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In this episode of Startups For The Rest Of Us, Rob along with Tracy Osborn , answer a number of listener questions on topics including founder hotseats, forgotten subscriptions, two-sided market places and more.
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Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host, Rob Walling. Today I’m joined by Tracy Osborn and we answer listener questions on two-sided marketplaces, mastermind hotseats, forgotten subscriptions, and more questions from listeners like yourself. This is Startups for the Rest of Us episode 479.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing startups, whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob and today with Tracy Osborn, we’re here to share our experiences to help you avoid the mistakes we’ve made.
Welcome back to the show. Each week, on the show, we cover topics relating to building and growing startups. We’re ambitious founders, but we’re not willing to sacrifice our life or health to grow our company. This week, we dig into the mail bag and we answer four or five listener questions. Some good questions came through this week.
I hope you enjoy my conversation with Tracy Osborn, who’s been on the show several times. She’s answered listener questions with me, she’s also was the founder of WeddingLovely, which was a two-sided wedding marketplace. I had interviewed her maybe 20 episodes ago if you want to go back and check that out for her expertise. I always like to save the two-sided marketplace questions for her since she lived that dream (so to speak) for four or five years.
We have several different show formats, oftentimes I will interview a founder and dig into their struggles, their failures, and their victories. We have these listener question episodes, sometimes we have breaking news, we get updates from a founder, Mike Taber, every 4-6 weeks. And of course we have our seats now and again.
The 2020 State of Independent SaaS Report is almost done. I’m putting the finishing touches on that. I’ve commented last episode how much time that’s taken. I’m super proud of what we put together, I’m stoked every revision I get back from the designers, gets me more excited.
I’m doing a live video stream of some key takeaways of that report in about two weeks. If you want to be sure to hear about that, head to stateofindiesaas.com and that’ll redirect you into MicroConf to a landing page. Enter your email and you’ll definitely get an email when that livestream is going to go live. It’s going to be about 20-30 minutes.
I’m doing it kind of a conference doc where I’m really presenting findings and what I think they mean and there has been some surprises that we’ve seen in the data and then some not so surprises. It’s fun to cover both sides of those. I hope you join me for that in just a couple of weeks. With that, let’s dive into this episode.
Tracy, thanks so much for coming back on the show.
Tracy: Happy to be here.
Rob: I am excited to dig into some listener questions today and specifically, I handpicked the first two because they’re about two-sided marketplaces. As people heard in the intro, you ran one for several years. I was saving those for when you’re back on the show.
Tracy: Very cool. I’m really excited to answer those.
Rob: Let’s dive into the first one. Unfortunately, it was a voicemail that we received several months ago and due to some technical glitches, I can no longer get at the audio file. But in essence the caller sent a voicemail in, and he said, “Look, I’m starting a two-sided marketplace. Obviously, we need both sides to be successful and only the businesses pay.” It’s a business on one side and consumers on the other. The business is I believe pay the subscription. Which side should they focus their marketing budget on?
Tracy: This is a fun one. It goes to the problem of marketplaces where the beginning part, the start of a marketplace is really hard because you need to get both sides of the marketplace. For WeddingLovely, the marketplace I’ve ran before, I need to get both the businesses on WeddingLovely, but also the consumers for those businesses so that they would have customers through my marketplace.
What I did to WeddingLovely and this is probably why I recommend to anyone who is running a marketplace, is to focus on bringing in as much revenue as possible, especially if you’re doing a bootstrap business, which means that you need to focus your marketing budget on the business side. But obviously you need to have some way of bringing in the other side of the marketplace.
What I recommend here is to look for ways that you can use, the side that you’re spending your marketing budget on, for instance, the businesses. What can you do to incentivize them to bring in the other side of the marketplace?
For example with WeddingLovely, I worked with the business on WeddingLovely, the wedding businesses, to give them the tools to bring in the people that they worked with, to bring them on the platform and encourage them to use WeddingLovely on the other side. My marketing budget was going to those businesses, but those in essence trickling down the other side by utilizing those businesses to bring in the people that they’re working with.
In essence I would recommend to spend your marketing budget on the people who are bringing you revenue, but do your best to incentivize the people that you’re working with, that you’re spending those revenue dollars on, bring in the customers that they work with, bring in the other side of the marketplace. So that you’re more efficient with the money that you’re spending on the marketing budget, but you’re still bringing in both sides of that marketplace.
Rob: I think that’s a savvy way to do it. The way I think about this is oftentimes, businesses marketing to other businesses need to spend a lot of money. You need to have higher quality content, you need to spend ads, nurture, and convince them why they should pay. There’s a huge job, and that’s just the job of any standard SaaS app.
On the flip side, businesses market to consumers frequently do it with virality, they do it with content, they do it with Instagram posts, giveaways. There’s things that you can do that they’re just so different. They’re so different in terms of the approaches. I think it’s not that you can do it more inexpensively with consumers, but I do think that given that we see people selling B2C ebooks for $10, $20 or $30, there’s obviously ways to acquire customers that are a lot cheaper than there are to acquire that big SaaS customer, where you’re paying $100, $500, or $1000 to close that account versus acquire someone for $10, $20, or $30. It’s such a different game.
In that sense, I agree with you and then I would put marketing budget towards the folks who are going to be paying you. I think there are guerilla, scrappy, bootstrappery ways to go after the consumer side of it. One of them is what you said, it’s to get the businesses to bring their critical mass to you. I think that’s a great way to do it. There’s models for B2C marketing. We won’t go there, but that’s what I would focus on as the cheaper and more expensive ways to get consumers to join up.
Tracy: Next question comes in from Anthony. He says, “Hi. I listen to a bunch of episodes, so I apologize if this was covered. I heard a couple episodes on marketplaces and how to get them going from a cold start, but I don’t think you’ve touched on the ‘come for the tools, stay for the network’ strategy, where you build a SaaS tool for one or both sides of the marketplace, and is useful regardless of the existence of the marketplace.” He also brings in a link to a Strife article that covers a little of this, which is a really cool link and I’m pretty sure you can add it to the show notes. What do you think?
Rob: I think it’s a great idea. In fact, if I personally were to go after a two-sided marketplace, which I tell people not to do, don’t do it. If you’re listening to this, don’t do it. It’s just so hard. Unless you have funding, or unless you’re a second-time founder, or unless you really have a unique insight or unique reach, or you already have an audience that essentially makes it more of a one-sided marketplace.
If you look at how Joel Spolsky and Jeff Atwood started Stack Overflow, that’s very much a two-sided marketplace. You need people asking questions and answering them. It’s both one-sided and two-sided because it’s the same audience, but they’re doing two things. They didn’t just go start from scratch. Community sites, two-sided marketplace is very hard to start, but they brought their massive blog audiences to it.
If you have that type of unique reach into a space, I would say consider doing this. All that said, if I were going to do it, start a two-sided marketplace, I would do it in a space where I have reach. If you think about TinySeed, it’s a two-sided marketplace because you need to bring investors in and get them to put money into a fund, and then you need to have enough reach into the founder space that folks will come to you. You essentially have a deal saying, “Hey, we want to be funded by you.” It’s a tough thing to manage from a cold stop.
I would do it in a space where I have reach or I would do it with a tool like this because having that utility, having a SaaS app that these businesses need, that you either give away just to draw them or that you give at an inexpensive price point in order to get the network effect going, is really an interesting way to do it.
Sean Ellis did this in reverse. He essentially started growthhackers.com and he used his reputation as a marketing expert (and he had a bit of an audience). He got a network effect and built it up—it’s like a social news site for growth hackers in essence—then, he built software on top of that. Actually, I believe later just totally pivoted into the SaaS aspect of it. It’s an interesting reverse model of what the question asker was asking, but I do think there are many ways to go about this.
Tracy: The one thing I would caution, the article on Strife talks about Hipcamp and how Hipcamp now allows you to book private campsites. I’m not totally familiar with Hipcamp. It’s a two-sided marketplace for private campgrounds, but it started out as a tool for people to find what campgrounds are out there, what’s available, and they sounded like they scraped a bunch of publicly available list in order to take all those data into one place.
The two-sided marketplace didn’t exist in the beginning, and we are talking about adding a tool or a launcher of two-sided marketplace. I feel like one needs to come after another, they can’t really do them concurrently because then you’re splitting your focus between two separate products, two different things you have to work about. One leads into the other.
That was one of the problems I had with WeddingLovely. There was a wedding at the marketplace when I launched a tool for people to plan their wedding. Then, all of a sudden I was a solo founder with two products that I was working on, two products to support, and it became really hard to do both. A marketplace is hard on its own. Supporting a tool and a marketplace can be tougher, especially if your tool is pretty significant.
That’s just one thing I want to bring up to caution against. It could be a good way. I agree that marketplaces are really, really hard. It’s part of the reason why WeddingLovely didn’t succeed, especially since I was a semi-bootstrapped founder, trying to run everything myself. Adding a tool on my own plate, did not help the situation actually. That probably significantly hurt it.
Rob: It’s like doing it on hard mode.
Tracy: Totally.
Rob: It’s like, let’s start a SaaS app and have all these other stuff, two-sided marketplace stuff to worry about. Like it’s not hard enough just starting and marketing a SaaS app. With that said, still, that’s what I would do. But I’m a SaaS person. That’s what would draw me to a two-sided marketplace, is the appeal of being able to build a product. There is a little bit of personal preference in there. It’s like know what you’re getting into. I think that’s really the moral.
Tracy: Actually, now that you mentioned this, building the app was me just being frustrated about running the marketplace and being something else to focus on, which leads into it, some of the other issues I had running this business. But it was a fun, different project to work on that would also help my business. I agree on that aspect.
Next question comes in from Simon. Simon writes, “Hey, Rob. I received the TinySeed update. I went through the list of podcast because I was curious about one thing. What is the type of mastermind you’re running with the hot seat implementation? I heard a bit about it on Peter Suhm/Matt Wensing episodes in Croatia, which is out of beta, but it left me curious, maybe you have some more info for me. Thanks and keep rocking.”
I find this question actually really interesting because before I started at TinySeed, I, myself, wasn’t totally aware about hotseats, masterminds, and these other things. I never participated in the mastermind myself. One of the things we’re doing at TinySeed for the next incoming batch is I wrote a little bit of a guide. I thought when I didn’t know what the hotseats were, I’m like, “Oh, but of course. Everyone else knows,” and just rolled with it. But we did find that a few of the founders were also unaware about how they work, so I wrote this little guide. Maybe you can go ahead and give an overview. I just want to say that I feel like it’s not obvious and not completely common that everyone knows how hotseats work.
Rob: Totally, yeah. It’s that shorthand where we get and we talk MRR and LTV, and the first time you listen to this podcast, you’re like, “What are all these acronyms mean? I think masterminds, hotseats, founder treats and all that stuff is the same.”
Mastermind is really just a phrase that we’ve adopted from Internet marketers, to be honest. In that context, there are people that would start these like, “$5000 a month mastermind and you worked with the Internet marketer, and he’s going to help you grow this big business.” I think they have a reputation that I don’t love, but in the startup space, it really does capture this idea of two, three, four founders are getting the other on on a regular basis, whether via Zoom or other video chat or whether it’s in person, really going deep on their businesses and having that implied NDA, confidentiality, and sharing their struggles.
This is especially helpful if you don’t have a co-founder. That someone’s along on the journey that is not your spouse, not your significant other, that you can complain to, that you can rant about, that you can celebrate wins with, who’s there on the journey so you don’t have to call someone and say, “Hey. I’m running this company and here’s the background for the past 12 months on what I’ve been doing and here’s my headspace.” It’s so hard to do that.
In the mastermind context, whether it’s weekly, biweekly, monthly, people know what’s going on and they’re following your story in a way that you can’t share on a podcast, because you need ultra-transparency and that kind of stuff. That’s in general how I think about a startup mastermind, and we actually did a whole episode on what they are. Go to startupsfortherestofus.com, search for startups mastermind, and Mike and I went through that a few years ago.
Within a mastermind, so what do you do? You’re on a call for an hour or 90 minutes. What do you actually do? There’s two formats that I’ve seen. One is just pure round-robin. If there are three people and you’re on it for 45 minutes, then each person gets 15 minutes.
The other format that I’ve experienced with and been familiar with is a hot seat format. That’s where, if there are three people, 45 minutes, two of the founders maybe give five-minute updates; this is what’s going on. Then, the other founder takes the other 35 minutes and go way deep on a single issue or a single problem they’re facing. They ask for advice and thoughts, it’s a white board session, they’re thinking that through, and how can you help. It’s all the stuff. So, a hotseat really just means I have a lot of time to dig into something. You can talk about how we’ve implemented that with the TinySeed batch calls because it’s evolved a little bit over time, but there’s different value from each format, right?
Tracy: Yeah. It’s nice to hear what we do with the TinySeed call formats and we’ve gotten a lot of questions about that actually in the application since how we run our calls. It’s 50%, maybe 70% hotseat format and then 30% the round robin everyone gets a chance to talk. The way I look at it with the round robin is that I want to say people are going to get their problems solved, but really it’s harder in the round robin format because everyone’s concentrating on their own issues, and it’s a way for us to give people a place to talk out loud, to think about their own issues, because there is less feedback when you have short amount of time and everyone is participating. You have less time for people to give feedback.
With the hotseats, that’s when it’s really like, “Okay, cool. We’re going to sit down, we’re actually going to solve the problem.” That doesn’t mean you can’t have that problem solving part on those round robin formats, but it’s a lot harder when you’re telling everybody you have an even small period of time in order to share your problem as compared to being like, “Okay, cool. We’re really going to think over this one thing.”
That’s one of the things that I think about a lot with the TinySeed calls and how they work. Again, I want to emphasize that I totally want people to have their problem solved more on the round robin format, but the shorter amount of time makes it a little bit harder.
Rob: I hope that was helpful. That’s our rundown. We actually have two episodes where we spent the whole episode talking about it. Episode 167 from 2014, How to Organize and Run a Startup Mastermind, and episode 277, Five Ways to Structure Your Startup Mastermind. And I believe that’s when Mike and I went back and forth because I like round robin in general for the weekly or monthly masterminds that I’m in. And he likes a hotseat, I believe. We were going back and forth. Then I’ve since changed my opinions on that as well. If you want to know more about masterminds, head to those episodes.
Tracy: Awesome. Next question comes from Mike and he asks, “Has there ever been any public numbers on how much a SaaS’ monthly revenue comes from forgotten subscriptions or lost users? Those users who are paying, but never use the service/content. As an owner, do you think there’s any moral responsibility for us to stop charging these people at a certain point?”
Rob: Good question, Mike. I’ve never heard of public data. I know that I’ve seen private data across the number of SaaS apps and it really depends on the niche. In all honesty, if you are doing high pressure sales tactics to that Internet marketee, aspiring entrepreneur audience, and you’re selling annual plans, these numbers are 50%–60% of people who have paid for that year, maybe even 70%, and never use that much like the ebooks people buy that they never read, the video courses people buy that they want to get to and never do.
I think a normal range depends on exactly how you measure inactivity, but I’d say between about 15% and 25% is the healthy SaaS app range, which sounds really high. Even right now, I’m paying for a couple of SaaS subscriptions and we’re technically inactive. I believe I have three right now that one I’m leaving for data purposes until we totally transition to a new system, another one I signed up, the trial ended, I’m just extending my trial, so I’m like two months of paying and I haven’t yet flipped the switch in moving something live.
With those, I don’t feel like I wouldn’t want the owner of that SaaS company to come to me and say, “Hey, I want to shut these down because I’m leaving it on purpose.” Obviously, someone forgets about it. Moral responsibility, I guess you could ping people. It’s more about moral responsibility to get people activated. It’s how it think about it.
I build apps to provide value to people, and if they’re not getting that value out of it, then I feel like I’m failing them in the sense that I didn’t educate them well enough to learn how to use it, they don’t know what to do next. That’s how I think about it. I don’t know what you think about it, Tracy.
Tracy: I think this goes from, I can’t remember who, but I feel like there has been a few services out there that have gotten public to say, “We had a certain amount of customers who aren’t using our app. We’re going to do the right thing and make sure they’re not being charged or they’ve been removed or whatnot.” They’re promoting it as, look how moral we are being.
If you want to go that way, then sure, but if you’re a large company, you have the privilege to: (a) remove that revenue and not have to worry about that, and (b) also, we have the analytics and the things in place so they can see who is actively using the app, they have the time to dig into those numbers, they have the time to spend the time to remove those people. Anyone who is a small business who’s bootstrapped or whatnot, that doesn’t have a lot of time, has to be really efficient with our time, I want to say, “Hey, cool. That’s a great moral thing to do,” but I don’t think a lot of small businesses have the time to do that. If that makes sense.
I want to say that it’s totally fine if you don’t feel like you have to spend the time working on those kind of things that is going to lose you revenue when you could be spending the time, like you said, improving your app, improving your activation number, spending your marketing dollars, and working on getting the word out. I just want to reassure that there’s no problem with not having the time to do this moral revenue losing thing as a small app, even though there are people out there who have that ability.
Rob: I think it’s a good point you raised, is just to even look into it, it takes time. And time is the most valuable asset of a founder, especially when you’re a one-person or a three-person team. The revenue is an issue as well. What if you went out and sought everyone out and you email them, and you double check, “Hey, I’m going to cancel your account. Do you want to cancel? Are you sure, are you sure?” That is a campaign on its own. You’re going to do that and then you’re going to lose 15% or 20% of your MRR.
If that’s something you want to do, then go do it. I don’t know anyone that’s done it. You mentioned examples of folks that do it. I certainly don’t think there’s anything wrong with that. It’s interesting just to look across the landscape of the way we used to buy software as paid as a one time fee, and then you had to buy it when the next major version came out.
You bought Microsoft Word and then you had it for three or four years, and it didn’t matter if you used it or not, you paid that fee up front, $100 or $200. Microsoft Office was so cost prohibitive that they have student versions and they’re giving it away in India and Africa and stuff because it is expensive. Whether you paid for it and used it five times, or whether you paid for it and used it solid for three years, you paid the same amount.
We’ve transitioned to subscription things, and I think that’s way better for the consumer, because now we can cancel. That’s why SaaS is so hard to grow. When people aren’t using it, you haven’t got that big chunk of money up front. In my opinion, if you make it easy for people to cancel and with every app I’ve ever had, we email a monthly receipt. Every month, you get an email that you’ve been charged this month, this is your bill date, and this and that. You’re getting notified. I’d imagine there’s some apps out there that don’t do that and they try to hide behind it or they hope you forget and never check your credit card statements. Don’t do that. I don’t think that’s ethical.
But if you’re pinging people, when email receipts go out, we used to get a response and it’s like, “Hey, I meant to cancel this. Can I get a refund?” which we would do. We would definitely get cancellations from receipts. If we’re optimizing for non-cancellation, we would have removed our email receipts, we would have removed the cancellation button in the app and made you email support or you haven’t […] call support like Comcast or whoever does.
That’s the way to game things and that’s where I think you get on the immoral or unethical approach. I think what I’ve outlined, which is you’re notifying them, they’re well aware you’re doing it, you’re trying to get people onboarded, I feel like you’re doing what you can. You can’t force someone to use your app.
Tracy: Totally. Next question comes from Poco. He writes, “Firstly, thank you so much for all the great work and resources you offer. Do you know of any podcast similar to yours that specializes or also covers B2C stuff?”
Rob: Shorter answer is no. The long answer is the reason is because there is really no such thing as B2C SaaS. I think Lars […] said this on an early mentor call, but I’ve thought about this for years. What company can you think of that is not an entertainment company. Netflix and Spotify, I wouldn’t consider SaaS, they’re more content delivery.
Even Dropbox, which started as a consumer company, look at their public filings now. There’s a reason they went after enterprise. They are an enterprise company, the consumers that is lead gen. It’s just so we all are comfortable using their software, so that when you go to the company, and they want to sell to a 10,000-person enterprise, everybody’s already familiar with it.
It’s the same reason Apple computer gave away an Apple IIe back in 1980–1981. They gave an Apple IIe to every public school in California. They did it so that kids could learn computers, but also, they were familiar with the Apple operating system in essence and that when they went home, if their parents said, “Oh, what kind of computer we should get?” The kid would say, “I bought an Apple IIe,” they’re familiar with it.
I’m totally open to listening to this and you know of a B2C software. It’s basically what he’s saying, a podcast that focuses on B2C software, please write in questions@startupsfortherestofus.com or post a comment on this episode. Do you know of any, Tracy?
Tracy: I’m glad that you didn’t because I didn’t as well. I was wracking my brain and hoping that you had a good one to respond with. But yeah, I agree with you on all those points.
Rob: I’m sure there’s someone building mobile apps out there who’s doing a podcast. The B2C side tends to be training courses, information, sometimes it’s dietary stuff like I need a paleo meal planning app, or meditation, wellness. I think that’s the kind of stuff that focus on and I don’t know of any podcast that focus on that. Aside from one-off, like if you listen to This Week In Startups, Jason Calacanis interviews founders and you’ll see B2C founders come through there. That might be the one place that I’d go if I were looking for this.
Tracy: I think that’s all the questions we have.
Rob: We’re wrapped up for the day. That’s great. Short episode. Folks want to find you online, tracymakes.com or @tracymakes on Twitter.
Tracy: I’m off to correct you. It’s tracyosborn.com.
Rob: Oh, good. I’m glad you corrected me. I’m confused when the domain doesn’t match the twitter handle.
Tracy: If I could get @tracyosborn on Twitter, I would. Alas, there is another person.
Rob: There is another Tracy Osborn. I went out and bought robwalling.com two years ago from a different Rob Walling, and one of the bigger reasons is I just wanted all my handles to match and I got tired of saying, no one could remember what my website was softwarebyrob.com, because back in 2005, that was what you did. You didn’t just put your name.com, I don’t know why. It just wasn’t a common thing to do and now it makes so much more sense.
Thanks again to Tracy for joining me on the show today. We answered a lot of listener questions. And if you have a question that you’d like to hear answered on the show whether by me or myself with a guest, leave us a voicemail at (888) 801-9690. You can always email us, it’s questions@startupsfortherestofus.com. You can attach a Dropbox link, what have you.
Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under Creative Commons. Subscribe to us by searching for startups in any pod catcher. Visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. I’ll see you next time.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing startups, whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob and today with Tracy Osborn, we’re here to share our experiences to help you avoid the mistakes we’ve made.
Welcome back to the show. Each week, on the show, we cover topics relating to building and growing startups. We’re ambitious founders, but we’re not willing to sacrifice our life or health to grow our company. This week, we dig into the mail bag and we answer four or five listener questions. Some good questions came through this week.
I hope you enjoy my conversation with Tracy Osborn, who’s been on the show several times. She’s answered listener questions with me, she’s also was the founder of WeddingLovely, which was a two-sided wedding marketplace. I had interviewed her maybe 20 episodes ago if you want to go back and check that out for her expertise. I always like to save the two-sided marketplace questions for her since she lived that dream (so to speak) for four or five years.
We have several different show formats, oftentimes I will interview a founder and dig into their struggles, their failures, and their victories. We have these listener question episodes, sometimes we have breaking news, we get updates from a founder, Mike Taber, every 4-6 weeks. And of course we have our seats now and again.
The 2020 State of Independent SaaS Report is almost done. I’m putting the finishing touches on that. I’ve commented last episode how much time that’s taken. I’m super proud of what we put together, I’m stoked every revision I get back from the designers, gets me more excited.
I’m doing a live video stream of some key takeaways of that report in about two weeks. If you want to be sure to hear about that, head to stateofindiesaas.com and that’ll redirect you into MicroConf to a landing page. Enter your email and you’ll definitely get an email when that livestream is going to go live. It’s going to be about 20-30 minutes.
I’m doing it kind of a conference doc where I’m really presenting findings and what I think they mean and there has been some surprises that we’ve seen in the data and then some not so surprises. It’s fun to cover both sides of those. I hope you join me for that in just a couple of weeks. With that, let’s dive into this episode.
Tracy, thanks so much for coming back on the show.
Tracy: Happy to be here.
Rob: I am excited to dig into some listener questions today and specifically, I handpicked the first two because they’re about two-sided marketplaces. As people heard in the intro, you ran one for several years. I was saving those for when you’re back on the show.
Tracy: Very cool. I’m really excited to answer those.
Rob: Let’s dive into the first one. Unfortunately, it was a voicemail that we received several months ago and due to some technical glitches, I can no longer get at the audio file. But in essence the caller sent a voicemail in, and he said, “Look, I’m starting a two-sided marketplace. Obviously, we need both sides to be successful and only the businesses pay.” It’s a business on one side and consumers on the other. The business is I believe pay the subscription. Which side should they focus their marketing budget on?
Tracy: This is a fun one. It goes to the problem of marketplaces where the beginning part, the start of a marketplace is really hard because you need to get both sides of the marketplace. For WeddingLovely, the marketplace I’ve ran before, I need to get both the businesses on WeddingLovely, but also the consumers for those businesses so that they would have customers through my marketplace.
What I did to WeddingLovely and this is probably why I recommend to anyone who is running a marketplace, is to focus on bringing in as much revenue as possible, especially if you’re doing a bootstrap business, which means that you need to focus your marketing budget on the business side. But obviously you need to have some way of bringing in the other side of the marketplace.
What I recommend here is to look for ways that you can use, the side that you’re spending your marketing budget on, for instance, the businesses. What can you do to incentivize them to bring in the other side of the marketplace?
For example with WeddingLovely, I worked with the business on WeddingLovely, the wedding businesses, to give them the tools to bring in the people that they worked with, to bring them on the platform and encourage them to use WeddingLovely on the other side. My marketing budget was going to those businesses, but those in essence trickling down the other side by utilizing those businesses to bring in the people that they’re working with.
In essence I would recommend to spend your marketing budget on the people who are bringing you revenue, but do your best to incentivize the people that you’re working with, that you’re spending those revenue dollars on, bring in the customers that they work with, bring in the other side of the marketplace. So that you’re more efficient with the money that you’re spending on the marketing budget, but you’re still bringing in both sides of that marketplace.
Rob: I think that’s a savvy way to do it. The way I think about this is oftentimes, businesses marketing to other businesses need to spend a lot of money. You need to have higher quality content, you need to spend ads, nurture, and convince them why they should pay. There’s a huge job, and that’s just the job of any standard SaaS app.
On the flip side, businesses market to consumers frequently do it with virality, they do it with content, they do it with Instagram posts, giveaways. There’s things that you can do that they’re just so different. They’re so different in terms of the approaches. I think it’s not that you can do it more inexpensively with consumers, but I do think that given that we see people selling B2C ebooks for $10, $20 or $30, there’s obviously ways to acquire customers that are a lot cheaper than there are to acquire that big SaaS customer, where you’re paying $100, $500, or $1000 to close that account versus acquire someone for $10, $20, or $30. It’s such a different game.
In that sense, I agree with you and then I would put marketing budget towards the folks who are going to be paying you. I think there are guerilla, scrappy, bootstrappery ways to go after the consumer side of it. One of them is what you said, it’s to get the businesses to bring their critical mass to you. I think that’s a great way to do it. There’s models for B2C marketing. We won’t go there, but that’s what I would focus on as the cheaper and more expensive ways to get consumers to join up.
Tracy: Next question comes in from Anthony. He says, “Hi. I listen to a bunch of episodes, so I apologize if this was covered. I heard a couple episodes on marketplaces and how to get them going from a cold start, but I don’t think you’ve touched on the ‘come for the tools, stay for the network’ strategy, where you build a SaaS tool for one or both sides of the marketplace, and is useful regardless of the existence of the marketplace.” He also brings in a link to a Strife article that covers a little of this, which is a really cool link and I’m pretty sure you can add it to the show notes. What do you think?
Rob: I think it’s a great idea. In fact, if I personally were to go after a two-sided marketplace, which I tell people not to do, don’t do it. If you’re listening to this, don’t do it. It’s just so hard. Unless you have funding, or unless you’re a second-time founder, or unless you really have a unique insight or unique reach, or you already have an audience that essentially makes it more of a one-sided marketplace.
If you look at how Joel Spolsky and Jeff Atwood started Stack Overflow, that’s very much a two-sided marketplace. You need people asking questions and answering them. It’s both one-sided and two-sided because it’s the same audience, but they’re doing two things. They didn’t just go start from scratch. Community sites, two-sided marketplace is very hard to start, but they brought their massive blog audiences to it.
If you have that type of unique reach into a space, I would say consider doing this. All that said, if I were going to do it, start a two-sided marketplace, I would do it in a space where I have reach. If you think about TinySeed, it’s a two-sided marketplace because you need to bring investors in and get them to put money into a fund, and then you need to have enough reach into the founder space that folks will come to you. You essentially have a deal saying, “Hey, we want to be funded by you.” It’s a tough thing to manage from a cold stop.
I would do it in a space where I have reach or I would do it with a tool like this because having that utility, having a SaaS app that these businesses need, that you either give away just to draw them or that you give at an inexpensive price point in order to get the network effect going, is really an interesting way to do it.
Sean Ellis did this in reverse. He essentially started growthhackers.com and he used his reputation as a marketing expert (and he had a bit of an audience). He got a network effect and built it up—it’s like a social news site for growth hackers in essence—then, he built software on top of that. Actually, I believe later just totally pivoted into the SaaS aspect of it. It’s an interesting reverse model of what the question asker was asking, but I do think there are many ways to go about this.
Tracy: The one thing I would caution, the article on Strife talks about Hipcamp and how Hipcamp now allows you to book private campsites. I’m not totally familiar with Hipcamp. It’s a two-sided marketplace for private campgrounds, but it started out as a tool for people to find what campgrounds are out there, what’s available, and they sounded like they scraped a bunch of publicly available list in order to take all those data into one place.
The two-sided marketplace didn’t exist in the beginning, and we are talking about adding a tool or a launcher of two-sided marketplace. I feel like one needs to come after another, they can’t really do them concurrently because then you’re splitting your focus between two separate products, two different things you have to work about. One leads into the other.
That was one of the problems I had with WeddingLovely. There was a wedding at the marketplace when I launched a tool for people to plan their wedding. Then, all of a sudden I was a solo founder with two products that I was working on, two products to support, and it became really hard to do both. A marketplace is hard on its own. Supporting a tool and a marketplace can be tougher, especially if your tool is pretty significant.
That’s just one thing I want to bring up to caution against. It could be a good way. I agree that marketplaces are really, really hard. It’s part of the reason why WeddingLovely didn’t succeed, especially since I was a semi-bootstrapped founder, trying to run everything myself. Adding a tool on my own plate, did not help the situation actually. That probably significantly hurt it.
Rob: It’s like doing it on hard mode.
Tracy: Totally.
Rob: It’s like, let’s start a SaaS app and have all these other stuff, two-sided marketplace stuff to worry about. Like it’s not hard enough just starting and marketing a SaaS app. With that said, still, that’s what I would do. But I’m a SaaS person. That’s what would draw me to a two-sided marketplace, is the appeal of being able to build a product. There is a little bit of personal preference in there. It’s like know what you’re getting into. I think that’s really the moral.
Tracy: Actually, now that you mentioned this, building the app was me just being frustrated about running the marketplace and being something else to focus on, which leads into it, some of the other issues I had running this business. But it was a fun, different project to work on that would also help my business. I agree on that aspect.
Next question comes in from Simon. Simon writes, “Hey, Rob. I received the TinySeed update. I went through the list of podcast because I was curious about one thing. What is the type of mastermind you’re running with the hot seat implementation? I heard a bit about it on Peter Suhm/Matt Wensing episodes in Croatia, which is out of beta, but it left me curious, maybe you have some more info for me. Thanks and keep rocking.”
I find this question actually really interesting because before I started at TinySeed, I, myself, wasn’t totally aware about hotseats, masterminds, and these other things. I never participated in the mastermind myself. One of the things we’re doing at TinySeed for the next incoming batch is I wrote a little bit of a guide. I thought when I didn’t know what the hotseats were, I’m like, “Oh, but of course. Everyone else knows,” and just rolled with it. But we did find that a few of the founders were also unaware about how they work, so I wrote this little guide. Maybe you can go ahead and give an overview. I just want to say that I feel like it’s not obvious and not completely common that everyone knows how hotseats work.
Rob: Totally, yeah. It’s that shorthand where we get and we talk MRR and LTV, and the first time you listen to this podcast, you’re like, “What are all these acronyms mean? I think masterminds, hotseats, founder treats and all that stuff is the same.”
Mastermind is really just a phrase that we’ve adopted from Internet marketers, to be honest. In that context, there are people that would start these like, “$5000 a month mastermind and you worked with the Internet marketer, and he’s going to help you grow this big business.” I think they have a reputation that I don’t love, but in the startup space, it really does capture this idea of two, three, four founders are getting the other on on a regular basis, whether via Zoom or other video chat or whether it’s in person, really going deep on their businesses and having that implied NDA, confidentiality, and sharing their struggles.
This is especially helpful if you don’t have a co-founder. That someone’s along on the journey that is not your spouse, not your significant other, that you can complain to, that you can rant about, that you can celebrate wins with, who’s there on the journey so you don’t have to call someone and say, “Hey. I’m running this company and here’s the background for the past 12 months on what I’ve been doing and here’s my headspace.” It’s so hard to do that.
In the mastermind context, whether it’s weekly, biweekly, monthly, people know what’s going on and they’re following your story in a way that you can’t share on a podcast, because you need ultra-transparency and that kind of stuff. That’s in general how I think about a startup mastermind, and we actually did a whole episode on what they are. Go to startupsfortherestofus.com, search for startups mastermind, and Mike and I went through that a few years ago.
Within a mastermind, so what do you do? You’re on a call for an hour or 90 minutes. What do you actually do? There’s two formats that I’ve seen. One is just pure round-robin. If there are three people and you’re on it for 45 minutes, then each person gets 15 minutes.
The other format that I’ve experienced with and been familiar with is a hot seat format. That’s where, if there are three people, 45 minutes, two of the founders maybe give five-minute updates; this is what’s going on. Then, the other founder takes the other 35 minutes and go way deep on a single issue or a single problem they’re facing. They ask for advice and thoughts, it’s a white board session, they’re thinking that through, and how can you help. It’s all the stuff. So, a hotseat really just means I have a lot of time to dig into something. You can talk about how we’ve implemented that with the TinySeed batch calls because it’s evolved a little bit over time, but there’s different value from each format, right?
Tracy: Yeah. It’s nice to hear what we do with the TinySeed call formats and we’ve gotten a lot of questions about that actually in the application since how we run our calls. It’s 50%, maybe 70% hotseat format and then 30% the round robin everyone gets a chance to talk. The way I look at it with the round robin is that I want to say people are going to get their problems solved, but really it’s harder in the round robin format because everyone’s concentrating on their own issues, and it’s a way for us to give people a place to talk out loud, to think about their own issues, because there is less feedback when you have short amount of time and everyone is participating. You have less time for people to give feedback.
With the hotseats, that’s when it’s really like, “Okay, cool. We’re going to sit down, we’re actually going to solve the problem.” That doesn’t mean you can’t have that problem solving part on those round robin formats, but it’s a lot harder when you’re telling everybody you have an even small period of time in order to share your problem as compared to being like, “Okay, cool. We’re really going to think over this one thing.”
That’s one of the things that I think about a lot with the TinySeed calls and how they work. Again, I want to emphasize that I totally want people to have their problem solved more on the round robin format, but the shorter amount of time makes it a little bit harder.
Rob: I hope that was helpful. That’s our rundown. We actually have two episodes where we spent the whole episode talking about it. Episode 167 from 2014, How to Organize and Run a Startup Mastermind, and episode 277, Five Ways to Structure Your Startup Mastermind. And I believe that’s when Mike and I went back and forth because I like round robin in general for the weekly or monthly masterminds that I’m in. And he likes a hotseat, I believe. We were going back and forth. Then I’ve since changed my opinions on that as well. If you want to know more about masterminds, head to those episodes.
Tracy: Awesome. Next question comes from Mike and he asks, “Has there ever been any public numbers on how much a SaaS’ monthly revenue comes from forgotten subscriptions or lost users? Those users who are paying, but never use the service/content. As an owner, do you think there’s any moral responsibility for us to stop charging these people at a certain point?”
Rob: Good question, Mike. I’ve never heard of public data. I know that I’ve seen private data across the number of SaaS apps and it really depends on the niche. In all honesty, if you are doing high pressure sales tactics to that Internet marketee, aspiring entrepreneur audience, and you’re selling annual plans, these numbers are 50%–60% of people who have paid for that year, maybe even 70%, and never use that much like the ebooks people buy that they never read, the video courses people buy that they want to get to and never do.
I think a normal range depends on exactly how you measure inactivity, but I’d say between about 15% and 25% is the healthy SaaS app range, which sounds really high. Even right now, I’m paying for a couple of SaaS subscriptions and we’re technically inactive. I believe I have three right now that one I’m leaving for data purposes until we totally transition to a new system, another one I signed up, the trial ended, I’m just extending my trial, so I’m like two months of paying and I haven’t yet flipped the switch in moving something live.
With those, I don’t feel like I wouldn’t want the owner of that SaaS company to come to me and say, “Hey, I want to shut these down because I’m leaving it on purpose.” Obviously, someone forgets about it. Moral responsibility, I guess you could ping people. It’s more about moral responsibility to get people activated. It’s how it think about it.
I build apps to provide value to people, and if they’re not getting that value out of it, then I feel like I’m failing them in the sense that I didn’t educate them well enough to learn how to use it, they don’t know what to do next. That’s how I think about it. I don’t know what you think about it, Tracy.
Tracy: I think this goes from, I can’t remember who, but I feel like there has been a few services out there that have gotten public to say, “We had a certain amount of customers who aren’t using our app. We’re going to do the right thing and make sure they’re not being charged or they’ve been removed or whatnot.” They’re promoting it as, look how moral we are being.
If you want to go that way, then sure, but if you’re a large company, you have the privilege to: (a) remove that revenue and not have to worry about that, and (b) also, we have the analytics and the things in place so they can see who is actively using the app, they have the time to dig into those numbers, they have the time to spend the time to remove those people. Anyone who is a small business who’s bootstrapped or whatnot, that doesn’t have a lot of time, has to be really efficient with our time, I want to say, “Hey, cool. That’s a great moral thing to do,” but I don’t think a lot of small businesses have the time to do that. If that makes sense.
I want to say that it’s totally fine if you don’t feel like you have to spend the time working on those kind of things that is going to lose you revenue when you could be spending the time, like you said, improving your app, improving your activation number, spending your marketing dollars, and working on getting the word out. I just want to reassure that there’s no problem with not having the time to do this moral revenue losing thing as a small app, even though there are people out there who have that ability.
Rob: I think it’s a good point you raised, is just to even look into it, it takes time. And time is the most valuable asset of a founder, especially when you’re a one-person or a three-person team. The revenue is an issue as well. What if you went out and sought everyone out and you email them, and you double check, “Hey, I’m going to cancel your account. Do you want to cancel? Are you sure, are you sure?” That is a campaign on its own. You’re going to do that and then you’re going to lose 15% or 20% of your MRR.
If that’s something you want to do, then go do it. I don’t know anyone that’s done it. You mentioned examples of folks that do it. I certainly don’t think there’s anything wrong with that. It’s interesting just to look across the landscape of the way we used to buy software as paid as a one time fee, and then you had to buy it when the next major version came out.
You bought Microsoft Word and then you had it for three or four years, and it didn’t matter if you used it or not, you paid that fee up front, $100 or $200. Microsoft Office was so cost prohibitive that they have student versions and they’re giving it away in India and Africa and stuff because it is expensive. Whether you paid for it and used it five times, or whether you paid for it and used it solid for three years, you paid the same amount.
We’ve transitioned to subscription things, and I think that’s way better for the consumer, because now we can cancel. That’s why SaaS is so hard to grow. When people aren’t using it, you haven’t got that big chunk of money up front. In my opinion, if you make it easy for people to cancel and with every app I’ve ever had, we email a monthly receipt. Every month, you get an email that you’ve been charged this month, this is your bill date, and this and that. You’re getting notified. I’d imagine there’s some apps out there that don’t do that and they try to hide behind it or they hope you forget and never check your credit card statements. Don’t do that. I don’t think that’s ethical.
But if you’re pinging people, when email receipts go out, we used to get a response and it’s like, “Hey, I meant to cancel this. Can I get a refund?” which we would do. We would definitely get cancellations from receipts. If we’re optimizing for non-cancellation, we would have removed our email receipts, we would have removed the cancellation button in the app and made you email support or you haven’t […] call support like Comcast or whoever does.
That’s the way to game things and that’s where I think you get on the immoral or unethical approach. I think what I’ve outlined, which is you’re notifying them, they’re well aware you’re doing it, you’re trying to get people onboarded, I feel like you’re doing what you can. You can’t force someone to use your app.
Tracy: Totally. Next question comes from Poco. He writes, “Firstly, thank you so much for all the great work and resources you offer. Do you know of any podcast similar to yours that specializes or also covers B2C stuff?”
Rob: Shorter answer is no. The long answer is the reason is because there is really no such thing as B2C SaaS. I think Lars […] said this on an early mentor call, but I’ve thought about this for years. What company can you think of that is not an entertainment company. Netflix and Spotify, I wouldn’t consider SaaS, they’re more content delivery.
Even Dropbox, which started as a consumer company, look at their public filings now. There’s a reason they went after enterprise. They are an enterprise company, the consumers that is lead gen. It’s just so we all are comfortable using their software, so that when you go to the company, and they want to sell to a 10,000-person enterprise, everybody’s already familiar with it.
It’s the same reason Apple computer gave away an Apple IIe back in 1980–1981. They gave an Apple IIe to every public school in California. They did it so that kids could learn computers, but also, they were familiar with the Apple operating system in essence and that when they went home, if their parents said, “Oh, what kind of computer we should get?” The kid would say, “I bought an Apple IIe,” they’re familiar with it.
I’m totally open to listening to this and you know of a B2C software. It’s basically what he’s saying, a podcast that focuses on B2C software, please write in questions@startupsfortherestofus.com or post a comment on this episode. Do you know of any, Tracy?
Tracy: I’m glad that you didn’t because I didn’t as well. I was wracking my brain and hoping that you had a good one to respond with. But yeah, I agree with you on all those points.
Rob: I’m sure there’s someone building mobile apps out there who’s doing a podcast. The B2C side tends to be training courses, information, sometimes it’s dietary stuff like I need a paleo meal planning app, or meditation, wellness. I think that’s the kind of stuff that focus on and I don’t know of any podcast that focus on that. Aside from one-off, like if you listen to This Week In Startups, Jason Calacanis interviews founders and you’ll see B2C founders come through there. That might be the one place that I’d go if I were looking for this.
Tracy: I think that’s all the questions we have.
Rob: We’re wrapped up for the day. That’s great. Short episode. Folks want to find you online, tracymakes.com or @tracymakes on Twitter.
Tracy: I’m off to correct you. It’s tracyosborn.com.
Rob: Oh, good. I’m glad you corrected me. I’m confused when the domain doesn’t match the twitter handle.
Tracy: If I could get @tracyosborn on Twitter, I would. Alas, there is another person.
Rob: There is another Tracy Osborn. I went out and bought robwalling.com two years ago from a different Rob Walling, and one of the bigger reasons is I just wanted all my handles to match and I got tired of saying, no one could remember what my website was softwarebyrob.com, because back in 2005, that was what you did. You didn’t just put your name.com, I don’t know why. It just wasn’t a common thing to do and now it makes so much more sense.
Thanks again to Tracy for joining me on the show today. We answered a lot of listener questions. And if you have a question that you’d like to hear answered on the show whether by me or myself with a guest, leave us a voicemail at (888) 801-9690. You can always email us, it’s questions@startupsfortherestofus.com. You can attach a Dropbox link, what have you.
Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under Creative Commons. Subscribe to us by searching for startups in any pod catcher. Visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. I’ll see you next time.
Episode 478 | A Few Things I Learned in 2019
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Show Notes
In this episode of Startups For The Rest Of Us, Rob reflects back on his goals of 2019 and shares some lessons that are broadly applicable to founders/entrepreneurs. He also shares how he “unplugged” from the internet/devices while on a recent vacation with his family and the benefits he experienced.
Items mentioned in this episode:
Hey, welcome to Startups for the Rest of Us. I’m your host, Rob Walling. This is episode 478 and I’m going to fly solo today. Here I sit, just a couple of days after the New Year. I just had a ton of reflection, it’s really interesting.
I’m going to cover a couple of things today. I want to talk a little bit about unplugging, based on recent experience that I had going to the Dominican Republic with my family. It was my first time there. I unplugged, we unplugged for half of the trip. It was four days with no wifi and no Internet at all. I want to talk a little bit about that experience and the impact that it had on me, something that I want to make a habit of in this coming year.
I also want to revisit my 2019 goals. I know often around this time of the year, Mike and I revisit our prior year goals and we look ahead at the next year’s. I’m not going to do something nearly so formal, but I did want to talk through quickly, some of the goals that I had set for 2019. I have some other reflections on 2019, some lessons that I learned, that I think are pretty broadly applicable to founders and people doing hard things, ambitious folks trying to build something that is difficult.
If nothing else, I hope that you leave this episode with a sense that we’re all going through the same thing, we all experience these same thoughts, and experiences are very similar ones as we do these. It’s this feeling of, “Wow, I’m not moving fast as I want,” or, “I’m not very good at this,” or, “This is scary and I don’t really want to do this anymore. How am I going to fix this?” that type of thing. As I reflected back on stuff that’s happened over the past 12 months, it has been an absolute whirlwind. I want to talk through some of that today.
To start, over Christmas and New Years, I spent eight days in the Dominican Republic with my family. As I said, I had bever been, my kids had never been, but Sherry had, either spoken in an event or been in a retreat there earlier last year. She booked eight days for us and the later half of that was completely off the grid.
It was scary at first. I will admit. It’s weird, I’m not on Twitter and Facebook all the time, and I’m not in Slack all the time. I don’t need that constant dopamine rush of an app giving me feedback. It’s just not how I’m built. I shouldn’t say that’s not how I’m built because I have been there at times, but I’ve been very deliberate about not allowing myself to fall into that trap. Yet, I found myself frequently thinking of something, wanting to just know the answer right then, and wanting to Google it. Realizing, “Oh, I want to listen to that book,” going to Audible and not being able to download it. It was this slow grind on me, this realization of how reliant I am on external inputs.
I’ve always consumed a lot of media, typically reading books, listening to books, listening to podcasts. I do that because it gives me new ideas and fresh perspectives that allows me to view my day-to-day job in a different way, but it also allows me to come on this show and not say the same things over and over, to have an evolving perspective.
What I also realized is if anything, I consume a bit too much. Even though I feel I have a pretty good balance of consumption in production, in producing things, podcasts, conferences, accelerator or whatever, I realized during this four-day Internet fast that my mind wandered in glorious ways. I got so deep into topics that I just wouldn’t have stumbled upon, how I not had this time.
This wasn’t a retreat. I’d like to take a retreat once a year, maybe twice a year if I really need it. Typically, it’s a once a year cadence where I ask questions, then I sit down and write stuff. This was and that. I was with the family, I was not asking specific questions, I was really casually moving from one topic to the next, and it led to some real ground breaking insights, to some problems, or just issues that MicroConf expansion over the next 12-18 months, has a lot of logistics and a lot of things that we’re thinking about. How can we do this well? How can we make this better? I just had a lot of thoughts on it that didn’t have the space to come out in my day-to-day and creative ideas bring seemingly from nowhere, but they weren’t from nowhere. It’s all the thinking, the note taking, and just the 10,000 hours of going through this process. I think it was a real reminder for me to do this more often.
As I said, I only want to do a retreat every year or so. I actually think I want to do this off the grid thing quarterly. I feel like I could do it once a month, in all honesty. It was calming and soothing to just go away, turn off the Internet, and think about things. You can tell it rock my world, so that’s something that I want to try to do in 2020, is do this off the grid.
Bill Gates used to call it “think weeks” and I think he only did it once a year, but I wouldn’t necessarily go out with the intent of reading a bunch of books and synthesizing information. It really is, what are the broader issues at hand that I want to think about, but it’s also just let your mind wander almost in a meditative state, let the issues show themselves, let the thought show themselves, and let these creative insights come. That was a bigger realization for me.
If you already do that, I’m impressed. If you have never done this, obviously, it’s easier said than done given how busy all of our schedules are. It was pretty eye-opening to me, it is something that I believe is a practice that I am lacking in and I want to do better. That was unplugging.
Second topic I want to cover are goals that I had set for 2019. Really, I had four goals that I had set about. The first was exercise two or three times a week. I mostly achieved that. I was way ahead of it for a while. Once winter came, travel got in the way. I have absolutely fallen off the wagon. I feel that’s mostly a thumbs up-ish for me and it’s something that I need to keep doing especially as I get older. My birthday was just five day ago, so I’m another year older and I need to keep thinking about it.
I hate exercise. I just don’t want it. I never liked it. I was always an athlete in highschool and college, so I didn’t need to exercise, because that’s just what I did. It was built into this routine of, you go in your practice for two hours and you’re in this amazing shape, but that where I’m at. I have to set this goal for myself, otherwise, I don’t do it. That was number one.
Second one was to continue pushing TinySeed forward. It was to get the first batch chosen. It was to get the first batch to have a noticeable impact on their growth and not just me, obviously, but the program itself, the mentors. To make TinySeed essentially the preeminent accelerator for bootstrapper and for folks who don’t want to shoot the moon and who want to build this ambitious yet sane stuff for startups. I feel like that is on, or ahead of schedule with everything that I had envisioned and spoken with my co-founder, Einar. That feels like a win to me.
At this point, things are continuing to roll and frankly accelerating, both with TinySeed and the applications for batch two. We had a lot more folks with revenue, we had a lot more folks with tractions in the second application process. With MicroConf expansion, the way the podcast has continued, even though Mike has taken a step back, a lot of things are hitting on all cylinders. It hasn’t been easy and I’ll get into that a little later in this episode, but in taking stock on what happened in 2019, I’m pinching myself a little bit.
It’s interesting. I got an email last night actually and it was from Squarespace. It said, “Hey, your website, tinyseed.com is about to renew on the annual plan.” I emailed Einar and I said, “It was only a year ago that we started our first application process and that we had a website.” Before that, we did a landing page or something for a couple of months prior, but that’s it. It feels like it’s been two or three years based on how fast things have moved and how ambitious we’ve been with it, but how things have come together.
Not everything comes together, that’s for sure, but there was so much work to be done when this Squarespace site went live and we started taking applications. It’s that sense of we didn’t have a bunch of systems in place. We didn’t have much of employees. We didn’t have a bunch of funding. It was the two of us and we are raising enough money to trying to do the first batch. We didn’t have an amazing application process. It was a Google form that fed into a Google Sheet, that when people ask, “Hey, I’d love to get a confirmation email.” I sat and thought, am I going to write some code to make it to this? Am I going to have to go back and hack PHP, or learn Ruby to make it do this?
Of course, I remembered Zapier monitoring Google Doc and say, “That was it, it was just gum and bailing wire, and you’re just trying to keep it together,” but the outward appearance was not that. The fact that I was sifting through 880 something rows in a Google Sheet, trying to sort things, interview people, and doing 70 something calls, it’s the image of that duck that’s on the water. From above, it looks calm, but underneath you’re just paddling like crazy. This is as much as startup is as anything I’ve ever done in terms of the uncertainty and just the scrappiness that you have to do.
In that startup life, I used to work with a guy who would say, “In startup world, a week is a month, a month is a quarter, a quarter is like a year, because you’re moving so fast.” That’s been a big reflection of me. I think something I’m pleased about with 2019 is, I don’t work a ton of hours. I don’t work 50-hour weeks. I work normal work weeks. I take time off to reflect, and I feel like that.
My advice to you if you’re not already thinking this way is that’s how you play long ball. That’s how you do this for 15 or 20 years because being an entrepreneur is very, very hard. As we know, it’s extremely stressful. If you work this 50–60 hour weeks, you can do it for a short period of time, but over time, it degrades your ability to produce. Anyway, that’s the reflection on TinySeed. I’m going to talk a little bit more about MicroConf in the podcast in a couple of minutes.
My third goal was to not not freak out when the stock market crashed in 2019. That just didn’t it happen. That was more of a prediction than anything. I’m not sure if that was actually a goal.
The last goal that I completely failed on was to write, or re-write a book. That one has been on my list for years and it’s always been a Plan B, that if I have time, I really want to re-write Start Small, Stay Small. I still get a lot of emails about it. It’s still 90% applicable, but it’s dated. Some of the links don’t work and there’s just certain tactics that don’t work. I’m at the point where I kind of throw my hands up, like is this something I think I can pull off in the next year? I just don’t know. I need to get more thoughts to doing that.
The interesting thing for me is my day-to-day work, not my personal life, but work life has really come down to three things: MicroConf, this podcast, and TinySeed. I’ve already talked a bit about TinySeed and what we did last year. A question I get (actually often) is, “How do you get so much done or how do you run all three of these things? They seemed very time consuming.” It’s often hard. I’ll answer, “Well, I have a Trello board and I have a process, all these and all that,” and that’s part of it, being efficient, being fast with email, and delegating all these stuff.
I think the biggest thing that has saved me hundreds of hours, if not thousands, is this division of responsibilities to extremely capable people. It didn’t happen by accident, but it’s something that I’ve learned over the years. Some people get here really quickly. Some people immediately think, “I need senior project thinkers who can get things done.”
I started with a very limited budget because I was a bootstrapper, with basically no budget and a salary for my day job. I went for a work week route in 2007 and started hiring VAs, which are very task-based people. You need heavy process. That worked for that stage, so I hung on to that stage too long, that stage of task-based people.
That was really right before Drip and it wasn’t until Drip where I realized, “Wow, hiring project people, where they can handle an entire project, even if they need some training, they’re more expensive than task based, but they’re such a step-up in terms of how much you can delegate, much you can give and expect results.”
I think the next step up is a product person. Someone who isn’t just working on a project and managing that in timelines and dates because you can find a lot of project managers, but how many product people can you find? By product, I don’t mean software, I mean a podcast, if you think about it, is a product. A producer could produce it in a way that’s really at a high level. That’s better than someone who, you’re just like, “Okay, these are the dates and these are the timelines of the podcast. This is who needs to be on.”I was actually thinking about how do I make this better, how do I think ahead and add things to this.
The same thing with your software product that you’re managing. Obviously, it’s a product. The same thing with MicroConf. That’s a product if you think about it. It’s a bunch of different smaller events. Now, it’s online stuff. It’s the state of indie SaaS report and the live video stream that’s going to come along with it, the Slack channel and all of that. It’s all really product-based thinking.
While I could sit down with someone and outline, “Hey, week-to-week, month-to-month, this is what needs to happen and someone could logistically do it.” How do you find someone who’s one layer above that? As a product thinker, something with TinySeed as an accelerator. It’s a bit of a luxury, but it’s a realization I’ve had that there is no chance that MicroConf, TinySeed, and the podcast could all exist at the level that it does, without many product-based thinkers.
That started off as Einar and myself, and then Tracy joined the team to be thinking about TinySeed. It’s not just how do we run TinySeed, but it’s how do we make it better constantly and new suggestions of how do we improve this process. I talked about our application process for batch one, that was bailing wire and duct tape. When the second one came around, Tracy evaluated all these tools, just went off, and made recommendations to us. Basically made a decision to make this thing better and more manageable. It is, it’s better. We look at it as v2.0 of our whole process.
As we expand, because we’re going to fund more companies with this second batch than we did in the first, obviously, batch three, four, five will expand from there. These things have to get better. I think that the scrappiness of that initial one of just getting it done is what a lot of us founders are really good at. How can you find a person if you’re not good, I’m not great at, then putting that into writing, communicating a process, and improving upon that process constantly iterating, that’s not my strong suit. But that’s okay because you can find people, you can hire people, you can work with people who can help you with that. That’s where you’re really going to level up, is where you figure out your strengths. You double down on those and how do you backfill against your weaknesses.
Speaking of the podcast, I have to admit, I haven’t talked about this on the show. With episode 448, when Mike and I had a really intense conversation about him stepping back, focusing on Bluetick, and whether or not he should, that whole thing (again, if you haven’t listened to that) is one of the best episodes of this entire (almost) 500 episode run, in my opinion.
I was kind of scared after that because how do you take something that has been running for close to 10 years with two people, has a very defined format, we have not iterated very much on the format, and how do you reinvent it in a way that hopefully: (a) isn’t the worst, (b) isn’t just as good but is actually better, how do you do that? That’s a task that I was faced with back in that May–June time frame. It’s close to seven months now.
I’ve done some experiments. I’ve tried different show formats, Q&A with different people. Obviously, have been doing interviews but trying to do interviews in a different way than everyone else does, hot seats, there are some solo episodes like this, but there was a lot of uncertainty there for me. I certainly felt more trepidation and angst about keeping it going and I how I would do that. I was also highly motivated.
There’s this interesting thing growing up. It was not an option for me and my siblings to quit things. I don’t want to sound like the old guy who walked uphill both ways in the snow, which I did not do (I rode a bus to school), but being in school, I was one of the scholar athletes where I got straight As and also played two sports. It was just a given, that I got on the bus at 7:30 and my parents pick me up after football practice at 7:00 or 7:30. It was just 12-hour days and I never once thought this is hard, I shouldn’t do this. It was just, this is what we do as scholar athletes or as entrepreneurs. We do the hard things. I think it’s almost easier when you don’t question them. There was, of course, a certain point you can drive yourself to depression, there’s health issues, there’s a bunch of stuff.
When Mike took a step back, I never once thought, “Well, I guess we should shut the show down. I guess we should end the podcast,” because it’s just not an option to quit. Again, there are exceptions. It’s an option to quit if your startup isn’t working, you’re going bankrupt. There are things, there are ways, but in these scenarios where it’s not everything falling off a cliff, but it’s like this is hard, or this is a mental challenge, or a physical challenge, for that matter, which is what it was growing up in highschool and college. It was hard workouts, it was staying up then to try to finish homework, it was being tired a lot, that kind of stuff. Again, it’s just wasn’t an option not to do it. I think that’s a skill. That skill of hard work and the ability to not just question things, I think has served me well.
The feedback I’ve gotten on the new podcast format has been overwhelmingly positive. I’ve loved the constructive feedback I have received and I’m making tweaks to the show format, the week-to-week stuff. I plan on once again continue to double down on the show in 2020. My love that I have, the freedom to experiment with things, and sometimes they work and sometimes they don’t. I love that I have the time to do it.
I know I have a limited time, given everything else, but it is in line with MicroConf and even with TinySeed, the ability to do TinySeed Tales. I wanted to do TinySeed Tales for five years, that high level of NPR production. Didn’t have the time, didn’t have the budget, and this moment is essentially was an excuse for me to do that. We are certainly looking at a season two of TinySeed Tales. Plan to keep doing that based on the feedback I received.
One more reflection on 2019 I wanted to share with you before I wrap is once again that reinforcement, that running something on autopilot or doing something for the second, third, fourth, fifth time is not that hard. But launching new things is extremely time consuming in way more than you think it’s going to be. This is the reason why I always advise people who say, “Hey, I’m going to try to launch or grow two pruducts at the same time, even two info products,” to don’t do that. Grow one, get it to a plateau, auto-pilot it as much as you can, and focus on the other, because launching two things is time consuming, it’s mentally taxing.
With MicroConf, we’ve done 19 of them, our 20th, and our 21st are here in a couple of months. We’re pretty good at them at this point. Obviously, we can always improve, but it’s not a decision point of everything of what should the format be? What should the meals be? What should the schedule be? Really, it’s a known quantity. Even if we revamp it and tweak it each year, that’s a known quantity. It isn’t as time-consuming as something that you think is going to be pretty quick. Like the example that I’m experiencing, that I just spent five hours yesterday working on, is a state of independent SaaS survey and report. I literally thought that I could hire a designer, hire a statistician, then draft a survey, and hand most of it off to be done. That has not been the case.
We are literally hundreds, hundreds of person hours into this, including the designer statistician and my time. It has been so much more of my time than I estimated or anticipated. It’s worth it. Like the results, I’m starting to see we have versions of the report now that we’re tweaking and it’s absolutely worth every minute and every dollar that we’re spending on it. But it is that reminder to me that everything is new, everything is a decision, and everything has to be thought through from square one, about how we word things, the look, the feel, how we analyze, and what assumptions we’re making. It’s just that everything is new.
That’s the same thing when you’re building a product. You don’t know what features to build next, what customer to listen to, and everything is new. You don’t know if your pricing is off, you don’t know if your messaging is off, you don’t know if your positioning is off, you don’t know if your brand is off, or all of those things is on and only one os off. It’s just so hard, there’s so many variables, so many decisions to make. This is why launching new things is time consuming, it’s mentally taxing, and it really takes a founder mentality to do it.
You can’t hand off a task that requires a founder to a project person, or oftentimes, even a really good product person has a tough time doing something from scratch. There’s this very unique skill set that takes something from zero to one, in that sense, from zero to existence. It’s really hard. I do believe it’s something that we get better at the more you do. I also think that it’s one of the hardest things that I’ve done over and over.
There’s this old marketing adage, you launch a new product to an existing audience or existing products to a new audience, but never do both at once. That means a new product to a new audience. Frankly, at some point in your career, you have to, because nobody starts out without an audience or a product and that is the hardest part. As you’re grinding it out, as you’re struggling through these decisions, the uncertainty of what you’re doing, rethinking your pricing and thinking, “Wow, everyone else has this figured out, why don’t I know what to do? Why don’t I know the right answer?” The answer is, no one else really does either.
In closing, I’m not sure if there has been a year in recent memory that I have looked forward to more than 2020. For me, personally, it’s a lot of friends. I’m enjoying the podcast, loving, doubling down on that. I’m loving the way that TinySeed is expanding and I’m super stoked, honestly, about MicroConf in the expansion. It’s just everything that I’ve been working on for 15 years has come together in a way that I don’t think I could have imagined. It makes the hard days and the set backs so much easier to fight through when you have the winds along the way and when you have good people, talented people that you really enjoy working with, and that essentially you’re constantly collaborating with to make whatever it is that you’re working on better.
With that, I’ll wrap up this episode, I wish you a prosperous, a successful, and a happy 2020. Thank you so much for being a listener of Startups for the Rest of Us for all these years. In a couple of months, we’re going to be at our 500th episode, 10 years, and it comes even before that point. It’s just a pleasure to be able to get on the mic and talk to you every week.
Thank you so much for listening. Thank you for all your support, your feedback, and your comments. I’ll see you next time.
I’m going to cover a couple of things today. I want to talk a little bit about unplugging, based on recent experience that I had going to the Dominican Republic with my family. It was my first time there. I unplugged, we unplugged for half of the trip. It was four days with no wifi and no Internet at all. I want to talk a little bit about that experience and the impact that it had on me, something that I want to make a habit of in this coming year.
I also want to revisit my 2019 goals. I know often around this time of the year, Mike and I revisit our prior year goals and we look ahead at the next year’s. I’m not going to do something nearly so formal, but I did want to talk through quickly, some of the goals that I had set for 2019. I have some other reflections on 2019, some lessons that I learned, that I think are pretty broadly applicable to founders and people doing hard things, ambitious folks trying to build something that is difficult.
If nothing else, I hope that you leave this episode with a sense that we’re all going through the same thing, we all experience these same thoughts, and experiences are very similar ones as we do these. It’s this feeling of, “Wow, I’m not moving fast as I want,” or, “I’m not very good at this,” or, “This is scary and I don’t really want to do this anymore. How am I going to fix this?” that type of thing. As I reflected back on stuff that’s happened over the past 12 months, it has been an absolute whirlwind. I want to talk through some of that today.
To start, over Christmas and New Years, I spent eight days in the Dominican Republic with my family. As I said, I had bever been, my kids had never been, but Sherry had, either spoken in an event or been in a retreat there earlier last year. She booked eight days for us and the later half of that was completely off the grid.
It was scary at first. I will admit. It’s weird, I’m not on Twitter and Facebook all the time, and I’m not in Slack all the time. I don’t need that constant dopamine rush of an app giving me feedback. It’s just not how I’m built. I shouldn’t say that’s not how I’m built because I have been there at times, but I’ve been very deliberate about not allowing myself to fall into that trap. Yet, I found myself frequently thinking of something, wanting to just know the answer right then, and wanting to Google it. Realizing, “Oh, I want to listen to that book,” going to Audible and not being able to download it. It was this slow grind on me, this realization of how reliant I am on external inputs.
I’ve always consumed a lot of media, typically reading books, listening to books, listening to podcasts. I do that because it gives me new ideas and fresh perspectives that allows me to view my day-to-day job in a different way, but it also allows me to come on this show and not say the same things over and over, to have an evolving perspective.
What I also realized is if anything, I consume a bit too much. Even though I feel I have a pretty good balance of consumption in production, in producing things, podcasts, conferences, accelerator or whatever, I realized during this four-day Internet fast that my mind wandered in glorious ways. I got so deep into topics that I just wouldn’t have stumbled upon, how I not had this time.
This wasn’t a retreat. I’d like to take a retreat once a year, maybe twice a year if I really need it. Typically, it’s a once a year cadence where I ask questions, then I sit down and write stuff. This was and that. I was with the family, I was not asking specific questions, I was really casually moving from one topic to the next, and it led to some real ground breaking insights, to some problems, or just issues that MicroConf expansion over the next 12-18 months, has a lot of logistics and a lot of things that we’re thinking about. How can we do this well? How can we make this better? I just had a lot of thoughts on it that didn’t have the space to come out in my day-to-day and creative ideas bring seemingly from nowhere, but they weren’t from nowhere. It’s all the thinking, the note taking, and just the 10,000 hours of going through this process. I think it was a real reminder for me to do this more often.
As I said, I only want to do a retreat every year or so. I actually think I want to do this off the grid thing quarterly. I feel like I could do it once a month, in all honesty. It was calming and soothing to just go away, turn off the Internet, and think about things. You can tell it rock my world, so that’s something that I want to try to do in 2020, is do this off the grid.
Bill Gates used to call it “think weeks” and I think he only did it once a year, but I wouldn’t necessarily go out with the intent of reading a bunch of books and synthesizing information. It really is, what are the broader issues at hand that I want to think about, but it’s also just let your mind wander almost in a meditative state, let the issues show themselves, let the thought show themselves, and let these creative insights come. That was a bigger realization for me.
If you already do that, I’m impressed. If you have never done this, obviously, it’s easier said than done given how busy all of our schedules are. It was pretty eye-opening to me, it is something that I believe is a practice that I am lacking in and I want to do better. That was unplugging.
Second topic I want to cover are goals that I had set for 2019. Really, I had four goals that I had set about. The first was exercise two or three times a week. I mostly achieved that. I was way ahead of it for a while. Once winter came, travel got in the way. I have absolutely fallen off the wagon. I feel that’s mostly a thumbs up-ish for me and it’s something that I need to keep doing especially as I get older. My birthday was just five day ago, so I’m another year older and I need to keep thinking about it.
I hate exercise. I just don’t want it. I never liked it. I was always an athlete in highschool and college, so I didn’t need to exercise, because that’s just what I did. It was built into this routine of, you go in your practice for two hours and you’re in this amazing shape, but that where I’m at. I have to set this goal for myself, otherwise, I don’t do it. That was number one.
Second one was to continue pushing TinySeed forward. It was to get the first batch chosen. It was to get the first batch to have a noticeable impact on their growth and not just me, obviously, but the program itself, the mentors. To make TinySeed essentially the preeminent accelerator for bootstrapper and for folks who don’t want to shoot the moon and who want to build this ambitious yet sane stuff for startups. I feel like that is on, or ahead of schedule with everything that I had envisioned and spoken with my co-founder, Einar. That feels like a win to me.
At this point, things are continuing to roll and frankly accelerating, both with TinySeed and the applications for batch two. We had a lot more folks with revenue, we had a lot more folks with tractions in the second application process. With MicroConf expansion, the way the podcast has continued, even though Mike has taken a step back, a lot of things are hitting on all cylinders. It hasn’t been easy and I’ll get into that a little later in this episode, but in taking stock on what happened in 2019, I’m pinching myself a little bit.
It’s interesting. I got an email last night actually and it was from Squarespace. It said, “Hey, your website, tinyseed.com is about to renew on the annual plan.” I emailed Einar and I said, “It was only a year ago that we started our first application process and that we had a website.” Before that, we did a landing page or something for a couple of months prior, but that’s it. It feels like it’s been two or three years based on how fast things have moved and how ambitious we’ve been with it, but how things have come together.
Not everything comes together, that’s for sure, but there was so much work to be done when this Squarespace site went live and we started taking applications. It’s that sense of we didn’t have a bunch of systems in place. We didn’t have much of employees. We didn’t have a bunch of funding. It was the two of us and we are raising enough money to trying to do the first batch. We didn’t have an amazing application process. It was a Google form that fed into a Google Sheet, that when people ask, “Hey, I’d love to get a confirmation email.” I sat and thought, am I going to write some code to make it to this? Am I going to have to go back and hack PHP, or learn Ruby to make it do this?
Of course, I remembered Zapier monitoring Google Doc and say, “That was it, it was just gum and bailing wire, and you’re just trying to keep it together,” but the outward appearance was not that. The fact that I was sifting through 880 something rows in a Google Sheet, trying to sort things, interview people, and doing 70 something calls, it’s the image of that duck that’s on the water. From above, it looks calm, but underneath you’re just paddling like crazy. This is as much as startup is as anything I’ve ever done in terms of the uncertainty and just the scrappiness that you have to do.
In that startup life, I used to work with a guy who would say, “In startup world, a week is a month, a month is a quarter, a quarter is like a year, because you’re moving so fast.” That’s been a big reflection of me. I think something I’m pleased about with 2019 is, I don’t work a ton of hours. I don’t work 50-hour weeks. I work normal work weeks. I take time off to reflect, and I feel like that.
My advice to you if you’re not already thinking this way is that’s how you play long ball. That’s how you do this for 15 or 20 years because being an entrepreneur is very, very hard. As we know, it’s extremely stressful. If you work this 50–60 hour weeks, you can do it for a short period of time, but over time, it degrades your ability to produce. Anyway, that’s the reflection on TinySeed. I’m going to talk a little bit more about MicroConf in the podcast in a couple of minutes.
My third goal was to not not freak out when the stock market crashed in 2019. That just didn’t it happen. That was more of a prediction than anything. I’m not sure if that was actually a goal.
The last goal that I completely failed on was to write, or re-write a book. That one has been on my list for years and it’s always been a Plan B, that if I have time, I really want to re-write Start Small, Stay Small. I still get a lot of emails about it. It’s still 90% applicable, but it’s dated. Some of the links don’t work and there’s just certain tactics that don’t work. I’m at the point where I kind of throw my hands up, like is this something I think I can pull off in the next year? I just don’t know. I need to get more thoughts to doing that.
The interesting thing for me is my day-to-day work, not my personal life, but work life has really come down to three things: MicroConf, this podcast, and TinySeed. I’ve already talked a bit about TinySeed and what we did last year. A question I get (actually often) is, “How do you get so much done or how do you run all three of these things? They seemed very time consuming.” It’s often hard. I’ll answer, “Well, I have a Trello board and I have a process, all these and all that,” and that’s part of it, being efficient, being fast with email, and delegating all these stuff.
I think the biggest thing that has saved me hundreds of hours, if not thousands, is this division of responsibilities to extremely capable people. It didn’t happen by accident, but it’s something that I’ve learned over the years. Some people get here really quickly. Some people immediately think, “I need senior project thinkers who can get things done.”
I started with a very limited budget because I was a bootstrapper, with basically no budget and a salary for my day job. I went for a work week route in 2007 and started hiring VAs, which are very task-based people. You need heavy process. That worked for that stage, so I hung on to that stage too long, that stage of task-based people.
That was really right before Drip and it wasn’t until Drip where I realized, “Wow, hiring project people, where they can handle an entire project, even if they need some training, they’re more expensive than task based, but they’re such a step-up in terms of how much you can delegate, much you can give and expect results.”
I think the next step up is a product person. Someone who isn’t just working on a project and managing that in timelines and dates because you can find a lot of project managers, but how many product people can you find? By product, I don’t mean software, I mean a podcast, if you think about it, is a product. A producer could produce it in a way that’s really at a high level. That’s better than someone who, you’re just like, “Okay, these are the dates and these are the timelines of the podcast. This is who needs to be on.”I was actually thinking about how do I make this better, how do I think ahead and add things to this.
The same thing with your software product that you’re managing. Obviously, it’s a product. The same thing with MicroConf. That’s a product if you think about it. It’s a bunch of different smaller events. Now, it’s online stuff. It’s the state of indie SaaS report and the live video stream that’s going to come along with it, the Slack channel and all of that. It’s all really product-based thinking.
While I could sit down with someone and outline, “Hey, week-to-week, month-to-month, this is what needs to happen and someone could logistically do it.” How do you find someone who’s one layer above that? As a product thinker, something with TinySeed as an accelerator. It’s a bit of a luxury, but it’s a realization I’ve had that there is no chance that MicroConf, TinySeed, and the podcast could all exist at the level that it does, without many product-based thinkers.
That started off as Einar and myself, and then Tracy joined the team to be thinking about TinySeed. It’s not just how do we run TinySeed, but it’s how do we make it better constantly and new suggestions of how do we improve this process. I talked about our application process for batch one, that was bailing wire and duct tape. When the second one came around, Tracy evaluated all these tools, just went off, and made recommendations to us. Basically made a decision to make this thing better and more manageable. It is, it’s better. We look at it as v2.0 of our whole process.
As we expand, because we’re going to fund more companies with this second batch than we did in the first, obviously, batch three, four, five will expand from there. These things have to get better. I think that the scrappiness of that initial one of just getting it done is what a lot of us founders are really good at. How can you find a person if you’re not good, I’m not great at, then putting that into writing, communicating a process, and improving upon that process constantly iterating, that’s not my strong suit. But that’s okay because you can find people, you can hire people, you can work with people who can help you with that. That’s where you’re really going to level up, is where you figure out your strengths. You double down on those and how do you backfill against your weaknesses.
Speaking of the podcast, I have to admit, I haven’t talked about this on the show. With episode 448, when Mike and I had a really intense conversation about him stepping back, focusing on Bluetick, and whether or not he should, that whole thing (again, if you haven’t listened to that) is one of the best episodes of this entire (almost) 500 episode run, in my opinion.
I was kind of scared after that because how do you take something that has been running for close to 10 years with two people, has a very defined format, we have not iterated very much on the format, and how do you reinvent it in a way that hopefully: (a) isn’t the worst, (b) isn’t just as good but is actually better, how do you do that? That’s a task that I was faced with back in that May–June time frame. It’s close to seven months now.
I’ve done some experiments. I’ve tried different show formats, Q&A with different people. Obviously, have been doing interviews but trying to do interviews in a different way than everyone else does, hot seats, there are some solo episodes like this, but there was a lot of uncertainty there for me. I certainly felt more trepidation and angst about keeping it going and I how I would do that. I was also highly motivated.
There’s this interesting thing growing up. It was not an option for me and my siblings to quit things. I don’t want to sound like the old guy who walked uphill both ways in the snow, which I did not do (I rode a bus to school), but being in school, I was one of the scholar athletes where I got straight As and also played two sports. It was just a given, that I got on the bus at 7:30 and my parents pick me up after football practice at 7:00 or 7:30. It was just 12-hour days and I never once thought this is hard, I shouldn’t do this. It was just, this is what we do as scholar athletes or as entrepreneurs. We do the hard things. I think it’s almost easier when you don’t question them. There was, of course, a certain point you can drive yourself to depression, there’s health issues, there’s a bunch of stuff.
When Mike took a step back, I never once thought, “Well, I guess we should shut the show down. I guess we should end the podcast,” because it’s just not an option to quit. Again, there are exceptions. It’s an option to quit if your startup isn’t working, you’re going bankrupt. There are things, there are ways, but in these scenarios where it’s not everything falling off a cliff, but it’s like this is hard, or this is a mental challenge, or a physical challenge, for that matter, which is what it was growing up in highschool and college. It was hard workouts, it was staying up then to try to finish homework, it was being tired a lot, that kind of stuff. Again, it’s just wasn’t an option not to do it. I think that’s a skill. That skill of hard work and the ability to not just question things, I think has served me well.
The feedback I’ve gotten on the new podcast format has been overwhelmingly positive. I’ve loved the constructive feedback I have received and I’m making tweaks to the show format, the week-to-week stuff. I plan on once again continue to double down on the show in 2020. My love that I have, the freedom to experiment with things, and sometimes they work and sometimes they don’t. I love that I have the time to do it.
I know I have a limited time, given everything else, but it is in line with MicroConf and even with TinySeed, the ability to do TinySeed Tales. I wanted to do TinySeed Tales for five years, that high level of NPR production. Didn’t have the time, didn’t have the budget, and this moment is essentially was an excuse for me to do that. We are certainly looking at a season two of TinySeed Tales. Plan to keep doing that based on the feedback I received.
One more reflection on 2019 I wanted to share with you before I wrap is once again that reinforcement, that running something on autopilot or doing something for the second, third, fourth, fifth time is not that hard. But launching new things is extremely time consuming in way more than you think it’s going to be. This is the reason why I always advise people who say, “Hey, I’m going to try to launch or grow two pruducts at the same time, even two info products,” to don’t do that. Grow one, get it to a plateau, auto-pilot it as much as you can, and focus on the other, because launching two things is time consuming, it’s mentally taxing.
With MicroConf, we’ve done 19 of them, our 20th, and our 21st are here in a couple of months. We’re pretty good at them at this point. Obviously, we can always improve, but it’s not a decision point of everything of what should the format be? What should the meals be? What should the schedule be? Really, it’s a known quantity. Even if we revamp it and tweak it each year, that’s a known quantity. It isn’t as time-consuming as something that you think is going to be pretty quick. Like the example that I’m experiencing, that I just spent five hours yesterday working on, is a state of independent SaaS survey and report. I literally thought that I could hire a designer, hire a statistician, then draft a survey, and hand most of it off to be done. That has not been the case.
We are literally hundreds, hundreds of person hours into this, including the designer statistician and my time. It has been so much more of my time than I estimated or anticipated. It’s worth it. Like the results, I’m starting to see we have versions of the report now that we’re tweaking and it’s absolutely worth every minute and every dollar that we’re spending on it. But it is that reminder to me that everything is new, everything is a decision, and everything has to be thought through from square one, about how we word things, the look, the feel, how we analyze, and what assumptions we’re making. It’s just that everything is new.
That’s the same thing when you’re building a product. You don’t know what features to build next, what customer to listen to, and everything is new. You don’t know if your pricing is off, you don’t know if your messaging is off, you don’t know if your positioning is off, you don’t know if your brand is off, or all of those things is on and only one os off. It’s just so hard, there’s so many variables, so many decisions to make. This is why launching new things is time consuming, it’s mentally taxing, and it really takes a founder mentality to do it.
You can’t hand off a task that requires a founder to a project person, or oftentimes, even a really good product person has a tough time doing something from scratch. There’s this very unique skill set that takes something from zero to one, in that sense, from zero to existence. It’s really hard. I do believe it’s something that we get better at the more you do. I also think that it’s one of the hardest things that I’ve done over and over.
There’s this old marketing adage, you launch a new product to an existing audience or existing products to a new audience, but never do both at once. That means a new product to a new audience. Frankly, at some point in your career, you have to, because nobody starts out without an audience or a product and that is the hardest part. As you’re grinding it out, as you’re struggling through these decisions, the uncertainty of what you’re doing, rethinking your pricing and thinking, “Wow, everyone else has this figured out, why don’t I know what to do? Why don’t I know the right answer?” The answer is, no one else really does either.
In closing, I’m not sure if there has been a year in recent memory that I have looked forward to more than 2020. For me, personally, it’s a lot of friends. I’m enjoying the podcast, loving, doubling down on that. I’m loving the way that TinySeed is expanding and I’m super stoked, honestly, about MicroConf in the expansion. It’s just everything that I’ve been working on for 15 years has come together in a way that I don’t think I could have imagined. It makes the hard days and the set backs so much easier to fight through when you have the winds along the way and when you have good people, talented people that you really enjoy working with, and that essentially you’re constantly collaborating with to make whatever it is that you’re working on better.
With that, I’ll wrap up this episode, I wish you a prosperous, a successful, and a happy 2020. Thank you so much for being a listener of Startups for the Rest of Us for all these years. In a couple of months, we’re going to be at our 500th episode, 10 years, and it comes even before that point. It’s just a pleasure to be able to get on the mic and talk to you every week.
Thank you so much for listening. Thank you for all your support, your feedback, and your comments. I’ll see you next time.
Episode 477 | Assessing Product-Market Fit, How to Find a Mastermind, and More Listener Questions with Brian Casel
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Brian Casel of Audience Ops, answer a number of listener questions on topics including assessing product market fit, finding a mastermind and more.
Items mentioned in this episode:
Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host, Rob Walling. This week, Brian Castle joins me on the show. We talked about assessing product/market fit, how to find a mastermind, and answer many more listener questions. This is Startups for the Rest of Us episode 477.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing ambitious startups, whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob and today with Brian Castle, we’re here to share our experiences to help you avoid making mistakes we made.
Welcome back to the show. We have a listener question episode today, Brian Castle, who you may know from BootstrappedWeb Podcast. He was also on the show just a few weeks back talking about his experience growing a productized service called Audience Ops. It’s a content creation service that he grew, then had a 40% decline in revenue, and then built it back up through 2016-2017, and then he taught himself how to code and has since launched an early stage SaaS called ProcessKit.
Brian has a myriad of experiences under his belt. He’s still an early stage SaaS founder but he has a lot of productized service experience. He’s a blogger and podcaster. I enjoyed the conversation today. I felt like we attacked some pretty interesting questions in a very Startups for the Rest of Us kind of approach—building the ambitious startups, being meticulous, disciplined, repeatable, taking on these questions in a pragmatic way, and answering in a way that we would approach them.
Before we dive in, I’ve had a few questions about what I’ve been up to lately. I think the biggest thing I’ve been focusing on is TinySeed batch two. Applications closed about a month ago. I know I’m having a ton of conversations with the founders of companies who applied to be part of TinySeed and that’s been super exciting. Moving on that process, it’s super time consuming but it’s critical to making this whole ecosystem work. I’m just really digging in and spending a lot of time on that in addition to working on MicroConf stuff.
In fact, to the state of independent SaaS, the survey that we ran a couple of months ago, that report is almost done. We’re putting the finishing touches in the next week or two. I’m going to be doing a live video presentation of the high-level findings and the most important findings of it here in just a couple of weeks at the end of January.
If you’ve already responded to the survey itself and included your email, we’ll certainly notify you once that’s available. If you’re not on the list, obviously, microconf.com, that would be the place to get on that list. I think it says “[2:42] SaaS report” or something in the header, there’s a landing page where you can find about that. Whether you come to the live video event or not, we will have a full PDF report of that that will be made available.
There’s some crazy, interesting, findings. I’m super stoked to be digging in this data. I have this mental model of how these all shakes down but to actually have data to look at and to sift through, and to see which of my assumptions, and my experiences match up with that, and which are, perhaps, contrary or countered by the data has been super fascinating. I’m enjoying it a lot. I can’t wait for us to share that with you and the rest of the MicroConf community.
With that, let’s start answering questions with Brian Castle. Brian Castle, thanks so much for coming back on the show.
Brian: Hey, Rob. Thanks for having me on.
Rob: Absolutely, man. We’re going to answer some questions today. I think you said the Question & Answer episodes are some of your favorites. Is that right?
Brian: Yeah. I was just going to say yeah. This is one of my favorite types of Startups for the Rest of Us episodes. I’m excited to dive in.
Rob: It’ll be fun. I’ve already reminded people in the intro of your areas of expertise and everything. We have some voicemails to kick us off. We actually have a comment; there’s an interesting one about how to accept payment by check in a clever way that I had never heard about. I’m really interested to hear…
Brian: I saw that one.
Rob: … your take on it. I was like, “Hey, I learned something. That’s great.” Let’s kick us off with our first voicemail which is a question about the product market fit survey.
“Hey, Rob. This is Daniel from [00:04:13]. I’m curious whether you ever come across the product/market fit survey methodology and what your thoughts on it might be or if there’s other quantitative number-based survey methodology you’ve used to assess customer feedback? Thanks a lot.”
Rob: To give listeners a little bit of an idea, I’m pretty sure he’s talking about the Sean Ellis’ product/market fit survey which is one question and then with a follow up and it’s, “How disappointed would you be if this X product went away? You’re no longer able to use X product.” The answers are: Don’t care, mildly disappointed, really disappointed, somewhat disappointed. It’s four or five different options. If someone selects the top two of being really disappointed or incredibly disappointed—the topmost severe disappointment—if at least 40% of your current customers select that then Sean Ellis said that’s when he deems you have product/market fit.
I like this survey. I respect the hell out of Sean Ellis; he’s a great growth marketer. I like this survey because it gives you data and information. I think one of the cons is I don’t see the product/market fit as binary. This makes it look like, below 40%, you’re not; above 40%, you are. I feel more like it’s a gradient where it’s a spectrum of having product/market fit with certain audiences and often times, you have a little bit of a product/market fit but not a lot. When you start getting a lot, you really, really, know it.
With that context for the listeners, I’m curious, Brian, to hear your thoughts on this.
Brian: I definitely, completely, agree about what is product/market fit and that is not binary, 100%. We don’t have a lot of context in terms of what the questionnaire wants to use the survey for. What’s its current situation? Is it a new idea? Is it doing customer research to validate it? Or is it an existing SaaS with 1000+ users and maybe considering doing a pricing change or something? What is the goal for using that sort of survey?
I think the usefulness of it really depends on different situations. Without knowing that background, I have a couple of thoughts on this. I really do like using surveys in general. I’ve seen that one. I’ve seen different versions of it. There are all sorts of good questions that you can include but I always want to really stress that it’s really important to couple pure data from surveys especially if you can have enough responses to have meaningful data with actual conversations with customers. You’re really going to find much more real information from actual conversations or just understanding the language that people use or their body language and things like that.
One thing I do a lot in all of my products, especially early on during the validation stage but even ongoing, I even put this into an automation flows that happen all year long where a person gets a survey, asks a few questions like that like, “How did you hear about this? What’s the problem you’re trying to solve? What are the current solutions that you’re currently using for? Currently paying for?” A lot of those I actually have free form text answers. I could use multiple choice and you can get harder data that way. But I like freeform because it gets them at least typing. Then I can read those responses then I’ll handpick the ones that just gave a lot of information. They seem really into this problem and they want to answer questions about it. Then I’ll personally invite them to call us. That’s usually the flow—survey to reading their responses to picking out people then talking to them.
Rob: Yeah. I think that’s a really good way to do it. I agree with you that talking to customers is going to get you so much more contacts than a survey. With that said, I should’ve Googled this survey before, so I wasn’t stumbling around describing it. The question is, “How would you feel if you could no longer use the product name?” There’s only four choices. I remember there being five maybe it changed over the years. But it’s very disappointing, somewhat disappointed, not disappointed, not applicable, and no longer using the product. It’s a 40% or more say very disappointed.
I’ve run this survey with three and maybe four different products. I remember it being harsh. HitTail was growing very quickly. Everything was working. It was a smaller scale app. It peaked in low-mid six figures of annual recurring revenue. But it was growing and it seemed like people were using it. When I did it, I didn’t get 40% that were very disappointed. I think it was 25%-29% range. I remember being pretty shocked by that and also disappointed. I remember running it with Drip. I’ve run it with two others before that. I have no memory of what the answers were.
I remember running with Drip. This is when Drip was really starting to take off, it was starting to grow very quickly, and I knew we were onto something. People were coming in, and churn was really low. I think we might’ve hit negative at that point. We sent this out. I remember being just like, “Oh. This is going to be a 70%.” I think it was a 43%. I remember being shocked. It’s a harsh judge. I guess what I’m saying is this, it really is a high bar that if you get near 40%, you’re probably doing pretty well with your product.
Brian: Yeah. Especially, since it’s just one question, it’s sort of like jumping off point to go dig in deeper. It’s like, you do the survey, you get the data back. It’s below 40% or above 40%. “What does that mean?” I don’t think that should mean, “Let’s go change everything and the product now.” I think that should mean, “Let’s go talk to customers.” Then understand what the underlying issues are that leads to that number.
Rob: Yes, indeed. All right. Our next question is from a longtime listener and many time MicroConf attendee, Andrew Connell [00:10:10].
“Hey, Mike and Rob. First, kudos to Mike for being so open and honest about Bluetick and what you’re working through. Hearing what and how someone else is working through the issues that you’ve got such as what you’re doing is one of the most hopeful resources for the rest of us. Thanks a lot, good luck, and keep it up.
Now, for a bit of a show feedback, and questions, I love the new format. Change is always good and it’s nice to see the change. From a fellow podcaster who’s been doing this for six years on my show, I like that listeners develop a connection to the host. A change in the format is just like moving houses; it’s still in the same family, but the environment has changed. Well done and keep it up.
This podcast, this community, and MicroConf has done a lot for me since discovering it six years ago. However, I now feel like a fish out of water. My business is in info products. Mostly, one-time sales but some description stuff. It’s not something I’d call SaaS though. This is an awesome community and dominated by SaaS businesses, topics, questions, tactics, etc. MicroConf even feels more like it’s microSaaSconf these days and that’s coming from a four- or five-time attendee. I’m sure there’s plenty of stuff that applies to different businesses, but I suspect you get my point. I don’t want you to take that as a complaint or a gripe. It’s just an observation. Maybe it’s unfair but I’m a firm believer in doing your thing. You guys keep it up and do what you’re doing. I’m curious on what you would think about this.
My question is more about advice on other communities to explore. Over the last year, I’ve been looking into the different conferences trying to find other podcasts and communities niching down to just the info product world. Info products and non-SaaS businesses have some very specific challenges. There had been other challenges that SaaS businesses have. From the last few years of MicroConf, I suspect that there’s a pretty good tight of community because we bond together and have a pretty good side of meetups and dinners of considerable sizes. Maybe I’m wrong or maybe there are other listeners who hear this commoner question who may identify with it as well.
I guess I should have told you who I am, I forgot to mention at the beginning, this is Andrew Connell from [inaudible 00:12:10]. Keep it up and just curious to hear what you guys think about this. Thanks.
Rob: What do you think, sir?
Brian: Yeah. A few things, I think within the MicroConf community, people might be surprised even though it clearly has the emphasis on software and SaaS. That’s certainly true from the speakers and the overall themes of these conferences. I can personally say for sure that I’m friends with multiple people who return to MicroConf every year and they do not own SaaS businesses. They ran ecommerce businesses, I know some info product people, and those who are in that community. I think that’s a really good thing. I think you can still find those people within MicroConf.
Outside of that, one to consider would be Dynamite Circle from Dan and Ian from the Tropical MBA podcast. I was active in that for a while; not so much recently. That community is pretty sizeable similar to the MicroConf community as well. It has a wider variety. There are some info products stuff. There’s ecommerce folks in there, some stuff related to travel, and working from anywhere. That’s a good one to look into. I don’t know about info product stuff specifically in terms of communities, that could be hard to find, but those are my thoughts.
Rob: Yeah. Tropical MBA or Dynamite Circle is what I was going to suggest as well. Good community. I’ve always considered them like a sister podcast to us. They’re more about being a digital nomad but also have a nice variety of e-com and content websites. There’s a lot of Amazon and ecommerce sellers. There have been some WordPress folks and even some SaaS folks who straddled both lines. Like that community. I spoke at their event at Bangkok in 2014, I believe. It had been a long time. I admire what they’re up to.
There is a Rhodium Weekend or Rhodium. The Rhodium community from Chris Yates is very authentic community similar to MicroConf in the sense that Chris has just groomed it over the years. There’s just a lot of good people. That’s more of a buying and selling website but there are definitely folks there who do info products.
The thing is that then you get into the internet marketing stuff. You can look at DigitalMarketer and the digitalmarketer.com from Ryan Deiss. That’s an online training. I believe they run traffic and conversions. You can go to that conference. It’s more about marketing and less about the product. That’s where software and SaaS are pretty unique. We do get together and geek out about our products in addition to other things. The product is the thing that unites us.
Whereas Dynamite Circle, it’s not the product you have. It’s more of the travelling and going against the standard script of the rest of the world. That’s the unifying factor. Whereas with eCommerceFuel—and other community—they are more like us where they unite around ecommerce. I would agree with you that I still think that we do get info product questions. I have a course although I took it off of Udemy because Udemy, I don’t know if you’ve seen it lately, but it’s kind of a train wreck as a seller. They just keep changing the terms. It was more headache than it was worth.
I had a course on there about hiring BAs. I have multiple books. I’m a big believer in info products especially in that stair step—that step one to get you to the point of quickly buying out your time. I think they’re fantastic. For me, personally, long term, that recurring revenue, that growth, that high sales multiple, if you just had to sell, that’s the beauty of SaaS. That’s why I think so many more people aspire to run a SaaS company than aspire to run an info product empire. I also think there’s a lot more opportunity and there’s just a lot more people successfully doing it.
Obviously, there are folks, yes, can you make a $100,000 or $200,000 or $1,000,000 in an info product launch? Of course. We see people doing it. But they’re really few and far between. It’s a hamster wheel of content creation. Again, it doesn’t have the sales multiple that SaaS do and all of that stuff. I think they’re fantastic for a certain purpose, but I haven’t come across a whole community that is united around just building and aspiring to do info products.
Brian: Yeah. I’ll just add one shameless plug here if you don’t mind. I run the Productize which is a course but it’s also a community. We’ve got a pretty good Slack community in there now. It’s for people who are primarily consultants and they’re looking to step up to running a business with the team and a productized service business. There are folks there who coupled that with training program. There are some software people, WordPress people in there too. You’ve got a good little chat going in there in the Slack group for people who are going through that transition phase, so that’s another good one.
Rob: Glad you mentioned it. productizecourse.com is where you’ll go to find out more about that. Thanks for the question, Andrew. I really appreciate it. I hope to run into you at the next MicroConf.
Our third voicemail of the day is an interesting one. It’s about building a very similar app and making it more stable. He’s wondering if that’s competitive advantage worth pursuing.
“Hey, guys. I want to start by saying thank you for the work that you put into this show. I find it to be truly inspirational so keep up the good work. I’m working on my first SaaS app. I’m a web developer by day. I work on it on nights and weekends. The idea for the product actually came from my wife. She works in a totally separate industry and interacts with a certain SaaS app on a pretty regular basis. One day she was describing to me how frustrated she was with this app. It was slow, unintuitive, and sometimes experience downtime during the middle of the day.
I sat down with her to take a look at it. It really seemed like it was on a shaky foundation from a technical perspective. However, it’s the only product that meets the specific needs that it solves which is why her company uses it. Our current working hypothesis is that if we build a more stable, intuitive, and functional version of the app that has feature parity, we will have enough differentiation to break into the market. What’s your take on this? Do you think functional superiority with the same set of features is enough to differentiate us? Or should we be thinking about extra features that would set us apart from them? Thanks, appreciate it.”
Rob: Mr. Castle, what are your thoughts on this one?
Brian: Yeah. It’s a good question. I like the fact that your wife is a user of this other software so you have that really close used case where you can get that personal research into how she and the other members of the company use the product. That’s always good. You probably want to expand beyond that and maybe talk to her coworkers or other people who are using it. I also like the fact that there is this solution out there in the market. It proves that some people do buy the solution, but it’s not overcrowded from what it sounds like.
I would also just have the question in your mind to understand how easy it is to reach that market. I don’t think you mentioned what type of company it is or which industry it is. Even though you might be able to build something for that market, how easy it is to go find other people who are in your wife’s position in other companies throughout the world or throughout the country or the region? I think that gets to that question of product founder fit.
Sure, you might be able to build the same product or achieve feature parity, but do you have the inroads or the communities or the channels to be able to reach those people? I know there are enough of them. I think that’s something you can certainly vet out over the next few months.
Rob: Yeah. I like the pros you pointed out. I think the fact that they proved the market out by having this app is good. I’ve mixed emotions about this one. I think you need to ask more questions. The first question I have is we can all, with our high standards, and our impeccable taste in UX, and usability go use an app and say, “Oh my gosh, that app sucks. I could build it better.” Do their users care at all? Do they care at all? Do they care one bit?
An example: I was a contractor/contract developer for a consulting firm that was redoing an app for the Los Angeles County. They spent a million bucks and they paid us to build all these stuff. The old app was literally a main frame, it was a terminal app that they would log into. The UX is typing. It was just wasn’t particularly fun, it was hard to train people, it was a pain in the butt. The delete key didn’t work, command this didn’t work, there was no undo, there were all these things you couldn’t do.
We built a modern, quick web front end on it and a bunch of the users were either so used to the old UI that they were like, “Oh, I used to like type this and then hit three tabs and it got me to the other thing and this doesn’t do that.” I’m like, “Yeah, you don’t need to do any of that. You just do one click and it auto populates from this XML import.” They’re like, “Oh well, this just seems complicated.”
Change is hard—I guess is one thing—and also, a lot of people just don’t care, and they’re used to using something. That’d be the first thing I would really try to stress out is like, “Does everyone at your wife’s work, are they complaining about this software and just dying for a better solution. Do they really, really need something better or do they not care?”
Second thing I would ask is, what are switching cost? Because without knowing that, if it’s just an export of a CSV and an import of CSV and everything is set up, awesome. But if its switching cost is to retrain someone or retrain your whole team on it and move a bunch of data and do a bunch of other stuff, that’s tough. If everyone’s on annual contracts, that means you only have a once a year when you can basically get to those prospects because they can’t just cancel for the next month. Once they’re on a year contract, they won’t get there. Think about switching cost and I would inquire about those.
The last one is one that Brian brought up, and it was a first one that came to me is you build a better product, can you get in front of the users? What are the traffic channels? How expensive are they? Are these people online? If they’re not online, you’re talking about customer pain. I’ve talked about competitor pain and customer pain, in this case, you probably won’t have competitor pain. You’re going to be the pain to your competitor because you’re going to build a better product. But you will have customer pain. Or could feasibly have customer pain if it’s more of a brick and mortar type business where you can’t just run some Facebook ads or do some content marketing and generate a bunch of leads where it’s literally cold calling or going to the events or whatever.
Since you haven’t told this about the industry, we’re just completely conjecturing here. I’m not saying you shouldn’t do it, but these are the three yellow flags or the three big questions I would have with just doing this approach. But can this approach work? Absolutely. Look at what Xero has done competing against Quickbooks, most people don’t like Quickbooks and Xero built a web-based admin or a web-based competitor to it. I think the fact that there was Infusionsoft and then Drip and ConvertKit and all these other tools were able to come in and do similar things, that’s what we were doing. We’re trying to build easier-to-use, more modern with the integrations we wanted, just a more pleasant experience overall and it worked. It can definitely work but I think you need to answer some questions before you dive in with both feet.
Brian: Yeah. Just one quick thing to add–kind of a low hanging fruit. First thing to do on that last point to figure out how could you actually reach this market. A question to ask your wife is to understand how her company bought the software that they’re currently using. Whether she bought it or a manager or somebody else was the decision maker. Did they go through an enterprise sales process or did they just Google and find the website and buy it that way? Did they pay monthly, did they pay annually? I think those are better questions to understand than even how the product works, to understand what you’re actually getting into.
Rob: Totally agree. That’s a good point. Thank you for the question, hope that was helpful. Our next question is not a question, but a comment from Kenneth Caw and he has written in a few months in the past. He says, “Hey, Rob, enterprise sales guy here wants some help,” and he has actually written in when I had David Heller on the show to do a hot seat about enterprise sales and he had written in with a bunch of good suggestions. He says, “A lot of people don’t know this, but Stripe actually released a way to receive payments by paper check this year.” This was a question that I believe in the Laura Roeder Q&A episode. We were asked, “How do you manage paper checks and how do you keep track of them and this and that?”
He’s pointing now Stripe can do it. He said, “This makes things so much easier since they provide your customers and the address for the check to be sent to, receive and process it on your behalf.” That’s crazy. “Coincidentally enough, we used to do the same thing as you did with Drip, which is to set a discount code to the customer in Stripe and then put reminders in and then check it. When payment is due, once a year, we deal with six figure checks sometimes, so this has been a total efficiency improvement since Stripe deals with the invoicing, follow-up reminders, analytics tracking, repayments, etc. Best of all as a remote company, we don’t need to depend on someone making a trip to our company’s PO box to look for the check.”
I’m not sure why Stripe doesn’t advertise this enough, but you should let your listeners know about that. Since all one has to do is simply enable a checkbox—pun intended—in Stripe, which saves us bootstrappers precious time and resources managing this. Plus, it gives you an additional reason to deal with enterprise customers that want to do pay by checks.” Big smiley face because Ken is of course an enterprise sales guy.
Thank you so much, Ken, for writing in. Did you have any idea about this, Brian?
Brian: I had zero idea about this.
Rob: I never heard of that. That’s a great service. When he said by check I thought he was going to say, and his subject line is this payment by check, use Stripe. I thought he was going to talk about e-checks where it’s like just an ACH thing where you get the routing number. But I mean literally, an address the mail to check, that is bravo, Stripe.
Brian: That really is pretty incredible. I knew about the ACH thing. I kept promotional emails from Stripe. I have not received anything about this feature. It seems like a pretty killer feature.
Rob: Yeah.
Brian: I’m curious about your thoughts on accepting checks in general. I’ve seen this in my business in Audience Ops, I’ve had quite a few leads actually, ask for the ability to purchase our service using a check or having us invoice them and then them paying us like a more traditional agency or consulting model. I’ve refused those. We only stick to credit card and debit cards through Stripe subscriptions. I know for a fact that I have left some money on the table because of that, but I opt that way because I just don’t want to deal with chasing people down for checks in the mail.
Rob: Yeah, that’s the tradeoff. At Drip, once we started accepting checks, it was late, it was after we had a much larger team. There were salespeople that could manage it. That really is what it is. It’s like putting something on your calendar to remind you to check in with someone. But the bigger thing we did is we just said we had a minimum for a check. If I were in your shoes, I would only accept it for annual prepay. I would not do it on a monthly basis. It’s like, “Hey, if you really want to pay via check, then you gotta pay 12 grand all at once or 24 grand or whatever the price point is.” That would be how I would approach it at your scale because it’s not a requirement.
But yeah, once you get up in the 25K and up, maybe even 20K and up annual contract value, you need to start doing that at least in the B2B SaaS base. It’s great that Stripe accepts it. Obviously, it’s enough of a pain point that they started doing that. They wouldn’t have done that if people weren’t asking for it. But I also think then I wonder it says, they’ll take care of all the reminders and all that stuff that’s pretty fascinating. I’d like to almost investigate this a little more because again, we had to hand build something that reminded a salesperson to reach out and make sure that the check came through.
Brian: Yeah, for sure. The other thing that I would at least keep in mind for my business is that we’re a recurring service and that’s part of the reason why we don’t do checks is that we need the payments to keep coming in so that our team keeps working. If there’s a delay, then we would need to know to pause the service for a period of time. I guess if this works automatically through Stripe and then Stripe can just mark it as unpaid or paid, then that can be your indicator.
The other question that I would wonder about is international payments. Because that’s sort of a headache that we’ve seen just because credit cards internationally tends to decline, especially for higher dollar amounts more often than like US-based for whatever reason. We’ve had to fix failed payments more often with international. I wonder if this could somehow help that. I’m not sure.
Rob: My guess is no. I’ve not even Googled this, but international checks are so complicated with the banking that I would guess that would be a V2 if they were going to try to tackle it. There’s also big fees attached to it with sending checks and trying to cash them. If you send a US check to a Canadian or vice versa, there’s this big fee they charge to do that internationally. We experience all the same stuff you’re saying with the international credit cards being declined more often than that. I don’t think this would help.
Also, one other thing to throw in is, I wonder how much Stripe charges as a fee for doing that. This is something to think about. If you’re signing a $30,000 annual contract, a 3% fee on that is $900. That’s where it starts to make sense to maybe take a check because you can basically cash that for free. If Stripe’s still charging 3%, you have to think about that, but if it’s more like ACH where it’s half a percent or 1%, this could totally be worth it.
Thanks again for the info, Ken. Always appreciate your insights. Next question is from [Mereck 00:29:46] and he says, “Hey guys, great show. Would love to get your thoughts. I’m a cofounder in a small software house.” I think he’s an agency. Because they’re consulting from their hired hourly or by project. “The issue is that my cofounder doesn’t help company anymore. He made some significant contributions in the early days including his know-how, some money investing directly and working for free. But right now, because of an unplanned change of direction in the company, and a change of the market situation, we can’t find paid work for him. Not because he does not have value to give to the market, but for now the company is too small for two founders/CEOs.
He was upfront about his expectations about work and skills in the company and he still help out a few hours a week for free. No hard feelings between us, we aren’t looking for a legal resolution. I’m wondering if we should wait for the company to grow, if we should return him the money he invested, buy out his shares, or what you think? Thank you so much for your thought.”
This is an interesting one. We don’t often get a lot of too many consulting questions. But I feel this could happen with a SaaS startup. Skills no longer and neither might be an interesting one. I guess if you’re a salesperson, co-founded it and then you decide to go way down market and not need sales, that can be something. Curious if you have thoughts on this, Brian.
Brian: This one is tough. I don’t know all the details on this. One thing that stuck out to me is that he talked about refunding the money that he invested. I guess the partner’s actually put up some of their own cash other than just putting in their time. If it were just time and you’re talking about giving him compensation for the time that he spent, that’s a tricky one because you should have some agreement going into this thing that, “Hey, we’re all investing in this idea. We don’t know if it’s going to go anywhere. There’s no promises.”
Then there’s the question of, how was the initial partnership agreement drawn up, if there was any, which there really should, generally speaking. And there’s the concept of vesting and a vesting schedule. One model that I think we’ve seen recently is the user list. You spoke to Jane about this, is that right? They sort of paused her vesting so that her initial time was still–that value remained, but then from a certain date going forward, she’s phased out a bit. That’s one model to look out.
Rob: I think consulting firms don’t normally vest, but in this case that would’ve been super helpful. If he was above a certain number of hours per week or whatever he was vesting and then at the time that he leaves then yeah, you do, he either leaves it in until it grows. It’s up to him. If he owns 10, 20% of the company and he only vested that much, then he could say, “Hey, please buy me out.” And then you have to figure out, “Hey, we can buy it out over a year or two. We can pay this much per month out of cash flow.” Or if he wanted to grow, he could gamble and leave it in and expect the company will grow and it’ll be worth more when you get there.
I believe our consulting firms, obviously, there’s going to be a range, but I think valuations are around one times annual revenue. I don’t know if it’s looking ahead or looking back. I’m not exactly sure. But someone in the community might have more info on that. But I know the multiples compared to SaaS is pretty low because it is just hours. It’s a […] for hour-type thing.
Brian: Recurring contracts can help improve that.
Rob: Exactly. But assuming that he’s fully vested, and he owns a third or half of the company, I really do think it’s a conversation. I don’t think there is anything you should do here. I think it’s up to the two of you. With consulting firms, they can have pretty good profit margins. The cash coming off could be used to buy him out. I think that’s probably the long-term play. Say, you don’t have someone with stock who really isn’t working on the business.
The hard part is how to value if he’s doing all this work for free. I don’t know how you guys figure that part out. It’s just what’s fair there? Do you agree on hourly rate and try to estimate? Or is that just what created the value in the company and his stock reflects the value of that in essence.
Brian: Again, we don’t really know all the details here, but if it’s purely consulting and the work that he was involved when the work existed was just consulting project that started and finished, then I think that the question is, “How much does his contribution to those projects live on after he stops working in the company?” I think the simplest view is split whatever revenue came from those projects 50-50, whatever your partnership agreement was, and then new projects going forward that he’s not involved in, he doesn’t really have a part in those. That would be a simple way to look at it.
The other thing to consider depending on how big the numbers are that we’re talking about here and everything else, you might want to just talk to a third party. I know that there are professional arbitrators, but there are people in this community who…
Rob: It’s like mediators. That’s a good way to think about it is to get someone, other party, to just give you guys some direct advice knowing all the details because that’s the problem is, I think there’s some gaps here. Hope that was helpful, [Mereck 00:35:03]. Wish you the best of luck figuring that out.
Our next question is from Fred Myer and he’s asking for some advice for finding or starting a mastermind. He says, “Hi, I’m a web developer and owner of two lifestyle businesses looking for a mastermind to start or join. The easy to Google options don’t seem attractive. Do you have any advice on finding or starting a good mastermind?”
I’m going to assume that since he’s a web developer, he’s looking for a software-oriented mastermind. My recommendation is always Ken Wallace’s mastermindjam.com if you really have no network. My first recommendation is always, go to your network, go to events, be part of the Startups For the Rest of Us and the MicroConf community and you’ll find people. But if you haven’t done that, can’t do that, whatever, MastermindJam is a good alternative that Ken matches people up. What do you think, Brian?
Brian: Yeah. Totally agree. I recommend MastermindJam all the time. I also recommend going to conferences like MicroConf, like the upcoming MicroConf locals, that should be a good one too for this. Yeah, just getting into communities like that. In the past, when I was really early on in this industry and I didn’t know too many people, I had a bit more focus on my local community. I would go to local meetups. At the time I was into web design and WordPress, I went to local web design and web development and WordPress meetups. I met some really good friends through that. That turned into local mastermind groups.
These days, I’m not in a weekly mastermind currently like I was for a while. But my mastermind group now was borne out of the MicroConf community where we do TinyConfs a couple times a year. We all fly to one place and have a deep dive. We chat on Slack throughout the year. I find that that’s a good format for me right now.
Rob: Yeah. I think that makes a lot of sense. Sir, we are all out of time for today. If folks want to keep up with you, they can head to, let’s see, there’s productizecourse.com, there is audienceops.com which is your productized service where you and your team create content for content marketing for folks on a subscription basis, and castlejam.com, is that your personal website?
Good. Good call. Are you still @casjam on Twitter?
Brian: Yeah, my teenage AIM screen name lives on through Twitter.
Rob: I know. I registered software by rob.com in 2004, 2005 and started blogging. It’s like, “Why didn’t I just registered my name?” Maybe it was taken or maybe I didn’t think about it, but years later—it was literally in the past, probably 18 months—finally, I bought robwalling.com from the previous owner and redirected in it. It’s just so much easier. It’s so much more memorable. It’s like once people remember your name they can find you versus trying to remember this derivative of your name.
Brian: My whole life I’ve had people mispronouncing and misspelling my last name because they think it’s like the word castle. But then in recent years I’d have people mispronounce or not understand even what casjam even means which it doesn’t really mean anything. I just got sick of explaining that whole thing. It’s my name. That’s where my blog and newsletter and links to my podcasts and products and all that’s on there.
Rob: That’s the center. Very cool. If folks, they listen to this podcast, they will like the Bootstrapped Web podcast where you and Jordan Gall chat every week or so about this kind of stuff. I’m a long-time listener, long time first time; long time listener, first time caller. Anyways, alright man, I’ll let you go. It was a pleasure having you.
Brian: Yeah, good time answering these questions. Thanks for having me on, Rob.
Rob: Absolutely. That wraps us up for the day. If you have a question that you want answered in a future episode of the show whether by me or a guest, you can leave us a voicemail at 888-801-9690. You can email questions@startupsfortherestofus.com. Obviously, you can have just plain text in there, you can attach an MP3 […] Dropbox link to an AIFF. You know the drill.
Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under Creative Commons. If you’re not subscribed to Startups For the Rest of Us, you really should be, you’re missing out. Search for startups in any pod catcher. Visit startupsfortherestofus.com for full transcript of every episode posted within a week, maybe two of when the episode goes live, but continue to hear that the search for transcripts are super helpful for people so we will continue to do those. Thank you for listening. I’ll see you next time.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing ambitious startups, whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob and today with Brian Castle, we’re here to share our experiences to help you avoid making mistakes we made.
Welcome back to the show. We have a listener question episode today, Brian Castle, who you may know from BootstrappedWeb Podcast. He was also on the show just a few weeks back talking about his experience growing a productized service called Audience Ops. It’s a content creation service that he grew, then had a 40% decline in revenue, and then built it back up through 2016-2017, and then he taught himself how to code and has since launched an early stage SaaS called ProcessKit.
Brian has a myriad of experiences under his belt. He’s still an early stage SaaS founder but he has a lot of productized service experience. He’s a blogger and podcaster. I enjoyed the conversation today. I felt like we attacked some pretty interesting questions in a very Startups for the Rest of Us kind of approach—building the ambitious startups, being meticulous, disciplined, repeatable, taking on these questions in a pragmatic way, and answering in a way that we would approach them.
Before we dive in, I’ve had a few questions about what I’ve been up to lately. I think the biggest thing I’ve been focusing on is TinySeed batch two. Applications closed about a month ago. I know I’m having a ton of conversations with the founders of companies who applied to be part of TinySeed and that’s been super exciting. Moving on that process, it’s super time consuming but it’s critical to making this whole ecosystem work. I’m just really digging in and spending a lot of time on that in addition to working on MicroConf stuff.
In fact, to the state of independent SaaS, the survey that we ran a couple of months ago, that report is almost done. We’re putting the finishing touches in the next week or two. I’m going to be doing a live video presentation of the high-level findings and the most important findings of it here in just a couple of weeks at the end of January.
If you’ve already responded to the survey itself and included your email, we’ll certainly notify you once that’s available. If you’re not on the list, obviously, microconf.com, that would be the place to get on that list. I think it says “[2:42] SaaS report” or something in the header, there’s a landing page where you can find about that. Whether you come to the live video event or not, we will have a full PDF report of that that will be made available.
There’s some crazy, interesting, findings. I’m super stoked to be digging in this data. I have this mental model of how these all shakes down but to actually have data to look at and to sift through, and to see which of my assumptions, and my experiences match up with that, and which are, perhaps, contrary or countered by the data has been super fascinating. I’m enjoying it a lot. I can’t wait for us to share that with you and the rest of the MicroConf community.
With that, let’s start answering questions with Brian Castle. Brian Castle, thanks so much for coming back on the show.
Brian: Hey, Rob. Thanks for having me on.
Rob: Absolutely, man. We’re going to answer some questions today. I think you said the Question & Answer episodes are some of your favorites. Is that right?
Brian: Yeah. I was just going to say yeah. This is one of my favorite types of Startups for the Rest of Us episodes. I’m excited to dive in.
Rob: It’ll be fun. I’ve already reminded people in the intro of your areas of expertise and everything. We have some voicemails to kick us off. We actually have a comment; there’s an interesting one about how to accept payment by check in a clever way that I had never heard about. I’m really interested to hear…
Brian: I saw that one.
Rob: … your take on it. I was like, “Hey, I learned something. That’s great.” Let’s kick us off with our first voicemail which is a question about the product market fit survey.
“Hey, Rob. This is Daniel from [00:04:13]. I’m curious whether you ever come across the product/market fit survey methodology and what your thoughts on it might be or if there’s other quantitative number-based survey methodology you’ve used to assess customer feedback? Thanks a lot.”
Rob: To give listeners a little bit of an idea, I’m pretty sure he’s talking about the Sean Ellis’ product/market fit survey which is one question and then with a follow up and it’s, “How disappointed would you be if this X product went away? You’re no longer able to use X product.” The answers are: Don’t care, mildly disappointed, really disappointed, somewhat disappointed. It’s four or five different options. If someone selects the top two of being really disappointed or incredibly disappointed—the topmost severe disappointment—if at least 40% of your current customers select that then Sean Ellis said that’s when he deems you have product/market fit.
I like this survey. I respect the hell out of Sean Ellis; he’s a great growth marketer. I like this survey because it gives you data and information. I think one of the cons is I don’t see the product/market fit as binary. This makes it look like, below 40%, you’re not; above 40%, you are. I feel more like it’s a gradient where it’s a spectrum of having product/market fit with certain audiences and often times, you have a little bit of a product/market fit but not a lot. When you start getting a lot, you really, really, know it.
With that context for the listeners, I’m curious, Brian, to hear your thoughts on this.
Brian: I definitely, completely, agree about what is product/market fit and that is not binary, 100%. We don’t have a lot of context in terms of what the questionnaire wants to use the survey for. What’s its current situation? Is it a new idea? Is it doing customer research to validate it? Or is it an existing SaaS with 1000+ users and maybe considering doing a pricing change or something? What is the goal for using that sort of survey?
I think the usefulness of it really depends on different situations. Without knowing that background, I have a couple of thoughts on this. I really do like using surveys in general. I’ve seen that one. I’ve seen different versions of it. There are all sorts of good questions that you can include but I always want to really stress that it’s really important to couple pure data from surveys especially if you can have enough responses to have meaningful data with actual conversations with customers. You’re really going to find much more real information from actual conversations or just understanding the language that people use or their body language and things like that.
One thing I do a lot in all of my products, especially early on during the validation stage but even ongoing, I even put this into an automation flows that happen all year long where a person gets a survey, asks a few questions like that like, “How did you hear about this? What’s the problem you’re trying to solve? What are the current solutions that you’re currently using for? Currently paying for?” A lot of those I actually have free form text answers. I could use multiple choice and you can get harder data that way. But I like freeform because it gets them at least typing. Then I can read those responses then I’ll handpick the ones that just gave a lot of information. They seem really into this problem and they want to answer questions about it. Then I’ll personally invite them to call us. That’s usually the flow—survey to reading their responses to picking out people then talking to them.
Rob: Yeah. I think that’s a really good way to do it. I agree with you that talking to customers is going to get you so much more contacts than a survey. With that said, I should’ve Googled this survey before, so I wasn’t stumbling around describing it. The question is, “How would you feel if you could no longer use the product name?” There’s only four choices. I remember there being five maybe it changed over the years. But it’s very disappointing, somewhat disappointed, not disappointed, not applicable, and no longer using the product. It’s a 40% or more say very disappointed.
I’ve run this survey with three and maybe four different products. I remember it being harsh. HitTail was growing very quickly. Everything was working. It was a smaller scale app. It peaked in low-mid six figures of annual recurring revenue. But it was growing and it seemed like people were using it. When I did it, I didn’t get 40% that were very disappointed. I think it was 25%-29% range. I remember being pretty shocked by that and also disappointed. I remember running it with Drip. I’ve run it with two others before that. I have no memory of what the answers were.
I remember running with Drip. This is when Drip was really starting to take off, it was starting to grow very quickly, and I knew we were onto something. People were coming in, and churn was really low. I think we might’ve hit negative at that point. We sent this out. I remember being just like, “Oh. This is going to be a 70%.” I think it was a 43%. I remember being shocked. It’s a harsh judge. I guess what I’m saying is this, it really is a high bar that if you get near 40%, you’re probably doing pretty well with your product.
Brian: Yeah. Especially, since it’s just one question, it’s sort of like jumping off point to go dig in deeper. It’s like, you do the survey, you get the data back. It’s below 40% or above 40%. “What does that mean?” I don’t think that should mean, “Let’s go change everything and the product now.” I think that should mean, “Let’s go talk to customers.” Then understand what the underlying issues are that leads to that number.
Rob: Yes, indeed. All right. Our next question is from a longtime listener and many time MicroConf attendee, Andrew Connell [00:10:10].
“Hey, Mike and Rob. First, kudos to Mike for being so open and honest about Bluetick and what you’re working through. Hearing what and how someone else is working through the issues that you’ve got such as what you’re doing is one of the most hopeful resources for the rest of us. Thanks a lot, good luck, and keep it up.
Now, for a bit of a show feedback, and questions, I love the new format. Change is always good and it’s nice to see the change. From a fellow podcaster who’s been doing this for six years on my show, I like that listeners develop a connection to the host. A change in the format is just like moving houses; it’s still in the same family, but the environment has changed. Well done and keep it up.
This podcast, this community, and MicroConf has done a lot for me since discovering it six years ago. However, I now feel like a fish out of water. My business is in info products. Mostly, one-time sales but some description stuff. It’s not something I’d call SaaS though. This is an awesome community and dominated by SaaS businesses, topics, questions, tactics, etc. MicroConf even feels more like it’s microSaaSconf these days and that’s coming from a four- or five-time attendee. I’m sure there’s plenty of stuff that applies to different businesses, but I suspect you get my point. I don’t want you to take that as a complaint or a gripe. It’s just an observation. Maybe it’s unfair but I’m a firm believer in doing your thing. You guys keep it up and do what you’re doing. I’m curious on what you would think about this.
My question is more about advice on other communities to explore. Over the last year, I’ve been looking into the different conferences trying to find other podcasts and communities niching down to just the info product world. Info products and non-SaaS businesses have some very specific challenges. There had been other challenges that SaaS businesses have. From the last few years of MicroConf, I suspect that there’s a pretty good tight of community because we bond together and have a pretty good side of meetups and dinners of considerable sizes. Maybe I’m wrong or maybe there are other listeners who hear this commoner question who may identify with it as well.
I guess I should have told you who I am, I forgot to mention at the beginning, this is Andrew Connell from [inaudible 00:12:10]. Keep it up and just curious to hear what you guys think about this. Thanks.
Rob: What do you think, sir?
Brian: Yeah. A few things, I think within the MicroConf community, people might be surprised even though it clearly has the emphasis on software and SaaS. That’s certainly true from the speakers and the overall themes of these conferences. I can personally say for sure that I’m friends with multiple people who return to MicroConf every year and they do not own SaaS businesses. They ran ecommerce businesses, I know some info product people, and those who are in that community. I think that’s a really good thing. I think you can still find those people within MicroConf.
Outside of that, one to consider would be Dynamite Circle from Dan and Ian from the Tropical MBA podcast. I was active in that for a while; not so much recently. That community is pretty sizeable similar to the MicroConf community as well. It has a wider variety. There are some info products stuff. There’s ecommerce folks in there, some stuff related to travel, and working from anywhere. That’s a good one to look into. I don’t know about info product stuff specifically in terms of communities, that could be hard to find, but those are my thoughts.
Rob: Yeah. Tropical MBA or Dynamite Circle is what I was going to suggest as well. Good community. I’ve always considered them like a sister podcast to us. They’re more about being a digital nomad but also have a nice variety of e-com and content websites. There’s a lot of Amazon and ecommerce sellers. There have been some WordPress folks and even some SaaS folks who straddled both lines. Like that community. I spoke at their event at Bangkok in 2014, I believe. It had been a long time. I admire what they’re up to.
There is a Rhodium Weekend or Rhodium. The Rhodium community from Chris Yates is very authentic community similar to MicroConf in the sense that Chris has just groomed it over the years. There’s just a lot of good people. That’s more of a buying and selling website but there are definitely folks there who do info products.
The thing is that then you get into the internet marketing stuff. You can look at DigitalMarketer and the digitalmarketer.com from Ryan Deiss. That’s an online training. I believe they run traffic and conversions. You can go to that conference. It’s more about marketing and less about the product. That’s where software and SaaS are pretty unique. We do get together and geek out about our products in addition to other things. The product is the thing that unites us.
Whereas Dynamite Circle, it’s not the product you have. It’s more of the travelling and going against the standard script of the rest of the world. That’s the unifying factor. Whereas with eCommerceFuel—and other community—they are more like us where they unite around ecommerce. I would agree with you that I still think that we do get info product questions. I have a course although I took it off of Udemy because Udemy, I don’t know if you’ve seen it lately, but it’s kind of a train wreck as a seller. They just keep changing the terms. It was more headache than it was worth.
I had a course on there about hiring BAs. I have multiple books. I’m a big believer in info products especially in that stair step—that step one to get you to the point of quickly buying out your time. I think they’re fantastic. For me, personally, long term, that recurring revenue, that growth, that high sales multiple, if you just had to sell, that’s the beauty of SaaS. That’s why I think so many more people aspire to run a SaaS company than aspire to run an info product empire. I also think there’s a lot more opportunity and there’s just a lot more people successfully doing it.
Obviously, there are folks, yes, can you make a $100,000 or $200,000 or $1,000,000 in an info product launch? Of course. We see people doing it. But they’re really few and far between. It’s a hamster wheel of content creation. Again, it doesn’t have the sales multiple that SaaS do and all of that stuff. I think they’re fantastic for a certain purpose, but I haven’t come across a whole community that is united around just building and aspiring to do info products.
Brian: Yeah. I’ll just add one shameless plug here if you don’t mind. I run the Productize which is a course but it’s also a community. We’ve got a pretty good Slack community in there now. It’s for people who are primarily consultants and they’re looking to step up to running a business with the team and a productized service business. There are folks there who coupled that with training program. There are some software people, WordPress people in there too. You’ve got a good little chat going in there in the Slack group for people who are going through that transition phase, so that’s another good one.
Rob: Glad you mentioned it. productizecourse.com is where you’ll go to find out more about that. Thanks for the question, Andrew. I really appreciate it. I hope to run into you at the next MicroConf.
Our third voicemail of the day is an interesting one. It’s about building a very similar app and making it more stable. He’s wondering if that’s competitive advantage worth pursuing.
“Hey, guys. I want to start by saying thank you for the work that you put into this show. I find it to be truly inspirational so keep up the good work. I’m working on my first SaaS app. I’m a web developer by day. I work on it on nights and weekends. The idea for the product actually came from my wife. She works in a totally separate industry and interacts with a certain SaaS app on a pretty regular basis. One day she was describing to me how frustrated she was with this app. It was slow, unintuitive, and sometimes experience downtime during the middle of the day.
I sat down with her to take a look at it. It really seemed like it was on a shaky foundation from a technical perspective. However, it’s the only product that meets the specific needs that it solves which is why her company uses it. Our current working hypothesis is that if we build a more stable, intuitive, and functional version of the app that has feature parity, we will have enough differentiation to break into the market. What’s your take on this? Do you think functional superiority with the same set of features is enough to differentiate us? Or should we be thinking about extra features that would set us apart from them? Thanks, appreciate it.”
Rob: Mr. Castle, what are your thoughts on this one?
Brian: Yeah. It’s a good question. I like the fact that your wife is a user of this other software so you have that really close used case where you can get that personal research into how she and the other members of the company use the product. That’s always good. You probably want to expand beyond that and maybe talk to her coworkers or other people who are using it. I also like the fact that there is this solution out there in the market. It proves that some people do buy the solution, but it’s not overcrowded from what it sounds like.
I would also just have the question in your mind to understand how easy it is to reach that market. I don’t think you mentioned what type of company it is or which industry it is. Even though you might be able to build something for that market, how easy it is to go find other people who are in your wife’s position in other companies throughout the world or throughout the country or the region? I think that gets to that question of product founder fit.
Sure, you might be able to build the same product or achieve feature parity, but do you have the inroads or the communities or the channels to be able to reach those people? I know there are enough of them. I think that’s something you can certainly vet out over the next few months.
Rob: Yeah. I like the pros you pointed out. I think the fact that they proved the market out by having this app is good. I’ve mixed emotions about this one. I think you need to ask more questions. The first question I have is we can all, with our high standards, and our impeccable taste in UX, and usability go use an app and say, “Oh my gosh, that app sucks. I could build it better.” Do their users care at all? Do they care at all? Do they care one bit?
An example: I was a contractor/contract developer for a consulting firm that was redoing an app for the Los Angeles County. They spent a million bucks and they paid us to build all these stuff. The old app was literally a main frame, it was a terminal app that they would log into. The UX is typing. It was just wasn’t particularly fun, it was hard to train people, it was a pain in the butt. The delete key didn’t work, command this didn’t work, there was no undo, there were all these things you couldn’t do.
We built a modern, quick web front end on it and a bunch of the users were either so used to the old UI that they were like, “Oh, I used to like type this and then hit three tabs and it got me to the other thing and this doesn’t do that.” I’m like, “Yeah, you don’t need to do any of that. You just do one click and it auto populates from this XML import.” They’re like, “Oh well, this just seems complicated.”
Change is hard—I guess is one thing—and also, a lot of people just don’t care, and they’re used to using something. That’d be the first thing I would really try to stress out is like, “Does everyone at your wife’s work, are they complaining about this software and just dying for a better solution. Do they really, really need something better or do they not care?”
Second thing I would ask is, what are switching cost? Because without knowing that, if it’s just an export of a CSV and an import of CSV and everything is set up, awesome. But if its switching cost is to retrain someone or retrain your whole team on it and move a bunch of data and do a bunch of other stuff, that’s tough. If everyone’s on annual contracts, that means you only have a once a year when you can basically get to those prospects because they can’t just cancel for the next month. Once they’re on a year contract, they won’t get there. Think about switching cost and I would inquire about those.
The last one is one that Brian brought up, and it was a first one that came to me is you build a better product, can you get in front of the users? What are the traffic channels? How expensive are they? Are these people online? If they’re not online, you’re talking about customer pain. I’ve talked about competitor pain and customer pain, in this case, you probably won’t have competitor pain. You’re going to be the pain to your competitor because you’re going to build a better product. But you will have customer pain. Or could feasibly have customer pain if it’s more of a brick and mortar type business where you can’t just run some Facebook ads or do some content marketing and generate a bunch of leads where it’s literally cold calling or going to the events or whatever.
Since you haven’t told this about the industry, we’re just completely conjecturing here. I’m not saying you shouldn’t do it, but these are the three yellow flags or the three big questions I would have with just doing this approach. But can this approach work? Absolutely. Look at what Xero has done competing against Quickbooks, most people don’t like Quickbooks and Xero built a web-based admin or a web-based competitor to it. I think the fact that there was Infusionsoft and then Drip and ConvertKit and all these other tools were able to come in and do similar things, that’s what we were doing. We’re trying to build easier-to-use, more modern with the integrations we wanted, just a more pleasant experience overall and it worked. It can definitely work but I think you need to answer some questions before you dive in with both feet.
Brian: Yeah. Just one quick thing to add–kind of a low hanging fruit. First thing to do on that last point to figure out how could you actually reach this market. A question to ask your wife is to understand how her company bought the software that they’re currently using. Whether she bought it or a manager or somebody else was the decision maker. Did they go through an enterprise sales process or did they just Google and find the website and buy it that way? Did they pay monthly, did they pay annually? I think those are better questions to understand than even how the product works, to understand what you’re actually getting into.
Rob: Totally agree. That’s a good point. Thank you for the question, hope that was helpful. Our next question is not a question, but a comment from Kenneth Caw and he has written in a few months in the past. He says, “Hey, Rob, enterprise sales guy here wants some help,” and he has actually written in when I had David Heller on the show to do a hot seat about enterprise sales and he had written in with a bunch of good suggestions. He says, “A lot of people don’t know this, but Stripe actually released a way to receive payments by paper check this year.” This was a question that I believe in the Laura Roeder Q&A episode. We were asked, “How do you manage paper checks and how do you keep track of them and this and that?”
He’s pointing now Stripe can do it. He said, “This makes things so much easier since they provide your customers and the address for the check to be sent to, receive and process it on your behalf.” That’s crazy. “Coincidentally enough, we used to do the same thing as you did with Drip, which is to set a discount code to the customer in Stripe and then put reminders in and then check it. When payment is due, once a year, we deal with six figure checks sometimes, so this has been a total efficiency improvement since Stripe deals with the invoicing, follow-up reminders, analytics tracking, repayments, etc. Best of all as a remote company, we don’t need to depend on someone making a trip to our company’s PO box to look for the check.”
I’m not sure why Stripe doesn’t advertise this enough, but you should let your listeners know about that. Since all one has to do is simply enable a checkbox—pun intended—in Stripe, which saves us bootstrappers precious time and resources managing this. Plus, it gives you an additional reason to deal with enterprise customers that want to do pay by checks.” Big smiley face because Ken is of course an enterprise sales guy.
Thank you so much, Ken, for writing in. Did you have any idea about this, Brian?
Brian: I had zero idea about this.
Rob: I never heard of that. That’s a great service. When he said by check I thought he was going to say, and his subject line is this payment by check, use Stripe. I thought he was going to talk about e-checks where it’s like just an ACH thing where you get the routing number. But I mean literally, an address the mail to check, that is bravo, Stripe.
Brian: That really is pretty incredible. I knew about the ACH thing. I kept promotional emails from Stripe. I have not received anything about this feature. It seems like a pretty killer feature.
Rob: Yeah.
Brian: I’m curious about your thoughts on accepting checks in general. I’ve seen this in my business in Audience Ops, I’ve had quite a few leads actually, ask for the ability to purchase our service using a check or having us invoice them and then them paying us like a more traditional agency or consulting model. I’ve refused those. We only stick to credit card and debit cards through Stripe subscriptions. I know for a fact that I have left some money on the table because of that, but I opt that way because I just don’t want to deal with chasing people down for checks in the mail.
Rob: Yeah, that’s the tradeoff. At Drip, once we started accepting checks, it was late, it was after we had a much larger team. There were salespeople that could manage it. That really is what it is. It’s like putting something on your calendar to remind you to check in with someone. But the bigger thing we did is we just said we had a minimum for a check. If I were in your shoes, I would only accept it for annual prepay. I would not do it on a monthly basis. It’s like, “Hey, if you really want to pay via check, then you gotta pay 12 grand all at once or 24 grand or whatever the price point is.” That would be how I would approach it at your scale because it’s not a requirement.
But yeah, once you get up in the 25K and up, maybe even 20K and up annual contract value, you need to start doing that at least in the B2B SaaS base. It’s great that Stripe accepts it. Obviously, it’s enough of a pain point that they started doing that. They wouldn’t have done that if people weren’t asking for it. But I also think then I wonder it says, they’ll take care of all the reminders and all that stuff that’s pretty fascinating. I’d like to almost investigate this a little more because again, we had to hand build something that reminded a salesperson to reach out and make sure that the check came through.
Brian: Yeah, for sure. The other thing that I would at least keep in mind for my business is that we’re a recurring service and that’s part of the reason why we don’t do checks is that we need the payments to keep coming in so that our team keeps working. If there’s a delay, then we would need to know to pause the service for a period of time. I guess if this works automatically through Stripe and then Stripe can just mark it as unpaid or paid, then that can be your indicator.
The other question that I would wonder about is international payments. Because that’s sort of a headache that we’ve seen just because credit cards internationally tends to decline, especially for higher dollar amounts more often than like US-based for whatever reason. We’ve had to fix failed payments more often with international. I wonder if this could somehow help that. I’m not sure.
Rob: My guess is no. I’ve not even Googled this, but international checks are so complicated with the banking that I would guess that would be a V2 if they were going to try to tackle it. There’s also big fees attached to it with sending checks and trying to cash them. If you send a US check to a Canadian or vice versa, there’s this big fee they charge to do that internationally. We experience all the same stuff you’re saying with the international credit cards being declined more often than that. I don’t think this would help.
Also, one other thing to throw in is, I wonder how much Stripe charges as a fee for doing that. This is something to think about. If you’re signing a $30,000 annual contract, a 3% fee on that is $900. That’s where it starts to make sense to maybe take a check because you can basically cash that for free. If Stripe’s still charging 3%, you have to think about that, but if it’s more like ACH where it’s half a percent or 1%, this could totally be worth it.
Thanks again for the info, Ken. Always appreciate your insights. Next question is from [Mereck 00:29:46] and he says, “Hey guys, great show. Would love to get your thoughts. I’m a cofounder in a small software house.” I think he’s an agency. Because they’re consulting from their hired hourly or by project. “The issue is that my cofounder doesn’t help company anymore. He made some significant contributions in the early days including his know-how, some money investing directly and working for free. But right now, because of an unplanned change of direction in the company, and a change of the market situation, we can’t find paid work for him. Not because he does not have value to give to the market, but for now the company is too small for two founders/CEOs.
He was upfront about his expectations about work and skills in the company and he still help out a few hours a week for free. No hard feelings between us, we aren’t looking for a legal resolution. I’m wondering if we should wait for the company to grow, if we should return him the money he invested, buy out his shares, or what you think? Thank you so much for your thought.”
This is an interesting one. We don’t often get a lot of too many consulting questions. But I feel this could happen with a SaaS startup. Skills no longer and neither might be an interesting one. I guess if you’re a salesperson, co-founded it and then you decide to go way down market and not need sales, that can be something. Curious if you have thoughts on this, Brian.
Brian: This one is tough. I don’t know all the details on this. One thing that stuck out to me is that he talked about refunding the money that he invested. I guess the partner’s actually put up some of their own cash other than just putting in their time. If it were just time and you’re talking about giving him compensation for the time that he spent, that’s a tricky one because you should have some agreement going into this thing that, “Hey, we’re all investing in this idea. We don’t know if it’s going to go anywhere. There’s no promises.”
Then there’s the question of, how was the initial partnership agreement drawn up, if there was any, which there really should, generally speaking. And there’s the concept of vesting and a vesting schedule. One model that I think we’ve seen recently is the user list. You spoke to Jane about this, is that right? They sort of paused her vesting so that her initial time was still–that value remained, but then from a certain date going forward, she’s phased out a bit. That’s one model to look out.
Rob: I think consulting firms don’t normally vest, but in this case that would’ve been super helpful. If he was above a certain number of hours per week or whatever he was vesting and then at the time that he leaves then yeah, you do, he either leaves it in until it grows. It’s up to him. If he owns 10, 20% of the company and he only vested that much, then he could say, “Hey, please buy me out.” And then you have to figure out, “Hey, we can buy it out over a year or two. We can pay this much per month out of cash flow.” Or if he wanted to grow, he could gamble and leave it in and expect the company will grow and it’ll be worth more when you get there.
I believe our consulting firms, obviously, there’s going to be a range, but I think valuations are around one times annual revenue. I don’t know if it’s looking ahead or looking back. I’m not exactly sure. But someone in the community might have more info on that. But I know the multiples compared to SaaS is pretty low because it is just hours. It’s a […] for hour-type thing.
Brian: Recurring contracts can help improve that.
Rob: Exactly. But assuming that he’s fully vested, and he owns a third or half of the company, I really do think it’s a conversation. I don’t think there is anything you should do here. I think it’s up to the two of you. With consulting firms, they can have pretty good profit margins. The cash coming off could be used to buy him out. I think that’s probably the long-term play. Say, you don’t have someone with stock who really isn’t working on the business.
The hard part is how to value if he’s doing all this work for free. I don’t know how you guys figure that part out. It’s just what’s fair there? Do you agree on hourly rate and try to estimate? Or is that just what created the value in the company and his stock reflects the value of that in essence.
Brian: Again, we don’t really know all the details here, but if it’s purely consulting and the work that he was involved when the work existed was just consulting project that started and finished, then I think that the question is, “How much does his contribution to those projects live on after he stops working in the company?” I think the simplest view is split whatever revenue came from those projects 50-50, whatever your partnership agreement was, and then new projects going forward that he’s not involved in, he doesn’t really have a part in those. That would be a simple way to look at it.
The other thing to consider depending on how big the numbers are that we’re talking about here and everything else, you might want to just talk to a third party. I know that there are professional arbitrators, but there are people in this community who…
Rob: It’s like mediators. That’s a good way to think about it is to get someone, other party, to just give you guys some direct advice knowing all the details because that’s the problem is, I think there’s some gaps here. Hope that was helpful, [Mereck 00:35:03]. Wish you the best of luck figuring that out.
Our next question is from Fred Myer and he’s asking for some advice for finding or starting a mastermind. He says, “Hi, I’m a web developer and owner of two lifestyle businesses looking for a mastermind to start or join. The easy to Google options don’t seem attractive. Do you have any advice on finding or starting a good mastermind?”
I’m going to assume that since he’s a web developer, he’s looking for a software-oriented mastermind. My recommendation is always Ken Wallace’s mastermindjam.com if you really have no network. My first recommendation is always, go to your network, go to events, be part of the Startups For the Rest of Us and the MicroConf community and you’ll find people. But if you haven’t done that, can’t do that, whatever, MastermindJam is a good alternative that Ken matches people up. What do you think, Brian?
Brian: Yeah. Totally agree. I recommend MastermindJam all the time. I also recommend going to conferences like MicroConf, like the upcoming MicroConf locals, that should be a good one too for this. Yeah, just getting into communities like that. In the past, when I was really early on in this industry and I didn’t know too many people, I had a bit more focus on my local community. I would go to local meetups. At the time I was into web design and WordPress, I went to local web design and web development and WordPress meetups. I met some really good friends through that. That turned into local mastermind groups.
These days, I’m not in a weekly mastermind currently like I was for a while. But my mastermind group now was borne out of the MicroConf community where we do TinyConfs a couple times a year. We all fly to one place and have a deep dive. We chat on Slack throughout the year. I find that that’s a good format for me right now.
Rob: Yeah. I think that makes a lot of sense. Sir, we are all out of time for today. If folks want to keep up with you, they can head to, let’s see, there’s productizecourse.com, there is audienceops.com which is your productized service where you and your team create content for content marketing for folks on a subscription basis, and castlejam.com, is that your personal website?
Good. Good call. Are you still @casjam on Twitter?
Brian: Yeah, my teenage AIM screen name lives on through Twitter.
Rob: I know. I registered software by rob.com in 2004, 2005 and started blogging. It’s like, “Why didn’t I just registered my name?” Maybe it was taken or maybe I didn’t think about it, but years later—it was literally in the past, probably 18 months—finally, I bought robwalling.com from the previous owner and redirected in it. It’s just so much easier. It’s so much more memorable. It’s like once people remember your name they can find you versus trying to remember this derivative of your name.
Brian: My whole life I’ve had people mispronouncing and misspelling my last name because they think it’s like the word castle. But then in recent years I’d have people mispronounce or not understand even what casjam even means which it doesn’t really mean anything. I just got sick of explaining that whole thing. It’s my name. That’s where my blog and newsletter and links to my podcasts and products and all that’s on there.
Rob: That’s the center. Very cool. If folks, they listen to this podcast, they will like the Bootstrapped Web podcast where you and Jordan Gall chat every week or so about this kind of stuff. I’m a long-time listener, long time first time; long time listener, first time caller. Anyways, alright man, I’ll let you go. It was a pleasure having you.
Brian: Yeah, good time answering these questions. Thanks for having me on, Rob.
Rob: Absolutely. That wraps us up for the day. If you have a question that you want answered in a future episode of the show whether by me or a guest, you can leave us a voicemail at 888-801-9690. You can email questions@startupsfortherestofus.com. Obviously, you can have just plain text in there, you can attach an MP3 […] Dropbox link to an AIFF. You know the drill.
Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under Creative Commons. If you’re not subscribed to Startups For the Rest of Us, you really should be, you’re missing out. Search for startups in any pod catcher. Visit startupsfortherestofus.com for full transcript of every episode posted within a week, maybe two of when the episode goes live, but continue to hear that the search for transcripts are super helpful for people so we will continue to do those. Thank you for listening. I’ll see you next time.
Episode 476 | “We Went from Hundreds of Free Trials to a Few Dozen…On Purpose” with Jordan Gal
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Show Notes
In this episode of Startups For The Rest Of Us, Rob talks with Jordan Gal of CartHook about his big move to stop his free trials, move to demos, and increase his prices.
Items mentioned in this episode:
- CartHook
- Bootstrapped Web Podcast
- CartHook Pricing Change Blog Post
- Lincoln Murphy blog post about Qualification
Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host, Rob Walling. Each week on this show, we cover topics related to building and growing ambitious yet sustainable startups.
This week’s guest is Jordan Gal. You may know him from BootstrappedWeb. Also, the founder of CartHook. In this episode of Startups for the Rest of Us, I talk with Jordan about what I’ve seen as one of the gutsiest price increases and sales process changes by going up market that I’ve ever seen. The quote that I’m using in the title is, “We went from hundreds of free trials to a few dozen on purpose.” This is Startups for the Rest of Us episode 476.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome in building, launching, and growing startups, whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob and today with Jordan Gal, we’re here to share experiences to help you avoid the mistakes we’ve made.
It’s a great conversation today. In fact, often times I say we have many different episode formats. This one is less of an interview and it’s more of me and just letting Jordan go on this topic. He thought about it so deeply with his team. It was their realization of, “Our churn is way too high and we’re just running on this treadmill that is getting faster and faster, and the business doesn’t feel healthy. How do we fix that? It’s not one tactic. It’s not changing, making people email to cancel you. It’s not moving to annual plans. It’s not the little tactics. How do we revamp our entire sales, onboarding, pricing process, and go up market to change the nature of our business?” That’s what we’ll talk about today.
You can tell during the interview that I’m obviously impacted by it. I was impacted from the outside. I’m an angel investor in CartHook. CartHook has raised a small amount of money. It’s still very much in that bootstrap indie-funded mindset. Jordan is super capital efficient. He’s not on the constant churn to raise that Series A to Series B and go there. He hasn’t raised that institutional money that forces him to go after that. He’s very much like a Brennan Dunn […] with the RightMessage.
A lot of the other companies we hear about that are in our MicroConf community, they’re in the Startups for the Rest of Us community, they’ve raised a small amount of money to hit that escape velocity. They’re not looking to unicorn or bust. They’re not looking to be that one billion dollar company, necessarily. Jordan’s in that camp. I love the way he’s meticulous. He really thinks these decisions through. I really enjoyed the conversation today.
To set the stage, if you haven’t heard of Jordan, years ago he ran an ecommerce company, ecommerce business. If I recall, it was with his brother. Maybe his dad. It was like a family member. They sold that. He had a small exit there. Then, he wanted to start a SaaS or a software tools for ecommerce. He wound up starting CartHook. Originally, it was just cart abandonment emails and they’ve since stopped doing that.
They eventually got to the point where CartHook essentially replaces the checkout on Shopify. The headline of CartHook is “Maximize Conversion Rate and Grow Average Order Value Today.” They have a real competitive advantage that’s very much differentiated from a lot of the other products in the ecom space, and he’s got a lot of traction.
As we talked about during the interview, they’re doing several million dollars in ARR, which is a big deal. They’re in the 25-30 employee range. He’s really just been grinding it out for years to get there.
What I like about this conversation is I was getting investor updates and then I saw a blog post where Jordan was talking about increasing prices. That’s always such a dicey proposition. I then started chatting about it. I asked him what the thought process was and how they’ve gotten blowback. They basically led to the conversation that we have here on the podcast today.
Without further ado, let’s dive into the interview with Jordan Gal. Jordan, thank you so much for coming on the show.
Jordan: Rob, thanks very much for having me on.
Rob: It’s great to chat again. There’s a lot that we’re going to dig into today. It’s been a fascinating journey. From the outside, I have an inside seat as an investor in CartHook. I’ve watched this transformation that you’ve taken over the past year or so. I’m really fascinated to begin with that.
The nugget for this episode actually came when I saw you raised prices. You did it so well, you did it so elegantly with (I believe) almost no pushback. I read a blog post, it was a blog post that you put on the CartHook blog, and I was like, “Man, I really want to get you on the show to just talk about what the thought process was there.” There was so much more to it. It wasn’t just a price increase. There’s this whole story that were going to dig into today. You want to kick people off with letting us know where we’re headed today?
Jordan: This is a topic I’m excited to talk about, something that I’m proud of. The best way to get started is to give some context around what these decisions are, what they entail, and why we got to a point of wanting to take these bigger actions.
What I need to do is to ask everyone to go back with me for about a year. The history of our checkout product, 2017, is when we came out with it. It was very difficult, technically. It was just one challenge after another. Then, we released a version two where we made a lot of big fixes. That’s when we start to hit traction.
2018 was our big year of growth, where we 3X revenue and got to multiple millions in ARR. That was this wild ride. It was fun. I look back on that year very fondly. That’s how I always want to feel.
The holidays in ecommerce are always big, obviously. Black Friday, Cyber Monday, and then the holidays. The end of 2018 for us was gangbusters. Then, January–February 2019 comes around. We start to be able to catch our breath, really look at the company, and analyze how things are going. There was one number that stood out that was a problem. It was an obvious problem and something that could not be ignored. That was churn.
In January–February 2019, we’re cruising at 12%-14% monthly churn. Ecommerce itself has high churn. There’s a reason Shopify does not disclose their churn rate because it’s much higher than other software companies. It’s partly the nature of ecommerce, the nature of the market, whatever else. Still, 12%-14% monthly is unsustainable.
On first glance, it looks like the company’s a washing machine. It’s just bringing people in, spitting them out, and that’s not going to work out for the long-term. When we started to really analyze it more deeply, what we realized is that the situation was not nearly as bad as 12%-14% looked. What was happening was that we were attracting a top tier of merchants that really fit with our product. What they were selling, the way the company was set up in terms of the number of people, how technically savvy they were, all these characteristics from revenue point of view, cultural point of view, product point of view, and so on. We really lined up with this nicely. Those customers were sticking around for the longer-term.
The issue was that we were also attracting this lower-end merchant that did not fit with our business. It didn’t fit with the software, sophistication level required, pricing, all that. That large chunk was not staying. Those customers were coming in, doing a free trial, either leaving before the free trial ended, or paying once or twice, then leaving after that. There was a real bifurcation in these two populations.
The challenge was, how do we improve the health of our business, overall? We had a few goals. Why don’t I list out a few of the goals that we came up with when we start to tackle this? We wanted to do things like take more control of our business. A lot of it felt like we were not in control. We just had a ton of word of mouth. It was just a bunch of incoming demand. That did not feel like we were really controlling who was walking into the system. We obviously needed to reduce churn significantly.
At the same time, we also wanted to increase our pricing to align with the value we provide. We hadn’t changed our pricing since we launched and we were significantly better than we had launched. Overall, the saying that we came up with was “fewer, more qualified merchants.” That was our goal. To work with fewer merchants that were much better fit and much bigger overall. Those were the goals.
The way we did it was changing two big things. We changed our pricing and we changed our process. You started off this conversation talking about a pricing change. From the outside, it really looks like a pricing change. In reality, it’s more of a process change like a sales process, like how we bring people onboard. The pricing change served that larger process change.
Rob: Yeah, that makes a lot of sense. I have a couple of questions for you. You used this phrase, “To take control of our business.” You touched on that a little bit, but is it that you’re controlling who comes through the gate such that you only deal with customers that you deemed are nice or that are qualified? Or is it taking control? Are there any other aspects to that?
Jordan: There are a lot of different aspects to it. What’s happened over the past years as I have gone further away from the frontlines and from the customer interactions, is I have become shielded from the kinetic activity, actually talking and rubbing up against customers on a daily basis. I don’t feel that nearly as much as when I started to.
The anecdote I give was I had a conversation with our support team. I asked them, “What percentage of your work is for people who are in trial that won’t convert or people that have converted but are only going to stick around for a month or two?” They looked at me and said, “Probably 80%.” To me that sounded horrible. I’m setting up my employees to run on a treadmill at a very high rate of speed and looking at them saying, “How do we increase the speed?” That’s not a recipe for a happy employee.
What I mean by taking control over our business, it wasn’t just like this external-facing, “We only want to work with big merchants.” It was also, “This feels like a mess internally.” We’re doing an enormous amount of work for people that don’t fit. The reason we’re doing it is because they just walked in the door on their own and create a free trial. All of a sudden, we are forced to engage with them. It’s definitely unexpected that one of the biggest problems in our business is how to limit the number of people using the product. That’s not what I expected. I expected, how do I beg people to use our product and make them successful with it? That was a reality.
Rob: Yeah. You’re in a unique position, for sure, to be able to do this. There is no model for this. I’ve heard of apps going up market or changing. Drip went from generally as […] to focus on ecommerce. Obviously, that drove some people away in terms of that pivot or that focusing. There’s a model for that.
While you are going up market, you did it in a different way. You didn’t just raised prices. As you said, pricing is one piece of it. That’s where Ifind this whole decision and process super gutsy. It feels risky to me hearing about it. Did it feel that risky to you upfront? Were you just like, “No, I know this is going to work”? Or were you like, “Oh my gosh, this could completely tank a lot of things”?
Jordan: There was definitely a lot of fear. We’ll get into a bit of the math around what helped me overcome the fear was just being very objective in the math and saying, “No. This isn’t going to work out. Even if it’s not very successful, it’s still going to work out on the math and finances.” All of this comes back to the finances. If we had raised $8 million in a Series A, we would be trying to gather as much of the market as possible. That’s not what we’re doing. We raised a little bit of money. We want a healthy, profitable company.
If you want healthy and profitable, then you need to live within your means. The reality of our situation, just taking on as many customers as possible, was not leading to that outcome. It had churn way too high. The amount of work that was happening internally was too high for customers that didn’t make sense. That’s what helped us come to the conclusion of, “Okay, I’m going to take a risk, and we’re going to gather the forces. Let’s get into what we did.”
Rob: Jordan, I want to interrupt you real quickly. When you say it wasn’t working for you, I know that CartHook is doing several million in ARR. It was working to a certain extent, but was it really the churn? That double digit churn that wasn’t working for you?
Jordan: Yes. It’s all relative. Yes, I really shouldn’t be complaining. It is working to a degree because the revenue is where it is and all these. That’s from the outside perspective. From the inside perspective, sitting in my shoes, I have to acknowledge what’s good and what’s bad. Just because I can say we’re at several million in ARR does not mean everything is good. I was fine with that. A lot of this role is holding two things in your head at the same time that are completely in conflict with one another. That’s just the way it is.
The truth is, it wasn’t working for us in a sense that I didn’t like the way the future looked. There’s a straightforward formula that everyone can Google. I don’t remember exactly what it is. It basically tells you what your maximum revenue is. Given your growth and your churn, this is the maximum that you will reach. It will not go beyond that because that’s how math works. You will get to a point where a 12% of your revenue equals the amount of growth your getting, and then you’ll stay there forever, mathematically.
I looked at that and that wasn’t that far off on the horizon based on where we were currently. We still had room. We still had another 100+ MRR to get to that point but I felt that we need to move on this now before we hit that and then all of a sudden everything hits a wall. That’s what led into it.
Now, let’s get to the first big part of the decision. The first big part of the decision was on July 1st, 2019. We are doing two big things. We are shutting down the ability to create a self-serve free trial and we are changing pricing. Two massive things at the same time. A lot of complexity came out of that because when you do that, you don’t want to just do it quietly and not say anything. You do have to acknowledge it with your existing customers because they’re going to ask, “Hey. I noticed you changed your pricing. Does that mean that my price is going to change?” There’s a lot of communication with the existing customer base that went along with the changes that were intended for the non-existing customer base.
Rob: Yeah. I find that’s a good moment where, certainly, if you are going to raise prices on your existing customers, whether you grandfather them 6 months or 12 months or whether you don’t—there’s a whole conversation; we’ll probably going to get into around that—or if you’re not going to raise on them at all, it’s still a good time to get in touch. If you’re not going to raise on them right now or in the future, then you’ll let them know that. “Hey folks, we just raised the prices. We’re not going to do that for you. We’re going to grandfather you for now.” It’s a nice way.
If you aren’t going to grandfather them, it’s a perfect time to get in touch and say, “Hey, by the way, we’re going to grandfather you for a certain amount of time, but then change it up later and here’s why,” and give the whole defense or the reasoning behind it.
Jordan: That’s right. Now, for our situation, we did want to raise prices on existing customers. That’s a complicated thing because people are not used to that.
Rob: Yeah. I was going to ask. There is obviously a debate in the SaaS space. Every founder has their own opinions about it. It’s like, “I heard people say…” You know I’m not a fan of absolutes, right? So I hate it when you say, “You should always grandfather. You should never grandfather. You should blah-blah-blah.” I don’t think that’s the correct way to think about pretty much any of this.
I think there’s something in between and there’s a spectrum. I’ve often thought, “Hey. There are reasons to not grandfather, especially if you can communicate those reasons well in a letter, a blog post, or an email to your audience. If it makes sense to them and if it’s the right thing for your business, then these are the times when I would think about doing it.
I know that had been a hard decision. Grandfather for a period of time is what you ended up doing. Talk me through that.
Jordan: Yes, it was a hard decision and an easy decision at the same time. The math of it was very straightforward, that we would be foolish not to change pricing on existing customers. Here’s why. When we started the business, we didn’t have a full understanding of exactly how our business work from a financial metrics point of view. We thought we were on the software business, where we license our software to people to pay a monthly subscription fee to have access to the software. It’s a traditional SaaS.
The reason we thought that was because that’s what we had in our hands at that time. “Here’s the software. You can use it.” What we didn’t realize was the significance of the payment processing that we would be doing. We do significant payment processing. Hundreds of millions of dollars annually. We did not factor that into the business model. That resulted in our very heavily underutilizing our GMV (Gross Merchandise Value), the total amount of money being processed into our system. We were not monetizing our GMV.
If you look at, for example, Shopify, at scale, they make 50% of their money, $400 million annually around monetizing their GMV. That’s somewhere around $28 billion worth of GMV in total. They’re out over a basis a point. Over 1% of their GMV turns into revenue for them. $400 milion on $20 billion is 1.2 or so basis points.
We were well below that. Our pricing was 0.1%, a tenth of a percent. Shopify was making 10X what we were making on a monetizing GMV perspective. We didn’t realize that when we first started the business. Where we ended up was grandfathering pricing for existing customers on the subscription fee. If you pay $100 a month, $300 a month, $400 a month, or whatever that is, that will stay that way forever. On the GMV that you’re processing through our system, we move it up from 0.1% to our new pricing of 0.5%. It is a 5X but still very much in line with our competition, with Shopify, and with the market overall.
What we had to back it up was our software had just gotten so much better. It’s tough to describe how much better—how bad it was to begin with and how much better it is now. What we did is we put ourselves in their shoes and we said, “If I were a merchant and I had been with CartHook for a year, I had been around when it sucked, now it’s better and I’m happier, but I stuck with you guys this way, how would we want to be treated in that situation?”
What we decided to do was write that blog post that you alluded to earlier, that we should link up, because that was a very complicated blog post to write, and then make a promise that we thought was fair. That promise was, this is the new pricing for everybody, for new merchants. You will be grandfathered into your subscription price forever but your transaction fees will go up. However, we will let you go through the entire holiday, Black Friday season of 2019, and the price increase will only go into effect in January of 2020.
Basically saying, we’re not going to be bastards and raise the prices right before the holidays to maximize the amount of money we can make off you and you have no choice because you’re already using the system. We said, “No. We’re going to forego that revenue because that’s the right thing to do. But we will be raising it after the holiday’s over in January.” That makes sense?
Rob: Absolutely does. The thing I’m fascinated to hear is how did it go over? How many positive, negative comments? What was your sense of what your customer base responded with?
Jordan: The truth is we’re in the middle of it now. We’re halfway through. We sent out an initial email in July. Two weeks ago, we sent out another email. What we sent in July along with the blog post was, “Between now and January 2020, we have six months to earn that price increase in your eyes. Here’s what we’re planning on adding to the product and this is part of the justification of the price going up.”
What we’ve been very conscious of internally and from a product and prioritization point of view is that’s coming due. We will need to send an email to all those existing customers telling them that the price is going up next month and, “This is what we promised you and this is what we’ve accomplished.” We have an internal list of, “These are the things that are worth noting in that email that we can say these are significant improvements and significant additions that helped to justify the price increase.”
When we first sent it out in July, we heard nothing. Just no negative reactions. A few emails about clarification, a few questions, and then all good. That tells me that it went over pretty well and that a lot of people didn’t read it. That’s the reality of it.
Now, things are ramping up. We communicated again two weeks ago saying, “Hey, just as a reminder. In January 2020, your pricing is going to change. We will get back in touch in December before that happens to make sure that you are fully aware.” That communication started to cause a little bit more of a pushback. A lot of it was our fault because we communicated what the pricing change was. What we really should have done is personalize it.
“Last month, you did X and paid Y. In January, if you do the same X, then your pricing will be Z.” We should have laid that out more specifically and we didn’t. Because we didn’t, people started doing math themselves. If you do the math emotionally, you’ll get the wrong answer. We had a lot of emails back and forth just clarifying, “Look, it’s not going up 10X. Here’s the change for you.”
On the positive side, what it has also done is it has armed us with a bargaining chip with larger merchants. If you’re a large merchant and you’re processing $2 million a month in our system, and you don’t want to go from 0.1% to 0.5%, then let’s have a conversation to make sure you don’t go all the way up to 0.5%. Let’s set something up that makes sense, maybe get you in a 12 month contract. Let’s partner on this and do it the right way.
It has helped us get a lot of our larger merchants talking about pricing and moving toward annual contracts in order to lock down a predictable cost for them as opposed to something that’s variable.
Rob: There’s a number of things that I won’t even pull out of that because it’s the right way to think about it. It’s very smart, but one of the things you said was, “Let’s think about it from their perspective.” I imagined that that sentence, that phrase was uttered many, many times in your office when you were trying to make this decision. You thought it through. You and your team thought it through to the extent of some people could say if they were your customer, it would be a little outrageous. I could come out and say, “You 5X-ed my pricing. Even though technically I know I’m still grandfathered in the monthly, but 0.1 to 0.5 is a 5X. I’m going to come on and be outraged.” The fact that people didn’t do that indicates that you had (a) a case. You had justification. And (b) you communicated that in a way that made people feel comfortable. You weren’t screwing them.
Jordan: Yeah. It was not abstract. It was very real. It was, “How is […] from Native Deodorant going to react to this exact email that we’re about to send?” We’ve gotten to know these people over time. We worked for them in a long time. How is this specific person at this company going to take this? Are they going to go write to the Facebook page? Are they going to email us? Are they going to ask us for clarification? Are they going to want to get on the call?
Everything in that communication was based around real reactions. It was a lot of, “We’re here to talk about this. Here’s a Calend.ly link to set up a call with somebody if you want to talk about it.” It was thought through that way.
Rob: That’s the power of being a founder or a CEO who’s in touch with your customer base. Even at several million ARR and at 25-30 employees, you still know a bunch of customers by name. Not only do you know them by name, you know how they’re probably going to react to an email. You think it through deep. The best founders, best CEO that I see doing this, doing hard things and not pissing their customer base off, are the ones who are in touch with them. That’s a big key to this.
Jordan: Yeah and that’s gotten harder. I would say that it shifted away from my responsibility being super aware with these specific merchants, their personalities and relationships, and more just understanding that that’s important. And then, looking at my success team and saying, “Okay. Let’s think about these people. What’s your opinion on how’s this person is going to react?” Just knowing that that is a key thing to keep in mind is now more important than actually knowing and understanding the relationships themselves.
The conversations we’re having internally here is I’m asking my leadership, the people who are in these communications, in these difficult email threads of, “Does this make sense?” “Should I leave?” “You guys are being greedy.” These really difficult email conversations. What I have to do is I have to ask them to put two hats on. “Here’s your empathy hat for when you’re talking to people and we wanted the right thing by them.”
Then, I’m also going to ask you to switch hats, come to the conference room with me, and look at the spreadsheet that says, “When we make these changes, if 30% of our customers leave, and that still results to adding $100,000 to MRR, can you acknowledge that? Do you think 30% of our customers are really going to leave?” The answer is no. Can you carry both those things at the same time? Can you be very empathetic to people and make sure we’re doing right by them?
At the same time, acknowledging if someone leaves, we have to be able to accept that because the math will work out for us. That sets us up to be a healthier company, hire the people we need, and then get a bigger office that we need. We have to have that as part of the goal. It’s not just about what the customers want. It’s also about our business. It’s both together.
Rob: And that makes a lot of sense. That’s a big reason that you did have success with this. What’s next?
Jordan: That’s really the pricing change. Our existing customers, we had to communicate with them. That’s not done, but it’s going in the right direction. Now, the bigger change is the process. Making the switch from self-serve free trials to an application process with demos was the harder call. That was the scarier thing because we started getting good, we started getting to the hundreds of free trials every month. Then, you’re taking that flow of potential revenue and you literally just shut it down 100%. We took a faucet that was all the way opened and we closed it all the way. Now, people could not create a free trial unless we sent them a link to create a free trial. We shut the faucet all the way down.
We went from hundreds of free trials a month to a few dozen. That’s where it got scary because if you think about the nature of churn, it carries on for a few months. If we have this messy washing machine of merchants that don’t fit and only pay for one or two or three months, then they leave, when you shut down free trials, you are now going to hurt yourself both ways. You’re not going to be getting new customers and the customers from the past 90 days are still going to be churning.
It was like, “Alright guys, our revenue is about to go down. Everyone be okay with it. We’re going to keep calm. We’ve had this amazing run of growth. Everything’s going up. Now, we are purposely just going to chop off 10%-50% of our revenue over a 90 day span and we’re just going to be okay with that.” That expectation setting was super important so nobody freak out because I saw what was going to happen. We’re going to go from a few hundred to a few dozen and then the churn is going to continue on.
Rob: That’s really important to point out that, (a) you called that out to your team in advance, but (b) most people who have never run an app, where you have big waves of customers coming in and a lot of trials, if you shut that off, it’s exactly what you said. It’s like this huge wave. The churn is going to crash but it never crashes because your trials bolster it. It just keeps going up, and up, and up. But the moment I’ve had a couple apps where we had hiccups, whether it was suddenly Google downgraded us, the ads stopped working, whatever it is, our trials plummeted.
It wasn’t just, “Oh. We didn’t grow that month because we didn’t have as many trials.” It is devastating because oftentimes, your first 60 or first 90 day churn is way, way higher than your 90 day to infinity day churn. That’s the part that just crashes. If you don’t keep that constant influx top of funnel, it can be devastating. Like you said, 10%-15%, 20%-30%, I’ve seen with smaller apps. It’s painful if you’re not aware, if you don’t look at the math in advance.
Jordan: Yes. This […] back to what you’ve mentioned a few minutes ago, where I should be happy because things are going well. I knew internally that this is what was happening, that the trials were just keeping it afloat. The trial’s just kept overwhelming the churn. If anything happened at all to the trials coming in, then we’ll be exposed. Making this move was like, “Let’s do that on our terms instead of someone else’s terms.”
It’s also why we did it in the middle of the year, July 1st, literally right in the middle of the year, well in advance of the holidays so that we would have our act together now. That’s what happened. We completely stopped free trials and the churn kept going for 90 days. That hurt, but the benefits were amazing and immediate.
July 1st comes in and we just shut it down. You can’t see a free trial on our site. It’s apply for a demo. That terminology was super important to me. It was not “request” a demo, it was “apply.” It was a position of power. This is really good. You’ve heard about it. You’ve heard about the success people have with it. If you want it, you need to apply. We soft pedaled it on the site.
We’re not like, “Apply here to see if you’re good enough for us.” That sucks. That’s not good positioning. It was really, “Apply to see if we’re a fit.” People are like, “That’s […]. You’re basically just saying that we’re not good enough if you only want to work with successful merchants. We’re up and coming. You don’t want to work with us because we’re not big enough. That’s not cool.” In reality, it was much closer to, “Let’s make sure we’re a fit.” Think about all the things we’ve been talking about. It’s not just, “Do you make enough money?”
I read Lincoln Murphy’s blog post about qualification. He had a great write-up about the different types of qualification, where it’s strategic, cultural, financial, all these different things that are in line. We have some merchants that makes $1,000,000 a month, but we absolutely cannot stand working with them. That has now become a factor in the qualification.
Now, we have an actual pipeline. That sales process that was happening inside the product and a few interactions with support is now happening with people, with an application that people fill out, then every morning the success team comes in and either denies or accepts the application. Right now, we’re denying roughly 50% of the applications. We’re just saying, “It does not make sense for you to work with us. Here’s a link to our competitor that might make more sense for you.” We literally linked to the competitor in that rejection email.
Rob: That’s crazy. It’s such an unorthodox approach. It’s the Velvet Rope Policy. It’s just letting in exactly who you want. As we’ve said, it’s a luxury. Most apps needs all the trials they can get. You hit a certain point where that made sense, but I do think that more companies should think about doing this once they hit that point.
Jordan: When I spoke to other founders about this, I got the sense that people were like, “Can you do that? Is that okay?” To me it felt like, “That’s what I think we should do. It felt very strange to be like a slave to the fact that people want to use it, therefore we have no choice but to let them. What? That doesn’t make sense.”
Rob: I’ll tell you what, it’s way better to do it upfront than to let people in. Whether it’s just people aren’t qualified or they’re the toxic types of customers that you can identify pretty early on that you’re like, “Oh boy. This person’s never going to be happy with anything. They’re just going to rag on my staff the whole time. They’re going to Twitter the moment we don’t answer their email in four minutes.” If you can get them upfront, identify them that way, and not have to fire customers who’ve been with you for two or three months who are a pain in the ass (which all of us have to do, it sucks), for that alone, this is pretty valuable.
Jordan: Yes. We call them category four. We have category one, the best of the best direct-to-consumer brands that we recognize. We’d love to work with them, absolutely get them in, let’s give them the white-glove treatment. We have a category two that are a good fit. We have category three that are not quite there yet, it’s on the bubble. It’s the success team’s call whether or not they should come in or not. And we have category four that are jerks. It doesn’t matter how much revenue they make. If they’re just going to make us miserable, they just don’t get in.
Rob: Yeah. Isn’t that a hurricane category one?
Jordan: Yes. Think about what this has done internally. A few things that it has done. First is establish an actual sales pipeline that we can optimize. What we did there is first, we took a stab at what we think the pipeline actually looks like. Think about the different stages. We get a demo whether they get approved. They get the link to set-up a time to talk. Then, they get the link to sign up after that. Then, they create a free trial. Then, they’re launched and have a processed revenue. And then, they’re into the conversion piece of it.
Before, we didn’t have those steps. It was just a free trial and then hope the product does its job. Now, what we did is we set up the pipeline and those steps. We have in HubSpot, but I got a good recommendation from someone (I can’t remember exactly who) to put it up on the wall. I’ve got a bunch of index cards, we’ve got a bunch of markers, and we’ve got these tacky stuff that sticks to the wall. We created the categories as columns on our wall. Each prospect got an index card with their name on it and we would physically move the index card from stage to stage. It was just mimicking HubSpot. You would move in the HubSpot, you’d go to the wall, and you’d move it from one column to the next.
What that did is it showed the entire company in visual, physical format, what was happening with our sales pipeline, instead of just, “I don’t know. We have a few hundred trials.” The second thing it did is it was a dead obvious way to see where the friction was. The friction is the columns that have the most people, pretty simple. What it tells us is that stage in the pipeline is where we have a lot of friction, and that’s where we need to get the communications and marketing teams to create content.
Now, what does the success team need in order to help merchants get from that column to the next column and then start creating content, videos, support docs, to help people through that, so that the success team could provide those and the merchants can also get on their own?
We did it for three months or so. We’ve since taken it down. It’s no longer useful as it was in the beginning. At first, we made the switch. It just had this amazing impact. I have a bell on my desk. When someone became a paying customer, I would hit the bell. It was like this visceral experience for people. We’re not a company that just answers emails. We’re doing something specific. We’re finding people, identifying who the right people are, moving through this pipeline, and getting them to success.
Rob: I love that idea, the visual nature of it. Just seeing cards, it must be obvious visually and just be an amazing queue for you guys. That’s really cool.
Jordan: Yeah. They were just a very large vertical stack of prospects that didn’t go from, let’s say, approved but didn’t schedule the actual appointment to do the demo. Okay, we need to be better at that. An obvious one was also like they’ve created a trial, but they’re not processing revenue yet. They need to get over the hump of actually using the product.
One thing I did mentioned earlier on the pricing is that not only did we remove self-served free trials but we removed free trials entirely. We asked for the first $500 upfront at the time of sign-up that we have a 30-day money back guarantee instead of the free trial. It’s all toward the same type of positioning of, “Let’s make sure that you’re a good fit. Once we know that you’re a good fit, then you commit to us. We’re committing to you. You commit to us. Let’s do this together.”
Rob: Yeah. When you look at large, enterprise companies, let’s say HubSpot or Salesforce or something, they get a bad rap for being enterprises. They’re a pain in the ass to deal with, they’re too expensive, and their sales process sucks. You’re moving somewhere between self-serve and what they do. It sounds like there is less friction. Is your pricing public on your website?
Jordan: Yes, it is.
Rob: So the pricing’s public, that’s a difference. They tend to hide it behind a thing, then it’s a negotiation, blah-blah-blah. The difference is there. You put up the velvet rope. You’ve gone upmarket. They’re typically not free trials with these really expensive enterprise plans. It typically all annual. I don’t think you’re there yet, but my guess is you’ll be moving there because there’s a lot of reasons to do that. Both predictability with the merchant but also predictability for you. You are taking that step towards the upmarket playbook, right?
Jordan: Yeah. The results, if you think about internally, going from hundreds of free trials to a few dozen, what we’ve been able to do is give love to the right merchants. We’ve told our support team, “Guys, we’re no longer doing things. It’s not about crushing tickets. You could take your time. You can spend 45 minutes on an email as long as on the other end the person goes, ‘Wow. That was everything I needed and you took your time. I feel great about it.’”
The fewer, more qualified merchants is the theme. We’re much common internally. Our support staff finish things up by 11, then they’re doing support docs, they’re helping testing on the product team, and everyone’s happier. People who are jerks, no one feels the need to like, “Hey, I guess I can’t turn down money because it’s not my business.” Now, they’re empowered. If this person sucks, tell them to get lost. People are more empowered. They’re happier. Our monthly churn went from 12%. It continued on for those few months. Five or so months later, we’re at 5% monthly churn.
Rob: Oh, man. Wow. That’s crazy. That’s such a testament. On the podcast and in the whole MicroConf community, what’s funny is before we started talking about this, let’s say in 2010, there wasn’t just this common knowledge on a lot of things that we talked about. Lower price products have higher churn. The customers are more of a pain in the ass. We all know that now. You know that if you’re selling a $10 product, everybody’s price sensitive. Your churn is through the roof. They want all the features. It’s just known now.
Then, there’s the next step up of $50 price point average revenue per customer or $100 average revenue per customer. You guys were at such a high volume that even those numbers didn’t make sense anymore. It just didn’t make sense to service them because they were such a small portion. They were huge portion in your customer base, in your trial base, very small portion of your actual revenue. Now, we can only bother or we should only focus on $500 to $2000 a month average revenue per user.
That’s the step. It’s obviously very deliberate and I’m just struck by the impact. It’s not one thing. It rippled through the entire business in mostly positive ways, it sounds like. The fact that you support people now have the ticket, the ticket volume is whatever it is, a tenth of what it used to be, is just phenomenal.
Jordan: Yeah. The way we look at it is that we really made a healthier company. The growth in 2019 was nothing nearly 3X of the previous year. But now, we’re in a position to grow in a much healthier way.
Going back to the faucet analogy, now that we’ve tightened it up all the way, fully controlled everything, now that we have our systems in place, we understand who the right matches are, the systems are better, the people are happier, now we can start to open up a little bit on our terms, and grow faster but in our way. An example is when someone’s a category three, they’re qualified but they’re not one or two, we send them a recorded version of the demo. Now, we can open that growth back up, but on our terms and under control. If we don’t like the way that’s going, we’re just going to shut that back down.
Rob: We talked a lot about the positives. Was there a major negative repercussions to this?
Jordan: Just finances.
Rob: That’s short-term.
Jordan: Yeah. The short-term financial hit that hurt is just a stressful thing. We did that with what I felt was enough money in the bank, that we wouldn’t get to the point where I felt like I have to go raise more money. I wanted to get through this in a way that we come out to the other side.
Really, if you think about all the way back, the decision to increase prices on existing customers and that kicking in January, what we really needed to do was just get through this six month period. The increased pricing on that GMV that is coming on the door already is going to overwhelm all of the negative impact of it. Then, we’ll be in a position where we are much more profitable and much happier at the same time. Just six months of pain but all towards putting ourselves to a good spot in 2020.
Rob: Yeah, and that’s playing long ball. You have a long-term mindset. You’re not churning and burning, “Oh, how can I maximize revenue now to raise the next round? Or have an exit?” or whatever it is. You’re thinking, “If I’m going to run this company for years, what is the healthiest company? What company do we all want to work for? What’s best really for the customers that are the best fit? What’s best?” The six months of pain, I’m sure, has sucked but you’re basically coming out on the other side of that. I hope January is truly an amazing month for you.
Jordan: Yeah. Thank you, man. I appreciate the ability to talk through the whole thing. I’m actually writing a blog post about this. I’ll let you know when that’s out.
Rob: Sounds cool.
Jordan: I know it’s all unique to each individual business, but the big lesson I hope people get from it is that you don’t have to play by what you think are established rules. You should do what you think is best for your business.
Rob: Love it. We will link up the price increase blog post that you talked about. I have that link right here. I googled Lincoln Murphy’s blog post about qualification and hopefully it’s the same one. We will also link that up. If you get your post published before this goes live, we can throw that in there as well.
If folks want to keep up with what you’re up to, they can go to @jordangal on Twitter and carthook.com is your app. Any other places they should keep their eye on?
Jordan: Yeah. I also do a podcast with my good friend, Brian Castle, called BootstrappedWeb. Those are the three places: Twitter, CartHook, and BootstrappedWeb.
Rob: Sounds great. Thanks again for coming on.
Jordan: My pleasure. Thank you.
Rob: Thanks again to Jordan for coming on the show. Also, I should call out episode 452 of this podcast. Just a few months ago, Jordan came on and answered listener questions with me. If you’re interested to hear more of his thought process, go back and listen to 452. You can hear his take on several listeners questions.
If you have a question for me or a future guest, leave me a voicemail at (888) 801-9690 or email questions@startupsfortherestofus.com. As you know, our theme music is an excerpt from a song by MoOt. It’s called We’re Outta Control. It’s used under Creative Commons. You can subscribe to us in any pod catcher. Just search for “startups” and visit startupsfortherestofus.com if you want to see a transcript of each episode as well, to see show notes, and comments by other loyal Startups for the Rest of Us listeners. Leave a comment of your own if you want to give a thumbs up, your thoughts, constructive criticism, whatever it might be on any of the shows. Thank you for listening. I’ll see you next time.
This week’s guest is Jordan Gal. You may know him from BootstrappedWeb. Also, the founder of CartHook. In this episode of Startups for the Rest of Us, I talk with Jordan about what I’ve seen as one of the gutsiest price increases and sales process changes by going up market that I’ve ever seen. The quote that I’m using in the title is, “We went from hundreds of free trials to a few dozen on purpose.” This is Startups for the Rest of Us episode 476.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome in building, launching, and growing startups, whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob and today with Jordan Gal, we’re here to share experiences to help you avoid the mistakes we’ve made.
It’s a great conversation today. In fact, often times I say we have many different episode formats. This one is less of an interview and it’s more of me and just letting Jordan go on this topic. He thought about it so deeply with his team. It was their realization of, “Our churn is way too high and we’re just running on this treadmill that is getting faster and faster, and the business doesn’t feel healthy. How do we fix that? It’s not one tactic. It’s not changing, making people email to cancel you. It’s not moving to annual plans. It’s not the little tactics. How do we revamp our entire sales, onboarding, pricing process, and go up market to change the nature of our business?” That’s what we’ll talk about today.
You can tell during the interview that I’m obviously impacted by it. I was impacted from the outside. I’m an angel investor in CartHook. CartHook has raised a small amount of money. It’s still very much in that bootstrap indie-funded mindset. Jordan is super capital efficient. He’s not on the constant churn to raise that Series A to Series B and go there. He hasn’t raised that institutional money that forces him to go after that. He’s very much like a Brennan Dunn […] with the RightMessage.
A lot of the other companies we hear about that are in our MicroConf community, they’re in the Startups for the Rest of Us community, they’ve raised a small amount of money to hit that escape velocity. They’re not looking to unicorn or bust. They’re not looking to be that one billion dollar company, necessarily. Jordan’s in that camp. I love the way he’s meticulous. He really thinks these decisions through. I really enjoyed the conversation today.
To set the stage, if you haven’t heard of Jordan, years ago he ran an ecommerce company, ecommerce business. If I recall, it was with his brother. Maybe his dad. It was like a family member. They sold that. He had a small exit there. Then, he wanted to start a SaaS or a software tools for ecommerce. He wound up starting CartHook. Originally, it was just cart abandonment emails and they’ve since stopped doing that.
They eventually got to the point where CartHook essentially replaces the checkout on Shopify. The headline of CartHook is “Maximize Conversion Rate and Grow Average Order Value Today.” They have a real competitive advantage that’s very much differentiated from a lot of the other products in the ecom space, and he’s got a lot of traction.
As we talked about during the interview, they’re doing several million dollars in ARR, which is a big deal. They’re in the 25-30 employee range. He’s really just been grinding it out for years to get there.
What I like about this conversation is I was getting investor updates and then I saw a blog post where Jordan was talking about increasing prices. That’s always such a dicey proposition. I then started chatting about it. I asked him what the thought process was and how they’ve gotten blowback. They basically led to the conversation that we have here on the podcast today.
Without further ado, let’s dive into the interview with Jordan Gal. Jordan, thank you so much for coming on the show.
Jordan: Rob, thanks very much for having me on.
Rob: It’s great to chat again. There’s a lot that we’re going to dig into today. It’s been a fascinating journey. From the outside, I have an inside seat as an investor in CartHook. I’ve watched this transformation that you’ve taken over the past year or so. I’m really fascinated to begin with that.
The nugget for this episode actually came when I saw you raised prices. You did it so well, you did it so elegantly with (I believe) almost no pushback. I read a blog post, it was a blog post that you put on the CartHook blog, and I was like, “Man, I really want to get you on the show to just talk about what the thought process was there.” There was so much more to it. It wasn’t just a price increase. There’s this whole story that were going to dig into today. You want to kick people off with letting us know where we’re headed today?
Jordan: This is a topic I’m excited to talk about, something that I’m proud of. The best way to get started is to give some context around what these decisions are, what they entail, and why we got to a point of wanting to take these bigger actions.
What I need to do is to ask everyone to go back with me for about a year. The history of our checkout product, 2017, is when we came out with it. It was very difficult, technically. It was just one challenge after another. Then, we released a version two where we made a lot of big fixes. That’s when we start to hit traction.
2018 was our big year of growth, where we 3X revenue and got to multiple millions in ARR. That was this wild ride. It was fun. I look back on that year very fondly. That’s how I always want to feel.
The holidays in ecommerce are always big, obviously. Black Friday, Cyber Monday, and then the holidays. The end of 2018 for us was gangbusters. Then, January–February 2019 comes around. We start to be able to catch our breath, really look at the company, and analyze how things are going. There was one number that stood out that was a problem. It was an obvious problem and something that could not be ignored. That was churn.
In January–February 2019, we’re cruising at 12%-14% monthly churn. Ecommerce itself has high churn. There’s a reason Shopify does not disclose their churn rate because it’s much higher than other software companies. It’s partly the nature of ecommerce, the nature of the market, whatever else. Still, 12%-14% monthly is unsustainable.
On first glance, it looks like the company’s a washing machine. It’s just bringing people in, spitting them out, and that’s not going to work out for the long-term. When we started to really analyze it more deeply, what we realized is that the situation was not nearly as bad as 12%-14% looked. What was happening was that we were attracting a top tier of merchants that really fit with our product. What they were selling, the way the company was set up in terms of the number of people, how technically savvy they were, all these characteristics from revenue point of view, cultural point of view, product point of view, and so on. We really lined up with this nicely. Those customers were sticking around for the longer-term.
The issue was that we were also attracting this lower-end merchant that did not fit with our business. It didn’t fit with the software, sophistication level required, pricing, all that. That large chunk was not staying. Those customers were coming in, doing a free trial, either leaving before the free trial ended, or paying once or twice, then leaving after that. There was a real bifurcation in these two populations.
The challenge was, how do we improve the health of our business, overall? We had a few goals. Why don’t I list out a few of the goals that we came up with when we start to tackle this? We wanted to do things like take more control of our business. A lot of it felt like we were not in control. We just had a ton of word of mouth. It was just a bunch of incoming demand. That did not feel like we were really controlling who was walking into the system. We obviously needed to reduce churn significantly.
At the same time, we also wanted to increase our pricing to align with the value we provide. We hadn’t changed our pricing since we launched and we were significantly better than we had launched. Overall, the saying that we came up with was “fewer, more qualified merchants.” That was our goal. To work with fewer merchants that were much better fit and much bigger overall. Those were the goals.
The way we did it was changing two big things. We changed our pricing and we changed our process. You started off this conversation talking about a pricing change. From the outside, it really looks like a pricing change. In reality, it’s more of a process change like a sales process, like how we bring people onboard. The pricing change served that larger process change.
Rob: Yeah, that makes a lot of sense. I have a couple of questions for you. You used this phrase, “To take control of our business.” You touched on that a little bit, but is it that you’re controlling who comes through the gate such that you only deal with customers that you deemed are nice or that are qualified? Or is it taking control? Are there any other aspects to that?
Jordan: There are a lot of different aspects to it. What’s happened over the past years as I have gone further away from the frontlines and from the customer interactions, is I have become shielded from the kinetic activity, actually talking and rubbing up against customers on a daily basis. I don’t feel that nearly as much as when I started to.
The anecdote I give was I had a conversation with our support team. I asked them, “What percentage of your work is for people who are in trial that won’t convert or people that have converted but are only going to stick around for a month or two?” They looked at me and said, “Probably 80%.” To me that sounded horrible. I’m setting up my employees to run on a treadmill at a very high rate of speed and looking at them saying, “How do we increase the speed?” That’s not a recipe for a happy employee.
What I mean by taking control over our business, it wasn’t just like this external-facing, “We only want to work with big merchants.” It was also, “This feels like a mess internally.” We’re doing an enormous amount of work for people that don’t fit. The reason we’re doing it is because they just walked in the door on their own and create a free trial. All of a sudden, we are forced to engage with them. It’s definitely unexpected that one of the biggest problems in our business is how to limit the number of people using the product. That’s not what I expected. I expected, how do I beg people to use our product and make them successful with it? That was a reality.
Rob: Yeah. You’re in a unique position, for sure, to be able to do this. There is no model for this. I’ve heard of apps going up market or changing. Drip went from generally as […] to focus on ecommerce. Obviously, that drove some people away in terms of that pivot or that focusing. There’s a model for that.
While you are going up market, you did it in a different way. You didn’t just raised prices. As you said, pricing is one piece of it. That’s where Ifind this whole decision and process super gutsy. It feels risky to me hearing about it. Did it feel that risky to you upfront? Were you just like, “No, I know this is going to work”? Or were you like, “Oh my gosh, this could completely tank a lot of things”?
Jordan: There was definitely a lot of fear. We’ll get into a bit of the math around what helped me overcome the fear was just being very objective in the math and saying, “No. This isn’t going to work out. Even if it’s not very successful, it’s still going to work out on the math and finances.” All of this comes back to the finances. If we had raised $8 million in a Series A, we would be trying to gather as much of the market as possible. That’s not what we’re doing. We raised a little bit of money. We want a healthy, profitable company.
If you want healthy and profitable, then you need to live within your means. The reality of our situation, just taking on as many customers as possible, was not leading to that outcome. It had churn way too high. The amount of work that was happening internally was too high for customers that didn’t make sense. That’s what helped us come to the conclusion of, “Okay, I’m going to take a risk, and we’re going to gather the forces. Let’s get into what we did.”
Rob: Jordan, I want to interrupt you real quickly. When you say it wasn’t working for you, I know that CartHook is doing several million in ARR. It was working to a certain extent, but was it really the churn? That double digit churn that wasn’t working for you?
Jordan: Yes. It’s all relative. Yes, I really shouldn’t be complaining. It is working to a degree because the revenue is where it is and all these. That’s from the outside perspective. From the inside perspective, sitting in my shoes, I have to acknowledge what’s good and what’s bad. Just because I can say we’re at several million in ARR does not mean everything is good. I was fine with that. A lot of this role is holding two things in your head at the same time that are completely in conflict with one another. That’s just the way it is.
The truth is, it wasn’t working for us in a sense that I didn’t like the way the future looked. There’s a straightforward formula that everyone can Google. I don’t remember exactly what it is. It basically tells you what your maximum revenue is. Given your growth and your churn, this is the maximum that you will reach. It will not go beyond that because that’s how math works. You will get to a point where a 12% of your revenue equals the amount of growth your getting, and then you’ll stay there forever, mathematically.
I looked at that and that wasn’t that far off on the horizon based on where we were currently. We still had room. We still had another 100+ MRR to get to that point but I felt that we need to move on this now before we hit that and then all of a sudden everything hits a wall. That’s what led into it.
Now, let’s get to the first big part of the decision. The first big part of the decision was on July 1st, 2019. We are doing two big things. We are shutting down the ability to create a self-serve free trial and we are changing pricing. Two massive things at the same time. A lot of complexity came out of that because when you do that, you don’t want to just do it quietly and not say anything. You do have to acknowledge it with your existing customers because they’re going to ask, “Hey. I noticed you changed your pricing. Does that mean that my price is going to change?” There’s a lot of communication with the existing customer base that went along with the changes that were intended for the non-existing customer base.
Rob: Yeah. I find that’s a good moment where, certainly, if you are going to raise prices on your existing customers, whether you grandfather them 6 months or 12 months or whether you don’t—there’s a whole conversation; we’ll probably going to get into around that—or if you’re not going to raise on them at all, it’s still a good time to get in touch. If you’re not going to raise on them right now or in the future, then you’ll let them know that. “Hey folks, we just raised the prices. We’re not going to do that for you. We’re going to grandfather you for now.” It’s a nice way.
If you aren’t going to grandfather them, it’s a perfect time to get in touch and say, “Hey, by the way, we’re going to grandfather you for a certain amount of time, but then change it up later and here’s why,” and give the whole defense or the reasoning behind it.
Jordan: That’s right. Now, for our situation, we did want to raise prices on existing customers. That’s a complicated thing because people are not used to that.
Rob: Yeah. I was going to ask. There is obviously a debate in the SaaS space. Every founder has their own opinions about it. It’s like, “I heard people say…” You know I’m not a fan of absolutes, right? So I hate it when you say, “You should always grandfather. You should never grandfather. You should blah-blah-blah.” I don’t think that’s the correct way to think about pretty much any of this.
I think there’s something in between and there’s a spectrum. I’ve often thought, “Hey. There are reasons to not grandfather, especially if you can communicate those reasons well in a letter, a blog post, or an email to your audience. If it makes sense to them and if it’s the right thing for your business, then these are the times when I would think about doing it.
I know that had been a hard decision. Grandfather for a period of time is what you ended up doing. Talk me through that.
Jordan: Yes, it was a hard decision and an easy decision at the same time. The math of it was very straightforward, that we would be foolish not to change pricing on existing customers. Here’s why. When we started the business, we didn’t have a full understanding of exactly how our business work from a financial metrics point of view. We thought we were on the software business, where we license our software to people to pay a monthly subscription fee to have access to the software. It’s a traditional SaaS.
The reason we thought that was because that’s what we had in our hands at that time. “Here’s the software. You can use it.” What we didn’t realize was the significance of the payment processing that we would be doing. We do significant payment processing. Hundreds of millions of dollars annually. We did not factor that into the business model. That resulted in our very heavily underutilizing our GMV (Gross Merchandise Value), the total amount of money being processed into our system. We were not monetizing our GMV.
If you look at, for example, Shopify, at scale, they make 50% of their money, $400 million annually around monetizing their GMV. That’s somewhere around $28 billion worth of GMV in total. They’re out over a basis a point. Over 1% of their GMV turns into revenue for them. $400 milion on $20 billion is 1.2 or so basis points.
We were well below that. Our pricing was 0.1%, a tenth of a percent. Shopify was making 10X what we were making on a monetizing GMV perspective. We didn’t realize that when we first started the business. Where we ended up was grandfathering pricing for existing customers on the subscription fee. If you pay $100 a month, $300 a month, $400 a month, or whatever that is, that will stay that way forever. On the GMV that you’re processing through our system, we move it up from 0.1% to our new pricing of 0.5%. It is a 5X but still very much in line with our competition, with Shopify, and with the market overall.
What we had to back it up was our software had just gotten so much better. It’s tough to describe how much better—how bad it was to begin with and how much better it is now. What we did is we put ourselves in their shoes and we said, “If I were a merchant and I had been with CartHook for a year, I had been around when it sucked, now it’s better and I’m happier, but I stuck with you guys this way, how would we want to be treated in that situation?”
What we decided to do was write that blog post that you alluded to earlier, that we should link up, because that was a very complicated blog post to write, and then make a promise that we thought was fair. That promise was, this is the new pricing for everybody, for new merchants. You will be grandfathered into your subscription price forever but your transaction fees will go up. However, we will let you go through the entire holiday, Black Friday season of 2019, and the price increase will only go into effect in January of 2020.
Basically saying, we’re not going to be bastards and raise the prices right before the holidays to maximize the amount of money we can make off you and you have no choice because you’re already using the system. We said, “No. We’re going to forego that revenue because that’s the right thing to do. But we will be raising it after the holiday’s over in January.” That makes sense?
Rob: Absolutely does. The thing I’m fascinated to hear is how did it go over? How many positive, negative comments? What was your sense of what your customer base responded with?
Jordan: The truth is we’re in the middle of it now. We’re halfway through. We sent out an initial email in July. Two weeks ago, we sent out another email. What we sent in July along with the blog post was, “Between now and January 2020, we have six months to earn that price increase in your eyes. Here’s what we’re planning on adding to the product and this is part of the justification of the price going up.”
What we’ve been very conscious of internally and from a product and prioritization point of view is that’s coming due. We will need to send an email to all those existing customers telling them that the price is going up next month and, “This is what we promised you and this is what we’ve accomplished.” We have an internal list of, “These are the things that are worth noting in that email that we can say these are significant improvements and significant additions that helped to justify the price increase.”
When we first sent it out in July, we heard nothing. Just no negative reactions. A few emails about clarification, a few questions, and then all good. That tells me that it went over pretty well and that a lot of people didn’t read it. That’s the reality of it.
Now, things are ramping up. We communicated again two weeks ago saying, “Hey, just as a reminder. In January 2020, your pricing is going to change. We will get back in touch in December before that happens to make sure that you are fully aware.” That communication started to cause a little bit more of a pushback. A lot of it was our fault because we communicated what the pricing change was. What we really should have done is personalize it.
“Last month, you did X and paid Y. In January, if you do the same X, then your pricing will be Z.” We should have laid that out more specifically and we didn’t. Because we didn’t, people started doing math themselves. If you do the math emotionally, you’ll get the wrong answer. We had a lot of emails back and forth just clarifying, “Look, it’s not going up 10X. Here’s the change for you.”
On the positive side, what it has also done is it has armed us with a bargaining chip with larger merchants. If you’re a large merchant and you’re processing $2 million a month in our system, and you don’t want to go from 0.1% to 0.5%, then let’s have a conversation to make sure you don’t go all the way up to 0.5%. Let’s set something up that makes sense, maybe get you in a 12 month contract. Let’s partner on this and do it the right way.
It has helped us get a lot of our larger merchants talking about pricing and moving toward annual contracts in order to lock down a predictable cost for them as opposed to something that’s variable.
Rob: There’s a number of things that I won’t even pull out of that because it’s the right way to think about it. It’s very smart, but one of the things you said was, “Let’s think about it from their perspective.” I imagined that that sentence, that phrase was uttered many, many times in your office when you were trying to make this decision. You thought it through. You and your team thought it through to the extent of some people could say if they were your customer, it would be a little outrageous. I could come out and say, “You 5X-ed my pricing. Even though technically I know I’m still grandfathered in the monthly, but 0.1 to 0.5 is a 5X. I’m going to come on and be outraged.” The fact that people didn’t do that indicates that you had (a) a case. You had justification. And (b) you communicated that in a way that made people feel comfortable. You weren’t screwing them.
Jordan: Yeah. It was not abstract. It was very real. It was, “How is […] from Native Deodorant going to react to this exact email that we’re about to send?” We’ve gotten to know these people over time. We worked for them in a long time. How is this specific person at this company going to take this? Are they going to go write to the Facebook page? Are they going to email us? Are they going to ask us for clarification? Are they going to want to get on the call?
Everything in that communication was based around real reactions. It was a lot of, “We’re here to talk about this. Here’s a Calend.ly link to set up a call with somebody if you want to talk about it.” It was thought through that way.
Rob: That’s the power of being a founder or a CEO who’s in touch with your customer base. Even at several million ARR and at 25-30 employees, you still know a bunch of customers by name. Not only do you know them by name, you know how they’re probably going to react to an email. You think it through deep. The best founders, best CEO that I see doing this, doing hard things and not pissing their customer base off, are the ones who are in touch with them. That’s a big key to this.
Jordan: Yeah and that’s gotten harder. I would say that it shifted away from my responsibility being super aware with these specific merchants, their personalities and relationships, and more just understanding that that’s important. And then, looking at my success team and saying, “Okay. Let’s think about these people. What’s your opinion on how’s this person is going to react?” Just knowing that that is a key thing to keep in mind is now more important than actually knowing and understanding the relationships themselves.
The conversations we’re having internally here is I’m asking my leadership, the people who are in these communications, in these difficult email threads of, “Does this make sense?” “Should I leave?” “You guys are being greedy.” These really difficult email conversations. What I have to do is I have to ask them to put two hats on. “Here’s your empathy hat for when you’re talking to people and we wanted the right thing by them.”
Then, I’m also going to ask you to switch hats, come to the conference room with me, and look at the spreadsheet that says, “When we make these changes, if 30% of our customers leave, and that still results to adding $100,000 to MRR, can you acknowledge that? Do you think 30% of our customers are really going to leave?” The answer is no. Can you carry both those things at the same time? Can you be very empathetic to people and make sure we’re doing right by them?
At the same time, acknowledging if someone leaves, we have to be able to accept that because the math will work out for us. That sets us up to be a healthier company, hire the people we need, and then get a bigger office that we need. We have to have that as part of the goal. It’s not just about what the customers want. It’s also about our business. It’s both together.
Rob: And that makes a lot of sense. That’s a big reason that you did have success with this. What’s next?
Jordan: That’s really the pricing change. Our existing customers, we had to communicate with them. That’s not done, but it’s going in the right direction. Now, the bigger change is the process. Making the switch from self-serve free trials to an application process with demos was the harder call. That was the scarier thing because we started getting good, we started getting to the hundreds of free trials every month. Then, you’re taking that flow of potential revenue and you literally just shut it down 100%. We took a faucet that was all the way opened and we closed it all the way. Now, people could not create a free trial unless we sent them a link to create a free trial. We shut the faucet all the way down.
We went from hundreds of free trials a month to a few dozen. That’s where it got scary because if you think about the nature of churn, it carries on for a few months. If we have this messy washing machine of merchants that don’t fit and only pay for one or two or three months, then they leave, when you shut down free trials, you are now going to hurt yourself both ways. You’re not going to be getting new customers and the customers from the past 90 days are still going to be churning.
It was like, “Alright guys, our revenue is about to go down. Everyone be okay with it. We’re going to keep calm. We’ve had this amazing run of growth. Everything’s going up. Now, we are purposely just going to chop off 10%-50% of our revenue over a 90 day span and we’re just going to be okay with that.” That expectation setting was super important so nobody freak out because I saw what was going to happen. We’re going to go from a few hundred to a few dozen and then the churn is going to continue on.
Rob: That’s really important to point out that, (a) you called that out to your team in advance, but (b) most people who have never run an app, where you have big waves of customers coming in and a lot of trials, if you shut that off, it’s exactly what you said. It’s like this huge wave. The churn is going to crash but it never crashes because your trials bolster it. It just keeps going up, and up, and up. But the moment I’ve had a couple apps where we had hiccups, whether it was suddenly Google downgraded us, the ads stopped working, whatever it is, our trials plummeted.
It wasn’t just, “Oh. We didn’t grow that month because we didn’t have as many trials.” It is devastating because oftentimes, your first 60 or first 90 day churn is way, way higher than your 90 day to infinity day churn. That’s the part that just crashes. If you don’t keep that constant influx top of funnel, it can be devastating. Like you said, 10%-15%, 20%-30%, I’ve seen with smaller apps. It’s painful if you’re not aware, if you don’t look at the math in advance.
Jordan: Yes. This […] back to what you’ve mentioned a few minutes ago, where I should be happy because things are going well. I knew internally that this is what was happening, that the trials were just keeping it afloat. The trial’s just kept overwhelming the churn. If anything happened at all to the trials coming in, then we’ll be exposed. Making this move was like, “Let’s do that on our terms instead of someone else’s terms.”
It’s also why we did it in the middle of the year, July 1st, literally right in the middle of the year, well in advance of the holidays so that we would have our act together now. That’s what happened. We completely stopped free trials and the churn kept going for 90 days. That hurt, but the benefits were amazing and immediate.
July 1st comes in and we just shut it down. You can’t see a free trial on our site. It’s apply for a demo. That terminology was super important to me. It was not “request” a demo, it was “apply.” It was a position of power. This is really good. You’ve heard about it. You’ve heard about the success people have with it. If you want it, you need to apply. We soft pedaled it on the site.
We’re not like, “Apply here to see if you’re good enough for us.” That sucks. That’s not good positioning. It was really, “Apply to see if we’re a fit.” People are like, “That’s […]. You’re basically just saying that we’re not good enough if you only want to work with successful merchants. We’re up and coming. You don’t want to work with us because we’re not big enough. That’s not cool.” In reality, it was much closer to, “Let’s make sure we’re a fit.” Think about all the things we’ve been talking about. It’s not just, “Do you make enough money?”
I read Lincoln Murphy’s blog post about qualification. He had a great write-up about the different types of qualification, where it’s strategic, cultural, financial, all these different things that are in line. We have some merchants that makes $1,000,000 a month, but we absolutely cannot stand working with them. That has now become a factor in the qualification.
Now, we have an actual pipeline. That sales process that was happening inside the product and a few interactions with support is now happening with people, with an application that people fill out, then every morning the success team comes in and either denies or accepts the application. Right now, we’re denying roughly 50% of the applications. We’re just saying, “It does not make sense for you to work with us. Here’s a link to our competitor that might make more sense for you.” We literally linked to the competitor in that rejection email.
Rob: That’s crazy. It’s such an unorthodox approach. It’s the Velvet Rope Policy. It’s just letting in exactly who you want. As we’ve said, it’s a luxury. Most apps needs all the trials they can get. You hit a certain point where that made sense, but I do think that more companies should think about doing this once they hit that point.
Jordan: When I spoke to other founders about this, I got the sense that people were like, “Can you do that? Is that okay?” To me it felt like, “That’s what I think we should do. It felt very strange to be like a slave to the fact that people want to use it, therefore we have no choice but to let them. What? That doesn’t make sense.”
Rob: I’ll tell you what, it’s way better to do it upfront than to let people in. Whether it’s just people aren’t qualified or they’re the toxic types of customers that you can identify pretty early on that you’re like, “Oh boy. This person’s never going to be happy with anything. They’re just going to rag on my staff the whole time. They’re going to Twitter the moment we don’t answer their email in four minutes.” If you can get them upfront, identify them that way, and not have to fire customers who’ve been with you for two or three months who are a pain in the ass (which all of us have to do, it sucks), for that alone, this is pretty valuable.
Jordan: Yes. We call them category four. We have category one, the best of the best direct-to-consumer brands that we recognize. We’d love to work with them, absolutely get them in, let’s give them the white-glove treatment. We have a category two that are a good fit. We have category three that are not quite there yet, it’s on the bubble. It’s the success team’s call whether or not they should come in or not. And we have category four that are jerks. It doesn’t matter how much revenue they make. If they’re just going to make us miserable, they just don’t get in.
Rob: Yeah. Isn’t that a hurricane category one?
Jordan: Yes. Think about what this has done internally. A few things that it has done. First is establish an actual sales pipeline that we can optimize. What we did there is first, we took a stab at what we think the pipeline actually looks like. Think about the different stages. We get a demo whether they get approved. They get the link to set-up a time to talk. Then, they get the link to sign up after that. Then, they create a free trial. Then, they’re launched and have a processed revenue. And then, they’re into the conversion piece of it.
Before, we didn’t have those steps. It was just a free trial and then hope the product does its job. Now, what we did is we set up the pipeline and those steps. We have in HubSpot, but I got a good recommendation from someone (I can’t remember exactly who) to put it up on the wall. I’ve got a bunch of index cards, we’ve got a bunch of markers, and we’ve got these tacky stuff that sticks to the wall. We created the categories as columns on our wall. Each prospect got an index card with their name on it and we would physically move the index card from stage to stage. It was just mimicking HubSpot. You would move in the HubSpot, you’d go to the wall, and you’d move it from one column to the next.
What that did is it showed the entire company in visual, physical format, what was happening with our sales pipeline, instead of just, “I don’t know. We have a few hundred trials.” The second thing it did is it was a dead obvious way to see where the friction was. The friction is the columns that have the most people, pretty simple. What it tells us is that stage in the pipeline is where we have a lot of friction, and that’s where we need to get the communications and marketing teams to create content.
Now, what does the success team need in order to help merchants get from that column to the next column and then start creating content, videos, support docs, to help people through that, so that the success team could provide those and the merchants can also get on their own?
We did it for three months or so. We’ve since taken it down. It’s no longer useful as it was in the beginning. At first, we made the switch. It just had this amazing impact. I have a bell on my desk. When someone became a paying customer, I would hit the bell. It was like this visceral experience for people. We’re not a company that just answers emails. We’re doing something specific. We’re finding people, identifying who the right people are, moving through this pipeline, and getting them to success.
Rob: I love that idea, the visual nature of it. Just seeing cards, it must be obvious visually and just be an amazing queue for you guys. That’s really cool.
Jordan: Yeah. They were just a very large vertical stack of prospects that didn’t go from, let’s say, approved but didn’t schedule the actual appointment to do the demo. Okay, we need to be better at that. An obvious one was also like they’ve created a trial, but they’re not processing revenue yet. They need to get over the hump of actually using the product.
One thing I did mentioned earlier on the pricing is that not only did we remove self-served free trials but we removed free trials entirely. We asked for the first $500 upfront at the time of sign-up that we have a 30-day money back guarantee instead of the free trial. It’s all toward the same type of positioning of, “Let’s make sure that you’re a good fit. Once we know that you’re a good fit, then you commit to us. We’re committing to you. You commit to us. Let’s do this together.”
Rob: Yeah. When you look at large, enterprise companies, let’s say HubSpot or Salesforce or something, they get a bad rap for being enterprises. They’re a pain in the ass to deal with, they’re too expensive, and their sales process sucks. You’re moving somewhere between self-serve and what they do. It sounds like there is less friction. Is your pricing public on your website?
Jordan: Yes, it is.
Rob: So the pricing’s public, that’s a difference. They tend to hide it behind a thing, then it’s a negotiation, blah-blah-blah. The difference is there. You put up the velvet rope. You’ve gone upmarket. They’re typically not free trials with these really expensive enterprise plans. It typically all annual. I don’t think you’re there yet, but my guess is you’ll be moving there because there’s a lot of reasons to do that. Both predictability with the merchant but also predictability for you. You are taking that step towards the upmarket playbook, right?
Jordan: Yeah. The results, if you think about internally, going from hundreds of free trials to a few dozen, what we’ve been able to do is give love to the right merchants. We’ve told our support team, “Guys, we’re no longer doing things. It’s not about crushing tickets. You could take your time. You can spend 45 minutes on an email as long as on the other end the person goes, ‘Wow. That was everything I needed and you took your time. I feel great about it.’”
The fewer, more qualified merchants is the theme. We’re much common internally. Our support staff finish things up by 11, then they’re doing support docs, they’re helping testing on the product team, and everyone’s happier. People who are jerks, no one feels the need to like, “Hey, I guess I can’t turn down money because it’s not my business.” Now, they’re empowered. If this person sucks, tell them to get lost. People are more empowered. They’re happier. Our monthly churn went from 12%. It continued on for those few months. Five or so months later, we’re at 5% monthly churn.
Rob: Oh, man. Wow. That’s crazy. That’s such a testament. On the podcast and in the whole MicroConf community, what’s funny is before we started talking about this, let’s say in 2010, there wasn’t just this common knowledge on a lot of things that we talked about. Lower price products have higher churn. The customers are more of a pain in the ass. We all know that now. You know that if you’re selling a $10 product, everybody’s price sensitive. Your churn is through the roof. They want all the features. It’s just known now.
Then, there’s the next step up of $50 price point average revenue per customer or $100 average revenue per customer. You guys were at such a high volume that even those numbers didn’t make sense anymore. It just didn’t make sense to service them because they were such a small portion. They were huge portion in your customer base, in your trial base, very small portion of your actual revenue. Now, we can only bother or we should only focus on $500 to $2000 a month average revenue per user.
That’s the step. It’s obviously very deliberate and I’m just struck by the impact. It’s not one thing. It rippled through the entire business in mostly positive ways, it sounds like. The fact that you support people now have the ticket, the ticket volume is whatever it is, a tenth of what it used to be, is just phenomenal.
Jordan: Yeah. The way we look at it is that we really made a healthier company. The growth in 2019 was nothing nearly 3X of the previous year. But now, we’re in a position to grow in a much healthier way.
Going back to the faucet analogy, now that we’ve tightened it up all the way, fully controlled everything, now that we have our systems in place, we understand who the right matches are, the systems are better, the people are happier, now we can start to open up a little bit on our terms, and grow faster but in our way. An example is when someone’s a category three, they’re qualified but they’re not one or two, we send them a recorded version of the demo. Now, we can open that growth back up, but on our terms and under control. If we don’t like the way that’s going, we’re just going to shut that back down.
Rob: We talked a lot about the positives. Was there a major negative repercussions to this?
Jordan: Just finances.
Rob: That’s short-term.
Jordan: Yeah. The short-term financial hit that hurt is just a stressful thing. We did that with what I felt was enough money in the bank, that we wouldn’t get to the point where I felt like I have to go raise more money. I wanted to get through this in a way that we come out to the other side.
Really, if you think about all the way back, the decision to increase prices on existing customers and that kicking in January, what we really needed to do was just get through this six month period. The increased pricing on that GMV that is coming on the door already is going to overwhelm all of the negative impact of it. Then, we’ll be in a position where we are much more profitable and much happier at the same time. Just six months of pain but all towards putting ourselves to a good spot in 2020.
Rob: Yeah, and that’s playing long ball. You have a long-term mindset. You’re not churning and burning, “Oh, how can I maximize revenue now to raise the next round? Or have an exit?” or whatever it is. You’re thinking, “If I’m going to run this company for years, what is the healthiest company? What company do we all want to work for? What’s best really for the customers that are the best fit? What’s best?” The six months of pain, I’m sure, has sucked but you’re basically coming out on the other side of that. I hope January is truly an amazing month for you.
Jordan: Yeah. Thank you, man. I appreciate the ability to talk through the whole thing. I’m actually writing a blog post about this. I’ll let you know when that’s out.
Rob: Sounds cool.
Jordan: I know it’s all unique to each individual business, but the big lesson I hope people get from it is that you don’t have to play by what you think are established rules. You should do what you think is best for your business.
Rob: Love it. We will link up the price increase blog post that you talked about. I have that link right here. I googled Lincoln Murphy’s blog post about qualification and hopefully it’s the same one. We will also link that up. If you get your post published before this goes live, we can throw that in there as well.
If folks want to keep up with what you’re up to, they can go to @jordangal on Twitter and carthook.com is your app. Any other places they should keep their eye on?
Jordan: Yeah. I also do a podcast with my good friend, Brian Castle, called BootstrappedWeb. Those are the three places: Twitter, CartHook, and BootstrappedWeb.
Rob: Sounds great. Thanks again for coming on.
Jordan: My pleasure. Thank you.
Rob: Thanks again to Jordan for coming on the show. Also, I should call out episode 452 of this podcast. Just a few months ago, Jordan came on and answered listener questions with me. If you’re interested to hear more of his thought process, go back and listen to 452. You can hear his take on several listeners questions.
If you have a question for me or a future guest, leave me a voicemail at (888) 801-9690 or email questions@startupsfortherestofus.com. As you know, our theme music is an excerpt from a song by MoOt. It’s called We’re Outta Control. It’s used under Creative Commons. You can subscribe to us in any pod catcher. Just search for “startups” and visit startupsfortherestofus.com if you want to see a transcript of each episode as well, to see show notes, and comments by other loyal Startups for the Rest of Us listeners. Leave a comment of your own if you want to give a thumbs up, your thoughts, constructive criticism, whatever it might be on any of the shows. Thank you for listening. I’ll see you next time.
Episode 475 | A Bluetick Update from #Mike Taber
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Show Notes
In this episode of Startups For The Rest Of Us, Rob checks in with Mike Taber on his continued progress with Bluetick. The final conclusion to the Google audit is revealed, and they check in with the .Net component problem, the podcast tour, and more.
Items mentioned in this episode:
Rob: In this week’s episode of Startups for the Rest of Us, I catch up with Mike Taber. He’ll give us an update on what he’s been up to with Bluetick for the past five weeks. Welcome to this week’s episode. I’m your host, Rob Walling.
This week on the show, we cover topics and tactics related to building and growing startups in order to better your life and improve the world in a small way. This is a show made by and for ambitious startup founders who want to build ambitious startups but want to stay sane at the same time. And our willingness, our sacrifice, our life, or our health in order to grow our company.
We want to make interesting things. We want to be constantly learning, growing, and evolving. We want to be in control of our time. I think that’s a big motivation while a lot of us start these companies so that we can work on stuff that is super interesting to us. We’re able to create and push things out into the world, do things in public, create opportunities for ourselves, and own our own destiny.
We have many show formats, interviews, hotseats, and listener questions. But every five weeks or so, Mike Taber, comes on the show. He and I co-hosted the show for the first 448 episodes. Now, he is spending a lot of time focusing on his startup, Bluetick at bluetick.io. He updates us on his journey. He’s taking a social media hiatus, podcast hiatus, and he’s really focusing on trying to grow the startup.
If you haven’t listened to episode 470 and maybe even 465, you can get a little more background on what’s been going on. This has been an ongoing conversation and you hear me refer back to things that Mike has been dealing with, fighting trough, and struggling with for quite some time. It was a good conversation this week. I think Mike’s making some progress on some friends, not as much progress on the marketing side. You’ll hear me bust this chops about that a little bit in this episode. Overall, I think you’ll enjoy it.
Our big future of MicroConf announcement went live last Friday. I imagined you heard episode 474.5 that I put into the feed that had the audio content of that announcement. It was super fun to put together. It was one of those things that’s super stressful. It is when you’re launching something. It’s one of these things that I couldn’t talk about on the MicroConf team. We’ve been talking about and thinking things through about expansion plans for years, literally, but pretty intently for 5–6 months trying to plan everything out. Even just having a video, recording a video like that, having it produced, and having a moment where everyone watch at the same time was definitely exhilarating and it was an experiment for us.
We wanted to part toes into the water, but it came out really great. As always, thank you for all your support. We really are just looking to get more people to connect with one another. I hope to connect with you, but I can’t meet everyone. The idea behind this whole community has always been connecting more of us to one another, which is exactly why we plan this expansion, and exactly why we’re diving in headfirst in 2020 and beyond.
It’s getting close to the holidays. I hope you’re taking some time to think about what the new year brings and to spend some time with your family. I’m going to continue to push the episodes out every Tuesday. For now, let’s dive into the conversation with Mike.
Mike, thanks so much for coming back on the show.
Mike: Hey, how’s it going?
Rob: It’s going pretty well. I always enjoy our conversations. I love circling back up with you and hearing what’s going on with Bluetick.
Mike: Yeah, cool as well. Where do you want to start today?
Rob: You told me offline that you had a pretty big win this month. You want to tell folks about that?
Mike: Yeah. I was working through a trial with a customer. They were looking at everything because they wanted to use Bluetick for their team. They signed up for the $500 a month plan. It’s a pretty big win. It’s one of the largest plans that I have at the moment. I see that somebody signed up for that, went through some onboarding things with them, got all of their user accounts setup, and got their mailboxes added. I know that they were working on some integrations to do direct work with the public API for Bluetick. So far, everything seems to be going well. I answered a few support emails but no major issues to speak of, so that’s nice.
Rob: Congrats. That’s super cool to hear. I know that has an impact on your overall MRR. It’s cool to hear. We really haven’t had a big win like that in a long time since we started talking about this, so I applaud that and I hope to hear more about it next time we circle up.
Mike: Definitely. One of the things that it made me realize was that in terms of the team accounts, obviously, getting a $500 a month customer versus a $50 customer, that’s a huge win. Not just a win. It’s also a large revenue boost.
In the past, I’ve been looking at smaller companies where they’ve got anywhere between one and three mailboxes or something like that. But the level of effort for those larger customers is not really that much bigger. For this particular customer, they sell software which I hadn’t have a whole lot of success trying to sell Bluetick to customers who were running a SaaS businesses. Even if they have a lifetime value of several thousand dollars. Even though those numbers tend to fit well with services company where they’re selling something that’s $5000, $10,000, or $15,000.
I think that the reason for that was more because I was looking at the types of customers who are selling. They’re lifetime value was spread out over a much greater period of time versus the ones like this one, where somebody buys our software and it’s a couple of thousand dollars right upfront. It just made me realize that there’s probably a lot of other customers that fit that type of profile where their price point for their software is, even just the starting point is probably relatively high, and it will be worth talking to these people and say, “Hey, would you like to put an automation process in place such that you’re reaching everybody who starts a trial?” I think it’s just a matter of segmenting the types of software companies and what their price point is.
Rob: If you’re listening to this and you fit that bill, reach out to us questions@startupsfortherestofus.com or you can hit up Mike. I was going to say DM you on Twitter, but you’re not on Twitter anymore. I don’t want to call out your personal email address on the show, but we’ll absolutely get this over to Mike if you send it there.
Mike: It’s pretty easy to find.
Rob: Yeah, you’re email. You can contact Mike, singlefounder.com. I’m guessing you have a contact link.
Mike: I think it’s on the website.
Rob: I guess they can just go to bluetick.io. That’s what I’m going to ask. Cool, this is a great win. How can you get more of these? I don’t want to dig into all the details of the customer, obviously, but what industry, why did they sign up, and how do you find more of them? Sometimes these things are anomalies, obviously. If you think it is, could be a repeatable customer or type that works for you? I think that would be a big win.
Mike: Yeah. I’m definitely going to look into that a little bit more once December is over. I’ve got a bunch of other things going on that I’m working on that are just taking time and effort to do. I just don’t really have the bandwidth to expand the energy and focus to go after those other things. It’s definitely something that I want to proceed and go after starting in January.
Rob: Cool. That was our big win. Tell me that this is not our big loss or our big agony of defeat moment, Mike. The Google audit, is it done. Is it done?
Mike: Yes, it is.
Rob: Yay!
Mike: Yeah, I know. No kidding. I’ve got the letter of assessment. I don’t remember whether I had that the last time we talked or not. I think I was still waiting for it, but I got it back. As soon as I got it, I turned around and send it to Google. It was about a month later, I sent it to them, and they replied to the email that I sent with the letter of assessment saying they’re still waiting for my letter of assessment. I was probably less than polite in my response because it was literally right below where they had written, “Where’s your letter of assessment?” but the next day, they emailed me and said, “Hey. Everything is good. You’re all set.”
Rob: That’s really good news. What sound effect should we trigger it? Is it people clapping? Is it glasses clinking?
Mike: I don’t know. Maybe a car crash?
Rob: Yeah. It’s been such a trainwreck. I’m happy for you. This is a second win. We’re off to a good start. It can only go downhill from here as well.
Mike: Do you want me to wrap up right now and be done with it?
Rob: Yeah, that’s right. No. I’m glad to hear it. It’s been about five weeks since we talked. Did it take much of your time during that five weeks? Was it just a small blip?
Mike: No. It was just a small blip. I didn’t have anything to do. Once I’ve got all the paperwork back, I sent it to Google, and basically just was waiting for them to come back and say, “Hey. This is all set.” I think that I have heard that if you email them again, it basically puts you back to the bottom of the queue, so you’re better off not saying anything which is just the most bizarre way to handle it, but it is what it is.
They probably work backwards from whatever’s been sitting in their queue the longest. I get that but it still sucks to have to wait and not be able to ask, “Hey. There’s this deadline coming up. Are you going to do anything with this paperwork I sent you?”
Rob: Cool. Let’s move on from that. That means you have five weeks of undistracted work. Life never gets in the way like getting sick, or thanksgiving, or kids. Being home from snow days, I’m sure, happens or whatever. I haven’t had that yet this winter but I know it’s coming.
Talk to me then. There’s been a recurring theme around this untestable sealed .NET component. I brought it up multiple times about, “Hey, are you going to get rid of it?” and you said, “Yes.” Last time we went back and forth of, “Should I be doing sales and marketing or should I be getting this done?” we actually had a comment from a listener, Ralph Corderoy, on episode 470 which was the last time we talked.
He said, “Regarding ditching the .NET package that makes testing hard, it hasn’t been made clear why the application code needs to change. A re-implementation could take the subset of the API that the application uses and provide just that; none of the application code would know or care, and then whatever’s needed to ‘peek through’ for testing would be added. This seems much simpler than altering the application code, to use a new API that would need designing in parallel, thus take less time and be easier to justify.”
Mike: Yeah. It’s not an actual. It’s not an API. It’s an actual library that’s compiled into Bluetick that’s the problem.
Rob: Got it.
Mike: I’m not sure I completely follow what he means by some of that.
Rob: I think if you have coded it to an interface or something that you have created. He’s saying that it’s an internal API. But it is interesting. The bottom line is you said, the way it’s done, it’s a tremendous amount of work because you have to read a bunch of stuff in the database. Do you really need to redo this stuff in the database, by the way? Would it be possible to not do that?
Once you switch the component, it has to be. When I say possible, sometimes you have a naming convention that you used the vendor’s name in the components name in it. If you switch it over and it’s a new component, it’s confusing why do we have that legacy name. The code would still work, right? That’s the thing I’m thinking.
Mike: Yeah. There’s a decision that I made early on to save some time, which was to take the component that they have and dump it to a JSON file, read it back, then put it back into the object. That’s part of the problem. It’s not even just an interface. It’s the entire component. It’s being sort basically as a binary blob. It’s not nearly as easy as it could be to rip that out.
I have written a bit of an interface around it to abstract it a little bit more, to make it easier to use a different component. I’m still going to have to convert all of those things in order to completely rip it out. I need to go through every single one of those blobs and convert it into whatever the new storage format happens to be. It’s not just a simple rip and replace.
Rob: Totally. I have two questions on that one. It’s Ralph’s final question on his comment from that episode. He said, “What’s the minimum that can be done to provide regression test to allow development to continue […]?” Is there a scope of less than what you described or is it all or nothing?
Mike: It’s probably all or nothing because of the naming convention rely on that component. Since I don’t have access to the source code for it, I can’t just copy things out. I can probably decompiled it and use them as it is, but it’ll still be really, really hard. It’s just not easy. A lot of that stuff is integrated into my unit test, so I have to rebuild a bunch of that unit test as well.
Rob: Right. I’m not sure that I want to rehash this decision, but the more we talk about it, the more I’m thinking, “Do you really need to remove this?” You said that it was that you couldn’t test it because it was sealed and you can’t write unit tests around it or something. I’m just thinking, is that big of a deal? Maybe you just live with it. Last time we talked, you said it would be a week. At a best case, it would be a week of data, of rewriting, and the blobs of data manipulation.
Mike: No. It’ll be a week of just a data migration. Once work is done, just to migrate the data is going to be a week.
Rob: Right. It’s like two weeks or three weeks of full time work to get this done. When I hear that, I think, “Ouch. How important is this?”
Mike: There’s other things I want to do including have a separate database for each customer for their mailboxes to be able to do more, to allow people to mind their mailbox for other information that they can’t get any other way. There’s literally no way to do certain types of queries in a mailbox. Even if you go into Gmail and start typing certain things, there’s literally zero way to get certain queries to work.
I would like to be able to surface some of those things for Bluetick but some of those features are so far off that it’s not worth it for me to go all the way down that road right now. I’m kicking at it a little bit to get certain pieces of it out, but I don’t want to go down the rabbit hole of implementing software the next three or four months in order to get everything working in the way I want it to work and an effort to implement features that are probably a year off anyway.
I’m trying to rip out this particular component so I don’t have to deal with it in the future. Then I can test things that I need to. Right now, I have a hard time testing email headers in certain ways, and going back to previous emails. It’s just harder for me to do that right now because I don’t have some of the infrastructure in place right now. I can’t put the infrastructure in place until I rip this thing out.
Rob: Got it. It’s a tough one. It’s tough to have a code that you have to redo that doesn’t provide value.
Mike: Without walking you through the specifics of it, it’s really hard to describe.
Rob: Yeah. You have decided to rip it out. The last time I was pushing you to, “If I were you, you could ignore this.” Obviously, you need to do sales and marketing because you need more customers to make all of it worthwhile, frankly. Having that legacy hanging over you head, the tech debt, it’s going to slow development. It makes you not want to build certain features that you may want to build, and I was now more on the side of, I would eat it during this holiday season. I would eat it. Personally, I would eat the time. But I’m 55/45 on that or 60/40. I’m not 95/5. I think an argument can be made both ways. Where do you land right now? Have you started working on that? Or are you going to replace it soon? Or are you just going to punt it?
Mike: I started working on it a while ago, but it’s just kicking out here and there, trying to abstract things a little bit more to get further along without breaking anything that’s already in place. There is a second interface in there to replace it but I’ve got to write some of the code that’s going to pull all the objects.
Right now, what I’m doing is I’m in a holding pattern probably for another week or so. Right now, I’m also still working on some of the additional multi-user functionality for that larger customer that I had, which I prioritize above pretty much everything else, to be perfectly honest, for obvious reasons.
Rob: Yeah. If it’s revenue, that should rise to the top. That’s the thing with .NET. My concern, Mike, is I think you have a history of letting things hang around for too long. Letting them linger, not just diving in doing the work, and getting it done so that it can be behind you. I felt like the Google audit was one thing. I know you could’ve done that fast. We’ve been talking about Google audit for how long? Seven months? Eight months? This .NET component, too. It’s like six, seven, or eight months.
To me, if it’s that, if we have been talking about it, if it’s been that important that we have, then it’s time to resolve that thing. To get it off. To get it off the to-do list. It feels like a shadow or a cloud that’s hanging over your head. I just don’t want to still be talking about that. I don’t want you to still be talking about that in this spring or next summer.
Mike: I totally agree. This piece of it has to be resolved. For the Google Audit, I was holding off because I didn’t feel like I had enough information to be able to make a good decision either way. I know that you’re always working in a realm of uncertainty where you don’t necessarily have all the information. Waiting to get more information isn’t always going to give you the information you need to make a better decision.
I also recognize that Google was throwing this out there to everybody and saying, “Hey, you have to do this.” Everybody was kicking and complaining about it. Nobody really knew what to do or what it involved.
I had a few conversations with other people. Before I went through the process and before I made the decision to go forward with it, I got at least some clarity. But none of that clarity I got was from Google, which sucks. There’s not a whole lot that I can do about it. And even since then, I had conversations with other entrepreneurs who’ve gotten in touch with me, and say, “Hey. I know you went through this. Can you help us out? What it is that you had to do?” I’ve been able to help them, which is nice to be able to do. At the same time, I feel like Google could’ve been a lot more forthcoming with a lot of the information. They just weren’t.
Rob: Oh, we know, Mike. We’ve been through it with you. You know what? I’m happy. I think a win for all of us is that I’m not going to ask about Google audit next time. That’s checked. It’s done. I want to get there with the .NET component. I know we can’t just wave a magic wand and make it go away. It’s something that I want to see we move past when you can. Obviously, I would prioritize the customer features, too. Anything’s that driving revenue would be number one.
Mike: Totally agree.
Rob: Someone circled back, they wrote in an asked if you ever took the Enneagram.
Mike: No, I didn’t. I took the wrong one.
Rob: You took a wrong one, yeah. It was a personally test that tells you what motivates you. I was saying for me, it was creating things. I have worked with folks who are about achievement and they were more of the Jeff Bezos role, where they didn’t really need to build or make things. They just wanted power. I’m not just, but they wanted power and achievement and that’s what made them happy.
Obviously, it’s not a cure-all or whatever, but it’s an interesting thing to learn about. The test is in our show notes, the link for the last episode, but I think a couple of people called in and said, “Yeah. I really like to know what motivates Mike and all that.”
Mike: So, you’re telling me I got to go in the show notes and look for that?
Rob: You got it. I can send you the link. I’ll send you the link and I’ll reimburse you for the $10 or whatever it takes, guys.
Mike: No, you won’t.
Rob: I’m teasing, I know. Send me you’re Venmo, Mike. There were some marketing stuff you were talking about. There was a podcast tour. You had someone sending emails to try to get you on some podcast. As I said, I didn’t think it would be a long term impact but certainly getting out there, it’s easy for you to jump in a podcast, and wondering if you’ve had any traction with that approach.
Mike: Yeah, I have. I’ve been in a couple of podcasts over the last month or so. Still working on other ones. I was on Sales Tools, and also on Jane Portman’s UI Breakfast. That one’s not going to be out until next month, I believed. I’ve been on those two so far. There’s a bunch of others that I started reaching out to, and we’ll see how that works out.
Rob: Okay. Two sounds okay. How many emails have been sent? That doesn’t sound like a ton of traction.
Mike: No, maybe five or ten tops.
Rob: How did that happened? You hired a contractor to do it, right? Two months ago.
Mike: Yeah. Most of the stuff’s set up. I’m just holding off on hitting the button. Actually, my mastermind group tomorrow, we’re meeting up. One of the things that we have is, “Hey. That button’s going to be click tomorrow to just blasting these things out.”
Rob: Stop holding off on hitting the button. Why are you holding off on hitting the button? We talked about it last time. I was like, “Cool. You’re getting ready?” You were like, “Yeah. I’m going to do it.” Five weeks later, why hold off on that?
Mike: I don’t know. Honestly, I almost feel like it was one of the reasons I built Bluetick to begin with. People don’t want to hit that button. It’s just need to be hit, to be perfectly honest. Honestly, my mastermind group member, he’s just like, “Yeah. We’ll just share control, just go in and click the button for you.”
Rob: Yeah. Consider your chops busted here on the show that you did not hit that button in the past five weeks. I really thought that that was an easy thing. It mostly set up. That’s something that you’ve got to be doing with these other stuff. It’s easy for you to do. I just feel like it’s one more step, it’s one more action to get you going.
The other thing, please tell me you hit the button on this one, Mike. Cold email. You said you had 900 addresses from some LinkedIn connections. You have prior Bluetick cancellations. You have some sales leads that never converted. You just had a whole list. It wasn’t even cold, it was warm, and you’re going to bucket them in and start getting back in touch with them.
Last we chatted, that was going to start. You hadn’t done it because MicroConf Europe. I said, “Cool. You’re going to get that going.” You generally agreed that, “Yup. This is the next thing to try to get more prospects.” Tell us where you are with it.
Mike: Yeah. That’s a total fail.
Rob: Oh no. You’re killing me.
Mike: I know, For whatever reason, I feel like I don’t want to start stuff in December when it comes to that stuff. I don’t know why.
Rob: It’s December 12. I think we last spoke, November 5th, maybe. Give or take. The three weeks before Thanksgiving, I think, are still good. I think starting stuff now it’s December—
Mike: Really?
Rob: Yeah, I do. November was always typically a decent work month. It was never the best, but we always had decent growth. Whereas in December, things tended to level off with my apps. Now that we’re mid-December, there’s no reason to start doing it now. I don’t think you want to book a call the week of December 15th. This is what we originally talked about. I was like, “I don’t want you to start this Mid-January,” which is now where you’re going to wind up.
Mike: Yeah.
Rob: It’s a bummer. It sounds like you don’t feel good about it.
Mike: No, I don’t. I don’t really have anything to offer up for either than it just didn’t get done. I should have. I can point out all sorts of things as to why I did or didn’t, but at the end of the day, it just didn’t get done. That’s where things are at.
Rob: Do you think it’ll get done before we talk next time? We’ll talk mid-January.
Mike: It’ll definitely get kicked off. Yeah, it’ll definitely get kicked off by then.
Rob: “It’ll definitely get kicked off by then.” I love that. I am so quoting that back to you. I’m actually going to go ahead and make a note of it, that sentence, here are the notes.
Mike: Awesome.
Rob: Last episode, you had launched the Zapier integration, I believe. You want to update us on that? Is that yielding anything? Didn’t you need a certain amount of beta users in other for it to be public or something like that?
Mike: Yeah. Right now it’s in early access, but I need to get to 50 users in order to do any cold marketing campaign with Zapier. Until I get to 50 customers, I’m probably not going to get to 50 users for it, it would just be difficult to do that. There’s probably ways I can hack it to some extent but I got to get to the 50 customers first.
Rob: I wouldn’t do that. I would just try to do it organically. Okay, so we’ll table that one. That one will be tabled for a while, actually. Something we ran at that time that we talked about last time was personal stuff like motivation, sleep, exercise. How was your motivation then over the past five weeks?
Mike: It’s been generally good, but I’ll be honest. I wish I didn’t have to struggle so much when it came to front-end code for Bluetick. Part of it is just lack of familiarity with some of the CSS that’s in there because I’m using libraries and templates that I got from WrapBootstrap. Some of it is just harder for me to do simple things than I would like.
I’ve started throwing things directly into the CSS, the style that I’m supposed to use in classes and stuff like that. I’m like, “You know what? I just don’t care. This just needs to get done. It just needs to work.”
Rob: That’s a bummer. Do you have any budget to hire a front-end dev so you don’t have to be mired in it?
Mike: I was actually thinking exactly that. Earlier today I spent two hours fighting and trying to get an image to display in the right place. What I’m thinking of doing is when I run into certain things like this, just go to my bug tracker and add them in there, so that it says, “Hey, this needs to show up in this particular place. I can’t get it to work,” then hire somebody to go through and get a lot of those things done for me so I don’t have to do it. I don’t have to spend my time and effort trying to figure out how to get it done.
Rob: Yeah. Any sticking point. We know you’re bootstrapping. We know that there’s not a ton. You don’t have so much revenue that you can hire anyone full-time or anything like that. If this is a point of friction, think about the questions I just asked, “What’s your motivation like?” You’re like, “It’s been good except for front-end code.”
Front-end code is not just a technical challenge. It sounds like it’s something you are not enjoying. It sounds like it’s something affecting motivation. It could really solve a lot if you were able to pull it off and bring someone in part time. Even if it is 20-40 hours a month. It could feasibly reduce the burden on your mental state as well as allow you to move faster.
Mike: Definitely. I have no doubt that somebody can get it done probably five or ten times faster than I am. Just to say, “This is exactly how to do it.” That would be perfect.
Rob: You’re thinking about that. It sounds like a good idea. Is it something you’re going to do? We can bat ideas around, but if it’s not a good idea then don’t. If it is a good idea, should that become a priority? For me, it sounds like it might be. Then, you have to take the step. You have to go on Upwork or work your network, you have to find that person, vet him and all that stuff.
Mike: I think that’s the challenge I have. How much time is that going to take versus trying to do it myself. I don’t know. I feel like I’ll be better served having somebody else to do it knowing that it’s going to take some upfront time and effort. It’s just going to push off some of the time frame of the implementation for certain things. I get images completely in the wrong place. I really don’t want to push a live, but at the same time, maybe it’s not the end of the world.
Rob: Sure. Again, if I were in your shoes, which is how I like to think about and couch when I do offer advice, the concept in my head of what you’re working on, how hard things are, and which you do and don’t like, I would look to hire someone. I know you’re focused now on getting features done so that the customer you just landed sticks around. That would be my number one priority. I would not let hiring derail that.
You’re not going to be doing any marketing over the next three weeks, four weeks, because hold email is not going to work with the holidays. There’s all these stuff. You have this time to crank through some things. To me, the big customer support is number one. Hiring, probably number two. And that unsealed .NET component in my head would be number three.
The hiring, an interesting thing you can do, whether you go to Upwork or Authentic Jobs or WeWork remotely, I have to think of which of those allow part time. Writing up a job description for front-end dev doesn’t take that long. Maybe it takes you an hour to do it. You can use an old job description or whatever, old posting you’ve used. Post that.
If you post on a higher-end job board, you tend to get higher quality but a lot fewer candidates. It shouldn’t take you a ton of time to vet. Again, that would be my second or third priority. Probably second priority that I was doing after supporting that big customer. I will say that and leave it at that.
I’m not trying to badger you to hire someone or anything like that. Or forcing you to make a decision. But, I don’t want your motivation. I know what it’s like to have crap on your to-do list that you don’t want to do and don’t like to do. I still have that. We have it on our whole entrepreneur career. It’s trying to minimize that. It’s trying to get less and less of that as you move forward.
I literally do look at my Trello board once a week and say, “What of these things I am procrastinating on because I don’t want to do them? Can I just archive these things?” We have a VA executive assistant. “Can I hand it to anybody on the team such that I enjoy my life more?” I think that’s important.
Mike: Yeah. For me, mentally managing the trade-off in runway versus how much am I going to be paying for this, is difficult as well. I only got so much runway to work with. At the same time, I’ve got to grow the business and anything that I spent is going to take away from that. It’s like, “All right. How do I manage this?” If the complete business was cash flow positive then it wouldn’t matter so much, but including my time is definitely not. That’s where I struggle a little bit, like how much should I budget with this stuff? And how much money should I be spending on certain things?
Rob: Sure. That’s without seeing your finances. Obviously, we can even begin to conjecture that. So, let’s leave that one at that. I’m curious to hear where you wind up with it on the next episode.
How about sleep? Overall, your sleep had gotten much better over the last several episodes. Going back nine months, it was terrible, and it has gotten better. How has it been over the last month or so?
Mike: It’s been touch and go. I’ve been sick for at least the past week or so. My kids were sick the week before that. Then, it was Thanksgiving and lots of other stuff in between. It comes and goes. Sometimes it’s great and sometimes it’s just not so much. I would definitely say it’s generally better than it was six months or nine months ago, but I think I could always be better.
Rob: Yeah. As we know, sleep impacts everything. That impacts your ability to focus. It impacts your motivation during the day. It impacts a lot of stuff. That’s something I know you’re keeping an eye on it, but it’s super, super, important.
Mike: Yeah. My doctors have me up to five medications again, I think.
Rob: Are you? Oh no. That’s not good.
Mike: Yeah. The past couple of weeks have not been helpful. I get off with a bunch of stuff. I go back and the doctor’s like, “You need to be on this and this.” I was like, “All right. Fine.” I’ll come off with the two of them in about a week. We’ll see how things will go.
Rob: Yeah. I’m just going to let that one go. I’m not going to dive into that. Exercise? How about that? You’re exercising twice a day at some point.
Mike: No, no, no. Not that much. It was three or four times a week.
Rob: Okay. I think one day we recorded, you said, “I’ve exercised twice today.” I think that was the statement. You didn’t say you were doing it twice a day.
Mike: There might have been that.
Rob: How has it been though?
Mike: The past two weeks have been off. I think that’s mainly because of Thanksgiving lumped in there but I’ve got to get back to the gym probably this coming week because I’ve been sick for the past week or so. I think I got there once or twice last week. I think it’s just once at the very beginning of the week. Then, I haven’t gone at all this week. I gotta get back there again next week.
I have the motivation to do it. It’s just lately, I haven’t had the energy because I felt terrible. Even right now, my sinuses are all congested. I’m a little loosey from the meds that I’m on. They affect your blood pressure, so the doctor warned me. She’s just like, “Yeah. Be careful walking up and down the stairs.” My god, this will be fun.
Rob: And you realized the reason I asked you about this stuff. I asked you about motivation because: (a) you’re interested and I want to hear what’s going on, but (b) I think it’s a good touch point for you to think about every week or four weeks or five weeks when we discuss to really think, “How is my motivation?”
Exercise’s probably more of an accountability thing that you think yourself the “next time Rob and I chat on the podcast.” I hope you feel a little bit of friendly pressure to keep doing it. I think it’s super helpful for all of us to have some type of exercise in our routine.
Mike: Generally, I’m still keeping track of everything that I eat. That’s been going really well. I’m down at least 10 or 12 pounds or so over the past three months. That’s been going well. I’m at least losing weight like I have planned on doing. Maybe not nearly as much because I haven’t gotten to the gym nearly as much.
Rob: Right. Lastly, we’ll wrap us up with differentiation. “I need to talk to some of my customers more.” We had talked about, should you change your positioning? You brought up like, get things you need from other people like a W9, for example. You’re going to have more conversations with customers to figure out if you need to add features to be unique, and then write the code to implement that.
Last time you were still noodling on stuff. Before that, you’re still noodling on stuff like, “I’m not sure yet how to make this unique. I’m not sure what my angle is.” I had said for not doing that, you need to have a unique traffic channel, would be the best marketer just to get people on top of the funnel or you need to have that unique selling proposition that differentiates you, the positioning that means, “Oh, at least a subset of people really need what I have and pretty much no one else has that.” I’m curious where you are with that.
Mike: This leads into something you and I have briefly talked about before the episode. We’re probably leave this off a bit. I was talking to somebody about possibly doing an integration that will provide a fair amount of that file collection capability. We only have one conversation so far, but their product is completely API-based. It would probably not be too difficult to get it to work with Bluetick. I still have to go and talk to a couple of customers to specifically know have that particular pain point of being able to collect files from people on an ongoing basis.
I just had that conversation with him earlier this week. Now that I’ve had that conversation—it’s actually been yesterday that when we talk—I have to go through, go back to those customers, and say, “We’re just thinking through this. Is this something that would be of interest to you? Will it make your life easier inside of Bluetick? If so, do you also know anybody else who has a similar type of problem, where right now they’ve got things hacked together in Bluetick, but with an integration like this, it might be possible to make it a much smoother experience? If so, I want to know if there are other people who would benefit from it and what those people like like? How to get in touch with them?” Once I know that stuff, then I can decide whether or not to actually build it and do that integration.
Rob: Interesting. It sounds like a one-off thing. It’s not like you’re actively reaching out to customers and having conversations. Or is this an outreach thing from you? Or was it an outreach from them?
Mike: For the integration?
Rob: Yeah. For this. I think you said that there’s a customer who probably needs that or a potential customer.
Mike: Yes. They’re making it work right now. They’re just basically asking people in an email. My idea was to basically bake the functionality directly into Bluetick, so when they send the email, they can say, “Go to this page and upload the five things that we need from you.” This other tool can do those things. If I can integrate with that other tool, then I can provide that to my customers like a white label thing, but it would get me further without having to write all that code.
I would have to write integration code, but I wouldn’t necessarily have to write this whole other tool to collect all the files and everything else that goes with it. I’m still noodling on that but I want to talk to the customers, and say, “Does Bluetick serve your needs right now? Or will something like this be better?” Does that make sense?
Rob: It does. This is it. When you have these small numbers in their early days, it’s trying to take one instance, extrapolate, and ask, “Are there any people like this?”
Mike: Extrapolate it from a single data point is not helpful.
Rob: Yeah, but it’s what you have to do right now.
Mike: I’ve got one kid. Thirty would be great.
Rob: Yeah, exactly. That’s all I have today. I think we covered pretty much everything. We have some wins. We have some not so wins. Overall, how do you feel about the past five weeks? Does it feel okay? Feel good? Great?
Mike: Okay. There’s been some high points with the Google audit getting done and adding a large customer, those were fantastic. Low points with things like having a deal with a front-end CSS code and a few other things that just haven’t been done, some of the marketing stuff I wanted to get done.
There was one customer. I wouldn’t want to call him customer because he signed up. It was the day before Thanksgiving or something like that. He signed up for an onboarding call. I was like, “Yes!” Then I looked at the time of it. It was 4:30 on a Wednesday afternoon. It’s literally the day before thanksgiving. I was like, “All right, fine.” Then they ghosted me, didn’t showed up, didn’t respond to any of my emails. I reached out to him several other times. Then, the billing went through. 12 minutes later, they asked for a refund. I’m so upset.
Rob: Yeah. That’s a bummer. That’s the hard thing about being solo. You run into stuff like that and you don’t have anybody else to handle it. I’m sorry to hear that.
Mike: That’s an obvious low point. That’s like a kick right into the teeth. I really tried to help out and tried to do something. Of course, the cancellation email was like, “I DIDN’T WANT THE SUBSCRIPTION.” It was all in caps. I was like, “Come on. All right, fine. Just refund. Bye.” That’s it, walk away. Get something else done.
Rob: You’ve got to move on, wipe your hands off, and be done. That will certainly happen.
Mike: I have to make a conscious effort of dust my hands off and just walk away. I’ll be like, “All right, whatever. I can’t make everybody happy.”
Rob: You can’t get hung up on it. You can let it ruin your day but you shouldn’t. These are the ones where you really have to shake it off. It happens every so often. Sometimes more often than not, everything on your customer base. You’ve got to move past it. Sounds like you’ve got a good head about it.
Anyway, let’s wrap up. We will catch up with you again after the New Year and hope things go well over the holidays.
Mike: All right. Talk to you soon.
Rob: Take it easy.
We’ll talk to Mike again in four or five episodes. Hope you enjoyed the conversation. I will talk to you next Tuesday.
If you have a question, we have a Q&A episode coming up with Brian Castle. If you have a question specifically for him, he knows productized services. He’s launched a couple of SaaS apps. He was essentially a non developer that taught himself how to code in order to have more control over his ability to launch SaaS apps, or any other questions. I’m just going to pull out ones that I think he knows about. You can email them too at questions@startupsfortherestofus.com or you can always leave us a voicemail at 888-801-9690. We have a theme song and it’s actually an excerpt from a song called We’re Outta Control by MoOt. We use it under Creative Commons.
In any pod catcher, you can search startups, and we’re typically on the top 3–5. Go on in the internet and search for Startups for the Rest of Us and you’ll find our website that we recently redesigned maybe three or four months since then. You can check that out. We have full transcripts of each episodes within a week or two. Those going live, thanks for listening. We’ll see you next time.
This week on the show, we cover topics and tactics related to building and growing startups in order to better your life and improve the world in a small way. This is a show made by and for ambitious startup founders who want to build ambitious startups but want to stay sane at the same time. And our willingness, our sacrifice, our life, or our health in order to grow our company.
We want to make interesting things. We want to be constantly learning, growing, and evolving. We want to be in control of our time. I think that’s a big motivation while a lot of us start these companies so that we can work on stuff that is super interesting to us. We’re able to create and push things out into the world, do things in public, create opportunities for ourselves, and own our own destiny.
We have many show formats, interviews, hotseats, and listener questions. But every five weeks or so, Mike Taber, comes on the show. He and I co-hosted the show for the first 448 episodes. Now, he is spending a lot of time focusing on his startup, Bluetick at bluetick.io. He updates us on his journey. He’s taking a social media hiatus, podcast hiatus, and he’s really focusing on trying to grow the startup.
If you haven’t listened to episode 470 and maybe even 465, you can get a little more background on what’s been going on. This has been an ongoing conversation and you hear me refer back to things that Mike has been dealing with, fighting trough, and struggling with for quite some time. It was a good conversation this week. I think Mike’s making some progress on some friends, not as much progress on the marketing side. You’ll hear me bust this chops about that a little bit in this episode. Overall, I think you’ll enjoy it.
Our big future of MicroConf announcement went live last Friday. I imagined you heard episode 474.5 that I put into the feed that had the audio content of that announcement. It was super fun to put together. It was one of those things that’s super stressful. It is when you’re launching something. It’s one of these things that I couldn’t talk about on the MicroConf team. We’ve been talking about and thinking things through about expansion plans for years, literally, but pretty intently for 5–6 months trying to plan everything out. Even just having a video, recording a video like that, having it produced, and having a moment where everyone watch at the same time was definitely exhilarating and it was an experiment for us.
We wanted to part toes into the water, but it came out really great. As always, thank you for all your support. We really are just looking to get more people to connect with one another. I hope to connect with you, but I can’t meet everyone. The idea behind this whole community has always been connecting more of us to one another, which is exactly why we plan this expansion, and exactly why we’re diving in headfirst in 2020 and beyond.
It’s getting close to the holidays. I hope you’re taking some time to think about what the new year brings and to spend some time with your family. I’m going to continue to push the episodes out every Tuesday. For now, let’s dive into the conversation with Mike.
Mike, thanks so much for coming back on the show.
Mike: Hey, how’s it going?
Rob: It’s going pretty well. I always enjoy our conversations. I love circling back up with you and hearing what’s going on with Bluetick.
Mike: Yeah, cool as well. Where do you want to start today?
Rob: You told me offline that you had a pretty big win this month. You want to tell folks about that?
Mike: Yeah. I was working through a trial with a customer. They were looking at everything because they wanted to use Bluetick for their team. They signed up for the $500 a month plan. It’s a pretty big win. It’s one of the largest plans that I have at the moment. I see that somebody signed up for that, went through some onboarding things with them, got all of their user accounts setup, and got their mailboxes added. I know that they were working on some integrations to do direct work with the public API for Bluetick. So far, everything seems to be going well. I answered a few support emails but no major issues to speak of, so that’s nice.
Rob: Congrats. That’s super cool to hear. I know that has an impact on your overall MRR. It’s cool to hear. We really haven’t had a big win like that in a long time since we started talking about this, so I applaud that and I hope to hear more about it next time we circle up.
Mike: Definitely. One of the things that it made me realize was that in terms of the team accounts, obviously, getting a $500 a month customer versus a $50 customer, that’s a huge win. Not just a win. It’s also a large revenue boost.
In the past, I’ve been looking at smaller companies where they’ve got anywhere between one and three mailboxes or something like that. But the level of effort for those larger customers is not really that much bigger. For this particular customer, they sell software which I hadn’t have a whole lot of success trying to sell Bluetick to customers who were running a SaaS businesses. Even if they have a lifetime value of several thousand dollars. Even though those numbers tend to fit well with services company where they’re selling something that’s $5000, $10,000, or $15,000.
I think that the reason for that was more because I was looking at the types of customers who are selling. They’re lifetime value was spread out over a much greater period of time versus the ones like this one, where somebody buys our software and it’s a couple of thousand dollars right upfront. It just made me realize that there’s probably a lot of other customers that fit that type of profile where their price point for their software is, even just the starting point is probably relatively high, and it will be worth talking to these people and say, “Hey, would you like to put an automation process in place such that you’re reaching everybody who starts a trial?” I think it’s just a matter of segmenting the types of software companies and what their price point is.
Rob: If you’re listening to this and you fit that bill, reach out to us questions@startupsfortherestofus.com or you can hit up Mike. I was going to say DM you on Twitter, but you’re not on Twitter anymore. I don’t want to call out your personal email address on the show, but we’ll absolutely get this over to Mike if you send it there.
Mike: It’s pretty easy to find.
Rob: Yeah, you’re email. You can contact Mike, singlefounder.com. I’m guessing you have a contact link.
Mike: I think it’s on the website.
Rob: I guess they can just go to bluetick.io. That’s what I’m going to ask. Cool, this is a great win. How can you get more of these? I don’t want to dig into all the details of the customer, obviously, but what industry, why did they sign up, and how do you find more of them? Sometimes these things are anomalies, obviously. If you think it is, could be a repeatable customer or type that works for you? I think that would be a big win.
Mike: Yeah. I’m definitely going to look into that a little bit more once December is over. I’ve got a bunch of other things going on that I’m working on that are just taking time and effort to do. I just don’t really have the bandwidth to expand the energy and focus to go after those other things. It’s definitely something that I want to proceed and go after starting in January.
Rob: Cool. That was our big win. Tell me that this is not our big loss or our big agony of defeat moment, Mike. The Google audit, is it done. Is it done?
Mike: Yes, it is.
Rob: Yay!
Mike: Yeah, I know. No kidding. I’ve got the letter of assessment. I don’t remember whether I had that the last time we talked or not. I think I was still waiting for it, but I got it back. As soon as I got it, I turned around and send it to Google. It was about a month later, I sent it to them, and they replied to the email that I sent with the letter of assessment saying they’re still waiting for my letter of assessment. I was probably less than polite in my response because it was literally right below where they had written, “Where’s your letter of assessment?” but the next day, they emailed me and said, “Hey. Everything is good. You’re all set.”
Rob: That’s really good news. What sound effect should we trigger it? Is it people clapping? Is it glasses clinking?
Mike: I don’t know. Maybe a car crash?
Rob: Yeah. It’s been such a trainwreck. I’m happy for you. This is a second win. We’re off to a good start. It can only go downhill from here as well.
Mike: Do you want me to wrap up right now and be done with it?
Rob: Yeah, that’s right. No. I’m glad to hear it. It’s been about five weeks since we talked. Did it take much of your time during that five weeks? Was it just a small blip?
Mike: No. It was just a small blip. I didn’t have anything to do. Once I’ve got all the paperwork back, I sent it to Google, and basically just was waiting for them to come back and say, “Hey. This is all set.” I think that I have heard that if you email them again, it basically puts you back to the bottom of the queue, so you’re better off not saying anything which is just the most bizarre way to handle it, but it is what it is.
They probably work backwards from whatever’s been sitting in their queue the longest. I get that but it still sucks to have to wait and not be able to ask, “Hey. There’s this deadline coming up. Are you going to do anything with this paperwork I sent you?”
Rob: Cool. Let’s move on from that. That means you have five weeks of undistracted work. Life never gets in the way like getting sick, or thanksgiving, or kids. Being home from snow days, I’m sure, happens or whatever. I haven’t had that yet this winter but I know it’s coming.
Talk to me then. There’s been a recurring theme around this untestable sealed .NET component. I brought it up multiple times about, “Hey, are you going to get rid of it?” and you said, “Yes.” Last time we went back and forth of, “Should I be doing sales and marketing or should I be getting this done?” we actually had a comment from a listener, Ralph Corderoy, on episode 470 which was the last time we talked.
He said, “Regarding ditching the .NET package that makes testing hard, it hasn’t been made clear why the application code needs to change. A re-implementation could take the subset of the API that the application uses and provide just that; none of the application code would know or care, and then whatever’s needed to ‘peek through’ for testing would be added. This seems much simpler than altering the application code, to use a new API that would need designing in parallel, thus take less time and be easier to justify.”
Mike: Yeah. It’s not an actual. It’s not an API. It’s an actual library that’s compiled into Bluetick that’s the problem.
Rob: Got it.
Mike: I’m not sure I completely follow what he means by some of that.
Rob: I think if you have coded it to an interface or something that you have created. He’s saying that it’s an internal API. But it is interesting. The bottom line is you said, the way it’s done, it’s a tremendous amount of work because you have to read a bunch of stuff in the database. Do you really need to redo this stuff in the database, by the way? Would it be possible to not do that?
Once you switch the component, it has to be. When I say possible, sometimes you have a naming convention that you used the vendor’s name in the components name in it. If you switch it over and it’s a new component, it’s confusing why do we have that legacy name. The code would still work, right? That’s the thing I’m thinking.
Mike: Yeah. There’s a decision that I made early on to save some time, which was to take the component that they have and dump it to a JSON file, read it back, then put it back into the object. That’s part of the problem. It’s not even just an interface. It’s the entire component. It’s being sort basically as a binary blob. It’s not nearly as easy as it could be to rip that out.
I have written a bit of an interface around it to abstract it a little bit more, to make it easier to use a different component. I’m still going to have to convert all of those things in order to completely rip it out. I need to go through every single one of those blobs and convert it into whatever the new storage format happens to be. It’s not just a simple rip and replace.
Rob: Totally. I have two questions on that one. It’s Ralph’s final question on his comment from that episode. He said, “What’s the minimum that can be done to provide regression test to allow development to continue […]?” Is there a scope of less than what you described or is it all or nothing?
Mike: It’s probably all or nothing because of the naming convention rely on that component. Since I don’t have access to the source code for it, I can’t just copy things out. I can probably decompiled it and use them as it is, but it’ll still be really, really hard. It’s just not easy. A lot of that stuff is integrated into my unit test, so I have to rebuild a bunch of that unit test as well.
Rob: Right. I’m not sure that I want to rehash this decision, but the more we talk about it, the more I’m thinking, “Do you really need to remove this?” You said that it was that you couldn’t test it because it was sealed and you can’t write unit tests around it or something. I’m just thinking, is that big of a deal? Maybe you just live with it. Last time we talked, you said it would be a week. At a best case, it would be a week of data, of rewriting, and the blobs of data manipulation.
Mike: No. It’ll be a week of just a data migration. Once work is done, just to migrate the data is going to be a week.
Rob: Right. It’s like two weeks or three weeks of full time work to get this done. When I hear that, I think, “Ouch. How important is this?”
Mike: There’s other things I want to do including have a separate database for each customer for their mailboxes to be able to do more, to allow people to mind their mailbox for other information that they can’t get any other way. There’s literally no way to do certain types of queries in a mailbox. Even if you go into Gmail and start typing certain things, there’s literally zero way to get certain queries to work.
I would like to be able to surface some of those things for Bluetick but some of those features are so far off that it’s not worth it for me to go all the way down that road right now. I’m kicking at it a little bit to get certain pieces of it out, but I don’t want to go down the rabbit hole of implementing software the next three or four months in order to get everything working in the way I want it to work and an effort to implement features that are probably a year off anyway.
I’m trying to rip out this particular component so I don’t have to deal with it in the future. Then I can test things that I need to. Right now, I have a hard time testing email headers in certain ways, and going back to previous emails. It’s just harder for me to do that right now because I don’t have some of the infrastructure in place right now. I can’t put the infrastructure in place until I rip this thing out.
Rob: Got it. It’s a tough one. It’s tough to have a code that you have to redo that doesn’t provide value.
Mike: Without walking you through the specifics of it, it’s really hard to describe.
Rob: Yeah. You have decided to rip it out. The last time I was pushing you to, “If I were you, you could ignore this.” Obviously, you need to do sales and marketing because you need more customers to make all of it worthwhile, frankly. Having that legacy hanging over you head, the tech debt, it’s going to slow development. It makes you not want to build certain features that you may want to build, and I was now more on the side of, I would eat it during this holiday season. I would eat it. Personally, I would eat the time. But I’m 55/45 on that or 60/40. I’m not 95/5. I think an argument can be made both ways. Where do you land right now? Have you started working on that? Or are you going to replace it soon? Or are you just going to punt it?
Mike: I started working on it a while ago, but it’s just kicking out here and there, trying to abstract things a little bit more to get further along without breaking anything that’s already in place. There is a second interface in there to replace it but I’ve got to write some of the code that’s going to pull all the objects.
Right now, what I’m doing is I’m in a holding pattern probably for another week or so. Right now, I’m also still working on some of the additional multi-user functionality for that larger customer that I had, which I prioritize above pretty much everything else, to be perfectly honest, for obvious reasons.
Rob: Yeah. If it’s revenue, that should rise to the top. That’s the thing with .NET. My concern, Mike, is I think you have a history of letting things hang around for too long. Letting them linger, not just diving in doing the work, and getting it done so that it can be behind you. I felt like the Google audit was one thing. I know you could’ve done that fast. We’ve been talking about Google audit for how long? Seven months? Eight months? This .NET component, too. It’s like six, seven, or eight months.
To me, if it’s that, if we have been talking about it, if it’s been that important that we have, then it’s time to resolve that thing. To get it off. To get it off the to-do list. It feels like a shadow or a cloud that’s hanging over your head. I just don’t want to still be talking about that. I don’t want you to still be talking about that in this spring or next summer.
Mike: I totally agree. This piece of it has to be resolved. For the Google Audit, I was holding off because I didn’t feel like I had enough information to be able to make a good decision either way. I know that you’re always working in a realm of uncertainty where you don’t necessarily have all the information. Waiting to get more information isn’t always going to give you the information you need to make a better decision.
I also recognize that Google was throwing this out there to everybody and saying, “Hey, you have to do this.” Everybody was kicking and complaining about it. Nobody really knew what to do or what it involved.
I had a few conversations with other people. Before I went through the process and before I made the decision to go forward with it, I got at least some clarity. But none of that clarity I got was from Google, which sucks. There’s not a whole lot that I can do about it. And even since then, I had conversations with other entrepreneurs who’ve gotten in touch with me, and say, “Hey. I know you went through this. Can you help us out? What it is that you had to do?” I’ve been able to help them, which is nice to be able to do. At the same time, I feel like Google could’ve been a lot more forthcoming with a lot of the information. They just weren’t.
Rob: Oh, we know, Mike. We’ve been through it with you. You know what? I’m happy. I think a win for all of us is that I’m not going to ask about Google audit next time. That’s checked. It’s done. I want to get there with the .NET component. I know we can’t just wave a magic wand and make it go away. It’s something that I want to see we move past when you can. Obviously, I would prioritize the customer features, too. Anything’s that driving revenue would be number one.
Mike: Totally agree.
Rob: Someone circled back, they wrote in an asked if you ever took the Enneagram.
Mike: No, I didn’t. I took the wrong one.
Rob: You took a wrong one, yeah. It was a personally test that tells you what motivates you. I was saying for me, it was creating things. I have worked with folks who are about achievement and they were more of the Jeff Bezos role, where they didn’t really need to build or make things. They just wanted power. I’m not just, but they wanted power and achievement and that’s what made them happy.
Obviously, it’s not a cure-all or whatever, but it’s an interesting thing to learn about. The test is in our show notes, the link for the last episode, but I think a couple of people called in and said, “Yeah. I really like to know what motivates Mike and all that.”
Mike: So, you’re telling me I got to go in the show notes and look for that?
Rob: You got it. I can send you the link. I’ll send you the link and I’ll reimburse you for the $10 or whatever it takes, guys.
Mike: No, you won’t.
Rob: I’m teasing, I know. Send me you’re Venmo, Mike. There were some marketing stuff you were talking about. There was a podcast tour. You had someone sending emails to try to get you on some podcast. As I said, I didn’t think it would be a long term impact but certainly getting out there, it’s easy for you to jump in a podcast, and wondering if you’ve had any traction with that approach.
Mike: Yeah, I have. I’ve been in a couple of podcasts over the last month or so. Still working on other ones. I was on Sales Tools, and also on Jane Portman’s UI Breakfast. That one’s not going to be out until next month, I believed. I’ve been on those two so far. There’s a bunch of others that I started reaching out to, and we’ll see how that works out.
Rob: Okay. Two sounds okay. How many emails have been sent? That doesn’t sound like a ton of traction.
Mike: No, maybe five or ten tops.
Rob: How did that happened? You hired a contractor to do it, right? Two months ago.
Mike: Yeah. Most of the stuff’s set up. I’m just holding off on hitting the button. Actually, my mastermind group tomorrow, we’re meeting up. One of the things that we have is, “Hey. That button’s going to be click tomorrow to just blasting these things out.”
Rob: Stop holding off on hitting the button. Why are you holding off on hitting the button? We talked about it last time. I was like, “Cool. You’re getting ready?” You were like, “Yeah. I’m going to do it.” Five weeks later, why hold off on that?
Mike: I don’t know. Honestly, I almost feel like it was one of the reasons I built Bluetick to begin with. People don’t want to hit that button. It’s just need to be hit, to be perfectly honest. Honestly, my mastermind group member, he’s just like, “Yeah. We’ll just share control, just go in and click the button for you.”
Rob: Yeah. Consider your chops busted here on the show that you did not hit that button in the past five weeks. I really thought that that was an easy thing. It mostly set up. That’s something that you’ve got to be doing with these other stuff. It’s easy for you to do. I just feel like it’s one more step, it’s one more action to get you going.
The other thing, please tell me you hit the button on this one, Mike. Cold email. You said you had 900 addresses from some LinkedIn connections. You have prior Bluetick cancellations. You have some sales leads that never converted. You just had a whole list. It wasn’t even cold, it was warm, and you’re going to bucket them in and start getting back in touch with them.
Last we chatted, that was going to start. You hadn’t done it because MicroConf Europe. I said, “Cool. You’re going to get that going.” You generally agreed that, “Yup. This is the next thing to try to get more prospects.” Tell us where you are with it.
Mike: Yeah. That’s a total fail.
Rob: Oh no. You’re killing me.
Mike: I know, For whatever reason, I feel like I don’t want to start stuff in December when it comes to that stuff. I don’t know why.
Rob: It’s December 12. I think we last spoke, November 5th, maybe. Give or take. The three weeks before Thanksgiving, I think, are still good. I think starting stuff now it’s December—
Mike: Really?
Rob: Yeah, I do. November was always typically a decent work month. It was never the best, but we always had decent growth. Whereas in December, things tended to level off with my apps. Now that we’re mid-December, there’s no reason to start doing it now. I don’t think you want to book a call the week of December 15th. This is what we originally talked about. I was like, “I don’t want you to start this Mid-January,” which is now where you’re going to wind up.
Mike: Yeah.
Rob: It’s a bummer. It sounds like you don’t feel good about it.
Mike: No, I don’t. I don’t really have anything to offer up for either than it just didn’t get done. I should have. I can point out all sorts of things as to why I did or didn’t, but at the end of the day, it just didn’t get done. That’s where things are at.
Rob: Do you think it’ll get done before we talk next time? We’ll talk mid-January.
Mike: It’ll definitely get kicked off. Yeah, it’ll definitely get kicked off by then.
Rob: “It’ll definitely get kicked off by then.” I love that. I am so quoting that back to you. I’m actually going to go ahead and make a note of it, that sentence, here are the notes.
Mike: Awesome.
Rob: Last episode, you had launched the Zapier integration, I believe. You want to update us on that? Is that yielding anything? Didn’t you need a certain amount of beta users in other for it to be public or something like that?
Mike: Yeah. Right now it’s in early access, but I need to get to 50 users in order to do any cold marketing campaign with Zapier. Until I get to 50 customers, I’m probably not going to get to 50 users for it, it would just be difficult to do that. There’s probably ways I can hack it to some extent but I got to get to the 50 customers first.
Rob: I wouldn’t do that. I would just try to do it organically. Okay, so we’ll table that one. That one will be tabled for a while, actually. Something we ran at that time that we talked about last time was personal stuff like motivation, sleep, exercise. How was your motivation then over the past five weeks?
Mike: It’s been generally good, but I’ll be honest. I wish I didn’t have to struggle so much when it came to front-end code for Bluetick. Part of it is just lack of familiarity with some of the CSS that’s in there because I’m using libraries and templates that I got from WrapBootstrap. Some of it is just harder for me to do simple things than I would like.
I’ve started throwing things directly into the CSS, the style that I’m supposed to use in classes and stuff like that. I’m like, “You know what? I just don’t care. This just needs to get done. It just needs to work.”
Rob: That’s a bummer. Do you have any budget to hire a front-end dev so you don’t have to be mired in it?
Mike: I was actually thinking exactly that. Earlier today I spent two hours fighting and trying to get an image to display in the right place. What I’m thinking of doing is when I run into certain things like this, just go to my bug tracker and add them in there, so that it says, “Hey, this needs to show up in this particular place. I can’t get it to work,” then hire somebody to go through and get a lot of those things done for me so I don’t have to do it. I don’t have to spend my time and effort trying to figure out how to get it done.
Rob: Yeah. Any sticking point. We know you’re bootstrapping. We know that there’s not a ton. You don’t have so much revenue that you can hire anyone full-time or anything like that. If this is a point of friction, think about the questions I just asked, “What’s your motivation like?” You’re like, “It’s been good except for front-end code.”
Front-end code is not just a technical challenge. It sounds like it’s something you are not enjoying. It sounds like it’s something affecting motivation. It could really solve a lot if you were able to pull it off and bring someone in part time. Even if it is 20-40 hours a month. It could feasibly reduce the burden on your mental state as well as allow you to move faster.
Mike: Definitely. I have no doubt that somebody can get it done probably five or ten times faster than I am. Just to say, “This is exactly how to do it.” That would be perfect.
Rob: You’re thinking about that. It sounds like a good idea. Is it something you’re going to do? We can bat ideas around, but if it’s not a good idea then don’t. If it is a good idea, should that become a priority? For me, it sounds like it might be. Then, you have to take the step. You have to go on Upwork or work your network, you have to find that person, vet him and all that stuff.
Mike: I think that’s the challenge I have. How much time is that going to take versus trying to do it myself. I don’t know. I feel like I’ll be better served having somebody else to do it knowing that it’s going to take some upfront time and effort. It’s just going to push off some of the time frame of the implementation for certain things. I get images completely in the wrong place. I really don’t want to push a live, but at the same time, maybe it’s not the end of the world.
Rob: Sure. Again, if I were in your shoes, which is how I like to think about and couch when I do offer advice, the concept in my head of what you’re working on, how hard things are, and which you do and don’t like, I would look to hire someone. I know you’re focused now on getting features done so that the customer you just landed sticks around. That would be my number one priority. I would not let hiring derail that.
You’re not going to be doing any marketing over the next three weeks, four weeks, because hold email is not going to work with the holidays. There’s all these stuff. You have this time to crank through some things. To me, the big customer support is number one. Hiring, probably number two. And that unsealed .NET component in my head would be number three.
The hiring, an interesting thing you can do, whether you go to Upwork or Authentic Jobs or WeWork remotely, I have to think of which of those allow part time. Writing up a job description for front-end dev doesn’t take that long. Maybe it takes you an hour to do it. You can use an old job description or whatever, old posting you’ve used. Post that.
If you post on a higher-end job board, you tend to get higher quality but a lot fewer candidates. It shouldn’t take you a ton of time to vet. Again, that would be my second or third priority. Probably second priority that I was doing after supporting that big customer. I will say that and leave it at that.
I’m not trying to badger you to hire someone or anything like that. Or forcing you to make a decision. But, I don’t want your motivation. I know what it’s like to have crap on your to-do list that you don’t want to do and don’t like to do. I still have that. We have it on our whole entrepreneur career. It’s trying to minimize that. It’s trying to get less and less of that as you move forward.
I literally do look at my Trello board once a week and say, “What of these things I am procrastinating on because I don’t want to do them? Can I just archive these things?” We have a VA executive assistant. “Can I hand it to anybody on the team such that I enjoy my life more?” I think that’s important.
Mike: Yeah. For me, mentally managing the trade-off in runway versus how much am I going to be paying for this, is difficult as well. I only got so much runway to work with. At the same time, I’ve got to grow the business and anything that I spent is going to take away from that. It’s like, “All right. How do I manage this?” If the complete business was cash flow positive then it wouldn’t matter so much, but including my time is definitely not. That’s where I struggle a little bit, like how much should I budget with this stuff? And how much money should I be spending on certain things?
Rob: Sure. That’s without seeing your finances. Obviously, we can even begin to conjecture that. So, let’s leave that one at that. I’m curious to hear where you wind up with it on the next episode.
How about sleep? Overall, your sleep had gotten much better over the last several episodes. Going back nine months, it was terrible, and it has gotten better. How has it been over the last month or so?
Mike: It’s been touch and go. I’ve been sick for at least the past week or so. My kids were sick the week before that. Then, it was Thanksgiving and lots of other stuff in between. It comes and goes. Sometimes it’s great and sometimes it’s just not so much. I would definitely say it’s generally better than it was six months or nine months ago, but I think I could always be better.
Rob: Yeah. As we know, sleep impacts everything. That impacts your ability to focus. It impacts your motivation during the day. It impacts a lot of stuff. That’s something I know you’re keeping an eye on it, but it’s super, super, important.
Mike: Yeah. My doctors have me up to five medications again, I think.
Rob: Are you? Oh no. That’s not good.
Mike: Yeah. The past couple of weeks have not been helpful. I get off with a bunch of stuff. I go back and the doctor’s like, “You need to be on this and this.” I was like, “All right. Fine.” I’ll come off with the two of them in about a week. We’ll see how things will go.
Rob: Yeah. I’m just going to let that one go. I’m not going to dive into that. Exercise? How about that? You’re exercising twice a day at some point.
Mike: No, no, no. Not that much. It was three or four times a week.
Rob: Okay. I think one day we recorded, you said, “I’ve exercised twice today.” I think that was the statement. You didn’t say you were doing it twice a day.
Mike: There might have been that.
Rob: How has it been though?
Mike: The past two weeks have been off. I think that’s mainly because of Thanksgiving lumped in there but I’ve got to get back to the gym probably this coming week because I’ve been sick for the past week or so. I think I got there once or twice last week. I think it’s just once at the very beginning of the week. Then, I haven’t gone at all this week. I gotta get back there again next week.
I have the motivation to do it. It’s just lately, I haven’t had the energy because I felt terrible. Even right now, my sinuses are all congested. I’m a little loosey from the meds that I’m on. They affect your blood pressure, so the doctor warned me. She’s just like, “Yeah. Be careful walking up and down the stairs.” My god, this will be fun.
Rob: And you realized the reason I asked you about this stuff. I asked you about motivation because: (a) you’re interested and I want to hear what’s going on, but (b) I think it’s a good touch point for you to think about every week or four weeks or five weeks when we discuss to really think, “How is my motivation?”
Exercise’s probably more of an accountability thing that you think yourself the “next time Rob and I chat on the podcast.” I hope you feel a little bit of friendly pressure to keep doing it. I think it’s super helpful for all of us to have some type of exercise in our routine.
Mike: Generally, I’m still keeping track of everything that I eat. That’s been going really well. I’m down at least 10 or 12 pounds or so over the past three months. That’s been going well. I’m at least losing weight like I have planned on doing. Maybe not nearly as much because I haven’t gotten to the gym nearly as much.
Rob: Right. Lastly, we’ll wrap us up with differentiation. “I need to talk to some of my customers more.” We had talked about, should you change your positioning? You brought up like, get things you need from other people like a W9, for example. You’re going to have more conversations with customers to figure out if you need to add features to be unique, and then write the code to implement that.
Last time you were still noodling on stuff. Before that, you’re still noodling on stuff like, “I’m not sure yet how to make this unique. I’m not sure what my angle is.” I had said for not doing that, you need to have a unique traffic channel, would be the best marketer just to get people on top of the funnel or you need to have that unique selling proposition that differentiates you, the positioning that means, “Oh, at least a subset of people really need what I have and pretty much no one else has that.” I’m curious where you are with that.
Mike: This leads into something you and I have briefly talked about before the episode. We’re probably leave this off a bit. I was talking to somebody about possibly doing an integration that will provide a fair amount of that file collection capability. We only have one conversation so far, but their product is completely API-based. It would probably not be too difficult to get it to work with Bluetick. I still have to go and talk to a couple of customers to specifically know have that particular pain point of being able to collect files from people on an ongoing basis.
I just had that conversation with him earlier this week. Now that I’ve had that conversation—it’s actually been yesterday that when we talk—I have to go through, go back to those customers, and say, “We’re just thinking through this. Is this something that would be of interest to you? Will it make your life easier inside of Bluetick? If so, do you also know anybody else who has a similar type of problem, where right now they’ve got things hacked together in Bluetick, but with an integration like this, it might be possible to make it a much smoother experience? If so, I want to know if there are other people who would benefit from it and what those people like like? How to get in touch with them?” Once I know that stuff, then I can decide whether or not to actually build it and do that integration.
Rob: Interesting. It sounds like a one-off thing. It’s not like you’re actively reaching out to customers and having conversations. Or is this an outreach thing from you? Or was it an outreach from them?
Mike: For the integration?
Rob: Yeah. For this. I think you said that there’s a customer who probably needs that or a potential customer.
Mike: Yes. They’re making it work right now. They’re just basically asking people in an email. My idea was to basically bake the functionality directly into Bluetick, so when they send the email, they can say, “Go to this page and upload the five things that we need from you.” This other tool can do those things. If I can integrate with that other tool, then I can provide that to my customers like a white label thing, but it would get me further without having to write all that code.
I would have to write integration code, but I wouldn’t necessarily have to write this whole other tool to collect all the files and everything else that goes with it. I’m still noodling on that but I want to talk to the customers, and say, “Does Bluetick serve your needs right now? Or will something like this be better?” Does that make sense?
Rob: It does. This is it. When you have these small numbers in their early days, it’s trying to take one instance, extrapolate, and ask, “Are there any people like this?”
Mike: Extrapolate it from a single data point is not helpful.
Rob: Yeah, but it’s what you have to do right now.
Mike: I’ve got one kid. Thirty would be great.
Rob: Yeah, exactly. That’s all I have today. I think we covered pretty much everything. We have some wins. We have some not so wins. Overall, how do you feel about the past five weeks? Does it feel okay? Feel good? Great?
Mike: Okay. There’s been some high points with the Google audit getting done and adding a large customer, those were fantastic. Low points with things like having a deal with a front-end CSS code and a few other things that just haven’t been done, some of the marketing stuff I wanted to get done.
There was one customer. I wouldn’t want to call him customer because he signed up. It was the day before Thanksgiving or something like that. He signed up for an onboarding call. I was like, “Yes!” Then I looked at the time of it. It was 4:30 on a Wednesday afternoon. It’s literally the day before thanksgiving. I was like, “All right, fine.” Then they ghosted me, didn’t showed up, didn’t respond to any of my emails. I reached out to him several other times. Then, the billing went through. 12 minutes later, they asked for a refund. I’m so upset.
Rob: Yeah. That’s a bummer. That’s the hard thing about being solo. You run into stuff like that and you don’t have anybody else to handle it. I’m sorry to hear that.
Mike: That’s an obvious low point. That’s like a kick right into the teeth. I really tried to help out and tried to do something. Of course, the cancellation email was like, “I DIDN’T WANT THE SUBSCRIPTION.” It was all in caps. I was like, “Come on. All right, fine. Just refund. Bye.” That’s it, walk away. Get something else done.
Rob: You’ve got to move on, wipe your hands off, and be done. That will certainly happen.
Mike: I have to make a conscious effort of dust my hands off and just walk away. I’ll be like, “All right, whatever. I can’t make everybody happy.”
Rob: You can’t get hung up on it. You can let it ruin your day but you shouldn’t. These are the ones where you really have to shake it off. It happens every so often. Sometimes more often than not, everything on your customer base. You’ve got to move past it. Sounds like you’ve got a good head about it.
Anyway, let’s wrap up. We will catch up with you again after the New Year and hope things go well over the holidays.
Mike: All right. Talk to you soon.
Rob: Take it easy.
We’ll talk to Mike again in four or five episodes. Hope you enjoyed the conversation. I will talk to you next Tuesday.
If you have a question, we have a Q&A episode coming up with Brian Castle. If you have a question specifically for him, he knows productized services. He’s launched a couple of SaaS apps. He was essentially a non developer that taught himself how to code in order to have more control over his ability to launch SaaS apps, or any other questions. I’m just going to pull out ones that I think he knows about. You can email them too at questions@startupsfortherestofus.com or you can always leave us a voicemail at 888-801-9690. We have a theme song and it’s actually an excerpt from a song called We’re Outta Control by MoOt. We use it under Creative Commons.
In any pod catcher, you can search startups, and we’re typically on the top 3–5. Go on in the internet and search for Startups for the Rest of Us and you’ll find our website that we recently redesigned maybe three or four months since then. You can check that out. We have full transcripts of each episodes within a week or two. Those going live, thanks for listening. We’ll see you next time.
Episode 474.5 | The Future of MicroConf
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In this half episode of Startups For The Rest Of Us, Rob makes the biggest announcement in MicroConf history and talks about the future of the conference.
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Episode 474 | Overcoming a 40% Decline in MRR with Brian Casel
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In this episode of Startups For The Rest Of Us, Rob talks with Brian Casel of Audience Ops, about recovering from a 40% decline in MRR. They start the story back in 2016 and work through the decline, audience ops rebound, the start of Ops Calendar, and Brian’s decision to learn how to code.
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Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host, Rob Walling. Each week on this show, we cover topics related to building and growing ambitious yet sane and sustainable startups. We realize that starting a company is hard. More than half of being a startup founder is managing your own psychology and much of being a founder is making decisions with incomplete information where the right answer is impossible to find through math or data.
This week’s episode, I talk with Brian Castle about overcoming a 40% decline in MRR and rising from those ashes. This is Startups for the Rest of Us episode 474.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome in building, launching, and growing startups. Whether you’ve built your fifth startup, or you’re thinking about your first. I’m Rob and today with Brian Castle, we’re here to share experiences to help you avoid the mistakes we’ve made.
Welcome back to the show. Thank you for joining me again this week on Startups for the Rest of Us. We have many different show formats. This week is a conversation with someone you’ve likely heard of, Brian Castle. He hosts the Bootstrapped Web podcast with Jordan Gal. And I’ve been listening to that podcast for many years. Hope you enjoy our conversation today.
But before we dive into that, I want to let you know about a MicroConf announcement we’re making this Friday, December 13th. It is by far the biggest we’ve made since launching the conference a decade ago. I really encourage you to go to microconf.com, make sure you’re on the email list. If you’ve attended a MicroConf in the past or you have tickets now, you’re already on the list and you’ll hear about it. But it really is big news and I’m not just saying that to try to sensationalize it or encourage you to go over there. But there’s a lot that’s been going on in terms of the planning of MicroConf for 2020 and we have a lot of new things coming and would love for you to be in the loop on all that’s going on. There’s a lot that’s going to be announced. microconf.com, make sure you’re on the email list.
I enjoyed the conversation I had today with Brian Castle. To set a little bit of the stage, Brian is a frontend designer and UX guy by trade, and then he learned to do some frontend development work. He had been doing a lot of consulting and eventually started dabbling and building products as many of us do. He started at a SaaS app called Restaurant Engine which was originally designed. His vision was for it to be Squarespace for restaurants, but really it evolved almost into a productized service where he had to do a lot of hand holding with the restaurant managers. I think that probably got his gears turning on its software plus service. That offered more value than just straight up building another website builder.
In early 2015, he sold Restaurant Engine for a tidy sum. He talks about that. He said it wasn’t life changing money, but it was enough to go towards a new home. We joined his story at that point where he sold Restaurant Engine and he’s about to start a new productized service. I hope you enjoy this conversation with Brian Castle.
Brian, thank you so much for joining me on the podcast.
Brian: Hey Rob, thanks for having me on.
Rob: Absolutely, man. We joined your story in the middle as I like to say where things are going up into the right. You’ve launched Audience Ops, productized service, and you launched it 2015 and over the course of about the next 18 months, it is all up into the right and you grow from zero dollars in MRR from April of 2015 to 50K of MRR by September of 2016. What was that feeling? Have you ever launched a product that grew that quickly. It’s productized service so it’s not all software, we get it. Have you ever launched anything that had had that much success for that long?
Brian: No, definitely not. I definitely didn’t expect to grow that fast. Looking back on it, it sort of makes sense. Obviously what I’ve learned with productized services is that you can charge a lot more per customer and that helps accelerate the growth rate. If you really nail a market and you’re solving a problem, specific value proposition all that, then I found that growing a recurring productize service like that can really happen. You can grow that revenue pretty fast.
But when I launched it in April 2015, I did not set out to even hit that. The goal was what’s the fastest thing that I can do to get 10K MRR and hit that within two months.
Rob: Right. Like you said, it’s the average revenue per user, a lot of people don’t realize it when that’s $500 a month or $1000, does not take many customers to get you to that 10K, 20K, 30K price point. I’ve seen it with MicroConf companies, with TinySeed companies trying to launch at $20 average revenue per customer app and get to any scale is a very long road even if you have a big audience or have a lot of traffic. Whereas the folks who are plug and away adding two customers a month at $500 average revenue per customer, that’s a grand a month of MRR that you’re growing. It’s a nice base to have.
Brian: Yeah. Audience Ops has, for the most part, been between $1000 and $2000 a month in terms of average per customer. I think it’s great to be able to grow a service like that so quickly. It has some downsides to it too when you’re charging that much because you just see crazy swings in MRR. You can add just a couple of customers, lose just a couple in a week and you’re seeing swings in 5K or 10K MRR. That can really screw with you.
Rob: Right. Stuff we won’t dig into here is you’ve talked a lot about productized services, there are pros and cons to them, you can grow quickly as you’re saying the price points are high and that’s great. Obviously the cons are hey, it’s not as easily scalable as pure software. You do have to hire staff. 50K MRR SaaS company might have 3, 4 people working on it. And a 50K productized service probably has a team of 15 or more. There’s pros and cons to this.
But the thing that’s cool is you launched it and 18 months later, obviously there was a lot of work that you had to do but you have this 50K MRR business now that’s supporting you because after you exited your prior app restaurant engine, I imagine you didn’t want to sit and burn through that cash. You mentioned to me offline that in 2016, you actually spent most of your restaurant engine money on a new house.
Brian: Yeah, that’s right. It wasn’t a life changing exit or anything, but it was a chunk of cash. I looked at that and I really thought about what is going to be in my next business to replace that income. I wanted to get into SaaS software right then in 2015. I looked at a few ideas, but the thought back then of basically burning all of that cash within a year and then maybe getting somewhere close to 10K MRR, which was a big maybe. That kind of scared me.
That’s what lead me to start looking at I kind of know productized services fairly well at this point. That seems to be the fastest way to get to a viable recurring revenue source to then free up my time. Obviously, a lot of work goes into building the team and the systems to remove myself, but that’s always been the goal with the service companies is to grow the cash flow to fund my time to work on stuff.
Rob: You’re a 50K MRR with Audience Ops, it’s fall, September 2016. Since everything is going up into the right, you’re feeling great, you already had two full time W-2 people, you turned 2 more people, they were contractors, you put them on salary and then you started looking at launching the SaaS app. You’re starting to build OPS Calendar. You did some validation there and started upping your expenses. What was the thought process there?
Brian: Right around that time, I guess it was around September into October, I had the idea for this software called OPS Calendar at the time, it was like an editorial software calendar with some process stuff built into it. You can automate content processes and things. Essentially, that was the precursor to my product today—ProcessKit. But back then, that’s what I was doing. At that point, I didn’t personally have the ability to just build an app myself. I‘ve always been a frontend developer and a designer, not a backend. It would definitely require outsourcing and hiring developers to build the functional app.
I did some presale, I got 10, 13, 14 people to prepay based on the idea and a promise that they will someday use this idea. That, combined with the growth rate on Audience Ops, and I had some profit saved up at this point. Okay, I’m good with spending around 5K a month on an outsourced developer and that turned into two or three guys overseas that I was working with.
Rob: Since we didn’t cover it before, could you give people just a two sentence explanation of what OPS Calendar, what it is and the purpose it would serve if it had made it to market, so to speak.
Brian: The idea with OPS Calendar, it was essentially an editorial calendar software with some production process stuff built into it. You and your team can build a process for how you produce blog articles, and podcasts, and social media, and map all that stuff to a calendar to see who needs to do what by when and also to schedule blog posts and social post to the calendar.
Back then I was running Audience Ops which is a content service, we do blog content as a service so obviously it was born out of that. That was essentially the idea with OPS Calendar at the time.
Rob: Yeah, cool. There’s a six months chunk where really from November of 2016, right after you ratchet up these expenses, things hit the skids with Audience Ops. I think this is one of the tough parts of your journey, it seems like. You want to walk us through the timeline there, what happened?
Brian: We’re three years later now and this is still one of those periods of time that I still look back on. Like, “Man, that was painful.” What happened was basically that growth from Audience Ops, 0-50K, that started to plateau right around October, November into the holidays and then started to decline through the holidays, in the January, February into about March or April is when it started to finally turn back around. It was painful on a number of fronts because it coincides right at the time that I decided to start spending a lot of extra cash on developers and employees all at the same time. There was that part of it.
And then it was also just like, “Why is this happening?” Everything was growing just fine up until that point. What is causing the reduction in leads or the increase to churn, it was probably a combination of both. I was looking at it in a thousand different angles to try to uncover what was actually causing it. It’s still unclear to me to this day. I have a few ideas, some hunches of what it could have been. But when you’re in it and you’re trying to fix it, you just don’t know what exactly is broken. It’s really frustrating.
Rob: Absolutely. That’s devastating. 40%? That’s a huge drop. 50K down to 30K. That’s a lot of salaries, that’s probably all your net profit on this thing. I’ve seen SaaS apps plateau, I’ve seen them right over the top, so to speak, when they start to decline. But I’ve never heard of a drop that fast that wasn’t due to some big platform risk. Like, “Hey, I’m integrated with Shopify and they just completely cut off our access.” Or, “I’m a Twitter client and they cut the API.” Or a Google change. Something that was just decimating.
But just to have that happen seemingly out of the blue, it sounds like, and three years later not have been able to pinpoint what happened, must have been terrible. It sounds like it went on for five months and you were just trying to fix it this whole time. Is that what it was?
Brian: Yeah. There are a few things. It was probably a combination of things that I look back on. One was in summer 2016, it was the first time that I hired a sales person for Audience Ops. There was somebody on the team, actually still on the team today, and I put that person into a sales role to remove myself from the sales. That was one remaining jobs that I was still doing in Audience Ops, the team was handling other stuff. It’s not any fault of his, he actually did a really great job of closing a lot of accounts that summer. Bringing out a lot of clients, but a lot of those clients that he sold and closed churned a lot faster than other clients have come on.
I take that as my fault for the training, maybe some of the compensation structure that I really didn’t structure and situate to have a sales person really set the right expectations for customers. Basically the way that I do when I do sales calls for Audience Ops is for me, when I do it, it’s really about let me tell you exactly what’s happening in Audience Ops and almost talk you out of signing up for Audience Ops to make sure that you’re really on board for this. There’s that, we just saw a string of cancellations.
Then the holiday season hit and that slowed down. It was weird because the previous holiday season was actually a pretty big spike in growth for us, but it didn’t happen in 2016. In January, now we’re in the thick of this six month period where sales are stalling, we’re seeing this churn. I go away to the Philippines, my wife has some family there. We were there for a whole month. My plan was to work a little bit while we’re there, but it’s a completely different timezone and that means I literally could not do any sales calls. Even the leads that we had, I couldn’t really even talk to them. Combine that with terrible WiFi while I was there. That was stressful as well.
Rob: How did that manifest itself? What was the peak moment or a moment you can remember where you lost your **** or you were feeling extremely mad about it?
Brian: Anyone who knows me, I am really pretty level headed, I think. I tend to compartmentalize pretty well. Poor sleep, bad eating habits and exercise and all that definitely starts to pile up. Because it’s like I could go exercise today, or I could keep working and try to fix this thing. That was a choice every single day.
Rob: Right. You just dug in and just grinded it out, I shall say. Probably took a toll on your body and mental well being, too.
Brian: Yeah. Into March, April 2017 is when things started to turn around. It’s almost like I don’t really know because it wasn’t a sudden turn around either. It took all of 2017 to dig back out and back up to where it was. But, we definitely improved a lot of things. That was when we really improved the new customer on boarding process heavily. Again, to reinforce those expectations. That I think had a really big impact on customer retention. If they have a really fantastic first month with Audience Ops, they’re really likely to stay on for a year or more at that point.
I worked on some new marketing stuff during that time and some new content, some webinar stuff. I think that seemed to help as well.
Rob: It’s something I talk a lot to entrepreneurs, especially new entrepreneurs don’t understand that they’ll see someone who’s built a business up to 10K a month. You may be able to sell that for $250,000 or something, there’s all these factors. But whatever, you can sell it for quite a million dollars. But people will say, “Why wouldn’t you just keep that? Just keep it and keep running on the side. It’s only three hours a week or five hours a week. Just keep running it.” Usually, there’s a couple of reasons, one because distraction is distraction and there’s opportunity cost to that. But the bigger one is that none of the businesses we have run on autopilot for years. They always get smacked around by something. Sometimes it’s Google, and sometimes it’s a competitor, and sometimes it’s platform risk, and sometimes it’s something you never would’ve guessed, it’s a key employee quitting, it’s something that you have a tough time identifying like what happened with you.
Then you have to shut everything down, stop doing what you’re focused on, and you have to turn your focus back to this thing that you’re tired of working on anyways. At a certain point, eventually, you give in. I’ve done this with multiple businesses and I’ve seen people do it as well, where you’re just like, “Forget it. I just got to sell this thing. I got to get it off my plate.”
Brian: Yeah. It hasn’t really come to that point in Audience Ops, but I can definitely say that there have been times. This period in 2016 was definitely one of those where it was like my mindset is trying to get this brand new idea for a SaaS off the ground. It wasn’t even in existence yet. It was just like get this thing to market. That was my number one goal. Working with developers, I’m paying for developers. I want that to happen as soon as possible. And then I have to stop and work on this churn problem in Audience Ops. Yeah, that was pretty painful.
Rob: We’ll talk in a second about how essentially you did turn that around through 2017. But I’m curious, that low point, this five, six months where things from November to March, April, when they are just in the thrawf and you can’t dig it out. You said that’s still a point that you remember very vividly. I have moments like that in three, four, five months period as well. I learned a lot from them and they impact the way that I do things today. They impact the way that I think about business and the way I ran my apps after that. I’m curious, what lesson or lessons did you take away from that? That impact the way that you make decisions.
Brian: I found that there are one or two of those points in my career so far that I can look back on, that I feel like really influenced the way that I work today. I think in some ways that’s a good thing and in some ways, I do things to a fault today to try to prevent that from happening again. On the positive side, I’ve been through enough of those ups and downs in the MRR graph to know that no matter how well something might be going today, I still have to play it extremely conservative.
We’re like three years out from that, Audience Ops is actually doing really well and I have a profit savings saved up that I’m able to deploy on new products and ProcessKit and things like that. But I’m actually hesitant to spend anything. Because it’s like just keep the reserves in check just in case, you really never know. You look at the news, the economy and stuff. I look at things almost afraid of what could happen.
Tactically, on the sales side of it, I talked about how that period I had a salesperson and then there was a string of churn that came in the months after that. That has caused me to really delay and delay on trying to put a salesperson in place again on Audience Ops.
I’m actually now doing that finally in the end of 2019 with a new strategy behind it and some new structure, but it took me three more years. I have removed myself from every other aspect of Audience Ops. I really spend less than two hours a week on this business, but those two hours are doing the sales calls. Because I just want to make sure that that message is being sent to new customers as they get on. I’m finally coming around to being okay in letting that role go.
Rob: That makes sense. I was going to ask, obviously, if you brought a salesperson and it didn’t work out, you had to turn the app around but after that, I would think that if you do want to get that sales, you would just try and try again. Most sales people don’t work out. The first one you find, frankly, more of the first VAs that I find, the first one almost never works out. So I just hire one, two, three, four and it’s frustrating and it takes time, but eventually, you find someone and then you’re able to let it go. Is that where you’re at now? Is that something you’re looking at doing, trying again and stepping away?
Brian: Yeah. I’m trying again because I think it will actually help impact the business, growth, and the overall health of the business to get me out of that role. Speaking about it now in 2019, I just have a lot more space to breathe. Financially and time wise and so many more things inside the business are more optimized now than they were back then. The on boarding stuff is really locked in, things like that. I just think it’s probably a better time to try to get that off my plate now than it was.
Again, things did start to turn around in 2017, but it took all of ‘17 into the beginning of ‘18. ‘18 was really when I finally got my bearings back in terms of having some space to play with.
Rob: Right. It sounds like it, and that April 2017 point could have been celebratory because you’re bringing your first paying customers in for your SaaS up OPS Calendar, but your financial runway was basically gone. You had to turn around over the next six, seven, eight months. What were a couple steps that you took, it was all hands on deck at that point, right? We’ve lost 40% revenue, we’re still declining at this point. What were some steps you took to turn this around and get out of the tailspin?
Brian: Just to be clear, there’s two parallel products in play here. One is Audience Ops which is in the site crisis mode, and then OPS Calendar which is trying to get off the ground but then I would have to pause, paying for the developers, right at these critical moments as we’re bringing these new customers on to the software. I just didn’t have the cash to fund for the development and couldn’t move fast and all that stuff. That was really frustrating.
But with Audience Ops to start to turn it around, I did a number of different things to try to attack the problem from different angles. One was that new customer on boarding again. I worked with my team a bit to see how can we just make sure that customers are really happy after their first month and that clearly has had an impact on improving churn over time. Just focusing on retention. I think that also helped with customers like referring other leads to us, that has that side effect too.
I did work on some new marketing materials. A whole round of new content, I think I did a recorded webinar that I put into the marketing system at that point, worked on the email automations that helped to nurture. I just went through the whole funnel. Everything that leads and customers see as they find out about Audience Ops, as they go through the sales process, as they get educated and nurtured and on boarded. I tried to improve every step of the funnel over that in early 2017.
Those are the kinds of improvements that you just don’t see moving the needle overnight, you just do that work then maybe a few months later things start to improve.
Rob: Right, and it worked because you turned it around over the next six or eight months.
Brian: I think it has definitely returned to where it was and has grown beyond that but it doesn’t really see the growth rate that it saw in that very first year. But I think that’s sort of a natural slowing down that a business sees. At least I’ll see it that way.
Rob: Yeah. It’s hard to say without going out and really beating the bushes and trying to generate a bunch of leads and doing cold outbound, focusing on SEO or running ads, there’s a natural threshold that always sets in. It seems to me like you’ve always been cool with that plateau because that plateau provides you with a full time income budget to build other apps which is really what you want to do. That’s your lifestyle choice.
Brian: Yeah, exactly.
Rob: They were working on OPS Calendar, your developers were, and you got your first paying customers in April and then you had to pull them off because you didn’t have the money, and then in July in 2017 you’re able to get them back to work on OPS Calendar, and then you get a little bit of traction right that latter half of 2017 but you never found product market fit with OPS Calendar. By February of 2018, you were still trying to push it forward, but some calamities happened. It sounds like there was a code base thing you want to talk us through what it was like dealing with that.
Brian: Throughout that year of 2017, it was trying to bring those first customers on and got a few handful of paying customers, but over the summer there whatever savings I had was gone from that period of Audience Ops. I’m not one of these people who just goes crazy on the credit card. Once I see a little bit of balance on there, I’m just too risk averse and debt averse to really go too heavy on that. I just pause and I don’t really spend until I have the cash in the bank account. I had to pause those developers over the summer which really, really hurt because I felt like it was at a critical time.
As we get into 2018, I went on a trip and we had been pushing off this upgrade from Vue one to Vue JS. At the time, I wasn’t a developer, I didn’t even really understand what Vue was. The developers chose that framework. That upgrade broke everything. I came home from that trip looking at a situation where I could pay those developers to go fix every single feature that I had just paid them for the last 18 months to build. Essentially, spend all that money and all that time again to rebuild the app, which was not going to happen.
It was also we’re having a hard time converting these customers, even a lot of the early prepaid customers didn’t end up continuing on as full customers. That said to me you know what, this thing isn’t really right. Because we have a process feature in OPS Calendar, and people were using that side of it and they were not touching the social media calendar stuff. That was also a signal to me that really the product that I deep down wanted to build was more of a process oriented tool.
Here I am in early 2018, probably going to “pivot” the product, if you will, to something else. Probably a new name and everything. I’m having a problem with these developers, but at that point I just decided to just stop everything. Just pause all work on OPS Calendar, take a month and figure out what I’m going to do. My conclusion was that I’m done with being limited by not being able to build apps myself. As a designer and front-end developer and product person, I’ve always felt, and this really brought it to a head was this experience with OPS Calendar, I’ve always felt this frustration that I can’t move fast enough because I’m always waiting for the developers to finish a feature. Sometimes I can’t move at all because I don’t have the cash to pay developers.
Let me bypass that by investing my time in learning back in development. I learned Ruby on Rails. I basically decided all of 2018, I’m going to use all my full time hours to make myself a full stack developer. I know I won’t be a very good one, but at least I’ll be able to take any idea and build it into a product and bring it to market, and that’s essentially what I do.
Rob: You were just about 18 months into OPS Calendar and I’m going to guess tens of thousands of dollars paying developers. You put on maintenance mode. You effectively shut it down. What was that decision like? How hard was it for you?
Brian: I think it was somewhere around $30,000 or $40,000 that I put into over that period of time. It sort of sucked, but it was also I don’t really have any other option here. I’m not going to just keep spending on something that’s clearly not working. I knew that the tech underneath the app, they technically built the features that I designed and speckled, but there were underlying architectural issues that I could just feel as a user.
That was another reason moving to let me just try to build it myself because at least I could design the thing from the inside out the way that I feel like it should be built. It was hard, but it was also I’m moving on. At that point I was also really excited about this idea for what the next version is which became ProcessKit, which is what I’m working on today.
Rob: I’m curious, deciding to learn to code from scratch, you’ll often hear folks send questions in to this podcast and say, “Should I learn to code if I’m going to watch a SaaS app?” The answer’s always it depends. Do you think that’s something you’re interested in? I would at the minimum learn to code well enough to know if the developers are trying to pull one over on you so you have a concept, you can talk to them. I don’t write production code anymore myself, but I wrote code professionally for 10 years.
I can still have architectural conversations. When Derrick and I were building Drip, I could go pretty deep on the tech stuff. It’s an asset to have for sure. But I’m curious, instead of learning to code, why not launch another productized service? Because you seem to be good at them, they seem to work out for you. Audience Ops is obviously successful and profitable. Why continue to seek after something that is showing you so much resistance in essence, which is a true software base SaaS app?
Brian: Number one, I’ve always been interested in software. I’m not new to software today. I’ve been working on it in different forms for many years. That has always been my number one interest in terms of what I want to create on the web. I’ve been building on the web for over a decade. That’s really always been where I’ve been heading with this. Even since I started Audience Ops, yeah I worked very hard on building it and building the team and the processes, the systems and everything. It’s always been with the end goal in mind of removing myself so that I can fund my time to work on software.
Like you said, the scalability aspect. Yes, I believe a service company can run without you and be profitable without you in the day to day like it is for me, but it’s clearly not as scalable as a SaaS that has hit product market fit and has that growth. Just in terms of the value of an asset and all that.
Also, I just wanted to go back to what you’re saying about the decision to learn to code or not, I agree with you. In many cases, it may not be the smartest choice, or maybe you should just learn a very light understanding of it so that you can communicate with developers. I think there are few caveats that made my situation a little bit unique from where most people are that I come across at least.
Number one, I’m not starting from scratch. I had been a frontend HTML, CSS, little PHP, little JavaScript work. But professional level frontend stuff for years. Building websites, doing a lot of work with advanced WordPress stuff, working on major websites for agencies and things like that. I was not completely new to basic coding and programming. I just never really learned a back end stack like Ruby on Rails, and working with databases and things like that.
There was that. That gave me a head start. And then the other thing is that I had the time. I really have full time hours to throw at this. If I didn’t have that, if I was doing this nights and weekends, I don’t think it would be possible to make as much progress as I did over the last now almost two years. I don’t think I would have been able to really make a lot of progress with it if I couldn’t work on it full time every day.
Rob: Right. You had a lot of time to focus and it was something that as you said, you already had a basis for.
Brian: And I had a lot of help too. A lot of my close friends are software developers, Rails developers, I had of people that I could turn to for support and they’ve been super helpful.
Rob: Totally. That’s the thing. You’re in the developer community already even if you’re more of a frontend developer/designer. It’s like you live in that world and it’s not such a far stretch to be like, okay, I want to go one layer deeper and see how it interacts with the service side code. Cool.
That takes us to spring of 2018. Audience Ops is back, profitable, and you were able to free up your time and spent most of 2018, as you said, learning Rails. What was the most surprising part of that experience of taking that six or eight months and digging into service side code and learning to build your own software top to bottom for the first time?
Brian: In the early months, I knew that it would be a very big effort and that it would take me a long time to get decent at it. It was a little bit frustrating going through tutorials and courses and then still not quite being able to build anything real yet, but then just hacking away at it a little bit more for another month or two and then I can build something very simple.
Over the course of 2018, I went through a bunch of courses, I worked with a coach which was very helpful, and then I did some throwaway practice project apps. By the end of that, I was able to put together a simple app called Sunrise KPI. That was the first real app that I’d built.
I should mention that the idea for ProcessKit I had throughout 2018. I bought the domain. I spent some money on that domain. I was putting sketch ideas for what ProcessKit would be, but I also knew that I wasn’t capable of building it yet. I had to get those skills up and it wasn’t until the end of 2018 I had felt confident in actually starting to build what is now ProcessKit.
Rob: Yeah. If someone’s listening to this and they are thinking about themselves learning to code, what would be a piece of advice, either a warning or just a hey, do this, this is what really worked for me, this is what fast tracked me.
Brian: Early on, I definitely wanted to stay away from the newest, trendiest, most complex frameworks, especially like the JavaScript frameworks and stuff. I’m sure there’s plenty of technical benefits to those, but I wanted boring, tried and true, non trendy stuff. It came down to a decision between Ruby on Rails or PHP in Laravel.
I went through a couple of weeks with PHP Laravel, some tutorials. I could follow along with those, but then I found I couldn’t take what I’d learned and go build something simple. I went through a one on one course on Rails. I did a month on PHP in Laravel and then a month on Rails. I found that at the end of the month on Rails, I was able to take that and build something simple. I continued to double down on Rails from there.
I went through a number of courses on that. Tip number one is to stick with something like Ruby on Rails, or PHP with Laravel. Something that has a huge developer community with tons of resources and educational stuff. That’s a big number one. Number two is to try and find mentors. I go to friends like I talked about. I paid a couple of people for paid mentorship for a while and I’ve learned to code in Rails developer communities, I go to that for some help as well. I frequently talked with friends about code questions. I hit up codementor.io quite a bit when I really get stuck.
Rob: Sounds cool. You mentioned ProcessKit which we haven’t really covered in this conversation. You want to tell folks what that is? Is it the next generation of OPS Calendar done in the way based on your learning from the first time?
Brian: At this point, the way that it’s positioned is that it’s really a projects tool. It kind of like a project management software, but it’s process driven. If your projects really follow the same script every time, they’re very repeatable and you’re doing a lot of the same stuff, whether you’re onboarding customers to a service or to a SaaS or something like that and you need your team to follow a certain process, that’s really where ProcessKit comes in. It’s different from the project management tools where you might run your tasks and projects in one of those tools, but you have your documentation, your SOPs over in a silo somewhere else. That’s where those kinds of operations tend to fall apart, the team just never really follows the SOPs.
ProcessKit sort of brings those together, and then also builds in automation steps. You can say if this then that, if it is is this type of project then assign these tasks to these people, calculate these due dates, and link up with Zapier and all that kind of fun stuff.
Rob: Cool. Where is that project in terms of launching? This is the part of the interview where I ask you questions I already know the answer to. What status is ProcessKit at right now?
Brian: It launched, it has customers. I’ve been doing the slow launch things over the past really throughout ‘19. I think I started on boarding the first customers around June, the very first ones. Today, we’re in November. I’ve been sending early access, invites pretty regularly since then. It was up on Product Hunt about two weeks ago and now it’s out there.
Rob: Is it everything you wanted and more to own a SaaS app? Is it just growing up into the right by itself? You make money while you sleep? I was going to say is it back to the same slug as OPS Calendar, but I don’t think it is. This time really is different. I get the feeling that there is more potential here. Is that pretty accurate?
Brian: First I heard your interview with Jane Portman this morning and I completely relate to that, probably so many other early SaaS founders with the long slow SaaS ramp of death. It’s real.
It’s very slow and the revenue is nowhere new replacing the income that I get from Audience Ops. But yeah, it’s less than a year in, and it does have more customers now than OPS Calendar did. It resonates with people a lot more, the problem and the solution, and the positioning. At least with my audience, the people that I’m connected to. But it’s early on. It really just launched a couple of weeks ago. Now that the new website is up, I’m starting to kick into gear. That shift away from just going to the early access list to actually marketing this thing and getting new traffic and new leads and that sort of stuff.
Rob: Now the real work begins is what I like to say. Getting to launch is like 30% of the journey. That’s where folks who are listening, we could do Startups for the Rest of Us drinking game where like if you get to launch and you don’t have some type of launch list that you’ve been building, then you have a problem. That’s the first base or the first quarter of the journey. And then now you’re launched and now the real work begins. That’s where it’s like you probably don’t have product market fit yet.
Now, I’m going to spend the next six months figuring that out as I grow very slowly. Then, you do get to product market fit, now I need to find a sustainable source of leads when it’s relatively scalable. Then you spend the next 6-12 months figuring that out. That’s why it’s the long slow SaaS ramp. These things are in stages and it’s truly the Cinderella stories that don’t have these steps in this order. It’s always a grind.
Even the Cinderella stories, like I said, there are no Cinderella stories, but even the ones that we look at and say, “Oh my gosh, that grew so fast.” It was a complete grind behind the scenes. This is never easy.
I wish you the best of luck with ProcessKit, because it’s essentially a second iteration of a SaaS app. You’ve obviously fought very hard for multiple years to get this out. This is something you really believe in. You can tell that it’s not an opportunistic product. It’s like I’m going to ship dog food to people on the internet because I could make money. You’re building this because this is something you need and you believe in. I hope that you’re able to make it work.
I think longer term, if for some reason it doesn’t work out, would you build another SaaS app again or would you consider doing a productized service?
Brian: At this point, I am pretty committed personally to doing software whether that’s ProcessKit or another idea or several other ideas, I’m pretty focused primarily on ProcessKit right now. I would use the productized service model if it came to that. No, I should say that I’m actually still using the service model in many ways. Obviously there’s Audience Ops that continues to grow, but even in ProcessKit, now we’re launching a Done with You process service to help you and your team improve and audit your processes, get you set up on ProcessKit as a paid service. That’s sort of like a productized service built on the software, which I really love that model.
You asked about how is it. For me right now, in that slow grind on ProcessKit, I’ll be honest, I’m really loving it. I’m really loving doing everything from the design to the code and talking to customers every day because being able to talk to customers and then literally iterate on the feedback that I got on the feature that I could ship by the end of the week, that just feels so empowering. I know that it won’t be forever, but at this point, Audience Ops is back to growth and profitable in steady state and a really amazing, fantastic team that I have that space to breathe now. I’m not worried about having to cut off the development cycles because of cash flow or things being built in the wrong way or things like that.
Rob: Yeah. There’s definitely a luxury to being able to control that whole pipeline, the manufacturing pipeline. Like I said, I don’t write code anymore, but when I was getting started all the way through Drip, everything before that, I wrote at least some code. Even if it was just maintenance, even if it’s just tinkering here, it was just tweaking. Because finding developer to make a three line code change in PHP or Cold Fusion or classic ASP or .NET or any of those things, it’s a huge amount of work to find someone just to do that. If you know the basics of code, to then just learn, I didn’t know some of those languages but I picked up a book or I went on Stack Overflow, whatever and you Google it, and you’re like, “I’m going to make this change and see if it doesn’t break anything.” If it doesn’t, it’s like wow, I just saved myself like a week of recruiting someone just because you know how to do the basics.
It cuts both ways. I think then you can also get mired in it and then you’re not working on the things you should be and that’s where as we started Drip originally, Derrick said, “Hey, I want to build it on Rails.” I said, “Cool.” Originally I was going to learn Ruby but eventually I said, “You know what, I actually think I shouldn’t because I will get into the repo and start tweaking things. And I should be talking to customers, I should be building processes for this business, I should be doing all the other things that don’t involve the coding.” There’s a point where that makes sense. And if obviously for building a venture backed startup and you’re raising money, you probably shouldn’t be the one digging into the code. Maybe someone on your team is. But there’s a balance there.
But that’s not what you’re doing. You’re building something that you want to build, that you want to exist in the world, and you’re willing and able to take it slow and that gives you a luxury.
Brian: Taking it slow, I’m as impatient as they come with things. I constantly want to move fast and execute and ship something new every single week. But bigger picture, that what’s this podcast and MicroConf and everything is all about. It’s about embracing that slow model of taking your time and making sure that things are done right. I’m all about it.
Rob: That’s right. Ambitious founders who want to build interesting things, build sizable business but are not willing to sacrifice their lives, their health, their relationships, whatever it is, even in your case, it’s a lifestyle that you don’t want to sacrifice to do it and that’s what it’s about. It’s about retaining that control.
Brian: 100%.
Rob: Thanks so much for coming on the show, man. If folks want to keep up with you, and they like the podcast, they should search for Bootstrapped Web, podcast you release every week or two with Jordan Gall. I’m a listener, have been for years. If they want to keep up with you on Twitter, you are @casjam and of course processkit.com is where your SaaS app lives. Any other places folks might want to look out for you?
Brian: Audience Ops is still kicking. Great team over there. Yeah, you hit it. That’s it.
Rob: Sounds great. Thanks again, man.
Brian: Thanks. Thanks, Rob.
Rob: If you have any questions for Brian or myself after hearing this interview, I’d love it if you would tweet me @robwalling or send a question into questions.startupsfortherestofus.com and I would be glad to have Brian back on the show to answer questions you have about any of his experiences, or productized services, or anything else that you feel like he could lend some insight into. If you have an unrelated question for the show, you can leave me a voicemail at 888-801-9690. Or you can always email us questions.startupsfortherestofus.com. You can find us in all the podcasting marketplaces and directories, just search for Startups.
If you’re interested in the full transcript or to make a comment on an episode, just hit up startupsfortherestofus.com. This was episode 474. Our theme music is an excerpt from We’re Outta Control by MoOt, it’s used under Creative Commons. Thank you for listening, and I’ll see you next time.
This week’s episode, I talk with Brian Castle about overcoming a 40% decline in MRR and rising from those ashes. This is Startups for the Rest of Us episode 474.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome in building, launching, and growing startups. Whether you’ve built your fifth startup, or you’re thinking about your first. I’m Rob and today with Brian Castle, we’re here to share experiences to help you avoid the mistakes we’ve made.
Welcome back to the show. Thank you for joining me again this week on Startups for the Rest of Us. We have many different show formats. This week is a conversation with someone you’ve likely heard of, Brian Castle. He hosts the Bootstrapped Web podcast with Jordan Gal. And I’ve been listening to that podcast for many years. Hope you enjoy our conversation today.
But before we dive into that, I want to let you know about a MicroConf announcement we’re making this Friday, December 13th. It is by far the biggest we’ve made since launching the conference a decade ago. I really encourage you to go to microconf.com, make sure you’re on the email list. If you’ve attended a MicroConf in the past or you have tickets now, you’re already on the list and you’ll hear about it. But it really is big news and I’m not just saying that to try to sensationalize it or encourage you to go over there. But there’s a lot that’s been going on in terms of the planning of MicroConf for 2020 and we have a lot of new things coming and would love for you to be in the loop on all that’s going on. There’s a lot that’s going to be announced. microconf.com, make sure you’re on the email list.
I enjoyed the conversation I had today with Brian Castle. To set a little bit of the stage, Brian is a frontend designer and UX guy by trade, and then he learned to do some frontend development work. He had been doing a lot of consulting and eventually started dabbling and building products as many of us do. He started at a SaaS app called Restaurant Engine which was originally designed. His vision was for it to be Squarespace for restaurants, but really it evolved almost into a productized service where he had to do a lot of hand holding with the restaurant managers. I think that probably got his gears turning on its software plus service. That offered more value than just straight up building another website builder.
In early 2015, he sold Restaurant Engine for a tidy sum. He talks about that. He said it wasn’t life changing money, but it was enough to go towards a new home. We joined his story at that point where he sold Restaurant Engine and he’s about to start a new productized service. I hope you enjoy this conversation with Brian Castle.
Brian, thank you so much for joining me on the podcast.
Brian: Hey Rob, thanks for having me on.
Rob: Absolutely, man. We joined your story in the middle as I like to say where things are going up into the right. You’ve launched Audience Ops, productized service, and you launched it 2015 and over the course of about the next 18 months, it is all up into the right and you grow from zero dollars in MRR from April of 2015 to 50K of MRR by September of 2016. What was that feeling? Have you ever launched a product that grew that quickly. It’s productized service so it’s not all software, we get it. Have you ever launched anything that had had that much success for that long?
Brian: No, definitely not. I definitely didn’t expect to grow that fast. Looking back on it, it sort of makes sense. Obviously what I’ve learned with productized services is that you can charge a lot more per customer and that helps accelerate the growth rate. If you really nail a market and you’re solving a problem, specific value proposition all that, then I found that growing a recurring productize service like that can really happen. You can grow that revenue pretty fast.
But when I launched it in April 2015, I did not set out to even hit that. The goal was what’s the fastest thing that I can do to get 10K MRR and hit that within two months.
Rob: Right. Like you said, it’s the average revenue per user, a lot of people don’t realize it when that’s $500 a month or $1000, does not take many customers to get you to that 10K, 20K, 30K price point. I’ve seen it with MicroConf companies, with TinySeed companies trying to launch at $20 average revenue per customer app and get to any scale is a very long road even if you have a big audience or have a lot of traffic. Whereas the folks who are plug and away adding two customers a month at $500 average revenue per customer, that’s a grand a month of MRR that you’re growing. It’s a nice base to have.
Brian: Yeah. Audience Ops has, for the most part, been between $1000 and $2000 a month in terms of average per customer. I think it’s great to be able to grow a service like that so quickly. It has some downsides to it too when you’re charging that much because you just see crazy swings in MRR. You can add just a couple of customers, lose just a couple in a week and you’re seeing swings in 5K or 10K MRR. That can really screw with you.
Rob: Right. Stuff we won’t dig into here is you’ve talked a lot about productized services, there are pros and cons to them, you can grow quickly as you’re saying the price points are high and that’s great. Obviously the cons are hey, it’s not as easily scalable as pure software. You do have to hire staff. 50K MRR SaaS company might have 3, 4 people working on it. And a 50K productized service probably has a team of 15 or more. There’s pros and cons to this.
But the thing that’s cool is you launched it and 18 months later, obviously there was a lot of work that you had to do but you have this 50K MRR business now that’s supporting you because after you exited your prior app restaurant engine, I imagine you didn’t want to sit and burn through that cash. You mentioned to me offline that in 2016, you actually spent most of your restaurant engine money on a new house.
Brian: Yeah, that’s right. It wasn’t a life changing exit or anything, but it was a chunk of cash. I looked at that and I really thought about what is going to be in my next business to replace that income. I wanted to get into SaaS software right then in 2015. I looked at a few ideas, but the thought back then of basically burning all of that cash within a year and then maybe getting somewhere close to 10K MRR, which was a big maybe. That kind of scared me.
That’s what lead me to start looking at I kind of know productized services fairly well at this point. That seems to be the fastest way to get to a viable recurring revenue source to then free up my time. Obviously, a lot of work goes into building the team and the systems to remove myself, but that’s always been the goal with the service companies is to grow the cash flow to fund my time to work on stuff.
Rob: You’re a 50K MRR with Audience Ops, it’s fall, September 2016. Since everything is going up into the right, you’re feeling great, you already had two full time W-2 people, you turned 2 more people, they were contractors, you put them on salary and then you started looking at launching the SaaS app. You’re starting to build OPS Calendar. You did some validation there and started upping your expenses. What was the thought process there?
Brian: Right around that time, I guess it was around September into October, I had the idea for this software called OPS Calendar at the time, it was like an editorial software calendar with some process stuff built into it. You can automate content processes and things. Essentially, that was the precursor to my product today—ProcessKit. But back then, that’s what I was doing. At that point, I didn’t personally have the ability to just build an app myself. I‘ve always been a frontend developer and a designer, not a backend. It would definitely require outsourcing and hiring developers to build the functional app.
I did some presale, I got 10, 13, 14 people to prepay based on the idea and a promise that they will someday use this idea. That, combined with the growth rate on Audience Ops, and I had some profit saved up at this point. Okay, I’m good with spending around 5K a month on an outsourced developer and that turned into two or three guys overseas that I was working with.
Rob: Since we didn’t cover it before, could you give people just a two sentence explanation of what OPS Calendar, what it is and the purpose it would serve if it had made it to market, so to speak.
Brian: The idea with OPS Calendar, it was essentially an editorial calendar software with some production process stuff built into it. You and your team can build a process for how you produce blog articles, and podcasts, and social media, and map all that stuff to a calendar to see who needs to do what by when and also to schedule blog posts and social post to the calendar.
Back then I was running Audience Ops which is a content service, we do blog content as a service so obviously it was born out of that. That was essentially the idea with OPS Calendar at the time.
Rob: Yeah, cool. There’s a six months chunk where really from November of 2016, right after you ratchet up these expenses, things hit the skids with Audience Ops. I think this is one of the tough parts of your journey, it seems like. You want to walk us through the timeline there, what happened?
Brian: We’re three years later now and this is still one of those periods of time that I still look back on. Like, “Man, that was painful.” What happened was basically that growth from Audience Ops, 0-50K, that started to plateau right around October, November into the holidays and then started to decline through the holidays, in the January, February into about March or April is when it started to finally turn back around. It was painful on a number of fronts because it coincides right at the time that I decided to start spending a lot of extra cash on developers and employees all at the same time. There was that part of it.
And then it was also just like, “Why is this happening?” Everything was growing just fine up until that point. What is causing the reduction in leads or the increase to churn, it was probably a combination of both. I was looking at it in a thousand different angles to try to uncover what was actually causing it. It’s still unclear to me to this day. I have a few ideas, some hunches of what it could have been. But when you’re in it and you’re trying to fix it, you just don’t know what exactly is broken. It’s really frustrating.
Rob: Absolutely. That’s devastating. 40%? That’s a huge drop. 50K down to 30K. That’s a lot of salaries, that’s probably all your net profit on this thing. I’ve seen SaaS apps plateau, I’ve seen them right over the top, so to speak, when they start to decline. But I’ve never heard of a drop that fast that wasn’t due to some big platform risk. Like, “Hey, I’m integrated with Shopify and they just completely cut off our access.” Or, “I’m a Twitter client and they cut the API.” Or a Google change. Something that was just decimating.
But just to have that happen seemingly out of the blue, it sounds like, and three years later not have been able to pinpoint what happened, must have been terrible. It sounds like it went on for five months and you were just trying to fix it this whole time. Is that what it was?
Brian: Yeah. There are a few things. It was probably a combination of things that I look back on. One was in summer 2016, it was the first time that I hired a sales person for Audience Ops. There was somebody on the team, actually still on the team today, and I put that person into a sales role to remove myself from the sales. That was one remaining jobs that I was still doing in Audience Ops, the team was handling other stuff. It’s not any fault of his, he actually did a really great job of closing a lot of accounts that summer. Bringing out a lot of clients, but a lot of those clients that he sold and closed churned a lot faster than other clients have come on.
I take that as my fault for the training, maybe some of the compensation structure that I really didn’t structure and situate to have a sales person really set the right expectations for customers. Basically the way that I do when I do sales calls for Audience Ops is for me, when I do it, it’s really about let me tell you exactly what’s happening in Audience Ops and almost talk you out of signing up for Audience Ops to make sure that you’re really on board for this. There’s that, we just saw a string of cancellations.
Then the holiday season hit and that slowed down. It was weird because the previous holiday season was actually a pretty big spike in growth for us, but it didn’t happen in 2016. In January, now we’re in the thick of this six month period where sales are stalling, we’re seeing this churn. I go away to the Philippines, my wife has some family there. We were there for a whole month. My plan was to work a little bit while we’re there, but it’s a completely different timezone and that means I literally could not do any sales calls. Even the leads that we had, I couldn’t really even talk to them. Combine that with terrible WiFi while I was there. That was stressful as well.
Rob: How did that manifest itself? What was the peak moment or a moment you can remember where you lost your **** or you were feeling extremely mad about it?
Brian: Anyone who knows me, I am really pretty level headed, I think. I tend to compartmentalize pretty well. Poor sleep, bad eating habits and exercise and all that definitely starts to pile up. Because it’s like I could go exercise today, or I could keep working and try to fix this thing. That was a choice every single day.
Rob: Right. You just dug in and just grinded it out, I shall say. Probably took a toll on your body and mental well being, too.
Brian: Yeah. Into March, April 2017 is when things started to turn around. It’s almost like I don’t really know because it wasn’t a sudden turn around either. It took all of 2017 to dig back out and back up to where it was. But, we definitely improved a lot of things. That was when we really improved the new customer on boarding process heavily. Again, to reinforce those expectations. That I think had a really big impact on customer retention. If they have a really fantastic first month with Audience Ops, they’re really likely to stay on for a year or more at that point.
I worked on some new marketing stuff during that time and some new content, some webinar stuff. I think that seemed to help as well.
Rob: It’s something I talk a lot to entrepreneurs, especially new entrepreneurs don’t understand that they’ll see someone who’s built a business up to 10K a month. You may be able to sell that for $250,000 or something, there’s all these factors. But whatever, you can sell it for quite a million dollars. But people will say, “Why wouldn’t you just keep that? Just keep it and keep running on the side. It’s only three hours a week or five hours a week. Just keep running it.” Usually, there’s a couple of reasons, one because distraction is distraction and there’s opportunity cost to that. But the bigger one is that none of the businesses we have run on autopilot for years. They always get smacked around by something. Sometimes it’s Google, and sometimes it’s a competitor, and sometimes it’s platform risk, and sometimes it’s something you never would’ve guessed, it’s a key employee quitting, it’s something that you have a tough time identifying like what happened with you.
Then you have to shut everything down, stop doing what you’re focused on, and you have to turn your focus back to this thing that you’re tired of working on anyways. At a certain point, eventually, you give in. I’ve done this with multiple businesses and I’ve seen people do it as well, where you’re just like, “Forget it. I just got to sell this thing. I got to get it off my plate.”
Brian: Yeah. It hasn’t really come to that point in Audience Ops, but I can definitely say that there have been times. This period in 2016 was definitely one of those where it was like my mindset is trying to get this brand new idea for a SaaS off the ground. It wasn’t even in existence yet. It was just like get this thing to market. That was my number one goal. Working with developers, I’m paying for developers. I want that to happen as soon as possible. And then I have to stop and work on this churn problem in Audience Ops. Yeah, that was pretty painful.
Rob: We’ll talk in a second about how essentially you did turn that around through 2017. But I’m curious, that low point, this five, six months where things from November to March, April, when they are just in the thrawf and you can’t dig it out. You said that’s still a point that you remember very vividly. I have moments like that in three, four, five months period as well. I learned a lot from them and they impact the way that I do things today. They impact the way that I think about business and the way I ran my apps after that. I’m curious, what lesson or lessons did you take away from that? That impact the way that you make decisions.
Brian: I found that there are one or two of those points in my career so far that I can look back on, that I feel like really influenced the way that I work today. I think in some ways that’s a good thing and in some ways, I do things to a fault today to try to prevent that from happening again. On the positive side, I’ve been through enough of those ups and downs in the MRR graph to know that no matter how well something might be going today, I still have to play it extremely conservative.
We’re like three years out from that, Audience Ops is actually doing really well and I have a profit savings saved up that I’m able to deploy on new products and ProcessKit and things like that. But I’m actually hesitant to spend anything. Because it’s like just keep the reserves in check just in case, you really never know. You look at the news, the economy and stuff. I look at things almost afraid of what could happen.
Tactically, on the sales side of it, I talked about how that period I had a salesperson and then there was a string of churn that came in the months after that. That has caused me to really delay and delay on trying to put a salesperson in place again on Audience Ops.
I’m actually now doing that finally in the end of 2019 with a new strategy behind it and some new structure, but it took me three more years. I have removed myself from every other aspect of Audience Ops. I really spend less than two hours a week on this business, but those two hours are doing the sales calls. Because I just want to make sure that that message is being sent to new customers as they get on. I’m finally coming around to being okay in letting that role go.
Rob: That makes sense. I was going to ask, obviously, if you brought a salesperson and it didn’t work out, you had to turn the app around but after that, I would think that if you do want to get that sales, you would just try and try again. Most sales people don’t work out. The first one you find, frankly, more of the first VAs that I find, the first one almost never works out. So I just hire one, two, three, four and it’s frustrating and it takes time, but eventually, you find someone and then you’re able to let it go. Is that where you’re at now? Is that something you’re looking at doing, trying again and stepping away?
Brian: Yeah. I’m trying again because I think it will actually help impact the business, growth, and the overall health of the business to get me out of that role. Speaking about it now in 2019, I just have a lot more space to breathe. Financially and time wise and so many more things inside the business are more optimized now than they were back then. The on boarding stuff is really locked in, things like that. I just think it’s probably a better time to try to get that off my plate now than it was.
Again, things did start to turn around in 2017, but it took all of ‘17 into the beginning of ‘18. ‘18 was really when I finally got my bearings back in terms of having some space to play with.
Rob: Right. It sounds like it, and that April 2017 point could have been celebratory because you’re bringing your first paying customers in for your SaaS up OPS Calendar, but your financial runway was basically gone. You had to turn around over the next six, seven, eight months. What were a couple steps that you took, it was all hands on deck at that point, right? We’ve lost 40% revenue, we’re still declining at this point. What were some steps you took to turn this around and get out of the tailspin?
Brian: Just to be clear, there’s two parallel products in play here. One is Audience Ops which is in the site crisis mode, and then OPS Calendar which is trying to get off the ground but then I would have to pause, paying for the developers, right at these critical moments as we’re bringing these new customers on to the software. I just didn’t have the cash to fund for the development and couldn’t move fast and all that stuff. That was really frustrating.
But with Audience Ops to start to turn it around, I did a number of different things to try to attack the problem from different angles. One was that new customer on boarding again. I worked with my team a bit to see how can we just make sure that customers are really happy after their first month and that clearly has had an impact on improving churn over time. Just focusing on retention. I think that also helped with customers like referring other leads to us, that has that side effect too.
I did work on some new marketing materials. A whole round of new content, I think I did a recorded webinar that I put into the marketing system at that point, worked on the email automations that helped to nurture. I just went through the whole funnel. Everything that leads and customers see as they find out about Audience Ops, as they go through the sales process, as they get educated and nurtured and on boarded. I tried to improve every step of the funnel over that in early 2017.
Those are the kinds of improvements that you just don’t see moving the needle overnight, you just do that work then maybe a few months later things start to improve.
Rob: Right, and it worked because you turned it around over the next six or eight months.
Brian: I think it has definitely returned to where it was and has grown beyond that but it doesn’t really see the growth rate that it saw in that very first year. But I think that’s sort of a natural slowing down that a business sees. At least I’ll see it that way.
Rob: Yeah. It’s hard to say without going out and really beating the bushes and trying to generate a bunch of leads and doing cold outbound, focusing on SEO or running ads, there’s a natural threshold that always sets in. It seems to me like you’ve always been cool with that plateau because that plateau provides you with a full time income budget to build other apps which is really what you want to do. That’s your lifestyle choice.
Brian: Yeah, exactly.
Rob: They were working on OPS Calendar, your developers were, and you got your first paying customers in April and then you had to pull them off because you didn’t have the money, and then in July in 2017 you’re able to get them back to work on OPS Calendar, and then you get a little bit of traction right that latter half of 2017 but you never found product market fit with OPS Calendar. By February of 2018, you were still trying to push it forward, but some calamities happened. It sounds like there was a code base thing you want to talk us through what it was like dealing with that.
Brian: Throughout that year of 2017, it was trying to bring those first customers on and got a few handful of paying customers, but over the summer there whatever savings I had was gone from that period of Audience Ops. I’m not one of these people who just goes crazy on the credit card. Once I see a little bit of balance on there, I’m just too risk averse and debt averse to really go too heavy on that. I just pause and I don’t really spend until I have the cash in the bank account. I had to pause those developers over the summer which really, really hurt because I felt like it was at a critical time.
As we get into 2018, I went on a trip and we had been pushing off this upgrade from Vue one to Vue JS. At the time, I wasn’t a developer, I didn’t even really understand what Vue was. The developers chose that framework. That upgrade broke everything. I came home from that trip looking at a situation where I could pay those developers to go fix every single feature that I had just paid them for the last 18 months to build. Essentially, spend all that money and all that time again to rebuild the app, which was not going to happen.
It was also we’re having a hard time converting these customers, even a lot of the early prepaid customers didn’t end up continuing on as full customers. That said to me you know what, this thing isn’t really right. Because we have a process feature in OPS Calendar, and people were using that side of it and they were not touching the social media calendar stuff. That was also a signal to me that really the product that I deep down wanted to build was more of a process oriented tool.
Here I am in early 2018, probably going to “pivot” the product, if you will, to something else. Probably a new name and everything. I’m having a problem with these developers, but at that point I just decided to just stop everything. Just pause all work on OPS Calendar, take a month and figure out what I’m going to do. My conclusion was that I’m done with being limited by not being able to build apps myself. As a designer and front-end developer and product person, I’ve always felt, and this really brought it to a head was this experience with OPS Calendar, I’ve always felt this frustration that I can’t move fast enough because I’m always waiting for the developers to finish a feature. Sometimes I can’t move at all because I don’t have the cash to pay developers.
Let me bypass that by investing my time in learning back in development. I learned Ruby on Rails. I basically decided all of 2018, I’m going to use all my full time hours to make myself a full stack developer. I know I won’t be a very good one, but at least I’ll be able to take any idea and build it into a product and bring it to market, and that’s essentially what I do.
Rob: You were just about 18 months into OPS Calendar and I’m going to guess tens of thousands of dollars paying developers. You put on maintenance mode. You effectively shut it down. What was that decision like? How hard was it for you?
Brian: I think it was somewhere around $30,000 or $40,000 that I put into over that period of time. It sort of sucked, but it was also I don’t really have any other option here. I’m not going to just keep spending on something that’s clearly not working. I knew that the tech underneath the app, they technically built the features that I designed and speckled, but there were underlying architectural issues that I could just feel as a user.
That was another reason moving to let me just try to build it myself because at least I could design the thing from the inside out the way that I feel like it should be built. It was hard, but it was also I’m moving on. At that point I was also really excited about this idea for what the next version is which became ProcessKit, which is what I’m working on today.
Rob: I’m curious, deciding to learn to code from scratch, you’ll often hear folks send questions in to this podcast and say, “Should I learn to code if I’m going to watch a SaaS app?” The answer’s always it depends. Do you think that’s something you’re interested in? I would at the minimum learn to code well enough to know if the developers are trying to pull one over on you so you have a concept, you can talk to them. I don’t write production code anymore myself, but I wrote code professionally for 10 years.
I can still have architectural conversations. When Derrick and I were building Drip, I could go pretty deep on the tech stuff. It’s an asset to have for sure. But I’m curious, instead of learning to code, why not launch another productized service? Because you seem to be good at them, they seem to work out for you. Audience Ops is obviously successful and profitable. Why continue to seek after something that is showing you so much resistance in essence, which is a true software base SaaS app?
Brian: Number one, I’ve always been interested in software. I’m not new to software today. I’ve been working on it in different forms for many years. That has always been my number one interest in terms of what I want to create on the web. I’ve been building on the web for over a decade. That’s really always been where I’ve been heading with this. Even since I started Audience Ops, yeah I worked very hard on building it and building the team and the processes, the systems and everything. It’s always been with the end goal in mind of removing myself so that I can fund my time to work on software.
Like you said, the scalability aspect. Yes, I believe a service company can run without you and be profitable without you in the day to day like it is for me, but it’s clearly not as scalable as a SaaS that has hit product market fit and has that growth. Just in terms of the value of an asset and all that.
Also, I just wanted to go back to what you’re saying about the decision to learn to code or not, I agree with you. In many cases, it may not be the smartest choice, or maybe you should just learn a very light understanding of it so that you can communicate with developers. I think there are few caveats that made my situation a little bit unique from where most people are that I come across at least.
Number one, I’m not starting from scratch. I had been a frontend HTML, CSS, little PHP, little JavaScript work. But professional level frontend stuff for years. Building websites, doing a lot of work with advanced WordPress stuff, working on major websites for agencies and things like that. I was not completely new to basic coding and programming. I just never really learned a back end stack like Ruby on Rails, and working with databases and things like that.
There was that. That gave me a head start. And then the other thing is that I had the time. I really have full time hours to throw at this. If I didn’t have that, if I was doing this nights and weekends, I don’t think it would be possible to make as much progress as I did over the last now almost two years. I don’t think I would have been able to really make a lot of progress with it if I couldn’t work on it full time every day.
Rob: Right. You had a lot of time to focus and it was something that as you said, you already had a basis for.
Brian: And I had a lot of help too. A lot of my close friends are software developers, Rails developers, I had of people that I could turn to for support and they’ve been super helpful.
Rob: Totally. That’s the thing. You’re in the developer community already even if you’re more of a frontend developer/designer. It’s like you live in that world and it’s not such a far stretch to be like, okay, I want to go one layer deeper and see how it interacts with the service side code. Cool.
That takes us to spring of 2018. Audience Ops is back, profitable, and you were able to free up your time and spent most of 2018, as you said, learning Rails. What was the most surprising part of that experience of taking that six or eight months and digging into service side code and learning to build your own software top to bottom for the first time?
Brian: In the early months, I knew that it would be a very big effort and that it would take me a long time to get decent at it. It was a little bit frustrating going through tutorials and courses and then still not quite being able to build anything real yet, but then just hacking away at it a little bit more for another month or two and then I can build something very simple.
Over the course of 2018, I went through a bunch of courses, I worked with a coach which was very helpful, and then I did some throwaway practice project apps. By the end of that, I was able to put together a simple app called Sunrise KPI. That was the first real app that I’d built.
I should mention that the idea for ProcessKit I had throughout 2018. I bought the domain. I spent some money on that domain. I was putting sketch ideas for what ProcessKit would be, but I also knew that I wasn’t capable of building it yet. I had to get those skills up and it wasn’t until the end of 2018 I had felt confident in actually starting to build what is now ProcessKit.
Rob: Yeah. If someone’s listening to this and they are thinking about themselves learning to code, what would be a piece of advice, either a warning or just a hey, do this, this is what really worked for me, this is what fast tracked me.
Brian: Early on, I definitely wanted to stay away from the newest, trendiest, most complex frameworks, especially like the JavaScript frameworks and stuff. I’m sure there’s plenty of technical benefits to those, but I wanted boring, tried and true, non trendy stuff. It came down to a decision between Ruby on Rails or PHP in Laravel.
I went through a couple of weeks with PHP Laravel, some tutorials. I could follow along with those, but then I found I couldn’t take what I’d learned and go build something simple. I went through a one on one course on Rails. I did a month on PHP in Laravel and then a month on Rails. I found that at the end of the month on Rails, I was able to take that and build something simple. I continued to double down on Rails from there.
I went through a number of courses on that. Tip number one is to stick with something like Ruby on Rails, or PHP with Laravel. Something that has a huge developer community with tons of resources and educational stuff. That’s a big number one. Number two is to try and find mentors. I go to friends like I talked about. I paid a couple of people for paid mentorship for a while and I’ve learned to code in Rails developer communities, I go to that for some help as well. I frequently talked with friends about code questions. I hit up codementor.io quite a bit when I really get stuck.
Rob: Sounds cool. You mentioned ProcessKit which we haven’t really covered in this conversation. You want to tell folks what that is? Is it the next generation of OPS Calendar done in the way based on your learning from the first time?
Brian: At this point, the way that it’s positioned is that it’s really a projects tool. It kind of like a project management software, but it’s process driven. If your projects really follow the same script every time, they’re very repeatable and you’re doing a lot of the same stuff, whether you’re onboarding customers to a service or to a SaaS or something like that and you need your team to follow a certain process, that’s really where ProcessKit comes in. It’s different from the project management tools where you might run your tasks and projects in one of those tools, but you have your documentation, your SOPs over in a silo somewhere else. That’s where those kinds of operations tend to fall apart, the team just never really follows the SOPs.
ProcessKit sort of brings those together, and then also builds in automation steps. You can say if this then that, if it is is this type of project then assign these tasks to these people, calculate these due dates, and link up with Zapier and all that kind of fun stuff.
Rob: Cool. Where is that project in terms of launching? This is the part of the interview where I ask you questions I already know the answer to. What status is ProcessKit at right now?
Brian: It launched, it has customers. I’ve been doing the slow launch things over the past really throughout ‘19. I think I started on boarding the first customers around June, the very first ones. Today, we’re in November. I’ve been sending early access, invites pretty regularly since then. It was up on Product Hunt about two weeks ago and now it’s out there.
Rob: Is it everything you wanted and more to own a SaaS app? Is it just growing up into the right by itself? You make money while you sleep? I was going to say is it back to the same slug as OPS Calendar, but I don’t think it is. This time really is different. I get the feeling that there is more potential here. Is that pretty accurate?
Brian: First I heard your interview with Jane Portman this morning and I completely relate to that, probably so many other early SaaS founders with the long slow SaaS ramp of death. It’s real.
It’s very slow and the revenue is nowhere new replacing the income that I get from Audience Ops. But yeah, it’s less than a year in, and it does have more customers now than OPS Calendar did. It resonates with people a lot more, the problem and the solution, and the positioning. At least with my audience, the people that I’m connected to. But it’s early on. It really just launched a couple of weeks ago. Now that the new website is up, I’m starting to kick into gear. That shift away from just going to the early access list to actually marketing this thing and getting new traffic and new leads and that sort of stuff.
Rob: Now the real work begins is what I like to say. Getting to launch is like 30% of the journey. That’s where folks who are listening, we could do Startups for the Rest of Us drinking game where like if you get to launch and you don’t have some type of launch list that you’ve been building, then you have a problem. That’s the first base or the first quarter of the journey. And then now you’re launched and now the real work begins. That’s where it’s like you probably don’t have product market fit yet.
Now, I’m going to spend the next six months figuring that out as I grow very slowly. Then, you do get to product market fit, now I need to find a sustainable source of leads when it’s relatively scalable. Then you spend the next 6-12 months figuring that out. That’s why it’s the long slow SaaS ramp. These things are in stages and it’s truly the Cinderella stories that don’t have these steps in this order. It’s always a grind.
Even the Cinderella stories, like I said, there are no Cinderella stories, but even the ones that we look at and say, “Oh my gosh, that grew so fast.” It was a complete grind behind the scenes. This is never easy.
I wish you the best of luck with ProcessKit, because it’s essentially a second iteration of a SaaS app. You’ve obviously fought very hard for multiple years to get this out. This is something you really believe in. You can tell that it’s not an opportunistic product. It’s like I’m going to ship dog food to people on the internet because I could make money. You’re building this because this is something you need and you believe in. I hope that you’re able to make it work.
I think longer term, if for some reason it doesn’t work out, would you build another SaaS app again or would you consider doing a productized service?
Brian: At this point, I am pretty committed personally to doing software whether that’s ProcessKit or another idea or several other ideas, I’m pretty focused primarily on ProcessKit right now. I would use the productized service model if it came to that. No, I should say that I’m actually still using the service model in many ways. Obviously there’s Audience Ops that continues to grow, but even in ProcessKit, now we’re launching a Done with You process service to help you and your team improve and audit your processes, get you set up on ProcessKit as a paid service. That’s sort of like a productized service built on the software, which I really love that model.
You asked about how is it. For me right now, in that slow grind on ProcessKit, I’ll be honest, I’m really loving it. I’m really loving doing everything from the design to the code and talking to customers every day because being able to talk to customers and then literally iterate on the feedback that I got on the feature that I could ship by the end of the week, that just feels so empowering. I know that it won’t be forever, but at this point, Audience Ops is back to growth and profitable in steady state and a really amazing, fantastic team that I have that space to breathe now. I’m not worried about having to cut off the development cycles because of cash flow or things being built in the wrong way or things like that.
Rob: Yeah. There’s definitely a luxury to being able to control that whole pipeline, the manufacturing pipeline. Like I said, I don’t write code anymore, but when I was getting started all the way through Drip, everything before that, I wrote at least some code. Even if it was just maintenance, even if it’s just tinkering here, it was just tweaking. Because finding developer to make a three line code change in PHP or Cold Fusion or classic ASP or .NET or any of those things, it’s a huge amount of work to find someone just to do that. If you know the basics of code, to then just learn, I didn’t know some of those languages but I picked up a book or I went on Stack Overflow, whatever and you Google it, and you’re like, “I’m going to make this change and see if it doesn’t break anything.” If it doesn’t, it’s like wow, I just saved myself like a week of recruiting someone just because you know how to do the basics.
It cuts both ways. I think then you can also get mired in it and then you’re not working on the things you should be and that’s where as we started Drip originally, Derrick said, “Hey, I want to build it on Rails.” I said, “Cool.” Originally I was going to learn Ruby but eventually I said, “You know what, I actually think I shouldn’t because I will get into the repo and start tweaking things. And I should be talking to customers, I should be building processes for this business, I should be doing all the other things that don’t involve the coding.” There’s a point where that makes sense. And if obviously for building a venture backed startup and you’re raising money, you probably shouldn’t be the one digging into the code. Maybe someone on your team is. But there’s a balance there.
But that’s not what you’re doing. You’re building something that you want to build, that you want to exist in the world, and you’re willing and able to take it slow and that gives you a luxury.
Brian: Taking it slow, I’m as impatient as they come with things. I constantly want to move fast and execute and ship something new every single week. But bigger picture, that what’s this podcast and MicroConf and everything is all about. It’s about embracing that slow model of taking your time and making sure that things are done right. I’m all about it.
Rob: That’s right. Ambitious founders who want to build interesting things, build sizable business but are not willing to sacrifice their lives, their health, their relationships, whatever it is, even in your case, it’s a lifestyle that you don’t want to sacrifice to do it and that’s what it’s about. It’s about retaining that control.
Brian: 100%.
Rob: Thanks so much for coming on the show, man. If folks want to keep up with you, and they like the podcast, they should search for Bootstrapped Web, podcast you release every week or two with Jordan Gall. I’m a listener, have been for years. If they want to keep up with you on Twitter, you are @casjam and of course processkit.com is where your SaaS app lives. Any other places folks might want to look out for you?
Brian: Audience Ops is still kicking. Great team over there. Yeah, you hit it. That’s it.
Rob: Sounds great. Thanks again, man.
Brian: Thanks. Thanks, Rob.
Rob: If you have any questions for Brian or myself after hearing this interview, I’d love it if you would tweet me @robwalling or send a question into questions.startupsfortherestofus.com and I would be glad to have Brian back on the show to answer questions you have about any of his experiences, or productized services, or anything else that you feel like he could lend some insight into. If you have an unrelated question for the show, you can leave me a voicemail at 888-801-9690. Or you can always email us questions.startupsfortherestofus.com. You can find us in all the podcasting marketplaces and directories, just search for Startups.
If you’re interested in the full transcript or to make a comment on an episode, just hit up startupsfortherestofus.com. This was episode 474. Our theme music is an excerpt from We’re Outta Control by MoOt, it’s used under Creative Commons. Thank you for listening, and I’ll see you next time.
Episode 473 | Managing Annual Subscriptions, Low-price vs. High, Being a Non-Developer Founder, and More Listener Questions with Laura Roeder
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Show Notes
In this episode of Startups For The Rest Of Us, Laura Roeder joins the podcast to answer a number of listener questions on topics including managing annual subscriptions, being a non-developer founder, and more.
Items mentioned in this episode:
Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host, Rob Walling. This is a show where we talk about building ambitious, yet sane startups. This week, I had a great time answering listener questions with Laura Roeder from MeetEdgar. We talked through questions about managing annual subscriptions, going low price versus high, being a non-developer founder, and we talked through more listener questions. This is Startups for the Rest of Us episode 473.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome in building, launching, and growing software products. Whether you’ve built your fifth startup, or you’re thinking about your first. I’m Rob and today with Laura Roeder, we’re going to share our experiences to help you avoid the mistakes we’ve made.
Welcome back to the show. This is the show where we focus on indie-funded and self-funded startups, folks who want to do interesting things, are ambitious, and want to build themselves a better life, but also want to build companies that grow. Starting a company is hard. Having this community of people who are going through the same thing that you are, having that sense of belonging, knowing (a) that it’s possible but (b) that there’s a place where we can all hang out and just get each other, and where you don’t go in and explain what you do and everyone looks at you funny, there’s a tremendous amount of value to that. That was a big reason why we started this podcast almost 10 years ago, back in 2010.
Startups for the Rest of Us has many episode formats. Sometimes, I just have conversations with folks, do interviews. Now and again, we do founder hot seats. But one of my favorite episode formats is listener questions. We’ve answered a tremendous number of listener questions over the years. We’ve had a lot of episodes on this. It’s just the gift that keeps on giving, because it’s a time for listeners to participate, and to hear what other folks are going through, and to hear the thought process of a couple of founders typically who’ve been there and have done some things, and it’s not that we’ve been through everything that they asked about, but you can at least hear that thought process of how we would approach it. And over the years, we’ve always receive positive feedback about this episode format.
Before we dive in, I want to let you know that at MicroConf, we are making an announcement next week. It is by far the biggest announcement that we will have made since we launched the event nine years ago. It is coincidental that the 20th MicroConf is going to be on April 20th of 2020, so the 20th during the 20s or whatever, but that’s not the announcement. I’ve obviously already mentioned that MicroConf Growth and Starter are in Minneapolis in late April of 2020, but if you’re not on the MicroConf list, I encourage you to go to microconf.com, enter your email, and we’ll loop you in as soon as we have the info. It really is pretty spectacular and you probably know me well enough by now to know that I’m not trying to inflate the importance of it.
Today I answer questions with founder Laura Roeder. If you don’t remember Laura, I interviewed her in episode 451. She runs MeetEdgar which is a social media management SaaS app and in 451, we talked about stellar growth, platform risk, layoffs, and powering through roadblocks. It was a really, really good interview and Laura knows her stuff. I have a ton of respect for her. Honestly, I always love getting on the mic and just chatting with her. Super fun. I had a fun interview at 451 and I had a great time talking to her today and hearing her insights and her take on some of your questions. Without further ado, let’s dive in.
Laura Roeder, thank you so much for coming back on the show.
Laura: I love the Startups for the Rest of Us. I cannot stay away.
Rob: Awesome. I am so stoked to have you on to answer some questions. You’ve actually submitted questions in the past, so it’s cool to have you on the other side of the ear bud, so to speak. We have some good questions today. As always, voicemails go to the top of the stack. I curated some questions that I think you should have some unique insight on. Let’s just roll right into the first voicemail which is about being a nontechnical founder and how to make good technical decisions.
Mack: Hi Rob, this is Mack from the UK. I’ve got a question, I’m looking for advice for a nontechnical founder. How can I avoid getting called out by poor decisions from the technical team or just not knowing about the consequences of some of the technical revisions that gets made to create their software? Any advice would be great. Thanks.
Rob: This is an interesting question, Laura. As a nontechnical SaaS founder yourself, I’m curious what your initial take is on it.
Laura: I would first like to take umbrage with the phrase non technical founder. I mean obviously, I know what he’s referring to. Nontechnical founder means that you are not a developer and I’m not a developer. But I always think it’s a little funny because I’m like, “I run a software company.” It doesn’t seem quite right to call me nontechnical, but this is a very real problem for all of us who are running software companies and are not developers because obviously, you are not intimately familiar with a really core part of what your company does.
I guess the first blanket advice for this is that, you really need to have a person in that CTO role who you trust 100%. I think this goes for any leadership role in your business, but it’s especially important in this case, because you’re not going to be able to provide so much oversight. Anyone can look at a customer service email and say, “Okay, that was not how we want to answer,” but you really can’t read code if you’re not a coder. I think that’s just step one is, make sure that you’re willing to put 100% faith in the person in that dev leadership role.
Rob: That’s what I was going to say as well. Even if you aren’t at the place where you can have a CTO. The fact that he used the phrase, “How do I not get called out,” does your team not trust you or do you feel like you have to make decisions that are out of your league? That’s an interesting turn of phrase. It implies that the team calls him out for making technical decisions, but are you making decisions you shouldn’t be since you’re not a developer? I would dig into that. I think having a CTO, or the senior dev, or somebody that really is making decisions in the best interest of the company, is a huge deal.
Laura: I think it also brings up that you shouldn’t try to pretend to be anything you’re not. If people are calling you out, does it mean that you’re pretending you know things that you don’t know or maybe making decisions that would be better for other people in the company to make? I think it’s just important to be unafraid to ask really stupid, really basic questions until you understand some of these core concepts related to writing code.
You can decide how much you feel you need to know. For me, I feel like I’ve been through this process recently big time with our finance team, understanding all the financials of the business. I just asked our finance person over and over and over again. Sometimes I’ll literally read a book. I read a finance book recently. I just wrote down questions for her in the margins and then I’m like, “I want you to read this book too and we’re going to have a call together. I’m going to ask you all of my questions about the book.”
I think that’s a great thing to do for technical questions as well. You need to be open with your team about what you know and don’t know and I think it’s important for you to work with the type of person that is very patient and very understanding in explaining things to you. Within reason, you don’t need to understand every detail. There are a lot of concepts that are probably unfamiliar to you that you do need to understand at least the basics of how “the sausage gets made.”
Rob: I like your example because as a founder, you don’t need to know every single thing about bookkeeping, accounting, and finance, but you should probably know enough to be able to ask the right questions. I feel the same way running a software company. I don’t think you should be able to code everything in a SaaS app, but maybe it’s worth going through a code where the code camps or maybe it’s worth on the side taking you to make classes.
It’s easier than ever to learn and have just a really basic level of coding knowledge such that, yes, you’ll never be able to make architectural decisions, you won’t make the senior level things, but you can at least relate to, “Oh, this is what code is. This is how it works. This is what it’s like to write a bug,” and spend four hours and not realizing that it’s the semicolon. That’s a lot of what it is. I think having that cursory knowledge and being able to then ask the right questions is what you’re touching on and that’s what I like about it.
Laura: Yes.
Rob: You don’t like the term non technical founder. If you’re a developer and you’re writing the code, then you’re like a developer founder, is it a non-developer founder, is there a term that you prefer rather than nontechnical?
Laura: I guess maybe just say founder and then when you’re explaining later your side of the business, because you also don’t call like you just a developer founder, but I’ve never heard anyone actually say that.
Rob: I was just making up a new term to try not to say technical and non, because typically it’s technical and nontechnical are the two terms people use. I was just trying to think of a different way to say that because you’re right, running a SaaS app, yes, you may not write code but you are more technical than most people we know just because by nature of being in it. It is a misnomer.
But if someone wanted to differentiate between Derek and I when we started Drip, he was literally in a code every day and I was literally not in the code every day. I don’t know how else you differentiate that or what phrase we could come up. I don’t feel nontechnical founder as pejorative. I don’t feel like it’s a negative. Does it have a stigma? Do you feel like it does?
Laura: I actually think it does have a little bit of a stigma because I’ve heard developers use it in that way before. We’re not as cool of a founder if you’re not technical.
Rob: No, I think that’s lame.
Laura: That is lame.
Rob: That sucks. I don’t use it that way but if it gets that connotation then yeah, we need to figure out another phrase for it. Cool. Thanks for the question. I hope that was helpful.
We’re going to bounce into our second question which is also a voicemail. It’s about a founder who’s launching a second SaaS app. They’re nearing launch and he’s concerned about potential lawsuits.
Thomas: Hello, this is Thomas from Austria. I listened to the show for a long time and wanted to tell you that it’s really great content. I love following along your journeys and also hear stories of other people in similar situations.
To my question, I founded a SaaS company three years ago. It provides an invoicing solution for small independent car repair shops. It’s doing pretty okay. I can live off it and it’s slowly growing, so I’m happy with that. Half a year ago, I founded another company with a partner and we are building a software to compare prices for car parts.
Now that we want to go to market with the software to the suppliers, the […] of us are trying to fight us pretty hard. I think we have to go to court several times. There is not really a legal problem with fetching the prices because we do it locally on the customer’s computer and they’re not going through our systems, but still they can make our lives very miserable if they pulled us to court all the time.
Now, I’m not really sure how to go along. My partner really wants to push through that and he’s sure that it will work out. I’m also pretty sure that it will work out in the end, but I’m not sure if I am the right person to spend my next one, two, three years fighting big companies. I wanted to hear your thoughts on that and maybe what you would do in this situation. Thank you.
Rob: Thomas also wrote in and he said that he wanted to clarify that he hasn’t spent any money on the price comparison project, and have a small private investor, but in essence, he has only invested his time so far. I should preface this with we’re not legal experts, we don’t give legal advice, obviously, but it’s more of, “Hey, if I were in your shoes, how would I think through this?” This is an interesting situation. I’m not sure it’s one I’ve heard before. What do you think about this Laura?
Laura: The way I think of it is just, there are pros and cons with every business, every business model, and it’s really smart to go into a business with your eyes wide open about those pros and cons. From what I understood from his message, this is a likely threat, not a certain threat. He suspects that there is going to be lawsuits. He has a good reason to believe that’s going to happen or it could not happen at all. It makes me think of with my business MeetEdgar, we are entirely dependent on the social networks. You can listen to my interview on this podcast on Startups for the Rest of Us. I talked about a big problem we had because of that, but all businesses have upsides and downsides.
For me, I know that I’m in a space where I’m totally dependent on these partners that I have no relationship with and that can do whatever they want. That’s a big downside to my business. The big upside is that I’m building on Facebook, Twitter, and Instagram. Obviously, very popular tools, so lots of users. I think that he just needs to know this going in and maybe it’s something that you budget for.
It’s good not to be scared of it. It’s good to go in and say, “Okay, I know that this will likely happen. Maybe we have some money set aside for it. Maybe we’ve already figured out who our lawyer is so they can jump right in and we won’t be surprised,” spending a few months just trying to find a good counsel.
To me it doesn’t sound like a deal breaker, because it might not even happen at all. Like you said, you have to know that that is a battle that you could be fighting and you have to know that that’s something that you want to sign up for.
Rob: I like the way you’re thinking about it. I think these unknowns, like if you’ve never received a cease and desist, or you’ve never been sued, it’s super scary. You don’t you don’t know what that entails. I got sued by a patent troll about probably five years ago, but it was literally a blanket. It was about a troll. Someone who sued 100 people at once for having online invoicing software is what it was. It was just this crazy, he sued everybody that does online invoicing because it was a ridiculous patent. I got to be honest, I was super scared the day I got the email.
Then I quickly realized I could talk to a lawyer and someone was just like, “Yeah, this just isn’t that big of a deal,” and we have these stigmas against things. Lawsuits can be a big deal. They can be expensive, but your point of it’s almost like try to demystify, or de-risk, or just get more familiar with what this might look like. Typically, if you were to launch something like this, you’re not going to get five lawsuits the next day from five suppliers. It’s probably going to be weeks, months, and then they’re going to grumble and they’re going to have to call you or send you an email, and then you might get a cease and desist.
It would be a long process and maybe like you said, you set aside money to either have a lawyer, whether it’s to go to court or whether it’s to try to negotiate settlements. There’s a lot of options here and I think this comes back to expertise. As a nonlawyer, you should know how to ask the right questions, but you’re not the expert in how they should all go down. There’s folks who can give you advice if you find a good counsel.
I think the biggest question for me is, is this a big idea? Is this a seven-figure idea or an eight-figure idea that’s worth going through all of this for it or is it something that’s going to generate $5000 a month? In which case personally, it doesn’t sound like it would really be worth it. I mean maybe I would launch it and if it’s doing a couple thousand dollars a month or $5000 a month and you start getting cease and desist, well maybe that’s the point where you’re like, “Okay, I guess I’m going to pull the plug on this,” maybe that’s the best decision because it just doesn’t make enough money or maybe that is your defense of, it doesn’t make enough money. Go ahead and sue it. It’s not worth anything.
I think that’s really the question I’d be asking, not is it worth it, but is the idea big enough? Do you think the company can be big enough to make it worth fighting for?
Laura: I think it’s also worth a quick Google. I think he said he’s in Austria. He didn’t say if the business would also be dealing with Austrian suppliers. America is very litigious, most of Europe is not, you can’t just file random lawsuits about anything the way you can in America. If this were my business, you can figure out a pretty good amount just from educating yourself on the internet. Would the suppliers have any case? If they wouldn’t, that’s also just going to make the whole thing much more unlikely.
Rob: Yeah. Thanks for the question Thomas. I hope that was helpful. Depending on what happens, I’d love to hear an update on how you move forward.
Our next question is about pricing and whether to try to go for more customers with lower pricing or vice-versa. It’s from Winslow Moore and he says, “I’m a huge fan of your podcast and all you guys do. I found you guys at the end of last year when I was going through a bit of what I’m doing in my life and I’ve learned so much. I’ve wanted to reach out for a while, but haven’t because my current product under development isn’t SaaS, it’s just an app. A recipe book app to be precise.” I’m assuming it’s a mobile app.
“Development is nearing completion and I’m wanting to make a landing page to gain some interest. Before I do, I’d like to figure out some pricing scheme options and I’m hoping you can give some advice. Here are my main ideas. Number one, make the app free with ads,” he listed pros and cons, “Number two, make the app freemium with paying to unlock X recipe storage. The third is to make it cheap like $1, and the fourth is to make it a subscription like $1 a month or $5 a quarter. Again, I know this isn’t something you normally answer questions on, but if you feel adventurous, it would be appreciated.” What do you think?
Laura: I feel like I have some news that he’s not going to like to hear. I’m trying to let him down gently. This is one of the most crowded spaces you could possibly enter. There’s so much recipe content on the internet. So much of it is excellent and so much of it is free. None of the models that you outlined gave a compelling reason for someone to pay. You just said like a recipe app, maybe they’ll pay $1, maybe they’ll pay a subscription. I think you just need to rethink your starting assumptions or maybe there’s something you didn’t tell us, because there are reasons that people could pay for some recipe or cooking service.
I know a SaaS business that does meal plans for people. You put in all of your detailed dietary requirements and they spit out really specific meal plans, shopping lists, and there’s a whole app and a subscription around it. They have a business doing that because they’re meeting a specific need in the market that is related to recipes. There are businesses related to recipes and food, but just recipe app, I don’t think is really one of them.
Rob: I like the way you’re thinking about it because if you were to niche way down and, like you said, build custom meal plans, that’s something you can’t get for free, or it’s really hard to do at a good quality or vegan meal plans or Paleo meal plans. There are ways to think about it. I’m guessing everything I just named is already done to death. Even if he has, let’s say, he builds not just content and he builds an app that actually has functionality that people are interested in. A $1 a month, you need a thousand customers to make, and doesn’t Apple 30%, I think, so you’re really making $0.70 on that. You need a thousand customers to make $700 a month. That is a tough business.
Even with apps store distribution, you would really need to know apps store SEO. I mean you to rank in the top whatever, top five, four or whatever term that has enough volume to do it. This would be a pure search play in my opinion, because at $1 a month, even for lifetime value is $10, $20, $30, $40, you can’t run ads, you can’t hire sales, none of the standard models work. It’s purely a spray-and-pray and it’s, “I need to have enough free traffic,” so you need virality, or you need organic discovery through a search engine. Really, none of these pricing models are easy.
Laura: I’m going to go out and say they’re not viable. I think it’s polite to say that they’re not easy, but they’re really only viable if you have some way of getting that mass, which is possible. Maybe you’re like, “I’m going to raise a ton of funding and I’m going to be the number one recipe destination on the internet.” Someone has to be that. That’s not an impossible thing, but it’s going to take a ton of money to get there or you’re like. “I am the number one SEO ninja on the app store. No one can do apps store SEO better than me and I also probably have a bunch of money or some money to put behind it, so that’s how I’m going to get there.”
I just think you need to really look at how does mass work out to make this a viable business and what’s my strategy beyond just like, “Well, I hope a lot of people find my recipe app in the app store.”
Rob: And even if you’re building a SaaS app, let’s say, just in general, what’s the general rule? The lower your price point, the higher your churn, the harder it is to grow. This is not in every case, but it’s in 95% of cases. That’s why so many SaaS apps, the playbook is, you go out, you underprice yourself because you just don’t know any better or you don’t value what your built and over time everybody goes up market. It’s a very common playbook.
The reason is if those customers as you go up market tend to churn less, they tend to be more sophisticated, less support, there’s just a bunch of plusses with it, but you often can’t start out at those high price points because your product is not worth it at that point. It doesn’t provide the value and it takes you time to get product market fit with that audience. Then move it up market.
Laura: That’s all B2B stuff, also, everything you’re saying. We’re talking B2C, so I don’t think there’s really even a big market to go to for an app. There’s more expensive consumer services but, I’ve never heard of an expensive app. Maybe it’s a thing, people have done everything. Now I’m curious. Is there an app for consumers that cost $800 a month and is a lot more high-end looking than the other app? I don’t know.
Rob: I’ve never heard of one. I bought a $25 app the other day. It wasn’t a subscription, but it’s a teleprompter, that goes on my iPhone, that listens to my voice. It’s the only one that turns the microphone on and as I speak, it teleprompts automatically. To me that was worth $25, but really, am I a consumer? Because I bought it for business purposes. I bought it for these videos I’m recording. I’ve also bought $20 app a couple of years ago. It was before where you can pair an iPad as a second monitor to your Mac. It was software that did that. Again, there was only one or two of them and I did the best one. It wasn’t a subscription and I would’ve been less likely to pay a subscription for either those to be honest.
Laura: Yeah, those are really tough models, too, where they’re only making $20 one time.
Rob: Right. Thanks for your question, Winston. Sorry for the bad news, but I hope that was helpful. I’m curious, if you love recipes or somehow love that space, then dig in and figure out that maybe it’s not a $1 app, maybe it is a website that you acquire from someone to get a traffic source and you build just a web app into there. I mean, there are other options in the food and recipe space, that I’m sure there’s opportunity and I would say don’t get locked into trying to pick up pennies really is what $1 a month it’s like.
Laura: I didn’t actually say the name of the one I was talking about. It’s realplans.com if you want to check that out.
Rob: Awesome. Our next question is about recurring payments and it’s from Gavin Esplan. He says, “I’m in the planning stage of a small daycare management app. One of the main features will be setting up recurring payments between the daycare providers and their customers, who are parents or guardians of the kids. I also need recurring payments for the providers to pay me. I’m a professional web developer, but I’m not sure which system, like Stripe, would be best to accomplish this. I’m leaning toward Stripe, but it’s probably because it’s the one I’ve heard of most. I’m not sure what other good options would be out there. Do you guys have any recommendations?” What do you think, Laura?
Laura: Well, there’s an easy part and a hard part to his question. As far as him taking payments from customer, I say yeah, Stripe is great. We use it. We like it. Go for it. The other part where your customers take payments gets a lot trickier because your customers need to have something like Stripe or PayPal, but they need their own individual accounts and then are you helping then set that up? Then there’s your customer stuff that has to be complied with or do they already have their accounts? I just want to point out there’s a trickier question within the question.
Rob: Stripe Connect is for marketplaces. I think it’s for this instance. I’ve never used it, but I know folks who’ve set up market places and use it. This isn’t technically a market place, so that’s where I’m not sure if the terms of service would apply to him having 20 or 30 day cares using it and taking payments or if the Know Your Customer stuff would pass through to him. Do you have any interaction with Stripe Connect?
Laura: No, I’ve researched it a little bit for a different project and the hurdle that we came up with is that this similar model, they still have to have their own Stripe account which Stripe helps facilitate. We thought that might be confusing and challenging for this customer to set that up which I imagine daycare centers might have the same or they might have their own payment system already that they’re using.
Rob: Yes I would head to Stripe Connect and at least research it because that’s the one that I’ve heard the most about when you’re in this type of situation. Again, not saying it’s going to work but I think that’s where it starts. In my opinion, Stripe is number one in this game. They kill it. They make it easy and if you can make it work with them, great. To me, by my rules, if for some reason I couldn’t you Stripe, I would look at Braintree. I think they’re the number two in our space for doing this stuff.
Obviously, it doesn’t sound like he’s funded. I’m guessing he’s bootstrapped listening to this podcast. If you look at Gumroad, as an example, became a processor themselves. That is a possibility. There’s a lot of red tape and regulation. I’m guessing, one of the reasons I heard Gumroad raised their money was that they had to go to banks basically and have a bank say, “Okay, we’re cool with you being a processor.” If you’re some bootstrap person working at your garage, that’s unlikely to happen. It’s probably not an option for you now, but in the longer term hopefully, you don’t have to do that, but that would be a parachute option, I think. Thanks for the question, Gavin, hope that was helpful.
Our next question is from Ash Yadav, and he’s looking for thoughts on joining an early stage startup just after graduation. He said, “I just cover the podcast, I’m going through one episode at a time. They really informative and enjoyable. I recently graduated with a degree in EECS,” Electrical Engineering and Computer Science, I think, “then joined an early stage Internet of Things startup. I want to ask what are some tools, courses, workshops, et cetera, I can look into to get more comfortable with the industry lingo.
As I recently graduated, working in a two person team right now, there are times when I have to talk to clients or talk to people who are much more experienced than me and sometimes I feel left out. I don’t have industry project management experience, an MBA, or the entrepreneurial experience to be fluent in business lingo. For example, this might sound silly, but someone recently talked to me about beta sites and I had no clue what beta sites were. Luckily, I was able to figure it out while we chatted in made it out alive, but I fear I’ll be in a similar situation again.”
You almost certainly will. I remember my first job out of college and I didn’t understand anything. Thanks that’s a great question, Ash. Interested in your thoughts, Laura.
Laura: I think the first thing, Ash, is that someone asking questions is a huge sign of intelligence, not the opposite. Everyone knows that you’re young, everyone knows that you just graduated from college. When you ask those questions like, “What’s a beta site?” instead of pretending that you know and then maybe being way off base, it’s actually going to make you look much smarter, eager to learn, and capable than just pretending that you know stuff. Hopefully, most of the people around you feel the same way that I do. I don’t think you should be shy about asking questions. Even if it’s something that you feel is really basic, that you feel a bit embarrassed about.
We all we’re born knowing nothing. No one knew the term Internet of Things until the first time they heard it and then someone explain it to them. No one is born knowing any of those stuff. I think people should do this anytime in their career. We were talking about this earlier in the podcast about learning and asking questions, asking more questions. For me, the answer is less about courses and more of just having the attitude and the mindset that asking questions is a wonderful thing and that’s how you learn.
Rob: Yeah, when I graduate from college and had my first job, I thought I needed to know everything. I felt weird about asking questions and I thought it was a sign of weakness. I pretty quickly learned what fixed it for me is I worked with this one guy who is really smart and he was senior and he knew bunch stuff. In meetings, someone would say a concept and I remember being like, “Oh, I know what that is,” and he would say, “I don’t know what that is. Can you define out for the group?” and I was like, “Whoa.” Everybody respected him.
That showed me that it was okay to ask a question like that. It was such a good model for me and I think the thing to keep in mind is you’re going to ask a lot of questions up front, but it’s not going to be like that forever, because you’re just going to learn enough. First, you’re going to learn 20% and then 60% and then you’re going to get to the point where you’re 80 or 90% fluent in all the lingo. That may take three months, it may take six months, but at a certain point, you’re not going to ask as many questions.
You still want to ask questions, but you’re going to be seen as more of this mid-level or senior and you’ll get to the point where you don’t have to do it all the time. For me, if I was trying to learn about a new space, I don’t know much about IoT (Internet of Things), just what I’ve heard on Tech podcast, so if I got a job at one, I would probably be in a similar boat. I would dive deep in the IoT podcasts and some IoT audio books. For me, I do a lot of audio just because that’s my thing. For you, maybe it’s Kindle or maybe it’s paper or whatever I would use Google a lot. I will try to get the lingo from the podcast or the books in advance and then every time I heard something I didn’t understand I would Google it. You’ll be shocked, there’s only so many terms in any space.
In SaaS, it’s an app and there’s MRR and there’s LTV and it sounds like there is infinite, but if you listen to the show for probably 10 or 20 episodes, you’re going to hear 90% of the terms that we all use. If you’ve defined of those and committed them to memory, that’s great training for trying to get up to speed faster.
Laura: Yeah, I love that advice. I was thinking just the other day I actually Googled the term “test case.” It came up in my company flat, they’re talking about test cases and I was like, “You know, I’m assuming I know what that means, based on some context, but I’m actually not sure that I know what a test case is. I just Googled it and I read about it and I figured it out, right in front of a nontechnical founder thing.” This is a skill that you want to have throughout your career and like Rob said, luckily, it will get certainly easier and you’ll have to do less Googling as time goes on.
It’s something to embrace to make sure that you’re not making assumptions, make sure that you are on the same page which is why it can be good to ask things like, “Okay, this is this is what I mean when I say test case, is that what you mean,” because those types of miscommunications come up all the time.
Rob: That’s a really good point. Probably once a week, I Google an acronym. Oftentimes, it’s something someone posts on Twitter and it’s like a colloquialism that I just don’t know. I mean maybe a year ago it was TBH and I used TBH the other day. I was talking to my 13-year-old and in conversation out loud, I was like, “So TBH, blah, blah, blah.” He’s like, “What does that mean?” and I was like, “To be honest.” He’s like, “Oh my, you’re such a nerd.” But I find myself Googling this on what does this mean and then there’s like seven different definitions and you have to take it from context. Don’t feel like you’re in over your head, Ash. I think we all are. Just because someone has been doing this for a few years doesn’t mean that they know everything about it. Thanks for the question. I think it’s a good one.
Wrapping this up for the day, our final question is from Zee and it’s about managing subscriptions. He says, “Hello. Big fan. What recommendations do you have to manage subscriptions that come both via credit card and check? As the business is growing, I want to make sure I’m not missing out on things as people renew their subscriptions. For example, we make a credit card payments through Braintree.” I think it means they accept credit card payments through Braintree, but they also have people that pay via check annually and they handle stuff through PayPal.
To set the context, when I first read this, I thought he was saying, “We have a bunch of SaaS subscriptions, how do we keep track of those?” But he’s actually saying they accept payments in a bunch of different ways, some of which are annual. He says, “We then use QuickBooks for all the accounting. We want to be sure we don’t miss out on annual fees.” Laura, have you had to deal with this?
Laura: No, I haven’t.
Rob: Is it all credit card with EDGAR?
Laura: Yeah. I mean, we would just say, “No, thank you.” if someone wanted to buy with a check, but I know that in some industries, you can’t do that.
Rob: Yeah we did this with Drip. Let me think. After we get acquired by Leadpages, we were using Stripe, they were using Braintree. At a certain point, we started accepting PayPal and they were doing these larger annual contract values. You get you get a 12-month subscription that is $20,000 and really that’s an invoice check situation. Frankly, you don’t want to pay the $600 processing fee, the 3%, but also the companies, bigger companies as you said that’s the way it works
The way we did it, like the very first one, is it literally went into an Excel spreadsheet or maybe it was a Google Docs that we all had access to and we’re like, Okay, note to self, calendar reminder,” and it goes into a Google Doc. In the next month, we need to build some type of system. Then we just went into our existing billing code, and we tweak some things to say, “Oh, this is a check and so and so needs to be reminded.” It sends off an email to this AR (accounts receivable) at this certain thing. We hacked it together. That took one day or two days of development work, but in the moment we were able to accept the check.
We knew there was a calendar reminder in case everything went haywire. We went back and it was like this just in time MVP implementation of something. I’ve been gone from Drip for two years now. I’m guessing by now, hopefully they built even a better system. I think there are a bunch of ways to do this and that they’re trying to build a gold-plated version from V1 is not necessarily the best way to do it. If you only have one or two customers paying you that way, you just don’t need that much infrastructure.
Laura: Yeah, I don’t have anything on this one.
Rob: All right. Well Laura, thanks again for coming back on the show. It’s so good to chat with you. Folks who want to keep up with you, you are @lkr on Twitter, that’s a great three-letter Twitter handle, I’m so jealous. If folks want to know what you’re up to with Edgar, they can head to meetedgar.com. Anything else you’d like folks to check out?
Laura: I would just like to say that people used to be a lot more impressed by my Twitter handle, I feel like you can tell that Twitter’s on its way out because I used to get a much bigger reaction. You threw in a little comment which was very polite of you, but I missed out on having a cool Instagram handle. My Instagram is @laurakroeder, I can’t even get @lauraroeder, I had to throw my middle initial in there. I’m just like feeling a little old that I missed the Instagram thing and no one cares about my Twitter handle anymore. That’s my closing comment for the show.
Rob: That’s amazing. Thank you so much. I guess I should go register an Instagram handle, is what you’re saying. That’s how old I am.
Laura: Yeah. Get on that.
Rob: Thanks again, Laura. I hope you enjoyed today’s episode. Next week on the show, Mr. Brian Castle from Bootstrapped Web and Process Kit is coming on to talk about just the brutal year he had in 2016 and 2017, overcoming a 40% decline in MRR, and we walk through his trials and tribulations, dig into frankly some struggles, some victories and failures, and it’s a good interview. Also I hope you’ve been checking out TinySeed Tales on Thursday mornings. That season wraps up here in the next week or so.
I would love to hear your feedback or input on that. You can email me directly questions@startupsfortherestofus.com, you can Twitter DM me, or if you have great things to say, obviously, just go into Twitter and let me know. I appreciate it. Should we do it again? I’ve started working on season two doing some interviews, but if you like it, if you will listen, if it’s a good fit for you, please let me know. If it’s not, that’s cool, too.
It was definitely an experiment. As I’ve said when we announced that this is by far the most time and money I’ve ever invested into an audio project. It’s TinySeed tales, because TinySeed was able to make that happen. If it’s worth it and it’s providing value, then we’ll keep doing it. If not, we always have more good ideas we can implement, so I can obviously but my focus elsewhere.
You heard a bunch of questions answered today. If you have a question for the show, you can leave us a voicemail at 888-801-9690 or you can record an MP3 and WAV, an Ogg Vorbis, an AIFF, send us a Dropbox or a GDrive link to questions@startupsfortherestofus.com.
I tweeted something out a couple weeks ago and I said if I were starting a company today, these are the tools that I would use. I just listed it, it was a five-minute tweet tops. I just listed a bunch of things and look through them, made comments and spit it out. It’s like one of the most popular tweets I’ve ever done. These things are both fine and infuriating, where you spend 20 minutes trying to craft something and like six people care about it and then you do something like this that is just off-the-cuff-flippant and it gets all these traction. I think it has 150 retweets or something at this point.
The funny thing is just the opinions about Dropbox versus GDrive versus Box. It was like, “Why not that? “ It’s personal preference. There’s feature parity. These things are not so different from one another, it’s really a personal preference, unless there’s some individual, sneaky feature somewhere that somebody has that you really need. For the most part, these things are all equivalent, but I think a lot of preference comes into it as well as pricing and stuff.
Anyway, I digress. Our theme music on the show is an excerpt from a song called We’re Outta Control by a band named MoOt, it’s used under Creative Commons. You can subscribe to this podcast, and you should, by searching for startups in any pod catcher you have. To be honest, new subscribers is a big ranking factor in iTunes. If you’re listening to this and you’re not subscribed, even if you just listen to it on the web or you somehow download it through an FTP script that you coded up years ago, it would be super cool if you would open iTunes and just hit the subscribe button because it does help us rank higher. It helps us get more reach and it helps us reach more people.
If you haven’t been to startupsfortherestofus.com in a while, we have full transcripts of all of our episodes within a week or two after they air, we […] the audio live is that, number one thing in transcripts just take time to get done. We get a decent number of helpful comments on the site too, so if you have a comment on an episode, you can obviously tweet to me @robwalling or you can come to the website itself startupsfortherestofus.com. Check out the fancy new design we put in place a couple of months ago. Leave a comment, drop us an email through the contact form. Thank you so much for listening today. I’ll see you next time.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome in building, launching, and growing software products. Whether you’ve built your fifth startup, or you’re thinking about your first. I’m Rob and today with Laura Roeder, we’re going to share our experiences to help you avoid the mistakes we’ve made.
Welcome back to the show. This is the show where we focus on indie-funded and self-funded startups, folks who want to do interesting things, are ambitious, and want to build themselves a better life, but also want to build companies that grow. Starting a company is hard. Having this community of people who are going through the same thing that you are, having that sense of belonging, knowing (a) that it’s possible but (b) that there’s a place where we can all hang out and just get each other, and where you don’t go in and explain what you do and everyone looks at you funny, there’s a tremendous amount of value to that. That was a big reason why we started this podcast almost 10 years ago, back in 2010.
Startups for the Rest of Us has many episode formats. Sometimes, I just have conversations with folks, do interviews. Now and again, we do founder hot seats. But one of my favorite episode formats is listener questions. We’ve answered a tremendous number of listener questions over the years. We’ve had a lot of episodes on this. It’s just the gift that keeps on giving, because it’s a time for listeners to participate, and to hear what other folks are going through, and to hear the thought process of a couple of founders typically who’ve been there and have done some things, and it’s not that we’ve been through everything that they asked about, but you can at least hear that thought process of how we would approach it. And over the years, we’ve always receive positive feedback about this episode format.
Before we dive in, I want to let you know that at MicroConf, we are making an announcement next week. It is by far the biggest announcement that we will have made since we launched the event nine years ago. It is coincidental that the 20th MicroConf is going to be on April 20th of 2020, so the 20th during the 20s or whatever, but that’s not the announcement. I’ve obviously already mentioned that MicroConf Growth and Starter are in Minneapolis in late April of 2020, but if you’re not on the MicroConf list, I encourage you to go to microconf.com, enter your email, and we’ll loop you in as soon as we have the info. It really is pretty spectacular and you probably know me well enough by now to know that I’m not trying to inflate the importance of it.
Today I answer questions with founder Laura Roeder. If you don’t remember Laura, I interviewed her in episode 451. She runs MeetEdgar which is a social media management SaaS app and in 451, we talked about stellar growth, platform risk, layoffs, and powering through roadblocks. It was a really, really good interview and Laura knows her stuff. I have a ton of respect for her. Honestly, I always love getting on the mic and just chatting with her. Super fun. I had a fun interview at 451 and I had a great time talking to her today and hearing her insights and her take on some of your questions. Without further ado, let’s dive in.
Laura Roeder, thank you so much for coming back on the show.
Laura: I love the Startups for the Rest of Us. I cannot stay away.
Rob: Awesome. I am so stoked to have you on to answer some questions. You’ve actually submitted questions in the past, so it’s cool to have you on the other side of the ear bud, so to speak. We have some good questions today. As always, voicemails go to the top of the stack. I curated some questions that I think you should have some unique insight on. Let’s just roll right into the first voicemail which is about being a nontechnical founder and how to make good technical decisions.
Mack: Hi Rob, this is Mack from the UK. I’ve got a question, I’m looking for advice for a nontechnical founder. How can I avoid getting called out by poor decisions from the technical team or just not knowing about the consequences of some of the technical revisions that gets made to create their software? Any advice would be great. Thanks.
Rob: This is an interesting question, Laura. As a nontechnical SaaS founder yourself, I’m curious what your initial take is on it.
Laura: I would first like to take umbrage with the phrase non technical founder. I mean obviously, I know what he’s referring to. Nontechnical founder means that you are not a developer and I’m not a developer. But I always think it’s a little funny because I’m like, “I run a software company.” It doesn’t seem quite right to call me nontechnical, but this is a very real problem for all of us who are running software companies and are not developers because obviously, you are not intimately familiar with a really core part of what your company does.
I guess the first blanket advice for this is that, you really need to have a person in that CTO role who you trust 100%. I think this goes for any leadership role in your business, but it’s especially important in this case, because you’re not going to be able to provide so much oversight. Anyone can look at a customer service email and say, “Okay, that was not how we want to answer,” but you really can’t read code if you’re not a coder. I think that’s just step one is, make sure that you’re willing to put 100% faith in the person in that dev leadership role.
Rob: That’s what I was going to say as well. Even if you aren’t at the place where you can have a CTO. The fact that he used the phrase, “How do I not get called out,” does your team not trust you or do you feel like you have to make decisions that are out of your league? That’s an interesting turn of phrase. It implies that the team calls him out for making technical decisions, but are you making decisions you shouldn’t be since you’re not a developer? I would dig into that. I think having a CTO, or the senior dev, or somebody that really is making decisions in the best interest of the company, is a huge deal.
Laura: I think it also brings up that you shouldn’t try to pretend to be anything you’re not. If people are calling you out, does it mean that you’re pretending you know things that you don’t know or maybe making decisions that would be better for other people in the company to make? I think it’s just important to be unafraid to ask really stupid, really basic questions until you understand some of these core concepts related to writing code.
You can decide how much you feel you need to know. For me, I feel like I’ve been through this process recently big time with our finance team, understanding all the financials of the business. I just asked our finance person over and over and over again. Sometimes I’ll literally read a book. I read a finance book recently. I just wrote down questions for her in the margins and then I’m like, “I want you to read this book too and we’re going to have a call together. I’m going to ask you all of my questions about the book.”
I think that’s a great thing to do for technical questions as well. You need to be open with your team about what you know and don’t know and I think it’s important for you to work with the type of person that is very patient and very understanding in explaining things to you. Within reason, you don’t need to understand every detail. There are a lot of concepts that are probably unfamiliar to you that you do need to understand at least the basics of how “the sausage gets made.”
Rob: I like your example because as a founder, you don’t need to know every single thing about bookkeeping, accounting, and finance, but you should probably know enough to be able to ask the right questions. I feel the same way running a software company. I don’t think you should be able to code everything in a SaaS app, but maybe it’s worth going through a code where the code camps or maybe it’s worth on the side taking you to make classes.
It’s easier than ever to learn and have just a really basic level of coding knowledge such that, yes, you’ll never be able to make architectural decisions, you won’t make the senior level things, but you can at least relate to, “Oh, this is what code is. This is how it works. This is what it’s like to write a bug,” and spend four hours and not realizing that it’s the semicolon. That’s a lot of what it is. I think having that cursory knowledge and being able to then ask the right questions is what you’re touching on and that’s what I like about it.
Laura: Yes.
Rob: You don’t like the term non technical founder. If you’re a developer and you’re writing the code, then you’re like a developer founder, is it a non-developer founder, is there a term that you prefer rather than nontechnical?
Laura: I guess maybe just say founder and then when you’re explaining later your side of the business, because you also don’t call like you just a developer founder, but I’ve never heard anyone actually say that.
Rob: I was just making up a new term to try not to say technical and non, because typically it’s technical and nontechnical are the two terms people use. I was just trying to think of a different way to say that because you’re right, running a SaaS app, yes, you may not write code but you are more technical than most people we know just because by nature of being in it. It is a misnomer.
But if someone wanted to differentiate between Derek and I when we started Drip, he was literally in a code every day and I was literally not in the code every day. I don’t know how else you differentiate that or what phrase we could come up. I don’t feel nontechnical founder as pejorative. I don’t feel like it’s a negative. Does it have a stigma? Do you feel like it does?
Laura: I actually think it does have a little bit of a stigma because I’ve heard developers use it in that way before. We’re not as cool of a founder if you’re not technical.
Rob: No, I think that’s lame.
Laura: That is lame.
Rob: That sucks. I don’t use it that way but if it gets that connotation then yeah, we need to figure out another phrase for it. Cool. Thanks for the question. I hope that was helpful.
We’re going to bounce into our second question which is also a voicemail. It’s about a founder who’s launching a second SaaS app. They’re nearing launch and he’s concerned about potential lawsuits.
Thomas: Hello, this is Thomas from Austria. I listened to the show for a long time and wanted to tell you that it’s really great content. I love following along your journeys and also hear stories of other people in similar situations.
To my question, I founded a SaaS company three years ago. It provides an invoicing solution for small independent car repair shops. It’s doing pretty okay. I can live off it and it’s slowly growing, so I’m happy with that. Half a year ago, I founded another company with a partner and we are building a software to compare prices for car parts.
Now that we want to go to market with the software to the suppliers, the […] of us are trying to fight us pretty hard. I think we have to go to court several times. There is not really a legal problem with fetching the prices because we do it locally on the customer’s computer and they’re not going through our systems, but still they can make our lives very miserable if they pulled us to court all the time.
Now, I’m not really sure how to go along. My partner really wants to push through that and he’s sure that it will work out. I’m also pretty sure that it will work out in the end, but I’m not sure if I am the right person to spend my next one, two, three years fighting big companies. I wanted to hear your thoughts on that and maybe what you would do in this situation. Thank you.
Rob: Thomas also wrote in and he said that he wanted to clarify that he hasn’t spent any money on the price comparison project, and have a small private investor, but in essence, he has only invested his time so far. I should preface this with we’re not legal experts, we don’t give legal advice, obviously, but it’s more of, “Hey, if I were in your shoes, how would I think through this?” This is an interesting situation. I’m not sure it’s one I’ve heard before. What do you think about this Laura?
Laura: The way I think of it is just, there are pros and cons with every business, every business model, and it’s really smart to go into a business with your eyes wide open about those pros and cons. From what I understood from his message, this is a likely threat, not a certain threat. He suspects that there is going to be lawsuits. He has a good reason to believe that’s going to happen or it could not happen at all. It makes me think of with my business MeetEdgar, we are entirely dependent on the social networks. You can listen to my interview on this podcast on Startups for the Rest of Us. I talked about a big problem we had because of that, but all businesses have upsides and downsides.
For me, I know that I’m in a space where I’m totally dependent on these partners that I have no relationship with and that can do whatever they want. That’s a big downside to my business. The big upside is that I’m building on Facebook, Twitter, and Instagram. Obviously, very popular tools, so lots of users. I think that he just needs to know this going in and maybe it’s something that you budget for.
It’s good not to be scared of it. It’s good to go in and say, “Okay, I know that this will likely happen. Maybe we have some money set aside for it. Maybe we’ve already figured out who our lawyer is so they can jump right in and we won’t be surprised,” spending a few months just trying to find a good counsel.
To me it doesn’t sound like a deal breaker, because it might not even happen at all. Like you said, you have to know that that is a battle that you could be fighting and you have to know that that’s something that you want to sign up for.
Rob: I like the way you’re thinking about it. I think these unknowns, like if you’ve never received a cease and desist, or you’ve never been sued, it’s super scary. You don’t you don’t know what that entails. I got sued by a patent troll about probably five years ago, but it was literally a blanket. It was about a troll. Someone who sued 100 people at once for having online invoicing software is what it was. It was just this crazy, he sued everybody that does online invoicing because it was a ridiculous patent. I got to be honest, I was super scared the day I got the email.
Then I quickly realized I could talk to a lawyer and someone was just like, “Yeah, this just isn’t that big of a deal,” and we have these stigmas against things. Lawsuits can be a big deal. They can be expensive, but your point of it’s almost like try to demystify, or de-risk, or just get more familiar with what this might look like. Typically, if you were to launch something like this, you’re not going to get five lawsuits the next day from five suppliers. It’s probably going to be weeks, months, and then they’re going to grumble and they’re going to have to call you or send you an email, and then you might get a cease and desist.
It would be a long process and maybe like you said, you set aside money to either have a lawyer, whether it’s to go to court or whether it’s to try to negotiate settlements. There’s a lot of options here and I think this comes back to expertise. As a nonlawyer, you should know how to ask the right questions, but you’re not the expert in how they should all go down. There’s folks who can give you advice if you find a good counsel.
I think the biggest question for me is, is this a big idea? Is this a seven-figure idea or an eight-figure idea that’s worth going through all of this for it or is it something that’s going to generate $5000 a month? In which case personally, it doesn’t sound like it would really be worth it. I mean maybe I would launch it and if it’s doing a couple thousand dollars a month or $5000 a month and you start getting cease and desist, well maybe that’s the point where you’re like, “Okay, I guess I’m going to pull the plug on this,” maybe that’s the best decision because it just doesn’t make enough money or maybe that is your defense of, it doesn’t make enough money. Go ahead and sue it. It’s not worth anything.
I think that’s really the question I’d be asking, not is it worth it, but is the idea big enough? Do you think the company can be big enough to make it worth fighting for?
Laura: I think it’s also worth a quick Google. I think he said he’s in Austria. He didn’t say if the business would also be dealing with Austrian suppliers. America is very litigious, most of Europe is not, you can’t just file random lawsuits about anything the way you can in America. If this were my business, you can figure out a pretty good amount just from educating yourself on the internet. Would the suppliers have any case? If they wouldn’t, that’s also just going to make the whole thing much more unlikely.
Rob: Yeah. Thanks for the question Thomas. I hope that was helpful. Depending on what happens, I’d love to hear an update on how you move forward.
Our next question is about pricing and whether to try to go for more customers with lower pricing or vice-versa. It’s from Winslow Moore and he says, “I’m a huge fan of your podcast and all you guys do. I found you guys at the end of last year when I was going through a bit of what I’m doing in my life and I’ve learned so much. I’ve wanted to reach out for a while, but haven’t because my current product under development isn’t SaaS, it’s just an app. A recipe book app to be precise.” I’m assuming it’s a mobile app.
“Development is nearing completion and I’m wanting to make a landing page to gain some interest. Before I do, I’d like to figure out some pricing scheme options and I’m hoping you can give some advice. Here are my main ideas. Number one, make the app free with ads,” he listed pros and cons, “Number two, make the app freemium with paying to unlock X recipe storage. The third is to make it cheap like $1, and the fourth is to make it a subscription like $1 a month or $5 a quarter. Again, I know this isn’t something you normally answer questions on, but if you feel adventurous, it would be appreciated.” What do you think?
Laura: I feel like I have some news that he’s not going to like to hear. I’m trying to let him down gently. This is one of the most crowded spaces you could possibly enter. There’s so much recipe content on the internet. So much of it is excellent and so much of it is free. None of the models that you outlined gave a compelling reason for someone to pay. You just said like a recipe app, maybe they’ll pay $1, maybe they’ll pay a subscription. I think you just need to rethink your starting assumptions or maybe there’s something you didn’t tell us, because there are reasons that people could pay for some recipe or cooking service.
I know a SaaS business that does meal plans for people. You put in all of your detailed dietary requirements and they spit out really specific meal plans, shopping lists, and there’s a whole app and a subscription around it. They have a business doing that because they’re meeting a specific need in the market that is related to recipes. There are businesses related to recipes and food, but just recipe app, I don’t think is really one of them.
Rob: I like the way you’re thinking about it because if you were to niche way down and, like you said, build custom meal plans, that’s something you can’t get for free, or it’s really hard to do at a good quality or vegan meal plans or Paleo meal plans. There are ways to think about it. I’m guessing everything I just named is already done to death. Even if he has, let’s say, he builds not just content and he builds an app that actually has functionality that people are interested in. A $1 a month, you need a thousand customers to make, and doesn’t Apple 30%, I think, so you’re really making $0.70 on that. You need a thousand customers to make $700 a month. That is a tough business.
Even with apps store distribution, you would really need to know apps store SEO. I mean you to rank in the top whatever, top five, four or whatever term that has enough volume to do it. This would be a pure search play in my opinion, because at $1 a month, even for lifetime value is $10, $20, $30, $40, you can’t run ads, you can’t hire sales, none of the standard models work. It’s purely a spray-and-pray and it’s, “I need to have enough free traffic,” so you need virality, or you need organic discovery through a search engine. Really, none of these pricing models are easy.
Laura: I’m going to go out and say they’re not viable. I think it’s polite to say that they’re not easy, but they’re really only viable if you have some way of getting that mass, which is possible. Maybe you’re like, “I’m going to raise a ton of funding and I’m going to be the number one recipe destination on the internet.” Someone has to be that. That’s not an impossible thing, but it’s going to take a ton of money to get there or you’re like. “I am the number one SEO ninja on the app store. No one can do apps store SEO better than me and I also probably have a bunch of money or some money to put behind it, so that’s how I’m going to get there.”
I just think you need to really look at how does mass work out to make this a viable business and what’s my strategy beyond just like, “Well, I hope a lot of people find my recipe app in the app store.”
Rob: And even if you’re building a SaaS app, let’s say, just in general, what’s the general rule? The lower your price point, the higher your churn, the harder it is to grow. This is not in every case, but it’s in 95% of cases. That’s why so many SaaS apps, the playbook is, you go out, you underprice yourself because you just don’t know any better or you don’t value what your built and over time everybody goes up market. It’s a very common playbook.
The reason is if those customers as you go up market tend to churn less, they tend to be more sophisticated, less support, there’s just a bunch of plusses with it, but you often can’t start out at those high price points because your product is not worth it at that point. It doesn’t provide the value and it takes you time to get product market fit with that audience. Then move it up market.
Laura: That’s all B2B stuff, also, everything you’re saying. We’re talking B2C, so I don’t think there’s really even a big market to go to for an app. There’s more expensive consumer services but, I’ve never heard of an expensive app. Maybe it’s a thing, people have done everything. Now I’m curious. Is there an app for consumers that cost $800 a month and is a lot more high-end looking than the other app? I don’t know.
Rob: I’ve never heard of one. I bought a $25 app the other day. It wasn’t a subscription, but it’s a teleprompter, that goes on my iPhone, that listens to my voice. It’s the only one that turns the microphone on and as I speak, it teleprompts automatically. To me that was worth $25, but really, am I a consumer? Because I bought it for business purposes. I bought it for these videos I’m recording. I’ve also bought $20 app a couple of years ago. It was before where you can pair an iPad as a second monitor to your Mac. It was software that did that. Again, there was only one or two of them and I did the best one. It wasn’t a subscription and I would’ve been less likely to pay a subscription for either those to be honest.
Laura: Yeah, those are really tough models, too, where they’re only making $20 one time.
Rob: Right. Thanks for your question, Winston. Sorry for the bad news, but I hope that was helpful. I’m curious, if you love recipes or somehow love that space, then dig in and figure out that maybe it’s not a $1 app, maybe it is a website that you acquire from someone to get a traffic source and you build just a web app into there. I mean, there are other options in the food and recipe space, that I’m sure there’s opportunity and I would say don’t get locked into trying to pick up pennies really is what $1 a month it’s like.
Laura: I didn’t actually say the name of the one I was talking about. It’s realplans.com if you want to check that out.
Rob: Awesome. Our next question is about recurring payments and it’s from Gavin Esplan. He says, “I’m in the planning stage of a small daycare management app. One of the main features will be setting up recurring payments between the daycare providers and their customers, who are parents or guardians of the kids. I also need recurring payments for the providers to pay me. I’m a professional web developer, but I’m not sure which system, like Stripe, would be best to accomplish this. I’m leaning toward Stripe, but it’s probably because it’s the one I’ve heard of most. I’m not sure what other good options would be out there. Do you guys have any recommendations?” What do you think, Laura?
Laura: Well, there’s an easy part and a hard part to his question. As far as him taking payments from customer, I say yeah, Stripe is great. We use it. We like it. Go for it. The other part where your customers take payments gets a lot trickier because your customers need to have something like Stripe or PayPal, but they need their own individual accounts and then are you helping then set that up? Then there’s your customer stuff that has to be complied with or do they already have their accounts? I just want to point out there’s a trickier question within the question.
Rob: Stripe Connect is for marketplaces. I think it’s for this instance. I’ve never used it, but I know folks who’ve set up market places and use it. This isn’t technically a market place, so that’s where I’m not sure if the terms of service would apply to him having 20 or 30 day cares using it and taking payments or if the Know Your Customer stuff would pass through to him. Do you have any interaction with Stripe Connect?
Laura: No, I’ve researched it a little bit for a different project and the hurdle that we came up with is that this similar model, they still have to have their own Stripe account which Stripe helps facilitate. We thought that might be confusing and challenging for this customer to set that up which I imagine daycare centers might have the same or they might have their own payment system already that they’re using.
Rob: Yes I would head to Stripe Connect and at least research it because that’s the one that I’ve heard the most about when you’re in this type of situation. Again, not saying it’s going to work but I think that’s where it starts. In my opinion, Stripe is number one in this game. They kill it. They make it easy and if you can make it work with them, great. To me, by my rules, if for some reason I couldn’t you Stripe, I would look at Braintree. I think they’re the number two in our space for doing this stuff.
Obviously, it doesn’t sound like he’s funded. I’m guessing he’s bootstrapped listening to this podcast. If you look at Gumroad, as an example, became a processor themselves. That is a possibility. There’s a lot of red tape and regulation. I’m guessing, one of the reasons I heard Gumroad raised their money was that they had to go to banks basically and have a bank say, “Okay, we’re cool with you being a processor.” If you’re some bootstrap person working at your garage, that’s unlikely to happen. It’s probably not an option for you now, but in the longer term hopefully, you don’t have to do that, but that would be a parachute option, I think. Thanks for the question, Gavin, hope that was helpful.
Our next question is from Ash Yadav, and he’s looking for thoughts on joining an early stage startup just after graduation. He said, “I just cover the podcast, I’m going through one episode at a time. They really informative and enjoyable. I recently graduated with a degree in EECS,” Electrical Engineering and Computer Science, I think, “then joined an early stage Internet of Things startup. I want to ask what are some tools, courses, workshops, et cetera, I can look into to get more comfortable with the industry lingo.
As I recently graduated, working in a two person team right now, there are times when I have to talk to clients or talk to people who are much more experienced than me and sometimes I feel left out. I don’t have industry project management experience, an MBA, or the entrepreneurial experience to be fluent in business lingo. For example, this might sound silly, but someone recently talked to me about beta sites and I had no clue what beta sites were. Luckily, I was able to figure it out while we chatted in made it out alive, but I fear I’ll be in a similar situation again.”
You almost certainly will. I remember my first job out of college and I didn’t understand anything. Thanks that’s a great question, Ash. Interested in your thoughts, Laura.
Laura: I think the first thing, Ash, is that someone asking questions is a huge sign of intelligence, not the opposite. Everyone knows that you’re young, everyone knows that you just graduated from college. When you ask those questions like, “What’s a beta site?” instead of pretending that you know and then maybe being way off base, it’s actually going to make you look much smarter, eager to learn, and capable than just pretending that you know stuff. Hopefully, most of the people around you feel the same way that I do. I don’t think you should be shy about asking questions. Even if it’s something that you feel is really basic, that you feel a bit embarrassed about.
We all we’re born knowing nothing. No one knew the term Internet of Things until the first time they heard it and then someone explain it to them. No one is born knowing any of those stuff. I think people should do this anytime in their career. We were talking about this earlier in the podcast about learning and asking questions, asking more questions. For me, the answer is less about courses and more of just having the attitude and the mindset that asking questions is a wonderful thing and that’s how you learn.
Rob: Yeah, when I graduate from college and had my first job, I thought I needed to know everything. I felt weird about asking questions and I thought it was a sign of weakness. I pretty quickly learned what fixed it for me is I worked with this one guy who is really smart and he was senior and he knew bunch stuff. In meetings, someone would say a concept and I remember being like, “Oh, I know what that is,” and he would say, “I don’t know what that is. Can you define out for the group?” and I was like, “Whoa.” Everybody respected him.
That showed me that it was okay to ask a question like that. It was such a good model for me and I think the thing to keep in mind is you’re going to ask a lot of questions up front, but it’s not going to be like that forever, because you’re just going to learn enough. First, you’re going to learn 20% and then 60% and then you’re going to get to the point where you’re 80 or 90% fluent in all the lingo. That may take three months, it may take six months, but at a certain point, you’re not going to ask as many questions.
You still want to ask questions, but you’re going to be seen as more of this mid-level or senior and you’ll get to the point where you don’t have to do it all the time. For me, if I was trying to learn about a new space, I don’t know much about IoT (Internet of Things), just what I’ve heard on Tech podcast, so if I got a job at one, I would probably be in a similar boat. I would dive deep in the IoT podcasts and some IoT audio books. For me, I do a lot of audio just because that’s my thing. For you, maybe it’s Kindle or maybe it’s paper or whatever I would use Google a lot. I will try to get the lingo from the podcast or the books in advance and then every time I heard something I didn’t understand I would Google it. You’ll be shocked, there’s only so many terms in any space.
In SaaS, it’s an app and there’s MRR and there’s LTV and it sounds like there is infinite, but if you listen to the show for probably 10 or 20 episodes, you’re going to hear 90% of the terms that we all use. If you’ve defined of those and committed them to memory, that’s great training for trying to get up to speed faster.
Laura: Yeah, I love that advice. I was thinking just the other day I actually Googled the term “test case.” It came up in my company flat, they’re talking about test cases and I was like, “You know, I’m assuming I know what that means, based on some context, but I’m actually not sure that I know what a test case is. I just Googled it and I read about it and I figured it out, right in front of a nontechnical founder thing.” This is a skill that you want to have throughout your career and like Rob said, luckily, it will get certainly easier and you’ll have to do less Googling as time goes on.
It’s something to embrace to make sure that you’re not making assumptions, make sure that you are on the same page which is why it can be good to ask things like, “Okay, this is this is what I mean when I say test case, is that what you mean,” because those types of miscommunications come up all the time.
Rob: That’s a really good point. Probably once a week, I Google an acronym. Oftentimes, it’s something someone posts on Twitter and it’s like a colloquialism that I just don’t know. I mean maybe a year ago it was TBH and I used TBH the other day. I was talking to my 13-year-old and in conversation out loud, I was like, “So TBH, blah, blah, blah.” He’s like, “What does that mean?” and I was like, “To be honest.” He’s like, “Oh my, you’re such a nerd.” But I find myself Googling this on what does this mean and then there’s like seven different definitions and you have to take it from context. Don’t feel like you’re in over your head, Ash. I think we all are. Just because someone has been doing this for a few years doesn’t mean that they know everything about it. Thanks for the question. I think it’s a good one.
Wrapping this up for the day, our final question is from Zee and it’s about managing subscriptions. He says, “Hello. Big fan. What recommendations do you have to manage subscriptions that come both via credit card and check? As the business is growing, I want to make sure I’m not missing out on things as people renew their subscriptions. For example, we make a credit card payments through Braintree.” I think it means they accept credit card payments through Braintree, but they also have people that pay via check annually and they handle stuff through PayPal.
To set the context, when I first read this, I thought he was saying, “We have a bunch of SaaS subscriptions, how do we keep track of those?” But he’s actually saying they accept payments in a bunch of different ways, some of which are annual. He says, “We then use QuickBooks for all the accounting. We want to be sure we don’t miss out on annual fees.” Laura, have you had to deal with this?
Laura: No, I haven’t.
Rob: Is it all credit card with EDGAR?
Laura: Yeah. I mean, we would just say, “No, thank you.” if someone wanted to buy with a check, but I know that in some industries, you can’t do that.
Rob: Yeah we did this with Drip. Let me think. After we get acquired by Leadpages, we were using Stripe, they were using Braintree. At a certain point, we started accepting PayPal and they were doing these larger annual contract values. You get you get a 12-month subscription that is $20,000 and really that’s an invoice check situation. Frankly, you don’t want to pay the $600 processing fee, the 3%, but also the companies, bigger companies as you said that’s the way it works
The way we did it, like the very first one, is it literally went into an Excel spreadsheet or maybe it was a Google Docs that we all had access to and we’re like, Okay, note to self, calendar reminder,” and it goes into a Google Doc. In the next month, we need to build some type of system. Then we just went into our existing billing code, and we tweak some things to say, “Oh, this is a check and so and so needs to be reminded.” It sends off an email to this AR (accounts receivable) at this certain thing. We hacked it together. That took one day or two days of development work, but in the moment we were able to accept the check.
We knew there was a calendar reminder in case everything went haywire. We went back and it was like this just in time MVP implementation of something. I’ve been gone from Drip for two years now. I’m guessing by now, hopefully they built even a better system. I think there are a bunch of ways to do this and that they’re trying to build a gold-plated version from V1 is not necessarily the best way to do it. If you only have one or two customers paying you that way, you just don’t need that much infrastructure.
Laura: Yeah, I don’t have anything on this one.
Rob: All right. Well Laura, thanks again for coming back on the show. It’s so good to chat with you. Folks who want to keep up with you, you are @lkr on Twitter, that’s a great three-letter Twitter handle, I’m so jealous. If folks want to know what you’re up to with Edgar, they can head to meetedgar.com. Anything else you’d like folks to check out?
Laura: I would just like to say that people used to be a lot more impressed by my Twitter handle, I feel like you can tell that Twitter’s on its way out because I used to get a much bigger reaction. You threw in a little comment which was very polite of you, but I missed out on having a cool Instagram handle. My Instagram is @laurakroeder, I can’t even get @lauraroeder, I had to throw my middle initial in there. I’m just like feeling a little old that I missed the Instagram thing and no one cares about my Twitter handle anymore. That’s my closing comment for the show.
Rob: That’s amazing. Thank you so much. I guess I should go register an Instagram handle, is what you’re saying. That’s how old I am.
Laura: Yeah. Get on that.
Rob: Thanks again, Laura. I hope you enjoyed today’s episode. Next week on the show, Mr. Brian Castle from Bootstrapped Web and Process Kit is coming on to talk about just the brutal year he had in 2016 and 2017, overcoming a 40% decline in MRR, and we walk through his trials and tribulations, dig into frankly some struggles, some victories and failures, and it’s a good interview. Also I hope you’ve been checking out TinySeed Tales on Thursday mornings. That season wraps up here in the next week or so.
I would love to hear your feedback or input on that. You can email me directly questions@startupsfortherestofus.com, you can Twitter DM me, or if you have great things to say, obviously, just go into Twitter and let me know. I appreciate it. Should we do it again? I’ve started working on season two doing some interviews, but if you like it, if you will listen, if it’s a good fit for you, please let me know. If it’s not, that’s cool, too.
It was definitely an experiment. As I’ve said when we announced that this is by far the most time and money I’ve ever invested into an audio project. It’s TinySeed tales, because TinySeed was able to make that happen. If it’s worth it and it’s providing value, then we’ll keep doing it. If not, we always have more good ideas we can implement, so I can obviously but my focus elsewhere.
You heard a bunch of questions answered today. If you have a question for the show, you can leave us a voicemail at 888-801-9690 or you can record an MP3 and WAV, an Ogg Vorbis, an AIFF, send us a Dropbox or a GDrive link to questions@startupsfortherestofus.com.
I tweeted something out a couple weeks ago and I said if I were starting a company today, these are the tools that I would use. I just listed it, it was a five-minute tweet tops. I just listed a bunch of things and look through them, made comments and spit it out. It’s like one of the most popular tweets I’ve ever done. These things are both fine and infuriating, where you spend 20 minutes trying to craft something and like six people care about it and then you do something like this that is just off-the-cuff-flippant and it gets all these traction. I think it has 150 retweets or something at this point.
The funny thing is just the opinions about Dropbox versus GDrive versus Box. It was like, “Why not that? “ It’s personal preference. There’s feature parity. These things are not so different from one another, it’s really a personal preference, unless there’s some individual, sneaky feature somewhere that somebody has that you really need. For the most part, these things are all equivalent, but I think a lot of preference comes into it as well as pricing and stuff.
Anyway, I digress. Our theme music on the show is an excerpt from a song called We’re Outta Control by a band named MoOt, it’s used under Creative Commons. You can subscribe to this podcast, and you should, by searching for startups in any pod catcher you have. To be honest, new subscribers is a big ranking factor in iTunes. If you’re listening to this and you’re not subscribed, even if you just listen to it on the web or you somehow download it through an FTP script that you coded up years ago, it would be super cool if you would open iTunes and just hit the subscribe button because it does help us rank higher. It helps us get more reach and it helps us reach more people.
If you haven’t been to startupsfortherestofus.com in a while, we have full transcripts of all of our episodes within a week or two after they air, we […] the audio live is that, number one thing in transcripts just take time to get done. We get a decent number of helpful comments on the site too, so if you have a comment on an episode, you can obviously tweet to me @robwalling or you can come to the website itself startupsfortherestofus.com. Check out the fancy new design we put in place a couple of months ago. Leave a comment, drop us an email through the contact form. Thank you so much for listening today. I’ll see you next time.
Episode 472 | From Amazing Launch to Near Bankruptcy to Profitability with Shai Schechter
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In this episode of Startups For The Rest Of Us, Rob talks with Shai Schechter of RightMessage, about his amazing launch and then finding himself near bankruptcy and how he was able to right the ship.
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Episode 471 | Fighting to Gain Traction in a Crowded Space with Jane Portman of Userlist
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In this episode of Startups For The Rest Of Us, Rob talks with Jane Portman of Userlist. They discuss the struggles of growing slowly, gaining traction in the crowded space, and some of the lessons learned from her first SaaS app.
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Rob: In this week’s episode of Startups For The Rest of Us, I talk with Jane Portman of Userlist, about their fight to gain traction in a crowded space. This is Startups For The Rest of Us episode 471.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing startups, whether you’ve built your fifth start up or you’re thinking about your first. I’m Rob and today with Jane Portman, we’re here to share our experiences to help you avoid the mistakes we’ve made.
Welcome to this week’s episode. I’m your host, Rob Walling. Each week on the show. We cover topics relating to building and growing ambitious startups that we grow, because we want to improve our lives. We want to improve the lives of those around us, but we’re not willing to sacrifice ourselves, our lives, our relationships, our health to grow these companies. We believe in relentless execution with a long-term mindset. We think in terms of years, not months. As such, we don’t burn ourselves out by working crazy hours, sacrificing our health, or relationships.
Over the past 470 episodes, we’ve espoused things like freedom, purpose, and relationships. Freedom is the freedom to work on what you want, when you want, without a boss breathing down your neck. The freedom to go on your kids baseball game on a Thursday afternoon without asking anyone’s permission. Purpose, the ability to work on something that fascinates you and drives you everyday to make it better. The purpose of building something that tens and thousands of people are getting value out of and it makes you feel great. Relationships, deep and meaningful relationships with your family, your significant other, your kids, your friends.That’s what Startups for the Rest of Us is all about. That’s the lens through which we view startups.
Today, I’ve invited Jane Portman on the show. Have known Jane for several years. She spoke at MicroConf Europe back in 2014. We’re going to talk about the app userlist.com that she co-founded with her co-founder Benedikt Deicke. They started working on Userlist about two years ago. They did a bunch of customer interviews. Then, almost a year later, they sold pre-orders. That was about one year ago. Really, it was a little bit less than a year ago when they started onboarding people and turned on billing towards the end of 2018.
Userlist, which used to be userlist.io, but they just recently got the .com, so now it’s userlist.com is customer life cycle email, perfect for your SaaS business. It’s event-based email, behavior tracking, lifecycle automation, segmentation, they have broadcast, and that kind of stuff. You can imagine competitors of Userlist might be something like an Intercom, customer.io and maybe even a tool like, Vero. To be honest, I’m so much less clear on the whole email marketing space. Know that I’m not in it day-to-day. But, at one point Vero was in this stuff as well.
Both Benedikt and Jane have been to many MicroConfs. I’ve had dinner with them multiple times. They are just fixtures of the community and good people who are working hard, essentially Bootstrap SaaS app. It’s always fun to have conversations with folks who are doing it. Benedikt is a developer and Jane is a really solid UX/UI designer. They make a good team, as you can tell by the design and from what I’ve heard the reviews of Userlist.
In today’s episode, we talk about the struggles of growing slowly and trying to find traction in a crowded space, because there is a lot of competition. We even walk through some lessons learned, that Jane learned from her first SaaS app that she founded. That one came as a surprise to me. I remembered the app, but I just hadn’t realized what had happened to it. In the middle of the interview she said, “Hey, I have a bunch of interesting takeaways from that,” and we run through those towards the end. Hope you enjoy this conversation with Jane Portman.
Jane Portaman, thank you so much for coming on the show today.
Jane: Thank you Rob. I’m super, super thrilled to share a story here.
Rob: It’s good to have you on. You and I have known each other for many years actually. You spoke at MicroConf Europe back in 2014. I believe? We’ve met at many a MicroConf.
Jane: Absolutely. Thanks for putting that amazing community together.
Rob: For sure. Congratulations on userlist.com. Still on the back of my mind, I think of you as userlist.io because you just have them for two years. I think just recently, you dropped a couple thousand bucks on the .com.
Jane: Quite a few, yeah. We’re absolutely excited about this. We had doubts until the very last moment. But when we did buy it, and when we got out to the community with the news, then it was an instant hit. We’re like, “Yes. This is so great.”
Rob: That’s what I was going to ask. As a bootstrapper, I think Benedikt said you spent $2000 or $3000 on the domain name. He mentioned it on his podcast. Obviously, that’s an investment. You said you have doubts right up until the end. Where you’re just questioning whether or not it would be worth it, whether or not you should do it?
Jane: We actually spent, $4000. It’s definitely a lot for a bootstrapper budget. We have been on the negotiation curve for a year-and-a-half. Basically, ever since our business started. It felt the right moment that it was available enough for us. We understood that Userlist really has good traction now. It was also a good enough point for them not to understand that we’re super, super successful because otherwise, we would probably go back up.
We started at negotiating at $20,000 and then met at $4000. We’ve been having doubts, but we have never looked back ever since. That’s been such an emotional uplift for the whole company.
Rob: Yeah, that’s good. That’s nice to have those hard decisions. That once you make them, you know you’re either going to feel terrible and be dragging them along and second guess them, or you’re going to feel amazing, move on, and know that it was the right call. It’s so hard to know until you send that wire or until you do the 301 redirect and how your domain is all up. I’m super stoked to hear that it was the right call for you guys.
Jane: Thank you.
Rob: You’ve been working on Userlist with your co-founder Benedikt and your co-founder Claire for two years now. As you and I talked a bit offline, it’s been a long journey to get to the point where you are today. You started doing customer interviews about two years ago. Then another year later, you did some presales. Then it was just about a year ago that you started onboarding people.
I know that there’s a lot of talk in the MicroConf community about Userlist. I believe they were even cemented from the stage of MicroConf Europe for folks who are using Userlist. I’ve heard from you and Benedikt that it’s been slow growth. It has been perhaps a little discouraging that it’s taking this long. Can you talk me through how that felt?
Jane: Absolutely. There are a lot of facets to that. First hand is, our naivety in the beginning. Our initial plan was to get to market and $5000 MRR in six months. Primary reason for that was that we did the software product together with Benedikt before. We got it out in a few weeks because it was smaller. This time, we figured, we’ll have a more complex product, but let’s go full throttle in this. It took way longer than that.
We’ve done a lot of administrative stuff in the first year. We didn’t even do much product development because of that, because email […] so sensitive. We wanted to get properly set up with a lot of things like incorporation, all kinds of legal documents, agreements, everything like that, we had in place before even onboarding the first customer.
That feels great because we don’t have to deal with that now. But whilst we were done building the actual MVP, the second part of the hurdle happened. It’s an intentional model that we decided to be a critical business tool for people as opposed to a Vitamin type of product. That implies lower churn and much better retention, but that also implies problematic onboarding. It’s much harder to help people onboard into critical business tool, as supposed to some productivity stuff.
Therefore our users, our customers, they do strongly depend not only on the state of our product, and the complexity. But also, because our product is super easy inside. The integration might seem intimidating, but it’s not really, and inside is super simple. What mostly depends on is this stage in their business. We have plenty of early-stage founders who are planning their launch in a few months and it’s never the perfect day to tackle customer messaging. That’s what we have to deal with. I think we still yet to solve that inflection point moment and how to stimulate that in our customer’s mind. We’ve been trying our best to inspire them with learning materials, with podcast channels, and everything else. It’s still very much learning in progress.
Rob: Yeah. You mentioned that it’s hard to get people to switch, or to come onboard because it’s such an aspirin. You’ve talked about the Vitamin aspirin. That caught me a little bit there. That’s what I found, too. When I’ve had apps that we’re Vitamins, it was easier to get people to try them out, but the churn was higher. Frankly, it can cut both ways.
It’s nice when people will just try it on a whim. It sucks when they cancel, but it is nice to be able to get casual users. Building the aspirin type product is exactly what you’re talking about, where it is a lot harder to get folks to sign up, commit, and move over. And there’s switching cost, even if there isn’t true switching cost. There’s switching cost in their head and there’s set up cost. There’s all of that almost mental baggage that I think people have resistance to moving over. How have you been attacking that?
Jane: Like I’ve said, we’ve been trying to inspire folks. We do our best to follow-up with the potential leads in the most polite but persistent way. We don’t have our secret sauce yet. It really helps that our brand has grown over the last years, especially. We have gotten some nice publicity. I think that a nice public image also makes us more attractive of a purchase, and that contributes to that excitement, that founders generally need to get started with this. It’s just a matter of technically helping them onboard when they need technical assistant, but that’s not a huge burden at all.
Rob: It’s an issue that probably any email tool, that’s worth its weight is facing. Is that, most people who are going to use their tool are already using something else in place of it. They are either using a tool like Mailchimp, or Drip, or customer.io, or they have built it themselves in-house. They already have Rails code with a Liquid template that they pull at the database and then they send these life cycle emails. I introed it at the top of the show, but just to remind folks, it’s customer life cycle email designed for SaaS businesses. It’s behavior-based, event-based life cycle automation, segmentation and that kind of stuff.
The switching cost for that is, there’s a challenge there because it’s hard. If I was running a SaaS app, I don’t want all my marketing emails in Mailchimp and my lifecycle emails in Userlist. I want them all together so that when someone unsubscribes, it unsubscribes across everything. So that I have the data, the tags, and all the stuff across everything. The decision to switch over to Userlist is not as simple, easy, “I make the decision today, I move tomorrow” decision. It’s the one that really covers a lot of aspects of my business, all the way from marketing, into the sales process, into the onboarding, the customer retention process. It really does touch a lot of key points in a business.
Jane: You’re just hitting a nail on its head. We have very, very heated discussions in house. They’re not heated, because we initially agreed to give this only post sign-up, customer communications. There is a bunch of trade-offs and perks related to that. The perks are that it allows us to make the products super simple inside. Literally, very very intuitive, as opposed to more complex enterprise tools that do both. On the other hand, there have been an increasing support requests and I know there are opinions out there (yours included), that we should probably allow for classic email marketing automation inside this list as well. So, it’s in debate and we’ll see if this direction is worth pursuing down the road. It’s not an easy decision for sure.
Rob: No. I went through the same thing. I wouldn’t say that I think you guys should do marketing. I just know that when we started Drip, it was overwhelming. By the time we’re just doing the customer interactions, people kept asking us for the marketing. It was for the reason I said they wanted it all to be in one place. That is a decision for you guys to make yourselves.
If you look at Intercom and Customer.io (https://customer.io/) , they’re not designed for marketing emails. It’s really customer communication. It’s obvious that you can build a business without doing those things. I don’t know if Vero was still that way, but getvero.com (https://www.getvero.com/) was also just used to be customer messaging. I think there’s a path to do it and do it successfully. It’s just a matter of how you attack it and which customers you go after.
Jane: And making these tools speak to each other. It’s not just a matter of technical set up. There is no convention in the whole SaaS industry to date. Please correct me if I’m wrong. What is the best practice if somebody becomes your customer? Do you keep sending them newsletters or not? What kind of communication they receive? Is there a single unsubscribe button or not? Every founder makes those decisions for themselves. It’s a technical set up and it’s plenty of logical decisions they have to take.
Rob: Yeah, that’s right. You find yourself all in the mix. Every founder, as you said, makes the decision differently, but they all think that their decision is right. That’s where it gets complicated. That’s interesting.
Over the last couple of years, you’ve been grinding it out, getting Userlist on, getting it built, getting presales, getting folks to use it. You do have paying customers at this point and MRR. I’m curious. In your mind, has there been a lot of uncertainty? Or is there uncertainty now in terms of, “Are we going to be able to pull this off? Is this going to work? We’re two years in and I wish we were growing faster. I wish we were bigger.” Does it ever feel like, “I am just not sure that this is going to work at the scale that we wanted to”?
Jane: It sure sometimes feels like a marketing drudge for any founder. From day one, we have never had any doubt that this is a product that’s needed for people. We’ve done some inventive products before, but we were absolutely positive that there is a need. It was just a matter of making it happen, step by step, slowly, very slowly, very very slowly towards the right direction.
We’ve actually been getting more optimistic with time. The last few months have been super cool. We know there’s a lot of work ahead, but it’s been so nice to see how the traction picks up and there is word of mouth in the community, et cetera. We have actually made decisions, we have been part-time on this, myself and Benedikt. We have made the decision to take the scary plunge and actually go full-time on that in the beginning of 2020, starting January.
Rob: Wow. That’s just a couple of months out. Good for you guys.
Jane: Yeah. There is a lot of work, like prep up we have to do in terms of client work. Having client work, it pulls your attention away, but on the same side, it lets you do that organic slow thing in the more secure manner. You don’t have to worry about bread and butter on the table, because that desperate type of marketing is no good for any brand.
Rob: Yeah. It’s hard to be stressed about money and watch runway shrinking away. Yet, it’s also hard to have split focus. I’ve done both of them and neither is that fun. That’s the conundrum of being a founder. It’s making hard decisions with incomplete information where none of the decisions is 100% clear. I feel your pain on that. Congrats on deciding to go full-time. I do think that will probably be game changing for you guys in terms of the focus.
Jane: Thank you so much. We’re absolutely looking forward to this.
Rob: I bet. I asked you before the interview, if we were cool to talk about your third co-founder, Claire Suellentrop. Folks may have seen her on the MicroConf stage a couple of years ago. You, Claire, and Benedikt actually started Userlist together a couple of years ago. I know that she’s a lot less involved than she was early on. Do you want to talk us through maybe, what the situation is and how that went down?
Jane: Yeah, absolutely. We started this together, the three of us. It was me who pulled the folks together. In my previous SaaS, I was a solo founder, so I had to pay Benedikt cash to build stuff. There was no way I could do this with such a complex project, so I invited Benedikt on board. I was super lucky that he said, “Yes.” There was one more piece of the puzzle missing, the marketing person. Claire was number one on my rolodex of nice people and also amazing marketers, so I reached out to her. At that point of time, she was particularly looking for something of her own to start after quitting Calendly. There was ofcourse time between that. She was previously director of marketing at Calendly. See how large of talent we’re talking about?
I was absolutely thrilled when she said, “Yes.” We had a lot of discussions in the beginning. I’m super happy that we formalized our relationship in the most transparent way. Splitting the shares in the correct manner, doing the vesting schedule, then doing the proper contract. Even though in the beginning, that contract was sort of informal, but we still signed. Then we incorporate it.
Everything was really really well-organized. It’s not just about being legally protected, but also about having clear system in your mind. What’s going to happen when something changes? The assumption of that was everyone was going to be friends forever. It’s definitely very naive and childish, because things change for everyone. That is exactly what happened after a year that we’ve been working together.
The traction has been slow. We just started onboarding our fist pre-order customer. There was no sign of MRR whatsoever. Claire had to decide what’s going to be the number one priority. She had to take things off her plate to make it happen. She had two large projects at that time. It was Userlist and Forget The Funnel, which you’ve probably heard online, which is a huge training website and platform for marketers. She made a conscious choice towards working with marketers because these are her peers, target audience, and that was just overall more fulfilling.
Therefore, we’ve rearranged our agreement. We slowed down her vesting in half and she became our advisor instead of doing work hands one. In that type of mode, we spend another year until just recently when all of the above happened, that we decided to go full in. It didn’t feel quite fair that we’d go full in, start working our backs off, and Claire would just be advising. We decided maybe we could put together a more fair agreement and we reconsidered it again.
Right now, we have not documented it yet. She will formally stop vesting at the end of the year. She will just retain the number of shares she has while myself and Benedikt will go full spin. It sounds pretty stressful, but we really didn’t get into any human arguments about it. It was more like a constructive discussion about figuring out ways how it can work for all of us and the work that’s fairly rewarding. Going into business with adequate people really, really pays off. After all, she is a good fit.
Rob: That’s what I’m going to say. From what I’ve heard from you and Benedikt just in passing, in talking about stuff, it sounds like it’s been a surprisingly easy process for something that could’ve been really hard. It often turns into a big emotional fight with co-founders if there’s someone that has a perfectly good reason to come, walk away, and do something else that they decided to go do. It can hurt people’s feelings and it can have all types of ramifications. It really sounds like you all were just reasonable people trying to figure out what was best. Is that a good summary of it?
Jane: Yeah, very much so. Interesting fact: we never got to use it, but in our original agreement we also had a field for a mediator. That was a person we all knew and trusted who would mediate our arguments should we arrive at a deadlock somewhere. We never resorted to that measure, but it was another cautionary thing that we took. It sounds like marriage. You need to find adequate people to really resonate with each other and you need to document everything. That’s how it works.
Rob: That’s good. I’m glad. I like Claire and I know that you guys are friends. It’s nice to be able to go away with everyone feeling good about the resolution.
Jane: We’re so very much a team. She remains as the co-founder. For sure we’re going to have a monthly marketing sessions together. She’s still participating largely in the strategic side of the business. It feels great. She’s a wonderful human being.
Rob: Jane, you’ve worked on many SaaS apps. You’ve built a couple yourself, as you said. You hired Benedikt prior as a contractor, and now working as a co-founder. You have a bit of an experience under your belly here. What has been the most surprising thing to you in building Userlist?
Jane: Building Userlist? I was thinking you’re going to ask about the takeaways from the first app because I had plenty.
Rob: Oh. Let’s go back on that after you answer this. I’d love to hear it.
Jane: Probably the slowness of it was the biggest surprise.
Rob: Yeah. You thought it would gain traction quicker?
Jane: Yes. The product idea is quite unbeatable. It’s really, really a useful tool. You will think that just getting the word out in the community would get fellow founders signing up like that but no.
Rob: Yeah. Is that an issue with switching cost? Or do you think it’s the differentiation thing of not having the same features? If I were to compare you to your competitors, I don’t know who has the most features or whatever, so I’m curious what your take is on that.
Jane: We’re all wise enough to know—our team and you—that features that are not exactly the key thing in purchasing decisions. I think feature parity is not an issue. A lack of some features is clearly a benefit in our case. It makes the product much more transparent and straightforward to use.
I don’t want to be comparing it to Apple but because it’s run-of-the-mill, we try to make some opinionated product decisions insight so that it’s simpler, easier to use, and more efficient. In that regard, that’s definitely not a problem.
As for the switching cost, yes. I think that’s a primary reason as we talked about. I’m hoping there’s a secret sauce inside. Overall, that and explaining what it does all together really makes a puzzle. I’m glad that I have been putting it together gradually but it’s clearly not there yet.
Rob: To wrap us up today, you hinted takeaways from your prior SaaS. For folks who don’t know, it’s called Tiny Reminder. It was a form builder with notifications. Does that correctly sum it up?
Jane: That’s right. It was a Vitamin. Very much Vitamin type of product.
Rob: Cool. What were your handful of takeaways from building and I presume, shutting that down?
Jane: Quite a few. I sold it Nusii, so it still exists and functions. They’re planning to grow it as a satellite, a promotional tool for Nusii. I had a bunch of takeaways. I’m so glad I had this lab SaaS, lab rat sort of project that I’ve made all possible mistakes. I didn’t market it to a clear audience. It was really so useful that anyone could use it and after that, just focus on a niche instead.
It was super Vitamin. That’s why we set out to do an Aspirin product this time. Also, I did a freemium and that was quite a battle. Freemium is not a great way for bootstrap founders to start their business. Not just because of the lack of revenue but also the lack of MRR as a validation. You never know whether those people are just like tire kickers or real users—do they really need it?
And a couple of more discoveries. I had a lot of experience with info products before. I’ve been observing how sales work, that sales are hard to get, how downloads work, how emails, sign-ups, and numbers work. Not everything is cool. I was not prepared for that in SaaS businesses. It’s so much harder.
Just selling a book and an impulse purchase is way easier than selling a tool. That’s clearly not something you can just buy. You need to use it and get value out of it.
Rob: I had that conversation with so many info marketers who are making $50,000 a month or $100,000 a month. They’ll say, “How am I going to get into SaaS?” I’m like, “I know you can write a copy. I know you can get people to impulse buy a book.” If they don’t read the book, they don’t cancel on you because they’ve already paid you. It’s like in a completely different world. You’re right, it’s not twice as hard. It’s like 10 times as hard to make it work with SaaS.
Jane: We had a spectacular product launch for Tiny Reminder. The number of free trials, I think, was the cold traction to the website. We’ve got like 10 or something. I don’t exactly remember the number but it was super miserable. For a typical marketing freebie, it would have been, like you’ve said, 10 times bad.
Another lesson was that I had no audience of my own related to design. I’m sure there are plenty of founders in that audience. I’ve learned to understand that personal audiences don’t translate into SaaS sales, period. We’ve had a few users coming from my site but this is clearly not a primary channel. It’s not something you can leverage very well. You really need to count on product market fit first and some scalable, reliable, marketing channels instead of trying to milk your list, which I’ve never done in a bad way, but I tried with the first product and it just clearly didn’t work.
Rob: Yeah. That’s a lesson I’ve learned a long time ago as well. You can sell a little bit to your list but really, they’re interested in hearing from you, hearing about your process, and they’ll buy books from you all day because that’s hearing about you and your process. Books, video courses, and conference tickets are things that you can sell their personal audience, but SaaS apps, you can get that first. You will get a first handful of customers and then that’s it. Now, the real work begins.
That’s why I’ve heard folks say, “Hey. You should build an audience before you build a product.” That’s the way to do it. I’ve heard that said about infoproducts and I’ve heard it said about SaaS. I think it’s the wrong advice with SaaS. It’s never bad to have an audience but I do not think it’s worth the years and all the effort of building an audience.
Building an audience is very, very hard in order to launch a SaaS app. I think I have many more examples of people who have not built an audience and launched a successful SaaS app than I had people who have done it. Versus, if we’re going to talk about the knowledge product side where you’re going to write books, courses, and that kind of stuff, I would say people need to know, like, and trust you. Therefore, if they need that relationship with you, therefore, I would recommend and err on the side of actually building an audience before doing that.
Jane: You need to find scalable ways of reaching out to new people anyways. Even if you have a nice waiting list like we had something close to between 500 and 1000 people, I have an impression that they never really fully converted, even though we’re doing our best and talking to them very, very often, very diligently, with exciting updates. It’s still not a scalable way to grow our customer base for sure.
Rob: Yeah. That’s right. When we launched Drip, I had a launch list—not my robwalling.com list—but an actual Drip interest list. It was about 3400 people. The first 500 on the list were from me talking about in the podcast. I think I emailed my email list and just talk about it in another podcast. Then, there were segments that were from other shows. There were some from Facebook ads to a landing page. I watch how they converted. It was definitely my personal brand that converted almost the worst.
There were some cold traffic that converts worse than that, but people were more interested in the story. That’s okay, but you have to know that going in that an audience is not a golden ticket to launching a successful SaaS app.
Jane: Moreover, it can be deceptive. We’ve heard those stories like Brennan building RightMessage. They almost have that hangover from Brennan’s authority in the automation space when they were building a different kind of product. I’ve just had Derrick on my show and we’ve talked about Level and how we validated it. That was basically off his authority based on Drip and everything that got him into a little bit deceptive situation, too.
Rob: Yup. As you said, it can be deceiving.
Jane, thank you so much for coming on the show today to talk about Userlist and your experience with it. If folks want to keep up with you on Twitter, you are @uibreakfast. You have the UI Breakfast Podcast that you have mentioned a couple of times. Any other things folks should check out?
Jane: Of course, userlist.com. We just migrated yesterday. That’s a great resource. You can find all kinds of materials if you’re interested in life cycle email. We grabbed the Twitter handle, too. We are now at @userlist. That’s just pure luck. We didn’t even buy it.
Rob: That’s great. Cool. Thanks again, Jane.
Jane: Thank you so much, Rob.
Rob: Thanks again to Jane for coming on the show. If you have a question you’d like to hear answered on the show, leave me a voicemail at (888) 801-9690. Or email questions@startupsfortherestofus.com.
Our theme music is an excerpt from We’re Outta Control used under Creative Commons. Subscribe to us by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. I’ll see you next time
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing startups, whether you’ve built your fifth start up or you’re thinking about your first. I’m Rob and today with Jane Portman, we’re here to share our experiences to help you avoid the mistakes we’ve made.
Welcome to this week’s episode. I’m your host, Rob Walling. Each week on the show. We cover topics relating to building and growing ambitious startups that we grow, because we want to improve our lives. We want to improve the lives of those around us, but we’re not willing to sacrifice ourselves, our lives, our relationships, our health to grow these companies. We believe in relentless execution with a long-term mindset. We think in terms of years, not months. As such, we don’t burn ourselves out by working crazy hours, sacrificing our health, or relationships.
Over the past 470 episodes, we’ve espoused things like freedom, purpose, and relationships. Freedom is the freedom to work on what you want, when you want, without a boss breathing down your neck. The freedom to go on your kids baseball game on a Thursday afternoon without asking anyone’s permission. Purpose, the ability to work on something that fascinates you and drives you everyday to make it better. The purpose of building something that tens and thousands of people are getting value out of and it makes you feel great. Relationships, deep and meaningful relationships with your family, your significant other, your kids, your friends.That’s what Startups for the Rest of Us is all about. That’s the lens through which we view startups.
Today, I’ve invited Jane Portman on the show. Have known Jane for several years. She spoke at MicroConf Europe back in 2014. We’re going to talk about the app userlist.com that she co-founded with her co-founder Benedikt Deicke. They started working on Userlist about two years ago. They did a bunch of customer interviews. Then, almost a year later, they sold pre-orders. That was about one year ago. Really, it was a little bit less than a year ago when they started onboarding people and turned on billing towards the end of 2018.
Userlist, which used to be userlist.io, but they just recently got the .com, so now it’s userlist.com is customer life cycle email, perfect for your SaaS business. It’s event-based email, behavior tracking, lifecycle automation, segmentation, they have broadcast, and that kind of stuff. You can imagine competitors of Userlist might be something like an Intercom, customer.io and maybe even a tool like, Vero. To be honest, I’m so much less clear on the whole email marketing space. Know that I’m not in it day-to-day. But, at one point Vero was in this stuff as well.
Both Benedikt and Jane have been to many MicroConfs. I’ve had dinner with them multiple times. They are just fixtures of the community and good people who are working hard, essentially Bootstrap SaaS app. It’s always fun to have conversations with folks who are doing it. Benedikt is a developer and Jane is a really solid UX/UI designer. They make a good team, as you can tell by the design and from what I’ve heard the reviews of Userlist.
In today’s episode, we talk about the struggles of growing slowly and trying to find traction in a crowded space, because there is a lot of competition. We even walk through some lessons learned, that Jane learned from her first SaaS app that she founded. That one came as a surprise to me. I remembered the app, but I just hadn’t realized what had happened to it. In the middle of the interview she said, “Hey, I have a bunch of interesting takeaways from that,” and we run through those towards the end. Hope you enjoy this conversation with Jane Portman.
Jane Portaman, thank you so much for coming on the show today.
Jane: Thank you Rob. I’m super, super thrilled to share a story here.
Rob: It’s good to have you on. You and I have known each other for many years actually. You spoke at MicroConf Europe back in 2014. I believe? We’ve met at many a MicroConf.
Jane: Absolutely. Thanks for putting that amazing community together.
Rob: For sure. Congratulations on userlist.com. Still on the back of my mind, I think of you as userlist.io because you just have them for two years. I think just recently, you dropped a couple thousand bucks on the .com.
Jane: Quite a few, yeah. We’re absolutely excited about this. We had doubts until the very last moment. But when we did buy it, and when we got out to the community with the news, then it was an instant hit. We’re like, “Yes. This is so great.”
Rob: That’s what I was going to ask. As a bootstrapper, I think Benedikt said you spent $2000 or $3000 on the domain name. He mentioned it on his podcast. Obviously, that’s an investment. You said you have doubts right up until the end. Where you’re just questioning whether or not it would be worth it, whether or not you should do it?
Jane: We actually spent, $4000. It’s definitely a lot for a bootstrapper budget. We have been on the negotiation curve for a year-and-a-half. Basically, ever since our business started. It felt the right moment that it was available enough for us. We understood that Userlist really has good traction now. It was also a good enough point for them not to understand that we’re super, super successful because otherwise, we would probably go back up.
We started at negotiating at $20,000 and then met at $4000. We’ve been having doubts, but we have never looked back ever since. That’s been such an emotional uplift for the whole company.
Rob: Yeah, that’s good. That’s nice to have those hard decisions. That once you make them, you know you’re either going to feel terrible and be dragging them along and second guess them, or you’re going to feel amazing, move on, and know that it was the right call. It’s so hard to know until you send that wire or until you do the 301 redirect and how your domain is all up. I’m super stoked to hear that it was the right call for you guys.
Jane: Thank you.
Rob: You’ve been working on Userlist with your co-founder Benedikt and your co-founder Claire for two years now. As you and I talked a bit offline, it’s been a long journey to get to the point where you are today. You started doing customer interviews about two years ago. Then another year later, you did some presales. Then it was just about a year ago that you started onboarding people.
I know that there’s a lot of talk in the MicroConf community about Userlist. I believe they were even cemented from the stage of MicroConf Europe for folks who are using Userlist. I’ve heard from you and Benedikt that it’s been slow growth. It has been perhaps a little discouraging that it’s taking this long. Can you talk me through how that felt?
Jane: Absolutely. There are a lot of facets to that. First hand is, our naivety in the beginning. Our initial plan was to get to market and $5000 MRR in six months. Primary reason for that was that we did the software product together with Benedikt before. We got it out in a few weeks because it was smaller. This time, we figured, we’ll have a more complex product, but let’s go full throttle in this. It took way longer than that.
We’ve done a lot of administrative stuff in the first year. We didn’t even do much product development because of that, because email […] so sensitive. We wanted to get properly set up with a lot of things like incorporation, all kinds of legal documents, agreements, everything like that, we had in place before even onboarding the first customer.
That feels great because we don’t have to deal with that now. But whilst we were done building the actual MVP, the second part of the hurdle happened. It’s an intentional model that we decided to be a critical business tool for people as opposed to a Vitamin type of product. That implies lower churn and much better retention, but that also implies problematic onboarding. It’s much harder to help people onboard into critical business tool, as supposed to some productivity stuff.
Therefore our users, our customers, they do strongly depend not only on the state of our product, and the complexity. But also, because our product is super easy inside. The integration might seem intimidating, but it’s not really, and inside is super simple. What mostly depends on is this stage in their business. We have plenty of early-stage founders who are planning their launch in a few months and it’s never the perfect day to tackle customer messaging. That’s what we have to deal with. I think we still yet to solve that inflection point moment and how to stimulate that in our customer’s mind. We’ve been trying our best to inspire them with learning materials, with podcast channels, and everything else. It’s still very much learning in progress.
Rob: Yeah. You mentioned that it’s hard to get people to switch, or to come onboard because it’s such an aspirin. You’ve talked about the Vitamin aspirin. That caught me a little bit there. That’s what I found, too. When I’ve had apps that we’re Vitamins, it was easier to get people to try them out, but the churn was higher. Frankly, it can cut both ways.
It’s nice when people will just try it on a whim. It sucks when they cancel, but it is nice to be able to get casual users. Building the aspirin type product is exactly what you’re talking about, where it is a lot harder to get folks to sign up, commit, and move over. And there’s switching cost, even if there isn’t true switching cost. There’s switching cost in their head and there’s set up cost. There’s all of that almost mental baggage that I think people have resistance to moving over. How have you been attacking that?
Jane: Like I’ve said, we’ve been trying to inspire folks. We do our best to follow-up with the potential leads in the most polite but persistent way. We don’t have our secret sauce yet. It really helps that our brand has grown over the last years, especially. We have gotten some nice publicity. I think that a nice public image also makes us more attractive of a purchase, and that contributes to that excitement, that founders generally need to get started with this. It’s just a matter of technically helping them onboard when they need technical assistant, but that’s not a huge burden at all.
Rob: It’s an issue that probably any email tool, that’s worth its weight is facing. Is that, most people who are going to use their tool are already using something else in place of it. They are either using a tool like Mailchimp, or Drip, or customer.io, or they have built it themselves in-house. They already have Rails code with a Liquid template that they pull at the database and then they send these life cycle emails. I introed it at the top of the show, but just to remind folks, it’s customer life cycle email designed for SaaS businesses. It’s behavior-based, event-based life cycle automation, segmentation and that kind of stuff.
The switching cost for that is, there’s a challenge there because it’s hard. If I was running a SaaS app, I don’t want all my marketing emails in Mailchimp and my lifecycle emails in Userlist. I want them all together so that when someone unsubscribes, it unsubscribes across everything. So that I have the data, the tags, and all the stuff across everything. The decision to switch over to Userlist is not as simple, easy, “I make the decision today, I move tomorrow” decision. It’s the one that really covers a lot of aspects of my business, all the way from marketing, into the sales process, into the onboarding, the customer retention process. It really does touch a lot of key points in a business.
Jane: You’re just hitting a nail on its head. We have very, very heated discussions in house. They’re not heated, because we initially agreed to give this only post sign-up, customer communications. There is a bunch of trade-offs and perks related to that. The perks are that it allows us to make the products super simple inside. Literally, very very intuitive, as opposed to more complex enterprise tools that do both. On the other hand, there have been an increasing support requests and I know there are opinions out there (yours included), that we should probably allow for classic email marketing automation inside this list as well. So, it’s in debate and we’ll see if this direction is worth pursuing down the road. It’s not an easy decision for sure.
Rob: No. I went through the same thing. I wouldn’t say that I think you guys should do marketing. I just know that when we started Drip, it was overwhelming. By the time we’re just doing the customer interactions, people kept asking us for the marketing. It was for the reason I said they wanted it all to be in one place. That is a decision for you guys to make yourselves.
If you look at Intercom and Customer.io (https://customer.io/) , they’re not designed for marketing emails. It’s really customer communication. It’s obvious that you can build a business without doing those things. I don’t know if Vero was still that way, but getvero.com (https://www.getvero.com/) was also just used to be customer messaging. I think there’s a path to do it and do it successfully. It’s just a matter of how you attack it and which customers you go after.
Jane: And making these tools speak to each other. It’s not just a matter of technical set up. There is no convention in the whole SaaS industry to date. Please correct me if I’m wrong. What is the best practice if somebody becomes your customer? Do you keep sending them newsletters or not? What kind of communication they receive? Is there a single unsubscribe button or not? Every founder makes those decisions for themselves. It’s a technical set up and it’s plenty of logical decisions they have to take.
Rob: Yeah, that’s right. You find yourself all in the mix. Every founder, as you said, makes the decision differently, but they all think that their decision is right. That’s where it gets complicated. That’s interesting.
Over the last couple of years, you’ve been grinding it out, getting Userlist on, getting it built, getting presales, getting folks to use it. You do have paying customers at this point and MRR. I’m curious. In your mind, has there been a lot of uncertainty? Or is there uncertainty now in terms of, “Are we going to be able to pull this off? Is this going to work? We’re two years in and I wish we were growing faster. I wish we were bigger.” Does it ever feel like, “I am just not sure that this is going to work at the scale that we wanted to”?
Jane: It sure sometimes feels like a marketing drudge for any founder. From day one, we have never had any doubt that this is a product that’s needed for people. We’ve done some inventive products before, but we were absolutely positive that there is a need. It was just a matter of making it happen, step by step, slowly, very slowly, very very slowly towards the right direction.
We’ve actually been getting more optimistic with time. The last few months have been super cool. We know there’s a lot of work ahead, but it’s been so nice to see how the traction picks up and there is word of mouth in the community, et cetera. We have actually made decisions, we have been part-time on this, myself and Benedikt. We have made the decision to take the scary plunge and actually go full-time on that in the beginning of 2020, starting January.
Rob: Wow. That’s just a couple of months out. Good for you guys.
Jane: Yeah. There is a lot of work, like prep up we have to do in terms of client work. Having client work, it pulls your attention away, but on the same side, it lets you do that organic slow thing in the more secure manner. You don’t have to worry about bread and butter on the table, because that desperate type of marketing is no good for any brand.
Rob: Yeah. It’s hard to be stressed about money and watch runway shrinking away. Yet, it’s also hard to have split focus. I’ve done both of them and neither is that fun. That’s the conundrum of being a founder. It’s making hard decisions with incomplete information where none of the decisions is 100% clear. I feel your pain on that. Congrats on deciding to go full-time. I do think that will probably be game changing for you guys in terms of the focus.
Jane: Thank you so much. We’re absolutely looking forward to this.
Rob: I bet. I asked you before the interview, if we were cool to talk about your third co-founder, Claire Suellentrop. Folks may have seen her on the MicroConf stage a couple of years ago. You, Claire, and Benedikt actually started Userlist together a couple of years ago. I know that she’s a lot less involved than she was early on. Do you want to talk us through maybe, what the situation is and how that went down?
Jane: Yeah, absolutely. We started this together, the three of us. It was me who pulled the folks together. In my previous SaaS, I was a solo founder, so I had to pay Benedikt cash to build stuff. There was no way I could do this with such a complex project, so I invited Benedikt on board. I was super lucky that he said, “Yes.” There was one more piece of the puzzle missing, the marketing person. Claire was number one on my rolodex of nice people and also amazing marketers, so I reached out to her. At that point of time, she was particularly looking for something of her own to start after quitting Calendly. There was ofcourse time between that. She was previously director of marketing at Calendly. See how large of talent we’re talking about?
I was absolutely thrilled when she said, “Yes.” We had a lot of discussions in the beginning. I’m super happy that we formalized our relationship in the most transparent way. Splitting the shares in the correct manner, doing the vesting schedule, then doing the proper contract. Even though in the beginning, that contract was sort of informal, but we still signed. Then we incorporate it.
Everything was really really well-organized. It’s not just about being legally protected, but also about having clear system in your mind. What’s going to happen when something changes? The assumption of that was everyone was going to be friends forever. It’s definitely very naive and childish, because things change for everyone. That is exactly what happened after a year that we’ve been working together.
The traction has been slow. We just started onboarding our fist pre-order customer. There was no sign of MRR whatsoever. Claire had to decide what’s going to be the number one priority. She had to take things off her plate to make it happen. She had two large projects at that time. It was Userlist and Forget The Funnel, which you’ve probably heard online, which is a huge training website and platform for marketers. She made a conscious choice towards working with marketers because these are her peers, target audience, and that was just overall more fulfilling.
Therefore, we’ve rearranged our agreement. We slowed down her vesting in half and she became our advisor instead of doing work hands one. In that type of mode, we spend another year until just recently when all of the above happened, that we decided to go full in. It didn’t feel quite fair that we’d go full in, start working our backs off, and Claire would just be advising. We decided maybe we could put together a more fair agreement and we reconsidered it again.
Right now, we have not documented it yet. She will formally stop vesting at the end of the year. She will just retain the number of shares she has while myself and Benedikt will go full spin. It sounds pretty stressful, but we really didn’t get into any human arguments about it. It was more like a constructive discussion about figuring out ways how it can work for all of us and the work that’s fairly rewarding. Going into business with adequate people really, really pays off. After all, she is a good fit.
Rob: That’s what I’m going to say. From what I’ve heard from you and Benedikt just in passing, in talking about stuff, it sounds like it’s been a surprisingly easy process for something that could’ve been really hard. It often turns into a big emotional fight with co-founders if there’s someone that has a perfectly good reason to come, walk away, and do something else that they decided to go do. It can hurt people’s feelings and it can have all types of ramifications. It really sounds like you all were just reasonable people trying to figure out what was best. Is that a good summary of it?
Jane: Yeah, very much so. Interesting fact: we never got to use it, but in our original agreement we also had a field for a mediator. That was a person we all knew and trusted who would mediate our arguments should we arrive at a deadlock somewhere. We never resorted to that measure, but it was another cautionary thing that we took. It sounds like marriage. You need to find adequate people to really resonate with each other and you need to document everything. That’s how it works.
Rob: That’s good. I’m glad. I like Claire and I know that you guys are friends. It’s nice to be able to go away with everyone feeling good about the resolution.
Jane: We’re so very much a team. She remains as the co-founder. For sure we’re going to have a monthly marketing sessions together. She’s still participating largely in the strategic side of the business. It feels great. She’s a wonderful human being.
Rob: Jane, you’ve worked on many SaaS apps. You’ve built a couple yourself, as you said. You hired Benedikt prior as a contractor, and now working as a co-founder. You have a bit of an experience under your belly here. What has been the most surprising thing to you in building Userlist?
Jane: Building Userlist? I was thinking you’re going to ask about the takeaways from the first app because I had plenty.
Rob: Oh. Let’s go back on that after you answer this. I’d love to hear it.
Jane: Probably the slowness of it was the biggest surprise.
Rob: Yeah. You thought it would gain traction quicker?
Jane: Yes. The product idea is quite unbeatable. It’s really, really a useful tool. You will think that just getting the word out in the community would get fellow founders signing up like that but no.
Rob: Yeah. Is that an issue with switching cost? Or do you think it’s the differentiation thing of not having the same features? If I were to compare you to your competitors, I don’t know who has the most features or whatever, so I’m curious what your take is on that.
Jane: We’re all wise enough to know—our team and you—that features that are not exactly the key thing in purchasing decisions. I think feature parity is not an issue. A lack of some features is clearly a benefit in our case. It makes the product much more transparent and straightforward to use.
I don’t want to be comparing it to Apple but because it’s run-of-the-mill, we try to make some opinionated product decisions insight so that it’s simpler, easier to use, and more efficient. In that regard, that’s definitely not a problem.
As for the switching cost, yes. I think that’s a primary reason as we talked about. I’m hoping there’s a secret sauce inside. Overall, that and explaining what it does all together really makes a puzzle. I’m glad that I have been putting it together gradually but it’s clearly not there yet.
Rob: To wrap us up today, you hinted takeaways from your prior SaaS. For folks who don’t know, it’s called Tiny Reminder. It was a form builder with notifications. Does that correctly sum it up?
Jane: That’s right. It was a Vitamin. Very much Vitamin type of product.
Rob: Cool. What were your handful of takeaways from building and I presume, shutting that down?
Jane: Quite a few. I sold it Nusii, so it still exists and functions. They’re planning to grow it as a satellite, a promotional tool for Nusii. I had a bunch of takeaways. I’m so glad I had this lab SaaS, lab rat sort of project that I’ve made all possible mistakes. I didn’t market it to a clear audience. It was really so useful that anyone could use it and after that, just focus on a niche instead.
It was super Vitamin. That’s why we set out to do an Aspirin product this time. Also, I did a freemium and that was quite a battle. Freemium is not a great way for bootstrap founders to start their business. Not just because of the lack of revenue but also the lack of MRR as a validation. You never know whether those people are just like tire kickers or real users—do they really need it?
And a couple of more discoveries. I had a lot of experience with info products before. I’ve been observing how sales work, that sales are hard to get, how downloads work, how emails, sign-ups, and numbers work. Not everything is cool. I was not prepared for that in SaaS businesses. It’s so much harder.
Just selling a book and an impulse purchase is way easier than selling a tool. That’s clearly not something you can just buy. You need to use it and get value out of it.
Rob: I had that conversation with so many info marketers who are making $50,000 a month or $100,000 a month. They’ll say, “How am I going to get into SaaS?” I’m like, “I know you can write a copy. I know you can get people to impulse buy a book.” If they don’t read the book, they don’t cancel on you because they’ve already paid you. It’s like in a completely different world. You’re right, it’s not twice as hard. It’s like 10 times as hard to make it work with SaaS.
Jane: We had a spectacular product launch for Tiny Reminder. The number of free trials, I think, was the cold traction to the website. We’ve got like 10 or something. I don’t exactly remember the number but it was super miserable. For a typical marketing freebie, it would have been, like you’ve said, 10 times bad.
Another lesson was that I had no audience of my own related to design. I’m sure there are plenty of founders in that audience. I’ve learned to understand that personal audiences don’t translate into SaaS sales, period. We’ve had a few users coming from my site but this is clearly not a primary channel. It’s not something you can leverage very well. You really need to count on product market fit first and some scalable, reliable, marketing channels instead of trying to milk your list, which I’ve never done in a bad way, but I tried with the first product and it just clearly didn’t work.
Rob: Yeah. That’s a lesson I’ve learned a long time ago as well. You can sell a little bit to your list but really, they’re interested in hearing from you, hearing about your process, and they’ll buy books from you all day because that’s hearing about you and your process. Books, video courses, and conference tickets are things that you can sell their personal audience, but SaaS apps, you can get that first. You will get a first handful of customers and then that’s it. Now, the real work begins.
That’s why I’ve heard folks say, “Hey. You should build an audience before you build a product.” That’s the way to do it. I’ve heard that said about infoproducts and I’ve heard it said about SaaS. I think it’s the wrong advice with SaaS. It’s never bad to have an audience but I do not think it’s worth the years and all the effort of building an audience.
Building an audience is very, very hard in order to launch a SaaS app. I think I have many more examples of people who have not built an audience and launched a successful SaaS app than I had people who have done it. Versus, if we’re going to talk about the knowledge product side where you’re going to write books, courses, and that kind of stuff, I would say people need to know, like, and trust you. Therefore, if they need that relationship with you, therefore, I would recommend and err on the side of actually building an audience before doing that.
Jane: You need to find scalable ways of reaching out to new people anyways. Even if you have a nice waiting list like we had something close to between 500 and 1000 people, I have an impression that they never really fully converted, even though we’re doing our best and talking to them very, very often, very diligently, with exciting updates. It’s still not a scalable way to grow our customer base for sure.
Rob: Yeah. That’s right. When we launched Drip, I had a launch list—not my robwalling.com list—but an actual Drip interest list. It was about 3400 people. The first 500 on the list were from me talking about in the podcast. I think I emailed my email list and just talk about it in another podcast. Then, there were segments that were from other shows. There were some from Facebook ads to a landing page. I watch how they converted. It was definitely my personal brand that converted almost the worst.
There were some cold traffic that converts worse than that, but people were more interested in the story. That’s okay, but you have to know that going in that an audience is not a golden ticket to launching a successful SaaS app.
Jane: Moreover, it can be deceptive. We’ve heard those stories like Brennan building RightMessage. They almost have that hangover from Brennan’s authority in the automation space when they were building a different kind of product. I’ve just had Derrick on my show and we’ve talked about Level and how we validated it. That was basically off his authority based on Drip and everything that got him into a little bit deceptive situation, too.
Rob: Yup. As you said, it can be deceiving.
Jane, thank you so much for coming on the show today to talk about Userlist and your experience with it. If folks want to keep up with you on Twitter, you are @uibreakfast. You have the UI Breakfast Podcast that you have mentioned a couple of times. Any other things folks should check out?
Jane: Of course, userlist.com. We just migrated yesterday. That’s a great resource. You can find all kinds of materials if you’re interested in life cycle email. We grabbed the Twitter handle, too. We are now at @userlist. That’s just pure luck. We didn’t even buy it.
Rob: That’s great. Cool. Thanks again, Jane.
Jane: Thank you so much, Rob.
Rob: Thanks again to Jane for coming on the show. If you have a question you’d like to hear answered on the show, leave me a voicemail at (888) 801-9690. Or email questions@startupsfortherestofus.com.
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