’t hear what I said,” which would frustrate me. Sometimes they were right. I’m like, “Oh, no, I screwed that up. I got that wrong.” So that wears at you because people say something nice to you like, “Your show is great. You’re the best.” People do say that to me. You remember it for 10, 15 minutes. People say, “You screwed this up.”
For me, I remember that all week and it just haunts me. So, it was that pressure that was just grinding on me, the expectation that oh, Tom went and did this crazy thing and it’s going to fail. Whether people were really saying that or not, that was in my head as well. Then there was also one person who hopefully got help that was threatening me and I had to report them to the police. So, I didn’t think that was normal, but that just was another thing that weighed on me. So, yeah, it was just all of that pressure combined and just trying to figure out each day, because it was a daily show, how to make sure we delivered on what I knew the audience liked.

Rob Walling:
That’s a really good point. It wasn’t even something that I thought about coming into this conversation, but your audience must be 10 times mine or 20 times, a lot larger, which means I know that I deal with a lot of compliments and it feels great. To your point, I also deal with people who say, I said the wrong thing. I’m dumb. I’m dumb. I’m an (beep). Whatever it is they say, you could call them haters, but frankly, to your point, there’s a lot of people that aren’t haters and their opinion is actually valid. I’m like, “Huh, I really did drop the ball there,” or “Wow, I misspoke there,” but you have whatever, 10, 20 times that volume might imagine. You talked a little bit about it, but how do you deal with that?
It is relevant to software entrepreneurs because so much of my audience is software developers. The first time they write a blog post, the first time they ship some code, it’s terrifying. Someone’s going to criticize me. I’m at the top of Hacker News and everyone’s ragging on me, or I’m on Product Hunt. Person said it was a crappy product. It’s this fear of criticism or this fear of public failure or whatever it is. You deal with that probably more than most. How have you learned to live with it without getting… Because you don’t strike me as someone who has a shell that’s so hard that it’s just like F everyone, right?

Tom Merritt:
Yeah, no, definitely not.

Rob Walling:
I feel like that’s what some politicians do or CEOs of big companies. Everyone else is wrong. That’s not balanced either, right? So how have you held those two things in tension?

Tom Merritt:
Yeah, it’s tough. I do a lot of things. For the stuff that you know is irrelevant, it’s just like, “You know what? You can get away with not reading the comments in some situations.” I have built a show that’s based on reading everyone’s emails and everyone’s comments. So, I can’t do that as much as maybe somebody who does a movie who’s like, “Yeah, I’m just not going to read my reviews.” There’s a little bit of that. There’s a little bit of just taking solace in the audience that you do have and saying, “Hey, do you also agree that this is there?” That resets expectations. If they do agree, they’ll say it nicer. But the majority of the time, what I’ve done is I engage. Now, there are a few situations where you can’t engage.
In fact, somebody dinged us in an Apple Podcast review this week for covering AI too much and gave us three out of five stars. I have no way to respond to it. So, it’s just sitting there in my brain eating away at me, but I’ll tell you in a second what I’ve done to deal with that. But for the people who email, I often just email back and I give myself time. Sometimes I’ll even write the response and then delete it so that I’m not responding emotionally. I try to recast what they’ve said in the nicest possible terms and then respond as if they said it that way. A lot of the times, I would say three quarters of the time, the person comes back with, “Oh, my gosh. I came off so harsh. What I meant was X,” or “Oh, that’s really helpful to hear. Thank you.” It turns it all around. That helps a lot.
Sometimes they don’t respond at all. Sometimes they still respond angrily. Honestly, that helps me because if I’ve made the effort to be nice and then you still respond angrily, I’m like, “Oh, okay. I can ignore you now. You are unreasonable.” I don’t have to think that what you said at the beginning was reasonable, but I can still learn something from it. I think the final thing I usually do is I try to honestly say, “Is there a way to do something better that will cause someone not to think this?” Because usually, what they’re saying is not what they’re mad at. When they’re saying, “I hated that you called Apple great,” they’re not saying, “I hated that you called Apple great.” They’re saying you don’t cover Android enough.
So, I try to look at okay, but what’s really behind the comment there and try to adjust that. I also do a lot of preventative measures, like going out and doing surveys and asking people, “Well, yo, what do you hate about the show? Get it out now. Just let us know.” That seems to help a little bit. Then in those cases, that Apple Podcast Review, I just said on the show today, I was like, “Hey, I know some people are tired of us covering AI, but it seems to be one of the most important stories right now, so that’s why we’re covering it.”
Maybe that person heard it and now I’ve answered this is why we’re covering it that way, but I usually try to just let myself calm down, maybe even write the angry email to get out of my head, and then say, “Okay, but what can I learn from this?” That helps some. There’s still times when it just gets to you and you just got to let it go.

Rob Walling:
Yeah, that’s a good system you have. It’s just a very mature way of thinking about it, because it’s so easy to say everybody’s wrong and it’s easy to also take offense to it and be too offensive.

Tom Merritt:
Well, yeah. If you just say everybody’s wrong, you don’t learn anything and you just keep getting the same criticism over and over again. But if you learn from it and then they still say the same thing, then at least for me, I’m like, “Oh, but you’re not right anymore because I addressed that already.” Yeah.

Rob Walling:
That’s great. I want to mix up a little bit and ask you about you’re very prolific. You have many podcasts. I listen to most of them, Daily Tech News Show, Cordkillers with Brian Brushwood. You were doing Current Geek with Scott Johnson. I think it’s on hiatus or maybe you won’t come back to it. I know there was a season. It’s A Thing with Molly and Sword and Laser as well, which I just never listened to. I don’t read a lot of fiction. Know A Little More and Let’s Talk About Star Wars. I could keep going. That’s a lot of podcasts, man. I have three podcasts. I have this one that’s shipped every week since 2010. I have one that goes in seasons, and I interview a startup founder over the course of a year every month, and then we make one season. So, it’s like a longitudinal things, but that’s one conversation.
Then there’s a producer and a voiceover and blah, blah, blah. It’s highly produced, but that’s a thing that happens once a year. Then I have one that I just do intros for, where we’re pulling content off our YouTube channel, audio content, but even that and I put a YouTube video at it every week on our channel, that’s a lot. Now I have a day job. These are all part of my day job, but I do run two companies as I’m doing that. But man, it feels like a ton of content. You, sir, put out way more than I just described. I think there are a lot of folks in the audience who want to be able to produce more content or to produce it quickly at a high quality. How do you this?

Tom Merritt:
Well, dude, you just said you run two companies. You threw that away that’s like, “I also just run two companies.” Well, I guess I run the company that’s making my podcast, but that’s all tight. That’s all it does. The key is that I do not have the day job. That helps a lot.

Rob Walling:
So is DTNS… Daily Tech News Show for those who aren’t getting the acronym there. Is DTNS most of your morning? Are you busy from 8:00 or 9:00 in the morning until 2:00 or 2:30 with it and then anything else has to happen after that?

Tom Merritt:
Pretty much. The short version of how Daily Tech News Show gets produced on a day where I’m on the show, I may or may not be in charge of what we call the rundown, which is what’s going to be in the show that day, but it’s basically the same whether I am or not. In the morning, I’m looking through my RSS Reader, I’m looking through Feedly. I’m marking stories that I think will be interesting. We have a shared Feedly account so we can all mark stories for each other. Then I go walk the dog, have my breakfast, that stuff, come back. We’re on a pretty routine schedule that from 9:00 to 10:00 Pacific, we are filling in the rundown.
So, if you’re in charge, you’re the one putting stuff in there saying, “This is going to be the quick hits. These are going to be the discussion stories.” If you’re not in charge, you’re contributing. You’re like, “Oh, I really like this story. Don’t miss this one.” You’ve got a little more latitude there. If I’m not doing the rundown, sometimes I’ll get a jump on a story I know is going to make it and start writing it. Then from 10:00 to 11:00, we’re writing up the intros and the notes and things we want to make sure we cover about those stories.
That gets distributed amongst the people working on the show. 11:00 to 12:00 is just cleaning up, making sure there’s as few typos as necessary as possible, looking if there’s any gaps, checking to see if there’s any late breaking news, whether a bank has had a problem that day that we suddenly have to jump on. Then at 12:00, we have a Discord voice meeting to go over that rundown and be like, “Okay, how much time are we given to this? Is this right? Any last minute adjustments we need to make?”
Then we get a break for lunch, 12:45, we jump on StreamYard, do all the tech checks, make sure everything’s working, and then we go live 1:00. 1:00 to 2:00 is the show. 2:00 to 2:30 is any production notes, any post stuff, things we need to talk about before we’re out of there. That can sometimes end early. Then I’m off to do other stuff. In there, depending on the day and what the load is like, and whether we have a guest who’s producing their own segment, I might have a little time to do some other stuff. I usually have time to do a few things. But yes, Daily Tech New Show is pretty predominant through that part.

Rob Walling:
The interesting thing is obviously, the software entrepreneurs in the audience are like, “Well, I don’t have every day until 2:00 PM to produce a show or a podcast.” But that’s not the takeaway here. The takeaway is, I think, A, you’re very disciplined as you’re talking in 15-minute increments almost, but also, I don’t think you rely on your own discipline. My guess is you have to show up because other people rely on you. If you don’t show up, it’s like having a gym buddy. I don’t want to go to the gym, but if I told I committed to being there every day at 9:00, then I’m going to be there. That’s what I think a lot of folks who do want to put out, let’s say, a podcast for their company or something on the YouTube channel.
The only reason that I ship the show every week still 13 years in, 650 something episodes, not the only reason, but a main reason that I don’t miss a week is because I haven’t missed a week. I haven’t missed a week. I mean, I got super sick one time and I recorded an episode. You hear Ira Glass sometimes with This American life where it’s like, “Ooh, this is rough,” but the show must go on, right? It’s like you have this rhythm. It’s the Jerry Seinfeld exes, right? I write a joke every day. I don’t want to break the chain.

Tom Merritt:
Yeah.

Rob Walling:
Is there a sense of that for you that it’s like, “Well, this is just what I do. I don’t care if I don’t feel like it”?

Tom Merritt:
There’s a group of people that are going to show up live. We stream the show on Twitch. We stream the audio on our Discord. Even though they are not the majority audience, the majority audience listens to it on demand later. They’re there. They’re waiting for us. They’re going to say, “Hey, where did you go?” if you’re not there. So, yeah, in the past, I have done the show from an airport just sitting out at the gate using airport Wi-Fi to stream. I’ve done a show from my car when I was moving and I couldn’t use my studio because everything was being packed up and put in a truck.
So, I just sat in my car in the garage and did the show from there. Thankfully, we’ve gotten to a point where if I need the day off, I can take the day off to the show and people will cover, but we still have a show. That has been one of my greatest stresses is making sure that we deliver because like you say, there’s that expectation of, “Hey, where’s the thing? I’m expecting the thing.” It is a habit.

Rob Walling:
Have you missed a day of Daily Tech News Show? Not you personally. Has there been a day where there was no show since 2013 or 2014, I guess?

Tom Merritt:
I don’t think there’s been a day without a show that wasn’t planned. We take all federal holidays off. That’s my way of not having to have to think too hard about what days are off. So, we’re like, “Yeah, if it’s on the federal holiday list, we take it off.” Then we take Saturdays and Sundays off, but I don’t think we’ve ever had a day we’re like, “Oh, sorry. There was no show.” Shows have been moved a couple of times. The very first show was late because I had to go do my… Not TSA pre, but the what’s the customs one?

Rob Walling:
Oh, the World Card.

Tom Merritt:
Yeah, whatever that one is, the customs thing. I had to go do the interview that day and it had been planned months before. Yeah, so there’s been a couple that have been rescheduled, but we’ve never missed one. We’ve never missed one that we intended to do, put it that way.

Rob Walling:
Yeah, it’s incredible. I want to ask you about this, ability that you have that I think is lost in society today. It’s to see both sides of a story or of a conversation or an argument, and it’s to be moderate. I say that complimentary.

Tom Merritt:
I know it’s a dirty word these days.

Rob Walling:
I’m insulting you, but no, this is the reason that I have listened to you, because I listened to you since the TWIT days. So, what are we talking, 12 years or something in there. It’s because when I hear a story from you, I don’t expect a spin. Even if there are others around it who are really wound up about it and are saying things, my words, not yours. Brian Brushwood is hilarious on Cordkillers, but he just gets spun up about things and he’ll just go off and you bring them down to earth. You’re like, “Well, maybe, but also, here’s the other side of that. Netflix is already paying the providers in France, the internet.” You show the other side of it.
Again, I just don’t hear it from many people and it’s a very informed opinion and calculates not the right word, but it’s very well considered. It’s as if you are like, no, this is the whole story and I’m going to present it. You have opinions of I think they’re screwing this up and long term, it won’t work, but also you’re not this extreme whatever Joe Rogan type thing. It’s not my style. So, how do you do that? Is it natural? Did you have to work on that?

Tom Merritt:
As with most things, a little of both. I think I’ve always been naturally tending to be empathetic. I try not to make that sound like a self-compliment, but always being able to see another person’s point of view and understand, “Oh, this is what they mean by that.” I think that that’s just one of those things I’ve been able to do. I’m also a contrarian. I have definitely been told that by my family that if there’s an opposite side to be taken, I will take it. So, that is part of it too is like, “Oh, if everybody’s thinking this, I’m going to tend to want to be like, ‘Yeah, but what’s the other side?'”
And then you combine that with not wanting someone to be able to write in and say, “You got this wrong” makes me try very hard to really understand because the corrections that I like getting but also try to avoid are I understand why you covered the 5G interference with airlines this way. I’m a pilot though, and let me tell you this is something that most people don’t know that we run into. I love getting those. I value those amazingly, but I do try to be like, “Okay, what is the pilot going to say about this? Can I find that answer before I have to rely on that person?”
You can’t always do that because no one can have all the experiences, but I do have that motivation to try to look a little farther behind what people think are the knee-jerk motivations. Well, they’re doing that because they’re greedy or they’re doing that because that. Human motivations are usually much more complex than that. I’ve been on the inside at CNET where people were accusing us of things and I was like, “No, I’m here. I know we’re not doing those things.” So I also try to go like, “Okay, but what are the people inside of Facebook thinking when they make this decision?” It looks different from the inside than it does from the outside. So, all of those things, I guess if I had to come up with a reason contribute.

Rob Walling:
AI, you’re covering it a lot, which I think is great and not too much for me, by the way.

Tom Merritt:
Three out of five stars.

Rob Walling:
Three out of five stars for you.

Tom Merritt:
There’s too much, too much.

Rob Walling:
I’m so opinionated about your coverage of AI, but the question for me is, are you using it? I record a YouTube video every week about building and growing SaaS companies, and I’m given a title. My team comes up with a title and says, “Can you record a video about this?” I say, yes. Then I think, “How am I going to outline this?” So I go to ChatGPT sometimes, and I’ll just type in outline a YouTube video just to see. I rarely use more than 20, 30% of it because a lot of it is generic internet advice. But I’m curious if in your workflow, anything you’re doing, are you using AI to help generate content research, any of that?

Tom Merritt:
Yeah, I’ve been trying it and I’ve used it for a few things here and there. It’s not good for a lot of the things I do because I am so focused on what we just talked about, trying to make sure that I’ve got all the nuances and bringing in the parts of the story that maybe people aren’t considering. ChatGPT is not good at that because it’s trained on the people who aren’t doing that. On the other hand, we use it on Sword and Laser, science fiction and fantasy book club podcast to create the artwork that goes in the thumbnail. My co-host, Veronica Belmont, uses Midjourney for that. That has been fantastic. It doesn’t always work perfectly. Sometimes it works hilariously, but we usually get something pretty interesting out of it.
I’ve been using it every so often to aid in writing a paragraph or two of something where I’m like, “Man, I just really need this summarized well.” I’ll put what I put in and say, “Shorten this up.” It’s pretty good at that. I still have to tweak it. It’s not ready-made when it comes out, but it helps. It saves a little time. My favorite use of it has been, I have an episode of Know A Little More coming out that is about OpenAI stuff and about transformers. So, I put in the two paragraphs leading up to it, describing how it works. I think it’s particularly about ChatGPT, this segment. Then I had ChatGPT write the next paragraph. It was really good. It nailed that one. It knows itself at least.

Rob Walling:
Any chance you’ve checked out ElevenLabs? It’s audio generative AI.

Tom Merritt:
Yeah, I have.

Rob Walling:
About a month ago, you can train it with your own voice, snippets of your own voice. So, I uploaded snippets of mine and trained it to sound like me. Then I typed out a piece of the intro of this podcast and I cut it in just to see if anybody would notice. I called it out in the episode. The Rob bot itself called out that I am not. Do I sound funny? Because I am Rob bot. Some people noticed, but most people said it sounded like you had a cold or you were using a different microphone. It was different, but it was really close, so you should do it. It’s weird. It’s weird to hear your own voice.

Tom Merritt:
This is where I reveal I’ve been using it this entire time.

Rob Walling:
The whole time. I’ve been using it for a decade, bro.

Tom Merritt:
No. Scott Johnson, one of my fellow podcasters, sent me a clip of myself saying something ridiculous about eating spiders or something in my own voice that he had trained it on. It was my first experience with it. Then I had a friend of mine, Alison Sheridan, did a bunch of the intros and outros of an episode of her podcast using it because she had lost her voice. So, it was super helpful for her. Then like you did, she called it out. Another friend of mine, Andrew Heaton, did an entire episode of his Political Orphanage Podcast written by ChatGPT and read by either ElevenLabs or one of the similar ones. I can’t remember if he used ElevenLabs or not.

Rob Walling:
I cannot imagine doing something long form like that. ChatGPT stuff that’s short or the ElevenLabs clip that was short, I can work with that. The longer it gets, it’s like a copy of a copy type thing where it starts getting off the rails. So, that must have been super interesting to hear. Well, Tom Merritt, it’s been great having you. Folks want to keep up with what you’re up to, Daily Tech News Show, wherever greater podcasts are served, on Patreon as well obviously, and Know A Little More. You have five, six other podcasts, but people can find you. On Twitter, you’re @acedetect.

Tom Merritt:
If you just search Tom Merritt-

Rob Walling:
There you go.

Tom Merritt:
… that crazy username shows up. Yeah.

Rob Walling:
Two R and two T’s. Yup. Thanks again so much for taking the time, Tom.

Tom Merritt:
Yeah, thanks, Rob. Appreciate it.

Rob Walling:
I really appreciate Tom taking time out of his business schedule to come on the show. I’ll admit he’s one of those people that I really admire and I’ve learned a ton from him over the years and it was great to be able to sit down and get some insights from him. If you like this show and are interested in tech news or cutting the chord streaming TV or just learning more about technical topics, his podcast are some of the best out there. Thanks for joining me again this week. This is Rob Walling signing off from episode 654.
Welcome. You’ve made it to the Hidden Track. When I told my 16-year-old that I was going to be interviewing Tom Merritt, he said, “I have to talk to him.” My son and I bond over a lot of Tom’s shows as we’re driving or doing whatever, especially their show, It’s Spoiler in Time, which is where they essentially talk about shows that are on the air. So, they are doing Last of Us and they do the Star Wars shows that come out, Mandalorian. It’s great fun and we’re able to hear other people’s other smart people’s opinions and compare them to our own. So, I let my son come on for a few minutes and just talk to Tom about a few nerdy things, and we’re going to roll that right here. Hope you enjoy it.

Fin:
Mr. Merritt, how do you feel about the obvious joke?

Tom Merritt:
Oh, the obvious joke. You have to push the obvious joke to make the obvious joke work.

Fin:
So in order to give the obvious joke merit, you have to be real stretchy with it.

Tom Merritt:
Like that, good example. Yeah. Yeah. I don’t like the obvious joke if it’s just laid out there flat, but yeah, you can use it to good effect or you can turn it on its head. One of my favorite things is when it sounds like someone’s doing the obvious joke and then at the end, it makes a hard left turn and you’re like, “Oh, that was not where I was expecting it to go.”

Fin:
All your podcasts have a certain quality to them that makes them really cool and fun to listen to.

Tom Merritt:
Oh, thanks. What is that? So I can keep doing it.

Fin:
Panache.

Tom Merritt:
Okay. All right.

Fin:
Maybe not the adjective good that I would’ve gone for. I mean, there is panache, but I think what makes it amazing is all that the work you put in. I mean, considering your success, it’s probably proof that the podcast, there’s no big podcast network, but the idea of podcasts are a meritocracy.

Rob Walling:
Uh-oh, here we go. You’re not going to do this. You’re not going to this the whole time, right? Yeah.

Fin:
No.

Rob Walling:
You’re killing me.

Fin:
Now I want to talk about nerd stuff.

Tom Merritt:
Okay, cool.

Fin:
Okay, so Star Wars.

Tom Merritt:
Yes.

Fin:
What’s your favorite Star Wars thing to come out in the last five years, let’s say?

Tom Merritt:
Last five years.

Fin:
Yeah. So, Clone War season seven was in there. There’s some good stuff.

Tom Merritt:
Bad Batch, Mando, all of that.

Fin:
Andor.

Tom Merritt:
Yeah, see, I think Andor is great, but Brian Brushwood thinks it’s the best. He would immediately just say Andor. I almost want to admit that he’s right, but then I resist that because I don’t want to admit that he is right. But I didn’t have the over the top reaction that he did, but I still really liked it. That first season of Mandalorian was really good too because again, it’s subverted expectations and it gave me that feel of Star Wars and the lived universe. I don’t know if you get Andor without the Mandalorian, so I probably will say season one of Mandalorian, which Andor is indebted to.

Fin:
Yeah, yeah. That makes sense. I’m glad that you mentioned Brian because one of the things we talk about a lot is the interesting dynamic on the podcast. We mostly listen to your Star Wars and Marvel stuff, and Brian is usually like, “I don’t like this.”

Rob Walling:
This is on Spoiler in Time, which is-

Fin:
Yeah, Spoiler in Time.

Rob Walling:
… part of Cordkillers.

Fin:
I need to specify because you have so many.

Rob Walling:
Yeah. There’s other listeners.

Fin:
Yeah, and Bryce tends to like him and you are the cooler head that prevails in those two. It’s an interesting dynamic and I’m wondering how much of that is conscious and how much of that is you guys overplaying. Is it natural or exaggerated, I guess, is my question.

Tom Merritt:
All of it is natural. All of it is real.

Fin:
I wasn’t trying to imply that it was…

Tom Merritt:
Well, this is just the first half of the answer, which is like we don’t sit down beforehand and say, “Okay, you be the negative person.” But we do exaggerate. Brian for sure likes to exaggerate. That’s who he is.

Rob Walling:
He’s a performer.

Tom Merritt:
That’s his personality, and it makes it more interesting to exaggerate as a conversation. But I probably exaggerate the least of them. I used to exaggerate more. I used to pick fights with Brian and get him going, but then people started to wonder if we were getting along and I was like, “Okay, that’s probably a push we get too far. We don’t want people to think we’re mad at each other.” But yeah, I think even in the last year or so, it’s gotten closer to Brian moderating and saying, “Yeah, there’s no bad episode of this series, but there has to be one worst episode,” as a way to say, “Look, I’m not trying to hate on it, but let me explain what I don’t like about it.” So yeah, I’d say there’s like 18% exaggeration in there.

Rob Walling:
That’s a good number.

Fin:
That’s what we were talking about, where it feels very real and natural, but there is also the sense that maybe Brian is a little bombastic.

Tom Merritt:
Yeah, he likes to push buttons and stuff, which is good. It’s fun.

Fin:
Okay. Fact, check me on this, Rob, but you used to run to do Walking Dead on either the film or podcast.

Rob Walling:
They did spoiler years ago. It was on frame rate, I think.

Tom Merritt:
Yeah, back at the frame rate days even. Yeah.

Fin:
Yeah. I don’t know if you’ve discussed this on a podcast, so I’m really sorry if this is redundant information, but as someone who has enjoyed both a lot of Walking Dead and the Last Of Us, how do you think those two compare?

Tom Merritt:
They almost feel and I guess literally they are as if they’re from different decades, different time periods, right? Again, not to repeat the Mando thing, but I think Last Of Us’s appeal owes a lot to Walking Dead. In fact, I wouldn’t be surprised, although I don’t know this if Last of Us the game didn’t owe something to the graphic novels of Walking Dead, because I think Walking Dead was one of the first to say, “Okay, but what if we focus on the problem being the people more now?” The movies did that a little bit.
The Romero movies certainly did that, but Walking Dead very quickly, we said, the zombies are not really a character with agency in our story. It’s going to all be about the people involved. I think The Last of Us ran with that and said, “Well, what if we focus even more on a couple of characters?” I don’t know. I guess The Last of Us is better to me, but only because it learned from our reactions to Walking Dead.

Fin:
It does feel not realistic, but everyone feels almost more grounded. In The Walking Dead, everyone goes off the deep end, and from there, it’s just like, “Wow, all these people suck.” But since The Last of Us is about this connection between Joel and Ellie, it almost feels more personable. I feel like even that applies to the villains because the lady who took over the Fedra place and made it almost worse, Caitlin, Catherine?

Tom Merritt:
Yeah. Yeah. Caitlin I think is right.

Fin:
I feel like she is more sympathetic than the governor, for example.

Tom Merritt:
Oh, for sure. Right.

Fin:
Yeah. But we haven’t seen the finale yet, so please no spoilers. But the evil, the priest teacher, creepy guy in episode eight felt very Walking Dead, because he was unhinged and unsympathetic. That sparked a conversation of what feels different and similar about these two shows. Yeah, I think the human connection is really what makes it interesting.

Tom Merritt:
I think that’s a normal process with new kinds of stories that are in the same vein where the first one to tell it like Night of the Living Dead doesn’t have to be complex because people are like, “Oh, my gosh, I’ve never seen zombies before.” The zombies are new. When we go back and watch it, it looks cookie cutter in some ways because we’re like, “Well, yeah, you don’t have to explain zombies. Zombies aren’t impressive. We’ve seen a million zombies.” That happens in smaller ways too. Whereas The Walking Dead, they had more space. They didn’t have to explain what zombies were anymore, but they had to leave space for you to realize, “Oh, this is about the interactions of the people.”
Last of Us benefits from like, “Oh, yeah, we’re used to that. Of course, it’s always about the people.” So now they have more space to be like, “Okay, we don’t have to explain this is about the people. We don’t have to leave space for that. We can focus in a little more.” But then there’s some characters like creepy guy that it’s like, “Yeah, it’s still a good character type. Maybe we’ll drag that one out anyway.” Yeah, it’s an interesting choice.

Fin:
Yeah. Oh, I’m glad you mentioned The Night of The Living Dead. I do feel like that one does have the barest hints of a more complex thing, because the zombies are definitely the start of the show, but spoilers for a 60-year-old movie, by the way. But at the end, the guy gets shot because they just think he’s a zombie. I think it was a real gut punch moment for me the first time I saw it. I think it was an accident and it’s not due to humans going crazy when civilization falls, but it does have that hint of this guy survived all this just to get shot by the people who should be helping him.

Tom Merritt:
Yeah, those are timeless elements of a story, right?

Fin:
Being really frigging sad.

Tom Merritt:
Yeah, or Old Yeller, no spoilers.

Fin:
Bridge to Terabithia.

Tom Merritt:
Yeah, Romeo and Juliet. I won’t tell you how that one ends.

Fin:
Ooh. I’m sure you’ve answered this somewhere else, but I don’t remember. So, thoughts on The Last Jedi?

Tom Merritt:
The Ryan Johnson one?

Fin:
Yeah, that was The Last Jedi, Ryan Johnson. Yes.

Tom Merritt:
So episode eight.

Rob Walling:
Episode nine. Wait, no, that’s Skywalker. Wait, is that Skywalker?

Tom Merritt:
Well, that’s why I asked. I was like, “Okay, it’s not the last movie. It’s The Last Jedi.”

Fin:
Yes, The Last Jedi.

Tom Merritt:
I like The Last Jedi.

Fin:
Good, thank you. Me too. I only dislike that they didn’t have Abrams and Johnson cooperate more because it did feel a little bit like a tug of war of “Oh, you were taking the story this way. Well, I’m going to take the story this way.” But outside of that, I thought it was a really good story. There are a couple parts here and there, like in any movie, where I’m like, “Eh, that didn’t work for me as much.” But overall, the way they handled the force timing between them, where they’re talking through the force I thought was really cool and really interesting.

Rob Walling:
Well, If you think about four, five, and six, their original trilogy, Luke or Vader and Obiwan could only communicate when they were together. It’s like you can’t just have them together that much, but the story might be better if they were talking and they were able to do that with this Force Time of you have these two arch enemies. So, that when they do finally get together, they can just fight and not have to have this long diatribe of when I met you, I was about [inaudible 00:45:43]. It’s like, “Okay, get on with the fight.” So I feel like Forced Time was a really nice narrative device.

Tom Merritt:
Yeah. Yeah.

Fin:
Okay. Also, just for the record, both of you probably know this, but it is called a dyad. I appreciate Force Time, but I want to make sure we’re all on the same page here as a Star Wars nerd. Oh, a dyad in the fourth.

Rob Walling:
That’s like the technical term for it.

Fin:
D-Y-A-D.

Tom Merritt:
Got it.

Fin:
Yes, definitely, Force Time. Great. I’m glad to hear you say that because my most unpopular movie opinion is that The Last Jedi is really good actually. I wrote a whole essay on it.

Tom Merritt:
I don’t know why people hate on that movie.

Fin:
That’s my litmus test.

Tom Merritt:
There are certainly little things about it you can pick on, but I don’t know why people hate it.

Fin:
Yeah, yeah, yeah, definitely. I feel like it almost gets dragged down by Rise of Skywalker because it sets up so much and the ninth movie.

Tom Merritt:
I knew a lot of people who are already against it even before Rise of Skywalker, who were then undermined, because they’re like, “You’ll see Rise of Skywalker’s going to be better.”

Fin:
Yeah, I hear people nowadays go like, “Oh, they set this up and never paid it off.” I’m like, “That’s not Johnson’s fault. Eight taken in a vacuum is a great movie.”

Tom Merritt:
Yeah, I agree.

Fin:
Cool. I’m glad we agree on that. This is a really fun if brief nerd diatribe.

Tom Merritt:
Yeah, man. Thanks for saying hi. It was good to meet you.

Rob Walling:
The Armageddon beer is there for when things get so bad that there is no hope, it’s when it’s absolute Armageddon. And when that happens, you and I are going to come into this trailer alone, we’re going to open that beer, each going to drink half, then we’re going to drive to the shop, the corporate headquarters, we’re going to turn in our keys and we’re going to walk. If it’s that bad, we’re going to drink the beer. And if it’s not, then we’re going to finish this job.
Welcome back to another episode of Startups With the Rest of Us. I’m Rob Walling, and this week we have a Rob solo adventure, where I’m going to talk through a few topics including a story about an Armageddon beer, how I would think about attacking a competitive market, asking yourself, “What will I do if I succeed?” And maybe more if time allows.
Before we dive into that, I want to let you know that MicroConf U.S. tickets are now sold out. So if you want to come to MicroConf U.S. here in Denver in a few weeks, get on the wait list at microconf.com/americas. I would expect a few additional tickets to become available. Sorry you missed out on tickets, but I hope to see you there.
And also, MicroConf Remote 6.0 starts today. It is solely focused on sales, leveling up your sales game as a SaaS founder. For tickets, head to microconf.com/remote. Even if you missed today’s session, which is about a 90-minute session, recordings will be available for those with tickets. So, microconf.com/remote.
I’m going to tell a story that I’ve told once on another podcast, but I’ve never done it here and I’ve always felt like it should be solidified in this archive.
Good friend of mine, whom I’ve known for decades, is a project manager at a big construction firm. And at the point in time that this story takes place, he was one of the best, if not the best project managers at this massive company.
And so, he was put on what was considered the most difficult job the company ever did. And almost like a movie setup, he was working with a general foreman that he had worked with many times, and this general foreman was retiring after this job. It was his last job. And this job was an absolute bear. I’m not sure I’m going to be able to communicate how difficult it actually was, but essentially it was a three-year job compacted into 12 months, maybe nine months.
So if you think about writing software, and if I told you, “We have a year long software project and we’re going to do it in three months or four months,” you can imagine how hard that would be and how many things would break along the way, across all the axes of things that could break.
So my friend and the general foreman are running this job. They’re planning how they’re not going to lose their minds running it. And the general form says, “Look, this is the hardest job either of us will ever run. It’s probably the hardest job ever run in this state, maybe in the country. But in this state, I’ve never heard of a job that is going to be more of a meat grinder and have more risk and more exposure than this job. It’s going to be so stressful.”
And as they’re talking about this, my friend opens the mini fridge in the trailer and he sees the usual water and soda, and then he sees a bottled beer in the back. And he says, “What are we doing, man? You can’t have alcohol on a job site.” And the general foreman says, “Don’t worry. If anyone drinks that beer, it’s going to be the least of our worries.” And my friend looks at him puzzled and the general foreman says, “Look at the label.” And he looks, and in Sharpie it’s written, “Armageddon beer. Do not drink.”
And the general foreman continues, he says, “The Armageddon beer is there for when things get so bad that there is no hope. It’s when it’s absolute Armageddon. And when that happens, you and I are going to come into this trailer alone, we’re going to open that beer, each going to drink half, then we’re going to drive to the shop, the corporate headquarters, we’re going to turn in our keys and we’re going to walk. If it’s that bad, we’re going to drink the beer. And if it’s not, then we’re going to finish this job.”
So my friend kind of shrugged it off or laughed. It just seems like a preposterous idea, right? Flash forward a few months, they’re in the middle of the job and it’s worse than they thought it would be. Everything’s falling apart. Everything’s hard, working 12 hour, 15 hour days, seven days a week. Just incredible pressure on the crew, hundreds of construction workers, and certainly on the people running, running the job, the project manager and general foreman.
And at a certain point, the project manager’s working on something, the general foreman says, “We have a problem.” Lays out some drawings and said, “All of this cable was mismeasured.” And you might think of cable as something in your house, right? A little wire that runs power to an electrical outlet or a light switch. So if you mismeasure that, you spend 10 bucks, 50 bucks, and you get another piece of wire and you cut it. These are pre-measured cables that are inches thick, two inches, three inches, sometimes four or five inches thick with their insulation. Very difficult to bend. They’re copper. They are just incredibly heavy. You need cranes or forklifts to move a spool of them around. And they’re incredibly expensive.
So he throws this drawing down and my friend looks at it and the color just leaves his face, and the hair stands up on the back of his neck and he says, “This is it. We’re done. This is hundreds and hundreds of thousands of dollars of a mistake that we have to replace.”
And if you don’t know construction, it’s a razor-thin business. So you often bid jobs at 10%, 15% gross margin. Those are bigger jobs. If you get smaller, you can work more margin in. But then, you try to make it up in efficiency or frankly in volume. You’re keeping your crews busy. And if you can even make a 5% net margin on a $6 million job, you’re making $300,000, that’s something. And then, you’re also making a gross margin, which is a big part of a overhead in construction. I won’t go down that rabbit hole. But hundreds of thousands of dollars on even a large job is a tremendous hit, and it can flip you upside down. It can make the job turn into a massive loss.
So my friend, whose face is now white, is just staring slack-jawed at the drawing, trying to figure out what happened, panicking. And the general foreman said, “Should I get the beer?” And it was an instant level set. It was a moment where my friend thought, “This is bad, but it’s not that bad. We don’t need to drink the beer, drive to the corporate headquarters and quit our jobs. We can figure this out.” And I love that. I love that It was a mental reset to go from panic, “The sky is falling, it’s Armageddon,” to, “We can figure this out.”
And so, what they did was they realized, as they actually tried to troubleshoot it without the panic, without the adrenaline going through their veins, that they were mismeasured, but there were some that were supposed to be longer than others. And so, the longest ones, although they were short, they were long enough to be for some of the other runs. And so, what initially appeared to be… I don’t remember the numbers, but let’s say it was $400,000, $500,000 mistake, turned out to be a $200,000 mistake. Still a big deal, but they figured it out.
And throughout that job, I believe there were one or two more times where the general foreman said, “Should I get the beer?” And they finished that job and they actually made buckets of money on it. I don’t actually know how. I don’t know all the details of how they possibly turned it all around based on the stories I’ve heard, but it’s one of those movie-like moments, where the odds are stacked against you and somehow they pulled it out. And then, the general foreman retired.
The reason I’m telling you this story is I imagine in your entrepreneurial journey, as you are building your company or companies, that events happen, things come along that make you feel like, “Well, that’s it. Guess we had a good run.” And I think someone asking if you need the Armageddon beer, whether it’s literally someone asking that, or if you have an object or a human that can level set and reset your mental model to, “Is this actually business ending?” I think that’s a tremendous superpower to have.
I’ve talked on this podcast and elsewhere about how my biggest regrets around building and selling drip was never what I did, but it’s how I felt while I was doing it. Between Russian spammers, sending phishing emails, between most of our IPs, getting blacklisted at different times, between angry customers, entitled customers who had made a mistake flaming us and then me personally on Twitter, to competitors who ripped us off, and on and on, there were all these moments that felt business ending.
And I’ll admit, the reaction I had often was they almost felt life ending in a way. But every time, after the adrenaline finished coursing through my veins, I would circle up the team and say, “How are we going to fix this?” And we did every time.
Obviously, I’m not saying there are never business ending events and nothing can be so bad. But if you’re like me, I felt a lot of speed bumps that I turned into roadblocks in my mind and I beared a mental burden that was detrimental to my mental health. And honestly, I don’t think it was anyone’s fault on my own.
And actually, after selling Drip, I vowed to never return to that mental state again, no matter how hard it got. And in fact, I haven’t. Even though today with MicroConf and TinySeed, I deal with larger sums of money, I deal with, I say it’s vicarious, but more intense situations through the founders that I’m invested in, and frankly, there are things that are happening and have happened that should be much more stressful than they were back in the day, I’m a different person now because I asked myself, “Is it time to get the beer?”
So I think if you’re a person who feels these things deeply and maybe feels like you’re constantly stressed about little or big things, having a symbolic Armageddon beer, whether it’s an object that you realize, “If it ever hits the fan, I’m cracking that open and I am consuming this sparkly water, this beer, this can of soda.” Or if it’s a human who asks you, “Should I get the beer?” Some other phrase that level sets what you’re actually going through and compares it to a business ending event, because usually those two will not be the same.
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My second topic I want to talk about is about developing taste. I was thinking about this the other day and about how when you first start consuming media, let’s say films or songs or music of any kind, really, it’s almost like you don’t have anything to compare it to.
I remember when my oldest son, who’s now 16, he was eight or nine, and we started watching movies together, a lot of movies, like the early Star Wars films, Back to the Future, Goonies, E.T., even Blade Runner as he got older. And then, of course, The Thing, 1982, as he got older. Just all the classic ’80s films that you should kind of have in your repertoire. And when I first showed him these films, he didn’t have anything to compare it to. He didn’t know how good Star Wars was compared to other science fantasy. I remember he read Lord of the Rings when he was little, and he said, “I want more books like that.” And I said, “Well, that’s one of the best. It may not be the best, but it’s certainly going to be hard to find another book that good.”
And it’s a trip when you’ve only read one thing or you’ve only seen one movie, you don’t have taste. I’m not trying to be snooty about taste, of like, “Oh, I have refined taste.” I just mean a reference for comparison to know what’s good and even to have a strong opinion about things for yourself. That’s what I mean by taste.
And to carry this into what we deal with every day, I remember as a developer writing software early on, and I had no taste as to what good code was. I didn’t know the difference between hacky spaghetti code that I had written since I was eight years old when I learned to code and really well-structured, these days, well-tested, unit-tested, amazingly easy to read and easy to edit without regression code. I didn’t know the difference. And over the years of coding, you start to learn those lessons.
Same thing with design. I was a software developer for several years and did not develop a design taste because I didn’t read books about design. I didn’t expose myself to a lot of design. And I would run into people who would say, “Oh, that font…” Derek Reimer’s this guy, “The font kerning is off.” I’m like, “What are you talking… I don’t even know what font that is.” I can’t name a font by seeing it. I don’t have that taste. I still don’t. And folks like Derek, folks like Tracy Osborne, who we’ve heard on this show, many others who have just impeccable design taste, and it’s because they’ve exposed themselves to a lot of things, they pay attention to the details.
And look, do I have taste in other areas? Absolutely. And by taste, again, I mean opinions. I care strongly about how audio sounds in a podcast. There’s a reason when I record these, even though they’re on video, I have this mic two inches from my face, because when I move it down six inches, I hear the difference and it bugs the (censored) out of me. And that is having taste.
There’s a famous clip of Ira Glass, who has run This American Life, which is usually the number one radio show and number one podcast in the country, and has been for decades.
Ira Glass:
“Nobody tells people who are beginners. And I really wish somebody had told this to me, is that all of us who do creative work, we get into it, and we get into it because we have good taste. But it’s like there’s a gap. That for the first couple years that you’re making stuff, what you’re making isn’t so good. It’s not that great. It’s trying to be good. It has ambition to be good, but it’s not quite that good. But your taste, the thing that got you into the game, your taste is still killer and your taste is good enough that you can tell that what you’re making is kind of a disappointment to you. You know what I mean?
A lot of people never get past that phase. A lot of people, at that point, they quit. And the thing I would just say to you with all my heart is that most, everybody I know who does interesting, creative work, they went through a phase of years where they had really good taste, they could tell what they were making wasn’t as good as they wanted it to be, they knew it fell short, it didn’t have this special thing that we wanted it to have. And the thing I would say to you is everybody goes through that. And for you to go through it, if you’re going through it right now, if you’re just getting out of that phase, you got to know it’s totally normal.
And the most important possible thing you could do is do a lot of work, do a huge volume of work, put yourself on a deadline, so that every week or every month you know you’re going to finish one story. Because it’s only by actually going through a volume of work that you’re actually going to catch up and close that gap, and the work you’re making will be as good as your ambitions.
In my case, I took longer to figure out how to do this than anybody I’ve ever met. It takes a while. It’s going to take you a while. It’s normal to take a while, and you just have to (censored) fight your way through that.
Rob Walling:
He’s basically talking about when you start creating anything, and in this case, let’s stick to audio content, but visual, being a musician, singing, all of these things, when you start creating anything, usually, you’ve listened or looked and developed a taste and an opinion of what you like and don’t like. And the quality of things that you make at that early stage do not compare to your taste.
I used to be so frustrated when I was in bands. I was in a couple different bands. We would write songs. The songs were good, they were catchy. We’d go to record them, and no matter how hard I tried, my vocals were never up to my taste. They were never up to the standard that I wanted them to sound like. And even now, listening back, I did vocal lessons, I practiced, I did all the things that you would need to get better, and yet they were never at the level that I wanted them to be.
And then, there are other things, like building companies or writing, the written word, writing blog posts, writing books, recording audio, all of those things, I remember when I started doing each of them. And I remember I didn’t know how to build a great business, I didn’t know how to write a great blog post, I didn’t know how to write a good book, and I wasn’t capable of creating good audio content. If you go back to the first 10, 20, 30 episodes of this show, it’s terrible, and that’s okay, because our audience was small and we were learning how to do it. And then, over the years, my abilities have caught up with my taste, both in my writing, although that still takes me longer than I would like, and in building and growing companies.
And so, almost like a fractal, whether you’re looking at a very tiny thing, like writing this function or this method in code, or whether designing this single image, or whether designing this webpage, or whether designing this company or this movement, in any of these things, if you want to develop taste, you need to expose yourself to a lot of that thing.
And I’ll go back again and say I have some design sense, but I would not consider my taste super refined in terms of visual design. I can have opinions on it, but they’re not at the level that someone like Tracy Osborne or Derek Reimer are. So you don’t have to do this with everything, but choose what you want to get better at. Choose what you want to have more opinions about, and expose yourself to that. And then, you have to go do it if you want to get better at it. So choosing what you want taste in and then choosing what you want to get better at is a matter of exposure and repetition.
And it’s also a matter of listening to those who maybe have gone before you, right? Because unlike developing a taste for coffee or wine, you don’t need to do it all yourself. You can be exposed vicariously to growing companies through a podcast like this, or a community like MicroConf or Indie Hackers or the Dynamite Circle. It’s not exactly the same, but it is an interesting proxy. And given that you may only start a few companies in your entire lifetime, being able to read books, listen to podcasts, and hear from other founders who are doing it can help you develop that taste and maybe even get a little better at it too.
For my last topic of the day, I want to talk about this question. The question is, “What if I succeed?” It’s a question I think all of us should be asking ourselves. Whether you are just starting out, you’re working a day job and you want to launch a side hustle, or you want to launch a business that can get to 10K MRR and support you.
I think we can sit and dream about things without thinking about the realities of them. Sitting down and asking yourself, “What if I succeed?” And then thinking or writing can be a way to prepare yourself for how things might actually be, instead of having this arrival fallacy, right? The arrival fallacy is where you say, “Once I get to that point with a side income of 2K a month, then I will have arrived and I’ll be happy.” “Once I can quit my day job and work for myself, then I’ll be happy.”
Or for those of you who have six figure, seven figure, multimillion dollar businesses, what is your end game? Is it growing the business and taking off huge amounts of profit? Well, what if you succeed? Is it selling for $20 million? $30 million? What if you succeed? What are you going to do then?
I have asked myself this very question about things that I’m working on. “What if I succeed with what I’m trying to do with this podcast, the YouTube channel, MicroConf, TinySeed? What does that look like and what does it mean for me? And what then?”
I think so many of us get caught up in the day-to-day, and we can get caught up in the anxiety of things that are exploding. We can get caught up in the grind and really lose focus on long-term goals and also be unhappy. And if you’re unhappy today, while you’re growing your company, odds are decent, you’re going to sell that company and you’re going to be unhappy then too. It’s easy to blame unhappiness on external factors. Usually, unhappiness, I won’t say comes from within, but it often has to do with your state of mind and how you are thinking about things, rather than being solely blamable on external factors.
So this exercise of, “What if I succeed?” I think helps you avoid this arrival fallacy, because I’ve known many people who get there, who get to 10K a month, who get to 100K a month, who get to a $10, $20 million exit and don’t know what to do next, and are shocked that they’re not happy forever. Don’t be shocked. We all go through it.
Asking yourself, “What if I succeed? It’s not just what are my goals, but how will I feel? What’s the next step after that?” Because as entrepreneurs, we are always pushing and looking to that next step. So don’t kid yourself, that you’re going to get somewhere and retire, stop working forever.
I’ve had three times in my professional career where I have effectively taken six to 12 months mostly off. And one time I was working 20 hours a week, it was right after I switched to full-time product work, and this is almost 15 years ago now, and I took about six or eight months and I worked 15, 20 hours a week. Before that, I was working 40 hours a week consulting, and then 15, 20 hours a week on my side hustle. So I went from 55, 60 hour weeks down to 15, 20. It felt like I wasn’t working at all, and it was amazing. And then, I got bored.
Second time I did it was when our second son, who is now 12, almost 13, was born. I took about eight or 10 months off. And that time I worked like eight hours a week, very minimal work. I was truly trying to achieve the four-hour work week because I thought that was what I wanted. I thought that would make me happy forever, and I got so bored.
And then, the last time I didn’t kid myself at all, that I was somehow going to be happy not doing anything. That was after selling and then leaving Drip in 2018, and I vowed to take about six months off. It was super rejuvenating and regenerating for me, because I didn’t kid myself into thinking that I was going to retire, because I’d been through it twice before and I knew that I would do something next, but I knew that that next thing that I did would be exactly what I wanted to do, nothing more, nothing less. Because I no longer had anything to prove to myself and I no longer wanted to work on things that didn’t make me happy almost every day.
So if you’ve never sat down and asked yourself, “What if I succeed with this?” I think it’s a good exercise to have, to take some notes, think about how you’re going to get there, to think about what it will look like when you get there, think about what you’ll do after, and to think about if along the way you might need that Armageddon beer.
Thanks so much for joining me this week and every week. This is Rob Walling signing off from episode 653.