Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk through an article by Unbounce about split testing their exit overlays. The guys give you a full walk through and their opinions on the findings of the article.
Items mentioned in this episode:
Transcript
Rob: In this episode of Startups for the Rest of Us, Mike and I talk about lessons learned from Unbounce’s five-split test across 2.3 million exit overlay visitors.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike: Well, we are in sunny Las Vegas as people are listening to this, and right now outside it is raining.
Rob: Is it supposed to rain on Tuesday?
Mike: No, I’m still in New England. We recorded a week ago early. Come on, man! Get with the program!
Rob: We’re time warping here. Yeah, so we record just a few days early, and I take off for Vegas in a couple days, and it’s supposed to be what? 70s and 80s? Pretty sunny there?
Mike: Yeah, I think I saw like 84 or 85, something like that last week when I looked.
Rob: It’d be nice. I’m looking forward to getting out and seeing the folks, you know, seeing the speakers, meeting the new speakers, and hanging out with people we haven’t seen for six to twelve months. It’s always exciting to kind gear up for that.
Mike: Yeah, it’ll definitely be interesting this time around just trying to keep up and pace ourselves for the two conferences. I know in years past every single year without fail, my voice starts to fail at about the second or third day. So I’m going to have to be a little careful about that.
Rob: I agree. The good thing is we’re not emceeing the Starter Edition, so we should have less talking. Although, you’re doing a talk there, so you’re really going to need to keep your voice going.
Mike: Yeah, my talk is the last slot on the last day so four or five days of talking and hopefully my voice will still stay with it.
Rob: Indeed. On my end, not too much new this week. Wanted to look at a couple recent iTunes reviews, and we’re up to 517 worldwide iTunes review. This one- I love the subject- “Best podcast ever” from John Turner, and he says “best podcast for anyone looking to start selling software or a SaaS product.” And we have Ray223 who says, “The oldest and the best. Thanks Rob and Mike for all the insights. Keep up the great work.” We have another from [Ludwig?] from Denmark, and he says, “If you’re considering have a startup, listen in here.” Really appreciate these reviews. If you haven’t left us an iTunes review, it goes a long way towards helping us to reach new audiences, to grow the show, and frankly, just keeps us motivated and keeps us from crying ourselves to sleep at night. I know Mike, you often pull up the reviews and read them to feel good about yourself, right? Oh, is it just me?
Mike: I think it’s just you, yeah.
Rob: Cool, so let’s get into the topic this week. We’re going to be talking through an article that’s on Unbounce.com’s blog. And the title of the article is “Lessons Learned from 2,345,864 exit overlay visitors.” And what they did is they ran split tests and some observational tests, which we’ll talk about in a second. They ran five of them over the course of two years, and it’s about 2.3-2.4 million visitors during that time. And so they just outlined the tests they ran, and with the results you would expect, and what actually happened. And I like how detailed this post is, and I like that some of the assumptions that we will make- when I say the split test you’ll think “I know which one is going to win.” Sometimes that’s correct, and other times it’s not. And so it’s kind of a fun walkthrough of people who are doing a lot of pretty sophisticated testing.
Mike: Do you think that that’s an exact number or just kind of a ballpark estimate of the 2,345,864?
Rob: I think they went into Google Analytics, you know, and just pulled up the number from the date of the first split test until today or whatever so I imagine it’s pretty exact.
Mike: So one of the things we wanted to mention before we kind of dive into this particular episode is the fact that there is a certain kind of minimum threshold you have to kind of be at in order for split testing like this to work. And I think Rob, you said the minimum you would even consider doing these kinds of split tests is when you get to about 30,000 uniques a month, right?
Rob: Yeah. You and I were talking before the show, and I ran some loose math, and let’s say these guys have 2.4 million unique visitors to their blog over the course of this 2 year thing, which is what they’re positing. So back of the napkin, 2.4 million is about 100,000 visitors a month, and at that rate, think about if you’re using exit overlay you’re around 1% to start with in terms of converting people to subscribers. So 1% of 100,000 is about 1,000 new subscribers a month. If you split test you could very likely get to 2% and that’s 1,000 to 2,000 and that’s a big difference. That moves the needle. As you start lowering the number of visitors you’re getting, let’s think about 50,000. That number’s going to move from about 500 to 1,000 new emails a month, and that’s still for me, still moves the needle. But as you start dropping down- 30,000? It’s like well, I’m going from 300 to 600. That’s cool. That’s about as low as I would go. If I have 10,000 and I go from 100 to 200 subscribers a month, I actually think at that point you should be focusing more time on generating traffic rather than split testing the traffic you have. So my mental math is somewhere in the 30-40,000 uniques a month if you’re going to start running experiments like this to have it actually move the needle.
Mike: So with that in mind, let’s start digging into these experiments. Let’s see what they found out.
Rob: Yeah. So they say back in 2015 they launched their first ever exit overlay. So it’s an exit intent popup that only appeared when you tried to leave the site. And the idea was they just wanted to collect more email addresses. And when they first started their conversion rate with the very first one, and it says “Conversion optimization tips you’ll actually use. Subscribe to our blog.” There’s no lead magnet, there’s no mini course, it’s just subscribe to the blog. And they were at 1.25% from the start, and we should probably take a quick break here. Some people hate exit intent popups. Some people love them for how well they convert. I think Unbounce takes a pretty good approach to it, and they actually write custom code to assure that you only see one even if they have a bunch running in different categories as people hear later. They were very specific to not hose the user experience because that’s the thing that sucks with exit overlays. If they keep popping up and you’re trying to read and you’re trying to go to another tab to do something, so this is a place where you can listen to these ideas, and you don’t have to do this with exit overlays if personally you don’t want to. This could just as well be a little Drip widget in your lower right, this could be a lead box, this could be embedded form in your website- all the stuff they do could still be applied to that, but they just happen to do it using exit intent.
Mike: Yeah, that kind of applies across the board to a lot of different marketing efforts. If it’s something that you’re not particularly enthralled with when you come across it- if it’s something that you just say “Aw, I can’t stand these things,” and you just keep closing them and they keep coming back, that really turns you off from trying them to begin with. But there’s also a difference between your experience on your website and the visitor who’s coming to your website. So you have to keep in mind what your end goal with these is and whether or not it even makes sense. Obviously you’re not the one browsing your site, but at the same time you are not necessarily representative of the person browsing your site. They may not care nearly as much as you do about it.
Rob: So we’ll kick into first experiment here in a second. In the post they say there are a few testing conditions they want to lay out. Number one: all overlays were triggered on exit, which means they were launched only when abandoning visitors were detected. Number two, they say for these first three experiments they compared sequential periods to measure results rather than true A-B tests. So they do say this is less scientific, more observational because you run them for thirty days and then run them for thirty days and compare the two time periods. They say that when comparing these sequential periods testing conditions were isolated by excluding new blog posts from showing any of the overlays. Conversion is defined as either completing the form, meaning they enter their email or later on they try something where it’s just a click, and we’ll get into that later. And lastly, it’s from January 2015 and ended November 2016, so almost two years. So that’s setting the stage. The first experiment they ran was to go from their generic signups which I talked about earlier which just said “Conversion optimization tips you’ll actually use.” and “Subscribe to the Unbounce blog” button. If you compare that with actually giving away content, the hypothesis is if we give away an e-book it’s going to generate more opt-ins. Both Mike and I would agree and most listeners that you’re going to increase your conversion rate if you do that. So they gave away an e-book called “23 Principles for Visually Designing More Persuasive Landing Pages.” And what happened, Mike?
Mike: Well, it looks to me like the conversion rate doubled from 1.27% to about 2.65%. Now the interesting thing here is you kind of mentioned this upfront- this wasn’t a true split test. The duration for the test itself was about half the time of the stuff they had running. So they ran the initial one for 170 days and then the split tests or the tests that they ran was for 96 days to offer this e-book.
Rob: The variant or the challenger, if you will.
Mike: Yep. And the conversion went from 1.27% to 2.65% so almost half the time and twice the conversion rate which kind of translates to the fact that they got about the same number of conversions in half the time. That’s a phenomenal increase to be honest.
Rob: It’s really cool. Yeah, this is good. I feel like this supports a lot of stuff that we’ve talked about over the years and what you would naturally think so that’s good. Their observation on this is offering tangible resources versus non-specific promises compositively impact conversion rates.
So experiment two gets a little more complicated. So they went from their single field- meaning just getting an email address- and you think about at this point they’re at a 2.65% conversion rate, they’re giving away an e-book, they’re asking for an email. They said that data people always spoil the party and someone internal to Unbounce wanted to get more information, not just the email. So they added three other form fields, so instead of just email they asked for a first name, do you work for an agency, and your company size, and they knew this was going to tank when they knew it was going to tank conversion rates, and it’s exactly what I thought would have intuited as well. Every form field you add from 1, 2, 3, and up, you are going to almost in all cases a decrease in conversion rates. And this once again confirms that. Take us through the results.
Mike: So the results basically went in the opposite direction. Just to point this out as Rob said at the very beginning, these were all run against different people, so it’s like somebody saw one and they ended up seeing another one. It’s really different segments of their audience that were seeing these, so again, the time periods were different that they used. And it looks like they did not want to run this one for very long just because the results were so bad, but the conversion rates went from 2.65% down to 1.25%.
Rob: D’oh! Right back to where they started. They’re still giving away that resource but just adding the three fields just tanked them.
Mike: Yeah, so it’s pretty obvious that even just looking at it you probably don’t want to fill out that form. If it’s in exiting intent and you are already inclined to leave, making it more difficult to send them information is just not going to work out in your favor.
Rob: I like the quote the post author says, “I knew this was for a good reason. Building our data warehouse is important. Still, a small part of me died that day.” And then it got worse. Basically since they added all the fields to it they had to expand the size the overlay and they just made it bigger so it could hold the form fields and then they realized that they had made it so big that the size was too large for many people’s browser windows. So the overlay only fired two out of every three visits. So not only did they have a lower conversion rate, but they cut their potential audience by a third. So then they redesigned the overlay to make it smaller and fit, but internally they decided that even though it was a lower conversion rate, they needed that data. And so now their new baseline is back to 1.25% which is kind of hard as a conversion rate optimized to make that much of a gain to double and then have to go back.
Mike: It depends on your situation because this is one of those places where you really need to make a judgment call about whether you need that data or not and whether you need it now. I think it’s this case with the types of questions they’re asking, I think they could probably get away with not asking certain things. But they went from asking just an email to first name, email, do you work for an agency, and company size. And those individual things really let someone on a marketing team target down and send a highly specific content to those people. You’re not going to send something about a freelancer to somebody who’s running an agency with thirty-five people. So it allows you to target the content you’re sending them and make sure that it is speaking their language and talking directly to their pain points because they’re going to have different pains than a freelancer. And if it’s important to have that information now, awesome. But I would also question whether you need to have it on that page. So one of the things that I’ve seen is that you can do this type of thing where you ask for a very limited amount of data and then on a next page you ask for more because they’ve already bought into the premise at that point. Let’s say they give you an email address and then it flips to another page and says, “Hey, thanks for that information. Can you tell us a little bit more info so we can more specific about the things we send you?” And at that point you can ask them, and if they don’t give it to you, you can follow up later and try and get it later or there’s different ways down the road that you can get it. But the question is do you need that information right now?
Rob: Yeah, and that’s called progressive profiling, if people are curious. There’s a really good tool that actually has a tight integration with Drip that does exactly that. You can set up all these fields and you can progressively over time- the first time you visit it’ll ask you for email, and then the next time it knows it already has your email so instead of doing nothing it’ll adjust for your first name or it’ll ask for something else. It’s pretty sophisticated stuff. That tool’s called Convert Flow, if you’re interested.
Alright, onto the the third experiment. I like this one. It starts off with the quote “It seemed like such a good idea at the time…” So the third experiment is challenging one overlay like they have now, just the one overlay giving away the e-book with the four form fields versus ten different overlays. And the ten different overlays are highly targeted or hyper relevant to each of their ten blog categories. So you can imagine on a blog you might have categories and one of them is split testing, one is copyrighting, one is email, one is paper click, one is social. So creating a separate overlay for each of those with hyper relevant headline/pitch, all that stuff. And so they did this and they said it took three hours maybe to do this, and then they have a table, and the results are kind of crazy. The email category result was .45%. So remember their baseline is currently at 1.25%. So their email is at .45%, their legion and content marketing is at .85% so there’s kind of the bottom end ones. And then their copyrighting one is at 3.22%, and their landing pages and mobile optimization is at 2.46%. So huge range now, but having that more granular data is super more interesting because now you know you have some big wins and some big losers you can just focus more on the losers rather than trying to do it across the board. They only did it for ten days. They said their conversion rate was a combined 1.36%. So it is slightly higher than the 1.25%. They said it eventually crept up to 1.42% after an additional quarter million views, but it didn’t do anything as much as they had hoped. So to take a step back, if you take a look at their copyrighting category they say “How to write killer landing page copy” versus their conversion rate optimization category was “How to Get Started with A-B Testing” and then the next one is UX and so the headline was “The Seven Deadly Sins of Landing Page Usability.” And so I don’t know that these were e-books, and they don’t say that each of these was as effective as that 23 Principles of Design e-book they originally gave away, but that was the idea here. That’s how they were trying to target to the specific category.
Mike: What I find interesting about this is that they decided to just go back to the baseline and use the average of all of these because it seems like there are certain cases where the targeted headlines work a lot better. So for example the copyrighting and the campaign strategy and the mobile optimization- those things have a much higher conversion rate. But then if you look at the other ones, like the email category or the social category, the conversion rate on those is less than 1%. So it makes sense to at the very least go back to the baseline but I kind of question why they didn’t go with those specific ones in those particular categories that were overperforming 2-3x what the baseline was.
Rob: Yeah, I agree. The average was a little weird, and I think they’re doing that just to kind of give you a general idea because now that you have this data, what would you expect is the next thing to do? It’s to keep the ones that are at 2% and above and only try to optimize the low performing categories, and that’s exactly what they did. They were going to test new offers over five categories that had low conversion rates and reasonable enough traffic volume to make it worth the test. Because some of these, now that you’re getting more granular, some might only get 1,000 views in a month so it’s not really worth diving in. What they did is they were then doing resource versus resource, and so they were basically trying a different headline to give away an e-book.
Mike: One thing that comes to mind now that you mention that that kind of leads into the next experiment they did, is if they start changing that and they start running different types of ads in some categories versus others then it changes a lot of the math around and it becomes a lot harder to test that stuff.
Rob: Oh totally. Yep. And so the result of this one, they don’t really go into much detail. They just say they saw a slight improvement in one of them, in a couple of them they saw a dropoff, but in legion and content marketing there was a dramatic uptick, and the results were statistically significant. So they’re making progress. They had five low-performing ones, and they basically knocked two of them out, so really they just have three low-performing ones.
And so for their fifth and final experiment as of this writing, they wanted to test legion overlays, which is what they’ve had the whole time asking for email and first name, etc. versus click through overlays. And so they talk about have an exit intent popup that basically has a headline and then a button that says either “get the video” or “get the e-book”- they’re still giving something away, but then that takes you to a landing page. And that landing page has a lot more text and a lot more conversion-oriented stuff. And so that’s what they tested.
Mike: So to contrast this experiment versus the other ones: the other ones were tweaking the headlines, they were asking for more or less information. And in this particular experiment what they mean by “click through” is they would make an offer to them, and the person did not have to fill anything out. They could simply click on a button that would take them to a landing page that would then ask them for information. So essentially they were providing a mechanism for them to say yes, I’m interested or not, and they could quickly answer that. And when the person clicks on the button it takes them to that landing page and then they can fill out that information so it becomes a two-step process instead of a one-step process.
Rob: Right. And this is actually something Clay Collins has talked about for years, and I heard about his podcast he used to have called The Marketing Show, and then when he came on our show a couple years ago well before the first [?] thing happened, he talked a lot about not popping something up and asking for information and they go with this juiced up opt-in where you can click a button and then the next step was a form and it just feels more- it tends to have better conversion rates and tends to make people feel more welcome and like you’re not just asking for something right up front.
So for this experiment they point out for this to be successful, the conversion rate on the overlays would need to increase enough to offset the dropoff that they expect by adding that extra landing page step. Because you figure 1.25% of people might submit one with the form fields in it, and then maybe after two or three times of having to click the button but now you need to get a lot of those folks to actually fill out the form on the landing page. So not surprisingly engagement with the overlays increased amazingly the ones with the buttons. And engagement is just clicks. And so the one with the form fields was .79%, and the ones with just the button click through was 3.62% so that’s about 4 1/2 times better. So that was just getting click throughs. In the end in their CRO category, the overlay with the button where you click through to the landing page, that essentially netted them twice the leads. So they had 100% improvement in terms of the net leads they received by having someone do a two-step opt-in instead of just popping up a form field in front of them. And in their legion category (they have this category on their blog) it was about a 50% (it was from 45-56) so little under 50% increase. And so they only did it in two categories and their next step would be applying the same format to all the other categories and measuring the results. So two-step opt-in for the win.
Mike: Yeah, so if it’s confusing, to kind of consolidate that, it is a two-step process versus a one-step process, so depending on where you calculate the conversions for that you have to take those into account. And not just the percentages but also the net result of it. So it’s not just about the people who click on that link and go to the next page, it’s about who clicks on the link and goes to the next page and submits their information. And what is the net result of that versus the original. And in both the cases here they had either a 100% or a 50% increase. Both of which are pretty significant especially considering the volume. And they took the time to say okay, this makes sense for us to kind of expand this and go out through the rest of our categories and implement it across the board.
Rob: And so that’s where they leave off. They’re kind of summarizing stuff that ended three months ago, and I’m sure they’re running their next tests as we speak. The nice part about this, I like their concrete examples. There’s so much that you read about split testing that can be vague or rule-of-thumb, and these- your mileage my vary, but a lot of the stuff they intuit really comes to pass, and I think it’s always helpful to get ideas for your own split tests. You may not have time to create ten different overlays, and unless you have 100,000 uniques a month to your blog, I wouldn’t create ten overlays. But especially some of those earlier tests were pretty big wins for not a ton of effort, for writing a new headline and giving away a resource you already have on your hard drive.
Mike: You know, Quickbooks is going to love you for saying “Intuit” all the time.
Rob: Yeah, I know. For using their intuition, yeah. I’m going to come up in their Google Alerts a bunch.
Mike: Yep, their SEO guys are going to start calling you. Interesting side note here, one of the things that Unbounce talks about is that they also have a list of what they’re going to be looking at next. The first one is a charter test which is what happens when they test their on-exit trigger. I guess there’s a 15-second time delay. And then there’s a referral test, which is what happens when they show different overlays to users from different traffic sources. And then the third one they’re looking at is new versus returning visitors. Do returning blog visitors convert better than first-time blog visitors? And I think those are all going to be interesting tests. If you’re interested in taking a look at that, go over and check out Unbounce’s website, subscribe to their blog, and I’m sure they will post out the results when they get those, and we’ll be sure to check it out.
Rob: While you’re at it, go to the lead page’s blog and subscribe too. They turn out good content like this as well. Got to plug the company man.
Mike: I get it. Well, I think that about wraps us up. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt for ‘We’re Outta Control’ by MoOt used under creative commons. Subscribe to us in iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening. We’ll see you next time.
Episode 334 | Why some products fail and others succeed
Show Notes
In this episode of Startups For The Rest Of Us, Mike and Rob talk about why some products fail and others succeed. Based on a listener question they lists reasons for both sides while also revealing some old failed product ideas of their own.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of ‘Startups for the Rest of Us,’ Rob and I are going to be talking about why some products fail and others succeed. This is ‘Startups for the Rest of Us’ episode 334.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers and entrepreneurs be awesome at building, launching, and growing software products whether you’ve built your first product or you’re just thinking about it.
I’m Mike.
Rob [00:26]: And I’m Rob.
Mike [00:27]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob [00:30]: Kind of the same old stuff. Just hiring a few more folks. We had two new developers start last week, and I think we have two or three open job recs right now. Doing a little bit of MicroConf prep with yourself and Zander. Kind of finalizing the schedule and some sessions. And, you know, fighting the good fight.
Mike [00:49]: It’s amazing how much the little things for MicroConf eat into your time. I mean, there’s all these little things that you think will take five minutes or something like that and they end up eating through twenty or thirty.
Rob [00:58]: Right. Yeah. There’s been a little bit of evening work and some thought and schedule crafting that’s gone on. But, overall, can’t complain given that we’re basically putting on two conferences back to back. I don’t feel like it’s anywhere near even the same amount of work that we used to put in five years ago on the conference.
Mike [01:16]: Right. It seems like it’s not twice as much work to hold the two conferences back to back either. At least not yet. I mean, we haven’t been onsite for it so that could certainly change things.
Rob [01:23]: Yeah, that’s true. And what’s nice about that is, like we’ve talked about in the past, we opened enough tickets that we just about sold out of both conferences but not quite. And I think that’s exactly where we want to be. I think we’ve sold four or five tickets in the past week across the two conferences, and that’s the ideal pace I feel like. Is that last minute folks who want to come who hear about it late I would really like for them to still be able to buy tickets and we’ve never had that really at any MicroConf in the past. So, it’s been kind of nice to see that.
How about you? What’s going on?
Mike [01:55]: Well, kind of related to MicroConf. I’ve been working on my working on my MicroConf talk a little bit. And outside of that, I’ve obviously been putting time into Bluetick and right now I’m working out some UI and workflow issues related to allowing people to self-onboard just because there’s certain parts of the setup process in onboarding that are a little bit more complicated. So, we’re reworking the UI a little bit to make it easier for them to do that and just kind of give them a wizard to walk them through it and anticipate where they’re going to run into issues. Because we’ve seen enough demos in onboarding sessions where this is obviously a problem and getting it the point where people can do that without our help and assistance is definitely going to be worthwhile.
And then kind of related to that is I’m working on recording some video walkthroughs of different parts of the application to show people how to use it so that I don’t have to walk people through those demos myself. Just based on stuff that I’ve learned that people have asked about and said, “What does this do?” Or, “How does that work?” And looking at places to key those videos in so that it’s obvious that if you need help here’s a little button just click on that and it will walk you through this particular piece.
Rob [02:55]: Yeah, that’s a really good way to go. I think that’s kind of become the blocking and tackling template. For this I know it worked really well for us in the early days of Drip. And it still does. I think the videos I recorded two years ago are still live. Or someone may have re-recorded them because we changed our top nav and we were like they get out of date.
And that’s the one bummer with videos is you have to re-record the whole thing as soon as you change one part of the app. You can’t just edit text or replace a screenshot. But recording a sixty- or ninety-second video that’s really tight can go a really long way for brand new people just getting oriented with a specific feature. And in Drip we actually embedded it right at the point they needed to consume it. They were also in the KB but there were only three or four constructs in the beginning. It was broadcasting campaigns and I don’t remember what else. But right as you got into a broadcast it’s like, “What’s a broadcast?” And then there was a sixty-second video of me talking about it. How to use it, how to set one up. Boom. Done. And we got some good feedback about that early on.
Mike [03:48]: That’s basically the approach that I’m using. It’s like right at the places where they need that information, that’s where the videos are and you’ll just be able to click on a little button that has the video embedded into it and it’ll just pop up over the page or something along those lines. We’re still kind of working that out. But, as you said, the one concern that I have is that there’s still parts of the app where the UI is changing and I know that those pieces are going to get out of date and it’s like, “Do I really need to worry too much about that?” Right now, I’m just going to say heck with it and record them and if they get out of day, they get out of date. And if we need to go back and re-record some of them then we will. Or I will.
Rob [04:23]: Yeah, that’s the way to go. One piece of advice there is I would consider only having the videos easily accessible during the blank slate phase. That’s where there’s zero data on that page and that’s when someone’s just trying to get started. They can watch the video or they can dive right in. Once they have one or two of these things set up, the odds of them needing to watch that video drop dramatically. At that point, you could potentially have a little link out to a KB or something.
I don’t know that you need to go so far as to – for the rest of the time that someone uses the app, you always have some link available for them to drop it in. Because you only need that the first one or two times tops that you’re going to set this up.
Mike [05:04]: That’s an interesting approach. I can certainly embed it on certain pages directly where if the page loads and there’s no data behind it, then show that video. And then otherwise up in the top corner or something like that, have a little help icon that they could click on.
That’s something I have to think about whether or not having that extra button there that’s kind of hidden or out of the way where people can just click on that and say, “Get help for this page,” for example. I wonder how much value that adds.
Rob [05:29]: Yeah. You could throw it in and then you could instrument it just to say, “How many clicks does this get?” Throw it into Mixpanel or Google Analytics or something. It’s just a javascript action. And then you could always remove it if people aren’t using it.
We found that the blank slate approach has worked really well. We got a lot of positive feedback about it. And then it kind of goes away once you’re past the blank slate which tends to be when you don’t need it anymore. So, that’s one way to do it that we’ve found to be quite good.
Mike [05:52]: Cool. I’ll definitely take a look at that.
Rob [05:54]: So, what are we talking about today?
Mike [05:55]: Well, today’s episode is based on a listener question from Matesh. And there was a conversation that kind of went back and forth so I’ll sort of paraphrase things here. But essentially he was asking about why some early ideas failed, specifically related to us. But I thought that it might useful to listeners for us to address that in a broader sense and talk about why different products fail and why different products succeed. And different ways that you can mitigate that and identify whether or not you’re on the right track or the wrong track.
Rob [06:23]: Sounds good. Let’s dive in.
Mike [06:25]: When you’re looking at the success and failure of different products, I think that there’s two very broad categories that things fall into. And the first one is whether you launched it or not. Clearly, if you never launched something then it’s not going to succeed. And that’s kind of a whole bucket of failures. There’s plenty of hard drives out there that are probably just littered with projects that people have started and then never finished. I think it’s pretty clear that there’s tons of reasons why those things failed. Most of it’s just people didn’t spend the time on it and follow through with it. But I think that we just kind of ignore those and move on to ones where people have launched it but, for whatever reason, it didn’t succeed.
Rob [07:00]: Okay. But before we do that, I have to tell you about at least one of my projects – it was probably circa 2005, 2006 – and I never launched it. But I still think this idea is as bad as it was the day I conceived it.
I always wanted to be able to follow artists and bands and directors and writers. Like I love Aaron Sorkin’s writing. And I wanted to go to one place to paste them all in or select them from a list and then, whenever they release something new, I would hear about it. You would think this would be fairly easy but I found myself keeping this big text document of all these band names and then these writer names and authors. And then I would periodically go through it and past them into Amazon and look and then I’d past them in here and there. And then I was just like I don’t think there’s really a good service for it. I think Bandsintown may do that now but I’m not sure it tells you about CD’s.
But anyways, I went through and I built the dot net and I hooked it up to the Amazon API and I did all this stuff. And then I realize this is an awful idea. This is something that some big venture funded company would do and try to create a big buzz around and raise a bunch of funding and then they’d go out of business and someone would come and pick up the scraps. Although I wish this existed and in a really palatable format.
Mike [08:10]: I think what you’re looking for is indieshuffle.com.
Rob [08:13]: Yeah? Does it do it for all the things I mentioned?
Mike [08:16]: I don’t know. You’d have to probably look at it and figure out whether or not. There’s probably little things that you were looking for that either are there or are not.
Rob [08:24]: Got it. So, this is cool for music?
Mike [08:27]: Yep.
Rob [08:27]: But it doesn’t have any of the other stuff. I follow authors who write fiction and nonfiction. And I follow, like I said, writers and directors so I would need film. Mine was going to be all that because you could, of course, use Amazon to look for those as new products came out. A new book or a new DVD at the time because there wasn’t streaming.
I’d imagine there’s either a service out there doing this now or there’s three different services. One for each genre.
Mike [08:52]: Yeah. Indieshuffle, I believe, is primarily aimed at music only. But there’s probably ones out there that are similar for those other spaces.
Rob [09:00]: Totally.
Mike [09:01]: Interestingly enough, I have an idea that I started back in 2005. I wrote out all the designs for it and it literally became a multibillion dollar business. It was named Lighthouse but the idea was essentially file sharing made easy so that you could just drag stuff into a folder and it would automatically share it on other machines. Sound familiar?
Rob [09:19]: Dropbox.
Mike [09:20]: Yep.
Rob [09:21]: Yeah. Now to be fair there were like 30 Dropbox competitors even when Dropbox came out. So, you could very well have been the 31st. Because obviously, the idea was one thing but Dropbox getting out ahead, raising the $10 million and execution is what took it ahead.
Mike [09:36]: Oh, totally.
Rob [09:36]: But it is fun to know. I almost acquired a business that did exactly – this was a Dropbox competitor – and the guy wanted a crazy multiple. But it was basically that. It had all the apps and all the stuff. It was kind of like a virtual thumb drive is what we were thinking of at the time.
Good thing you never launched that one because without raising a bunch of funding I’m not sure that you could have ever gotten that off the ground to the extent that they did. Because it’s the freemium model that allowed them to really get the traction, right?
Mike [10:00]: Right. It was 2005 when I wrote the design document for it and it was like an almost forty-page design document for it. But I never followed through and actually wrote it. I still wanted to tweak things out and figure out whether it was going to work or not. And at the time I was transitioning over into doing consulting because I’d left my full-time employment at the time. So, I was doing a lot of consulting and traveling and I just didn’t have the time to work on it.
Then fast forward like two or three years to 2008 is kind of when I went back to it. I started working on it and I think I probably wrote like a code for a week or two, and then I stumbled across Dropbox. And I’m like, nope, that’s it.
Rob [10:37]: Let’s say you had tried to build it in 2005. Do you remember how expensive servers were and storage and all that crap? It would have taken you literally millions of dollars to build it to any type of scale that would have paid. It was not a bootstrappable business even if you were ahead of Dropbox. Just purely for the cost of everything.
Mike [10:58]: The market that I was specifically looking to serve was magazines where they need to collect digital materials and files from graphic artists and they need to get those to their office. The problem was that most of those people had to use FTP servers and a graphic artist just does not know how to use FTP. They had problems with it. So, I was trying to make it easy for them to share their files. And there’s a general use case scenario that Dropbox came out and addressed at the consumer market. It’s interesting how that whole thing ended up playing out.
Rob [11:31]: Totally. What do you mean they don’t know how to use FTP? I think your wife takes offense at that.
Mike [11:35]: No. The thing is, she was actually the one who enlightened me to the problem because she was working with all these people who needed to send files to her. And they couldn’t figure it out. She was working at the magazine and they were trying to send her files and they just couldn’t get them or they didn’t’ get them in time. There was a lot of issues with FTP. You send the file and there’s no notifications behind it either. So, obviously, Dropbox has the notifications and stuff built into it.
There were all these ancillary things that went into that in transferring the files and making sure that people knew about them and there were deadlines and stuff like that. But, I don’t know. It’s interesting to look back on that stuff.
Rob [12:11]: For the listener wondering what we’re talking about, Mike’s wife used to be a graphic designer for a magazine. It was obviously a problem within her purview there.
Cool. So, let’s dive in. I totally sidetracked this whole episode so we could talk about these old, crappy ideas. Well actually, your idea was a good idea. Just one that would have taken a different approach.
Mike [12:30]: It kind of leads back to some of the reasons why something doesn’t get off the ground. It does relate to the episode, both of those things do. But I guess to kind of step back and go back on track, there’s a difference between launching and not launching. Once you’re past that, things also break down into a couple of different categories. And the first one is, did you get any paying customers or not? Because there’s a big difference between a product that gets zero customers and gets at least one. And there’s a lot of reasons why something might get no customers. Obviously, the most prevalent one is probably you didn’t do any marketing or you weren’t able to talk to people.
There’s also the quality problem issue. Your product has to be good enough for people to want to pay for it. Has to have the features that they need. Had to be solving a problem for them. And if it’s not doing any of those things then you’re not going to get any customers.
Rob [13:15]: Yep. Isn’t this startup founding 101 these days? Product building. The first step is figuring out what the problem is to be solved. So, there should be some conversations. And this only became popular really around 2007, 2008. Before that we just went off and everybody just built stuff and hoped people would use it. And then Steve Blank really bringing his customer development approach to the forefront. And that was the first time I heard about asking your customers in advance. And it was like, “Whoa, you can do that? What does that even look like?” And then there were several books written for our work group because one of them where Tim Ferriss did the ad words in advance of offering the product for sale. But there were six or seven books that had talked about that before that came out. And that was when it was like this really makes a lot of sense to try to do as much validation as possible up front to ensure that you are in fact solving a problem.
Mike [14:08]: That’s the first bucket of potential failures. The next one is: if you’ve achieved paying customers but the product is still losing money. Essentially you’ve got negative margins. And there’s a bunch of different reasons for products that fall into this category. They could range from your infrastructure or your hosting costs being too high. Your cost of acquisition is too high compared to your lifetime value. That means that your cost to acquire a customer is more than they are worth. It may cost you $50 to acquire a customer but if they’re only going to give you $25 over the course of the lifetime of that customer, it’s really not worth being in that business. You can’t sell at a loss and make it up on volume.
There are other situations where if it’s a product high service, for example, you might be selling something for $100 and then you’re farming out the work, but it costs $150 in labor to deliver whatever that is to the customer. And, again, you’re in the situation where’s you’re trying to deliver something, and you’re just simply not charging enough. And even in those situations, you can’t necessarily just raise prices and expect the problem to be solved. There’s certain types of problems or situations where the customer is simply not going to be willing to pay more money for something. They have this in their head that they can afford “X” and if you go to “X+5” or “+10” they look at that and say it’s not worth it to pay to have that problem solved at that price point.
Rob [15:27]: This is where I would guess if you had actually launched that Dropbox competitor, this is what you would have found if you tried to bootstrap it. You would have had to charge enough that you wouldn’t have been able to get – well, if you’d gone after magazines that’d be fine. That’s a whole other issue. But let’s just say you had gone after the consumer market like Dropbox did, you would have probably wanted to charge $5 a month or whatever. $40 or $50 a year and you wouldn’t have had the organic growth and the big exponential growth curve that Dropbox did have because they were doing that freemium model up front.
So, one thing to think about here is if you do raise a big bucket of money and you decide that you want to grow this thing super-fast and get the volume, it’s a lot more of a riskier bet because you’re not getting your money up front. But that’s how these companies get to the $100 million and eventually the billion dollar valuations.
With that said, I’m doubting – if you’re listening to this – that that’s where you want to go. So, you really do need to pay attention to unit economics. I heard someone at one point say that they wanted to start a competitor to Kissmetrics and Mixpanel. And I told them, “Do you realize they spend” – I forget what the amount was. It was like a quarter of a million dollars. It was more than a quarter of a million bucks a year and this was in the early days. This was before they scaled up. It was a quarter million a year just kind of table stakes just for all the hardware. Or even the EC2 credits. Or whatever it was they were doing because it’s just such a resource intensive business. So, diving into these analytics platforms or something with a lot of queues where you’re sending email – as I know all too well from having worked on Drip all these years – there can be real infrastructure costs. There’s a difference between a crud app like Basecamp or invoicing software or something and switching over to something that really gets a lot of requests per second, 1,000, 2,000, 3,000 request per second. There’s a true marginal cost per customer that you add.
It’s not something you’re going to be able to predict exactly. But it is something to keep in mind and do a sanity check of like, “Is there anything here that’s really going to scale up exponentially in terms of server load or in terms of support costs as I grow this app?”
Mike [17:25]: And sometimes those aren’t very easy or straight forward to calculate. I remember some offhand comment about it was either Kissmetrics or Mixpanel where one of the early versions of the app, they had 25 servers running in order to support nine customers. Which is more than one server per customer. And if you look at the price points that they’re charging you really can’t afford to have two to three servers per customer at the price points that they currently had. It’s just simply not possible. So, if you’re trying to develop a competitor to it, your hosting costs alone are going to kill you. There’s no way that you’re going to be able to make that work.
That said, they did get funding, and they’re able to scale it based on the fact that they’re able to drive those prices down. It’s a starting point. But, again, not everybody’s going to be able to be in a position where they can get that money and invest it to be able to drive those costs down as far as they need to go in order to make the business work long term.
Rob [18:16]: So, you’ve talked about the first step was never launching. The second one was zero customers versus one or more customers. This third one is getting paying customers but realize that it’s losing money. I think we have two others that we want to cover in terms of the ways that products can fail. What’s the next one?
Mike [18:32]: The next one is you have what I would call a mediocre success. It has paying customers but it’s got a marginal profit. And by marginal, I mean it’s almost not worth your time to do. The product is at least break even and it is making money but maybe it’s only making a couple thousand dollars a month. Maybe it’s $2,000 or $3,000 but, again, even if it’s making $3,000, if you’re spending thirty hours on it, is that worth your time? I think that’s an individual question you have to answer but if it’s paying you $10 an hour for your time then it’s probably not. If it’s paying you $50 or $100 or $200 an hour for your time then I would consider that probably more than a mediocre success. But there’s also overhead associated with running more than one product at a time and having each of them be a mid-range success that is simply not meeting your needs full-time. And the context which in it’s going to be harmful.
But, going back to the products that are a mediocre success, there’s problem solution fit. If it’s not a problem that people really need solved or it’s a nonexistent problem, chances are good that you can get some people to pay for it. But you’re not going to get large scale numbers of people. You’re going to get those people who it’s a really painful problem for and they’re willing to pay for it. But that could just be because they don’t know what some of the alternatives are out there or they haven’t done their research. And you can very quickly fall into a situation where people are using your product for something it simply wasn’t designed to do.
Rob [19:54]: Another thing that could be wrong when you have some paying customers but essentially a marginal profit and you’re not growing is you don’t have product market fit. So, you’ve built a product but you’re offering it to the wrong market or audience or there is not market or audience for this. And a related piece of that is market positioning where it might be related to your pricing or how you’ve portrayed it against competition but you really need to dig into why is your product better and for whom. And it might not be differentiated enough against the competitors and new products really need that.
People need to be able when they hit your website to think, “What bucket does this fit it? Is this invoicing software or proposal software or email marketing software?” And if you have just a description that is what the product does, everybody’s trying to figure out what bucket you fit into. As we’ve talked about in the past, creating a new bucket or creating a new product category is very expensive. HubSpot kind of did that and I think they might have said it took them $5 million before they were able to – he said they had to raise millions and millions of dollars before they were able to really define that product category. And I think that it’s a common mistake people make and one that I made with Drip in the early days was not wanting to position this against other competitors. Or just put it into a specific space like this is email marketing software but here’s why it’s better. Or this is marketing automation but here’s why it’s better.
I kind of wanted to be this new unique thing and all the headlines were just so vague and nondescript that people were having a tough time understanding. So as soon as we went with the, “This is marketing automation but it doesn’t suck,” That was the headline for so long. That really put us in a good position because people then realized, “Okay. So, you’re not going to own this entire market but you are going to own this portion of people who hate the other providers that are there.” So, that was a big product positioning fit for us. And I’ve seen other products be able to do that as well.
Mike [21:44]: The other thing that what you just talked about does is that it allows people to mentally identify who your competitors are because if they can’t do that then it’s going to be difficult for them to compare and contrast what you offer versus what some of the other ones offer. And sometimes you want to be able to specifically define who your competitors are and you can use market positioning to do that. But you can also take a particular market and either go upscale with it or down scale with it.
With Drip, for example, it was essentially pitched as Mail Chimp but more advanced. It was not quite advanced to the level of Infusionsoft or Marketo or things like that. It was more for a small business scenario then for a large enterprise or for somebody who’s just working out of their home office. And, obviously, that has changed over time but that was the position that you started in and that served Drip, obviously, very well.
Some other reasons you might be having some mediocre success is that you have poor design, which if your UI is not very good, it can affect some of your adoption rates. If somebody hits your website and they look at the screenshots of the product and it doesn’t look very good, then they are probably less inclined to purchase it. Even if you’ve gotten a base of customers who used it and the reason they used it is because they were experiencing the pain so much that they just had to have a solution. And they didn’t really care what it looked like. But, as you start to expand your customer base, people are going to care. They’re going to start taking those things into account. If you have misspellings in your UI, for example, that’s going to reflect on them. They’re going to say, “If you can’t get even just these basic things right on the surface, if it’s a complicated product in any way, shape or form, what sorts of problems are going to be underneath the covers?” So, you have to keep those types of considerations in mind.
Poor design decisions can lead to essentially a high churn rate which high churn is simply a symptom of something else. It could be support, it could be onboarding, it could be poor design, it could be quality, it could be downtime issues. There’s lots of different things associated with that. But at its core, high churn rates are associated with some other problem. And it could just not be even a technical problem. It could be that you are marketing to the wrong people and those are not the type of people that are going to stick around. It could be a symptom of a market targeting problem.
Rob [23:54]: Right. Back to poor design. You can point to apps that are successful that have poor design, and I will tell you, yeah, they were early. They were the only choice at the time. Or they really did a lot of heavy outbound sales, and the people who they talked to didn’t know any better. So, a lot of the email marketing or marking automation or big sales like sales force CRM stuff, yeah, the UI’s aren’t great. But you’re not them. You didn’t start ten years ago. You’re starting today. And today UI is a huge deal unless you’re in a very tight niche where you’re kind of the only player. So, this is something that you definitely need to pay attention to.
And in regards to churn, you’re right. It is a symptom of something. It’s often a symptom of crummy support or no product market fit or there’s a bunch of reasons that can happen. But all of this stuff is going to keep your grown flat. And that’s exactly a good way to have paying customers but essentially marginal profit assuming you are working on this a lot.
If you think about the micro-businesses I used to run – like DotNetInvoice or beach towels or apprentice line jobs – those had paying customers but they were highly profitable in the sense that the money that came in, I spent almost no time maintaining things. It was really all work done up front, and the money that came in was mostly profit. Maybe it was only a couple grand a month like you said but I wasn’t spending thirty hours a month on it. So, if you cobble a few of those together, you can actually kind of nice little lifestyle making $10,000 a month with a handful of these small apps not investing the time.
But that’s not really what we’re talking about here. We are talking about you having the intent of growing a SaaS app and working on it most of your free time and getting it to ten, twenty or thirty thousand because we’re guessing that, probably if you’re listening to this, that’s the goal that you have.
Mike [25:31]: The last one we’re going to talk about in this particular category is the high cost of acquisition but also a corresponding high lifetime value. Let’s say that your cost of acquisition is $1,500 and your lifetime value is $2,000 but you’re getting $100 a month from each person. Well, it’s going to take you fifteen months to get back the money that you’ve paid to acquire that customer which means that you have to spend a lot of money up front to get a return that is going to put you $500 in the black but it’s not going to start until another fifteen months after you acquire them. And that’s a very difficult position to be in. That’s why some companies go out and they raise funding to be able to start putting money into that funnel to help them figure out how to move that up, how to lower their costs of acquisition. And they’ve proven that it’s a profitable business model. They really just need to make the numbers work.
And if you’re in a position like this, it’s very difficult to do that because it’s going to stunt your growth. It’s going to make it a long slow slog in order to make that into a profitable product which defines this as a mediocre success.
Rob [26:32]: There are a lot of hurdles that you have to get through if you look at this list that we’ve just talked through. Just getting something launched is a pretty big deal. I know that we used to always talk about on the podcast how that’s not the finish line like most people think. That’s maybe the 40% marker and these days, the further things get and the more competitive they get, I think that may be even earlier. It’s so much easier to get to launch today than it was five years ago just given the tools that we have and all the resources and things like Heroku the platforms as a service. I used to have to spend a lot more time doing that stuff even the marketing tools as well. And then just getting zero versus one customer is a big hurdle. And then getting to the point where you’re marginally profitable. I think we’ve seen a lot of folks get there these days. It’s a hard place to be in because it feels like by that time you’ve worked so hard on the app and you’ve spent so much time building and launching and promoting and then you get to the point where it’s making $1,000 a month top line and it’s $500 a month in hosting costs and you’re still spending twenty hours a week developing on it. It can be tough. It can be a long slow ramp of death, if you will.
I think there are a bunch of other potential reasons that an app can fail but once you make it past this point where you have customers and marginal growth, if you can make it past that, those are the apps that we hear about. Those are the apps that we talk about. Those are the folks that do the attendee talks or the main stage talks at MicroConf. Or that you hear interviewed on podcasts. That’s kind of that final hurdle. I shouldn’t say final because, obviously, there’s so much more beyond that. But it is a point where you just feel like you’ve done something that so few people have done. It’s a big bridge to cross to get past that product market fit or get to that point where growth really does start coming easy. And it’s almost magical when that happens and you see that growth curve go up. And you think to yourself, “Oh my goodness. How did we get here?” Suddenly you go from scrambling from customer to customer to the point where 7K MRR growth per month. You look at that and you say, “Yeah, that was an okay month.” Or you can be disappointed with that. It sounds insane when you say that out loud but you do get to the point where that is the norm or less.
I just want to encourage you. If you’re listening to this, it does sound like a long road, but there is hope. There is a point where you get there and it just feels like everything’s hitting on all cylinders. You’re always going to have stress; you’re always going to have the next feature you need to get out or the competitor that’s ripping you off. But there does hit a point where you’re going to feel proud of yourself. You’re going to feel like you’re kicking ass and that’s where you want to get to. That’s the goal.
Mike [29:01]: That sounds like a pretty perfect place to stop for today’s episode.
Rob [29:04]: Thanks again to Matesh for writing in. And if you have a question and you’d be interested in hearing us discuss it on the show and maybe even turn it into an entire episode, call our voicemail number at 888-801-9690. You can email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt. It’s used under creative comments. Subscribe to us in iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening and we’ll see you next time.
Episode 333 | The Ultimate Guide to Email Sequences
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike give their thoughts on the ultimate guide to email sequences. Based on an article they define an email sequence, discuss why you should create one, and list the different types of sequences and their purpose.
Items mentioned in this episode:
- The Ultimate Guide to Email Sequences Article
- Drip
-
What Got You Here Won’t Get You There: How Successful People Become Even More Successful
- Bluetick
- CartHook
Transcript
Rob [00:00]: In the episode of Startups for the Rest of Us you are about to experience, Mike and I give our thoughts, feelings, inspiration. What else Mike? Our perspiration on an article called ‘The Ultimate Guide to Email Sequences.’ This is Startups for the Rest of Us, Episode 333. Welcome to Startups for the Rest of Us, a podcast that helps developers, designers and entrepreneurs be awesome at building launching and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:35]: I’m Mike
Rob [00:36]: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What do you think about that new intro?
Mike [00:40]: I don’t know. I don’t think I’ve ever heard you read the intro that fast before.
Rob [00:45]: Yeah, I know. I kind of zipped through it. What’s going on with you?
Mike [00:48]: Still working on doing demos and stuff for Blue Tick. It’s interesting. I’m talking to more and more people who want to add teams and so far the apps are only geared towards single users just because of all the other things that need to go into it in terms of privacy and data sharing between different people, even within the same account. Right now, we’re working on trying to figure out how to extend the system to support people who are working in more of a team environment and figuring out how to essential overlay permissions within a subscription over the top of what we’ve got and without breaking things, obviously because that’s kind of important. It’s been a challenge so far so it’s more about [?]. Things are going well.
Rob [01:25]: All right. But you do have customers that are coming on board that don’t need team stuff, right? That’s got to be your short-term play while you architect, build or whatever you’re going to do with the team stuff. It doesn’t seem like teams should stop you from launching, right? Or at least it doesn’t seem like it should stop you from getting to that 25 customer mark.
Mike [01:43]: No. I’m definitely not stopping it but it’s like we have to figure out how it’s going to work and think about all the different places where we need to make changes and that’s really what we’re doing is we’re planning it and trying to identify where the challenging spots are and if there’s any other things that are going to need a change under the covers because of it and then again the privacy issues just because we’ve got access to people’s mailboxes. A quick example, like let’s say that somebody throws a-when you throw a new email address into the system, up until that point, we don’t download any of the contents of the emails associated with it. As soon as you do, then we go back and we say, “Okay, well, these were all the emails that were sent and received to that email address. Now we’re going to download the contents of them so that they can be then displayed inside the app.” Let’s say that you and I are in the same account and you’ve emailed your wife, for example, and I throw your wife’s email address in as a contact, well, it’s going to trigger that. Should things be shared? Should they not? It’s just a very difficult problem to work through and think about the implications of everything. That’s where we’re focused on. You’re right. It doesn’t stop us from moving forward on all the other stuff and I’m certainly not. My work around [?] at this point is, “Hey, let’s sign you up for multiple subscriptions and then we’ll figure it out.”
Rob [02:57]: Yeah, that’s nice. Having a work around is huge. That’s what we’ve realized over the years. Someone always wants something that you don’t have yet. If you can figure out a way to get them set up in a way that is at least reasonable and they can continue to use it until you get that feature built. It’s pretty nice. That’s the way to get a lot of customers. That’s why I found with the best sales folks are the ones who don’t just listen to the customer say, “I want permissions,” and so it says, they come to tack and say, “All right,” the product team and they say, “All right, you need to build permissions.” But it’s like, “No, there’s probably a work around and like you’re saying, being able to have multiple accounts is one way to do that.
Mike [03:34]: I had somebody who wanted to do something and I said, “Hey, let’s get out a call. I just want to talk for a minute or two,” because he was already a customer. He’s like, “Hey, can I add somebody else in?” We just got in a call and talked it out. All he wanted to do was be able to send the emails from another account as well. I was like, “You can do that today. You don’t need a full blown account or anything.” We basically just bypassed the issue entirely, which was nice because I added another user and it didn’t take any real extra work on my part in terms of engineering or anything like that. It was just a quick call to say, “What is it you’re looking for?” As soon as I found it out, he’s just, “Okay, yeah, let’s just do this.” Made it easy.
Rob [04:09]: Cool. On my end, I only had one thing this week. I am about a quarter of the way through a book called ‘What Got You Here won’t Get You There: How Successful People Become Even More Successful.’ The reason I’m pretty intrigued by it, it’s written by Marshall Goldsmith and Mark Reiter and one of them is a masterful consultant for successful people and what he’s seen in his patterns over the years as he’s worked with these folks is that a lot of successful people still have a major flaw in their personality that is holding them back. He basically goes through the 10 or 12 that he’s seen. One of them is you give too much feedback or you always feel like you need to chime in [?] on your team or you’re too negative and you always poke up the holes or you’re too casual. There’s just a bunch of different things. What I like about it is A, its from his experience with hundreds and hundreds of clients, perhaps thousands of clients and he basically says when you tell this to a successful person, that they have this issue, they almost always say yeah. They either deny it or they say, “Yeah, but that’s why I am successful. I’m successful because I see the negative in everything.” He’s starting to build a case against taking these flaws and not trying to fix them. That’s what a lot of folks will try to do because they say, “No, that will make me not who I am. I won’t be as successful.” It’s a fascinating topic of conversation. As he read through a bunch of the behaviors, most of them I was like, “Yeah, I don’t do that, I don’t do that.” And then there’s a few it’s like, “Ha, I may need to ask some people like am I on the border on some of these?”
Mike [05:44]: It’s interesting. It reminds me a little bit in some ways of Gabriel Weinberg had a blog post about how the things you do in terms of your marketing, they will work to a certain extent and then you get to a certain point and beyond that, those things just don’t work for you anymore. I can see the same thing in terms of personal development, growth and being able to lead the business. Some people have that ability to create a company and build it as a startup and then build it to 105, 100 or 1000 employees. There’s other people, they can get to a certain point and then after that a lot of them end up getting forced out of the business or taking a back seat to somebody else just because they really don’t have the skill set, the personality or the capabilities to take business to the next level. I can definitely see myself falling into some of those categories along the way. I think being able to recognize your faults, your inexperience or inflexibility in certain situations is probably a benefit more than a hindrance. Being able to say, “Yeah, I understand that and I will try to avoid that situation,” is a little different than denying it.
Rob [06:47]: Here’s what I like about this book. Again, I’m only a quarter the way through it but already it’s just surfaced a bunch of anti-patterns in terms of behavior and personality. It isn’t necessarily for successful people. Even if you feel like, “I’m not very successful,” it’s still going to bring up a bunch of patterns that you should think through yourself. That’s basically what I’m doing. It doesn’t come off as super, self-help or personal development book but that’s exactly what it is and it’s doing a really good job of it because it’s making me think quite a bit as I’m listening how can I improve in these areas. Those are the kinds of books I enjoy, the ones that make me think about my own behaviors or my own motivations and get me to improve on those.
Mike [07:27]: Awesome. Anything else going on this week?
Rob [07:29]: No. I think we’re just talking about this article here. I ran across it at webprofits.agency and its own their blog. We’ll obviously link it up in the show notes. The article is called ‘The Ultimate Guide to Email Sequences.’ What’s funny is I read through the article and I was like, “This is pretty, you know, this is a nice guy.” I figured we can touch on some points here because it’s a nice overview of all the different types of all email sequences. If you’re not using some of them, you probably should be. These are all handy things to improve conversions, improve attention and that kind of thing. Once we got on the call beforehand, you were saying this is actually webprofits.agency is Sujan Patel’s company. [?] like a growth consultancy agency. Sujan Patel is a speaker at MicroConf starter edition. He’s been a long time colleague of mine. He’s interviewed me several times, a really good guy. It’s kind of funny how small this world is of startups and marketing.
Mike [08:23]: Yes, so let’s dive right in.
Rob [08:25]: All right. The article starts off talking about what is an email sequence. It says, “Let’s define it. An email sequence is a series of emails sent based on pre-set time intervals or trigger based automations or both.” You can either be time-based, where it’s like you’re going to get this email and the next one is three days later and then the next one is five days late or it’s going to be based on an action like not logging into your software for a week or clicking a link in an email or clicking links in the last three emails, etc. The next question is so why create a sequence? The beauty of it is, this is from the article, email sequences are automated, right? When you use both timed and trigger-based emails, messages go out when they are most likely to have an impact. Speaking from my experience, the reason I like email sequences and email mini-courses and I’ve been using these in most of my businesses for going on-it’s more than a decade now, is because they are set it and forget it. Aside from updating content when it gets stale, putting one of these email sequences lifts whatever conversion rate you’re going for. If it lifts it, it just lifts it forever. For every new person that signs up, it’s an evergreen sequence, as opposed to-the alternative is broadcast emails, which are sent out to your whole list all at once. They go out once and then you have to create new content the following week.
Mike [09:44]: One of the pieces of that, that I like the most is the fact that it calls out the fact that you can send out these emails when they’re most likely to have that impact. Lately when I’ve been doing on my Blue Tick demos, one of the things that I like to call out is that there’s a specific email in the sequence that goes out at 7.12 a.m. which I am almost never up at that point. I am up but I’m not sitting down at my desk working. That email goes out at 7.12 and so far that’s the one that converts the most. There’s lots of people that get that particular email and then they come through and they sign up for a demo. It’s just interesting you can use those as different touch points when it’s going to be the most impactful. There’s other situations as well. It’s not just like the broadcast emails. It’s, let’s say, somebody goes to fill out a form and you know that they went there but then they didn’t fill it out or they abandoned their shopping cart. There’s a bunch of products out there that will identify who those people are and then allow you to communicate with them “Hey, you didn’t finish this. Did you forget? Did you get distracted?” There’s lots of reasons why somebody didn’t follow through with something and most of the time it just because they got distracted. It’s not because they went to the page and then decided, “Oh, I actively do not want to do this,” or they see something that makes them turn away from it. It’s more that something else came up that they needed to deal with and it took priority. Being able to nudge them in that direction and essentially bring them back to the table is super helpful.
Rob [11:04]: So now we’re going to take a quick look at the eight different types of sequences that they call out in this post. We’ll go through them fairly quickly due to time constraints but obviously you can refer to the link we’ll have in the show notes if you want to dig in any one of these. They have examples with screenshots and that kind of stuff. What I like about this list is it made me think are we doing all of these with Drip? Are all of them relevant? If not, how do I get that into somebody’s cue to implement this? To dive into the first one is to nurture sequences. This, again coming from the article, it says what it is, “An email message or series of messages designed to help introduce subscriber to your company. These messages may be used to deliver any promised opt-in bonuses, like a coupon code or a lead magnet and they should set subscriber expectations on the frequency and content of the messages they will receive in the future”. I like to think of these as lead nurturing. It’s trying to get someone a little more familiar, to go from straight cold to perhaps a warm or an interested prospect.
Mike [12:01]: The other thing this does is it keeps you top of mind. There’s plenty of newsletters that I’m sure you’ve signed up for as well as I have that you sign up for them and you hear from them once or twice and then you don’t hear from them for like a year or two years. Even if it’s just six months, your expectation was that you were going to be getting content on a more regular basis. When you don’t, the person is essentially restarting a relationship every single time they send an email. Yes, they are going to get some conversions but at the same time, they are not really maintaining those contacts as warm contacts. If you get an email every single week from a particular company, when you run across that particular problem in your business, you’re more likely to turn to them for assistance than somebody who drops in once every three to six months and that’s it.
Rob [12:44]: The second type of sequence is an engagement sequence. Reading from the article, “An engagement sequence aims to deepen the relationship with your subscriber. Once the subscribers have absorbed your nurture messages, engagement sequences can help nudge them to take smaller scale actions that will prime them for future conversion opportunities.” One example is an app called Pocket that attempts to engage its most active users with messages sent annually to the top 1% and 5% readers. Pocket is an app that allows you to read offline annually. I would almost want to do that more often like every month or every quarter or something. Maybe monthly is too much but every quarter. It’s like you’re in top 1% of readers. This is like engagement. It’s a little more personalized than nurturing and it’s people who may already be using your app or you have some type of knowledge of the actions they’re taking. Another example of this is Netflix which offers personalized recommendations with easy calls to action. I get an email every week or two and it’s like, “We just added a show to the Netflix catalogue that you’ll probably like.” There’s always a play button ‘add to my list’. I add a lot of those. They tend to be stuff along the lines of what I’m watching or what the kids are watching and that’s a way that it keeps our cue full thus engaging us further into using their service.
Mike [14:06]: I think the example Pocket, it seems to me a little misleading because that’s probably not-I don’t think that’s the best example that could be used here. That’s solely because it’s only targeting the top 1% or 5% of your subscribers. It feels to me like there’s probably engagement that you could do for all 100% of the people who are on your list. You could make it look more personalized and say, “Hey, we’ve got this for you just as a special gift for our reader. Here’s something you might be interested in,” and you can base that-you can split up your list in three or four different categories and based on things you’ve either tagged them with in the past or they’ve explicitly expressed interest in, you could use those things to engage them but the reality is you’re trying to get them to click on something to make sure they’re still active as a user. I think that’s just really a matter of making sure that you’re delivering stuff to them that they want and that they’re going to be interested in because if they’re not interested in anything you have to offer, you’d really want them off your list.
Rob [15:02]: The next type of sequence is a conversion sequence. Reading from the article, “Conversion sequences are your big guns. You’ve nurtured your subscribers and advanced your relationship with smaller scale engagement suggestions, now you’re ready to ask them to take action usually to purchase something. They give an example here, we did this earlier on with Drip. Earlier on it was a failed experiment. I think our actual sequence wasn’t great but we called it our ready to buy sequence or RTB. We looked at our most engaged users and prospects and we started talking to them about more direct comparisons like us versus MailChimp and here’s what we can actually do with Drip. It was less like high level, topic funnel educational stuff. We started digging into calls to action like, “You should sign up for a Drip trial and here’s why.” Conversion sequence is definitely something you’re going to want in the mix because if you don’t ask for the sale, you’re just so much less likely to get it.
Mike [15:52]: I think a conversion sequence is one of those places where you want to have a little bit more than the fine grain approach in terms of who it is that you’re targeting with this so that you can take those measurements effectively because if, let’s say you target your entire list and 20% of them aren’t well qualifies, it skews your statistics and most of us are driven by those statistics but if you look at that and say, “Oh, well, only 1% of my list converted,” it’s a little different if you look at that and say, “Let me cut off this bottom 80% because most of those people, I know that they’re not going to convert because they’re just not in the right spot, they’re not far enough along. These are the people we should be focused on,” and then pitching it to that 20% and saying, “Okay, what’s our conversion rate here? Do we have this correct,” and trying to figure out is the definition of your target prospects correct in your systems or is it not. That’s where you start looking at those conversion rates. It’s not so that you can’t look at both across the entire spectrum versus who you think are well qualified but I think going after directly those well qualified people is a better approach just because you can get more fine grain and you can identify who those people are and use that to extrapolate where you should channel your future marketing efforts.
Rob [16:58]: The fourth type of sequence is an on-boarding sequence, my favorite, I love these. The first time I launched one with [?]. Forget what it did, I think it tripled, maybe like 5x the trial conversion. It was some insane number but reading from the article, “You’ve got the customer, now don’t leave them hanging. On-boarding messages ensure your new customers understand how to use the product they’ve just purchased so they can get full use and enjoyment out of it right away.” They have a little info-graphic about seven different emails you can send. It’s like the, “Hello, welcome to our app. We can solve your problem. Hey, have you tried. Here’s a copy of an e-book and we do all these stuff.” If you haven’t gone through Drips on-boarding emails in a while, I would recommend signing up and checking it out because we’ve really honed and added a ton of stuff too. I’m pretty sure-I think we even have a video course in it that’s really a well produced video course. There’s just a lot to it. Tons to be set on on-boarding emails but just know of all these sequences, I actually think on-boarding emails may be the first one I dig into when I think about a new app. It’s like how are you going to get people to actually use your software now that they’ve signed up.
Mike [18:02]: What are your thoughts on in terms of the on-boarding process itself, the emails that you’re sending, customizing those specifically based on where the person is at and what sorts of things they’re doing in the app. When you look at an on-boarding sequence like this and you say, “Oh, here’s a general layout of what that looks like,” and then you still go to sign up for an app and they send you through an on-boarding sequence and I just did this recently with a CRM that I signed up for. I was getting emails saying, “Hey, by now you should have done this,” and it was like four or five emails into the trial for it and I’m like, “Yeah, I still haven’t done stuff too so why are you sending me stuff for like step four and five? It does not make sense here.” I did notice it. It stuck out in my mind that they’re sending me on-boarding emails and that’s great but I’m not even there. You really need to be pushing me towards getting step two done.
Rob [18:50]: It sounds like they just had theirs in some basic auto responder. It didn’t have any status of what you were up to. That’s one of the early things we build into Drip is since we have liquid templeting, there are on-boarding emails basically say, “If you have completed this step,” and I think we do it by tag, “If your tags include X, then display this messages otherwise display this other one.” We never get ahead of the steps. If you’ve done a step, you won’t get an email asking you to do that step again. There’re different ways to handle that, like I said, we use tags and liquid but with workflows, now you could do it probably even more clearly than that because you could just have the [?] stands right in the workflows. If you don’t have some type of intelligence, you need to be really vague. If you’re going to use a MailChimp auto responder for this, then you have to waffle around the issue. You can’t say you have or have not done this. You just need to be more broad with it or think about moving to a platform that has some type of automation so that you can be hat specific because you’re definitely going to engage people more and get better results if you are really specific with what they have and have not done yet. The fifth type of sequence is an abandoned cart recovery sequence and reading from the article, “A would-be buyer has left something in your shopping cart but left without purchasing. An abandoned cart recovery sequence may help bring them back.” They have an example from Shopify and of course I think of [?] when I read this because that’s what they started as, was abandoned cart recovery. There’re several apps out there that do it or you could do it. There’s people that use Drip or use MailChimp or whatever to do it. I guess you need some automation in order to do this well. I got abandoned cart sequence within the last week from a website that sells watches. I put something in there and I was thinking about it and I got distracted and it sent me a 10% coupon in like a day or two later and a couple of days later sent me a 15% off and I was like, “You know, I’m going to see if they send me 20%.” They never did but then I went back and used the 15% and it actually brought me back. I was on the fence about buying the watch but at 15% cheaper, it totally made sense. These things, not just anecdotally, these things really do a pretty good job. These are going to be emails that over time are going to make you a lot of money.
Mike [20:52]: Another thing you can do with these types of things, even though it’s not like an abandoned cart recover sequence, you can also use it for things like when somebody goes to click on a link inside of an email and you know that they’ve done that, maybe you have automation in place where if they click on the link then it tags them. I set this up in Drip for when people are going to the Blue Tick website and it’s asking for an invite. When they put in their email address, it flips them over to another page and if they do not fill out that form within 10 minutes, it starts them into a Drip sequence that sends them emails to get them back and fill out that form. You don’t have to limit this just to abandoned carts. You can do it for other key pieces of your sales process to get people to take that next step because obviously if they don’t take that next step, then they’re not going to advance in your sales process. You can use these types of automations to get them to that, whether it’s actually going through and putting their credit card information or even just filling out a survey request or form or giving you more information that you need to help advance them.
Rob [21:50]: This isn’t just for carts. Imagine you have a two step signing process for your SaaS App where the first step is your email and your password and the second step is credit card. This is what we do with Drip. If you make it through the first step, you essentially are abandoning a cart. If you leave and we have a sequence tied to that and made us have had good results, not just for selling physical goods. Our sixth type of sequence is a renewal sequence and reading from the article, “Email list subscribers become disengaged for any number of reasons no matter how many nurturing and engagement sequences you have in place. Maybe their inboxes are flooded or maybe they’re no longer interested in what you’re selling. In any case, a renewal sequence, also known as a re-engagement sequence, is your last effort to bring them back into the fold.” You could see this working if you’re selling physical goods but even with a SaaS App, if someone hasn’t logged in, in 10, 20 or 30 days depending on how often they should be logging in based on your knowledge of successful customers, this is a good way to do it. It doesn’t just have to be a ‘hey come back’, it can be when you start. Think about making it more valuable to them like a weekly summary of stats or a weekly summary of all the benefits that they’ve gotten out of your app that people could unsubscribe from of course. But if they get that kind of a default when they sign up, not only are you reinforcing in their mind all the value they’re getting out of it but this can keep them engaged if they would be normally apt to wonder off.
Mike [23:13]: This reminds me of analytics applications where you’re connected to some of your accounts and they give you daily or weekly stats on how some of your different tools are doing or how some of your different lead automations are going. For example I think KickoffLabs does this. When a new lead comes in, you can have them send you an email that gives you a summary of all the leads that came in the previous day. It helps them to say, “Hey, look, we’re still providing value to you, even though you haven’t logged in, like here’s the value that you’ve gotten out of this product.” That’s a good way to help remind people that not only do they have that tool around but it’s doing things for them and working for them and it’s a good reason for them to not cancel. You can also use them, as you said, to help bring people back if you notice that they haven’t logged in for a while or they haven’t taken certain activities and if those activities are directly tied to the value that they would get out of the product and they’re not doing them, then you can use those to re-engage those people, bring them back in to help get them moving. It’s a secondary step, if they don’t do those, then you can send them other things to help bring them back and recover them as a customer because they’re probably on their way out at that point especially if they’re not doing those key things they need to be doing to get value.
Rob [24:22]: Seventh type of sequence is an event sequence. Reading from the article it says, “Like a conversion sequence, an event sequence aims to encourage subscriber action. In this case, however, that action is attendance at an event for example a live in-person meet up or an online webinar. Events sequences rely on both timed messages and trigger-based emails for example people who register to attend the event but didn’t show up.”
Mike [24:48]: Some of the things that come to mind for this is if you have somebody who signs up for a meeting with you or you’ve register for a meeting with them, sending those follow-up emails, whether it’s 10 minutes before and then like a several hours before, this is a friendly reminder to them that, “Hey, we’ve got this call scheduled.” It helps cut down on the cancellations and no-shows but you can also use this in events or situations where you’ve got a sale going on where it’s going to end at Thursday at midnight, for example. You can time those emails to be sent out two days or one day in advance and then a couple of hours before things. We do this for MicroConf. We’ve done this for years that lead up to the deadline for those things where once that deadline passes, the price will go up, for example. That’s very effective. You can get people who are on the fence or just dropped off the radar, they’ll say, “Oh, I’ll get to it later,” and they forget all about it and it’s 3 O’clock in the afternoon and they get a reminder email about it, “Oh shoot, I’ve got to go do that because otherwise this will go away.” There’s that time sensitivity to it that can help drive the traffic in the sales.
Rob [25:50]: Our eighth and final type of sequence is called a follow-up sequence. Reading from the article, “Follow-up sequences are similar to the on-boarding sequence described above but where on-boarding messages are intended for new product users, follow-up sequences should be used whenever customers complete an action such as finishing an online course or purchasing a product. The goal of this sequence can include things that re-enforcing information learned, to keep of top mind awareness, driving referral or affiliate sales, reiterating sales messages, sharing details on the next event, etc.”
Mike [26:20]: These are kind of those transactional emails that you get for accomplishing certain tasks within different pieces of software. One thing I wondered about is the logistics of managing some of these because some of the things that people might do are so desperate. Maybe you have some insight on this. If you have, let’s say five different things that you want somebody to do in their app, if you have these things in place, do you send those five after every single one or should you wait a little while to potentially put yourself in a position where you can aggregate them and say, “Hey, you did this, this and this,” and you put it all in one email as opposed to five separate ones.
Rob [26:53]: I think it depends on how close together those things might happen because sending someone five emails in a day or two days is going to be irritating. I would definitely aggregate there. If these things are going to happen once a week or in most cases they’re going to be a week apart, then having more touch points is probably good. Those are the eight types of email sequences. The funny part is the latter half of this article is about what to look for in an email provider and I had already chosen this article and linked to it where we were going to go through it and then I read this section and I was thinking, “Oh-Oh, what if they like, totally talk about a competitor, they don’t mention Drip or something,” but as it turns out, they have MailChimp, Drip and Vero and the author actually speaks really highly of Drip and says it’s the one that they use. When I see screenshots later on, it actually shows all the Drip screens of doing automation, tags, short codes and that kind of stuff. It’s an article that’s supporting Drip but that has nothing to do with what we’re talking about in the podcast. I just found the content in this article super helpful. I wanted to share it with you, our listener.
Mike [27:57]: To recap the different types of sequences are: nurture sequences, engagement sequences, conversion sequences, on-boarding sequences-I’m saying sequences way too much here-abandoned carts, renewals, events and follow-up sequences. If you have a question for us, you can call it into our voicemail at 1-888-801-9690 or you can e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Out of Control’ by MoOt, used under creative comments. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 332 | A Prioritization Framework to Deal With Task Overload
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about a prioritization framework to deal with task overload. Based on a blog post by Anthony Eden, they discuss business problems and the purpose of creating a framework.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of ‘Startups for the Rest of Us’ Rob and I are going to be talking about a prioritization framework to deal with task overload. This is ‘Startups for the Rest of Us’ episode 332.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products. Whether you’ve build your first product or you’re just thinking about it. I’m Mike.
Rob [00:25]: And I’m Rob.
Mike [00:26]: And we’re here to share experiences to help you avoid the same mistakes we’ve made. What’s going on this week Rob?
Rob [00:30]: You know you reminded me that I haven’t mentioned the conference that Drip is putting on. You know, it’s via Leadpages but it’s called Automated. And it’s the first marketing automation conference that we know about. So, we have Automatedconference.com and it’s virtual marketing automation conference April 12th through 13th. So, it’s during, I think is that MicroConf starter addition?
Mike [00:52]: Yes. It’s during MicroConf Starter Addition.
Rob [00:53]: Right. So, obviously, I will be prerecording my thing since it’s virtual. It’s nice to be able to do that. But if you’re interested at all it’s free and there’s a recording available after but I think that actually costs money. If you watch it live it’s free. And a really good speaker line up – Ezra Firestone, Laura Rotter, obviously, Clay Collins and Brennan Dunn, Anna from my team. There’s a lot of folks that are going to be dropping some mad knowledge on email marketing, marketing automation and that kind of stuff. So, check it out if you haven’t. It’s automatedconference.com.
Mike [01:23]: I almost feel bad because I think I feel like I have to correct you here. But the website says that the recordings are free if you register by the 13th.
Rob [01:30]: Oh, sorry. Thank you. I misread it. Yeah, it’s funny you know. It’s a trip – I mean I’m not putting it on myself, right. We have a conference organizer so I haven’t even been heavily involved in the planning of it. But that’s good. That’s a good way to do it. Is to give it away.
I know. Thank you for correcting that Mike. I appreciate it.
Mike [01:46]: It almost feels awkward.
Rob [01:49]: I know. Don’t worry about it. I’m glad you did so that everyone listening doesn’t feel like they have pay for the recordings.
So, how about you? What’s going on?
Mike [01:56]: Well, I did want to say congratulations over to the guys over at Snappa. They wrote in to us and said, “Hey, Mike and Rob. Huge fans and longtime listener. A lot of the strategies discussed in your show helped us grow our startup to $25,000 in monthly recurring revenue in 16 months without raising any funding. Just wanted to say thanks and looking forward to MicroConf next month in Vegas.”
Rob [02:14]: It’s pretty cool. Snappa.io and their value prop is to create marketing graphics in a snap to whip up graphics for social media ads, blogs and more without photoshop or graphic design skills. So, it’s kind of like an in-browser editor but completely designed to manipulate images and make them kind of marketing and ad worthy.
Mike [02:35]: Yeah. I mean the interesting thing about that – and saw this several months ago – was that they’ve kind of aimed it at the people who are doing advertising on Twitter and Facebook. Because all those things have image requirements that are slightly different from one another and they make it easy to kind of do all the things that you need to do to make the images social media ready or ad ready. And it’s really nice to just have a tool like that that you can just log in and – boom – you just make all those little tweaks and edits and now you’ve got your images. As opposed to having to send them out to a designer and say, “Hey, I need 10 different variations of this.” And figure out what the variations are that you need. It’s like they kind of have it built in.
Rob [03:10]: Seriously. I totally could have used this when I was running Facebook ads. I used to spend so much time in Pixelmator which is what I use on Mac to edit. And it was just redundant work over and over and over. And then I eventually outsourced it but it was always hard to keep a designer.
All the designers I find who are good, they’ll end up taking jobs. They don’t stay freelance. They either get really expensive or they take jobs. So, I was always either trying to find someone for this tiny project or doing it myself. And I really could have used a tool like this. So, congrats to Christopher Gimmer and the folks over at Snappa.io.
So, in terms of Drip updates, we’ve hit our stride. We hired, frankly he’s a UX/designer and he also slices stuff in HTML and he started like – it was several months ago now. Probably four or five months ago – but he’s really hitting stride with just cranking out front end stuff and we’ve always had like a really deep pool of rails developers on our team. And so, kind of our limiting bottleneck has often been for new features has been like front end work. And now that both Derek and – I say he’s the new guy, but he’s been with us like four or five months now – but now that he’s really hitting his stride it just feels like we’re shipping something. I think we’ve shipped like two or three fairly substantial features just last week. And, while we can’t maintain that pace all the time, I do think that we’re really hitting that stride of getting something meaningful out. And by meaningful I don’t just mean like a check box or a little tweak to this, a little tweak to that. But like an entire sequence of screens that does an entirely new flow. Like we added merge subscribers where you can merge Drip subscribers into one. We added global UTM settings so it’s several tabs of doing something that then defaults to all your links any time you put them in an email. Self-serve SPF decam which is the way you can verify your own sending domain and that’s like six or seven screens deep. And deals with the sendgrid api. So, there’s a ton of stuff that we’ve been tripping.
So, that feels good. I mean I realize Derek long ago looked me in the eye and said, “We are product people. Like the dopamine rush is from shipping features.” If you don’t ship features for a while, I start to forget that. And then having feature go out after feature, it reminds me of that’s really why I’m in this. You know? Is to get cool stuff out the door that customers are clamoring for. And then to hand that off to the marketing department and have them market and talk to support about it and have them say, “Oh this is so cool. It’s going to help our customers.” It’s a really good feeling. So, I’m kind of feeling – especially the last few weeks – just feeling up and optimistic about things.
Mike [05:31]: That’s cool. I stumbled across the merge and the UTM thing on my own when I was in there. Because I was automating my inbound lead fall for Bluetick and found those settings. I was like, “Oh, awesome.” And then I just sort of used them already. I haven’t seen the other one in terms of the DKIM stuff but I did use the other ones when I stumbled across them.
Speaking of that. I started automating my inbound lead funnel for Bluetick so I changed my homepage to have this ‘Request an Invite’ right on the homepage. That’s kind of the main call-to-action. And once you submit that, it sends the email address over into Drip and then there’s a workflow there that will wait for about 10 minutes or so because the next page after they do that is it takes them to a survey. And if they don’t fill out the survey, then Drip will start sending them a couple of reminders to say, “Hey, you haven’t filled this out. It would really help us out.” And, really, that’s essentially a prequalification mechanism for me. So, I look at that and, when the submit it, the form will remove them from that campaign in Drip and kind of put them into this sort of a holding area where when the form gets submitted it goes to a Google spreadsheet and I look at it and I can just mark it as either qualified or unqualified. And if it’s qualified then it sends it over into Bluetick and Bluetick invites them to a demo and then it creates a task and I can modify the text of the email that it gets sent to them based on what it is that they said to me inside of that survey.
I’ve started using this a couple of weeks ago and, so far, it’s working really, well because I can show people who’ve gone through that and they get to a demo exactly how they got there. And it’s just dog fooding it like a second level where I get to not only dog food it and use the product in a way that my customers would but I show them how I use it and I can show them their contact information and all the different touch points that they hit and why certain things happened.
There was one guy who replied to an email and he signed up for a demo. It was like from an email that was sent at like 7:00 in the morning. And I surely did not send that email. But he saw it and said, “Oh, yeah. I signed up for this and I filled out the survey and I didn’t respond to that first email. I should do this because you, basically, reminded me.” But it wasn’t me that sent it. It was Bluetick.
Rob [07:37]: That’s super cool, man. I mean, the dog fooding stuff we talked about a few weeks ago. But it’s a big deal. A: to get this automated to save you time. But B: to be using your own product and to be able to demo it during that process. So, you kind of have the luxury of having a product that is demo able during the sales process to the people who’ll be using it. Congratulations. It sounds cool.
Mike [07:58]: Yeah. It’s nice to be able to do that. And it’s just interesting to see the different reactions. Somebody had asked me about whether people frown upon seeing how the automation behind it is working and the fact that I’m not actually sending the emails. So far I haven’t gotten any push back. In fact, a lot of the people I’ve talked to have said, “I like that you do this because it shows me what my customers are going to see and, even though I have in the back of my mind, I know that it is probably automated. It doesn’t matter because it solves my problem.”
Rob [08:27]: Oh, I totally agree. If you were showing me that and I was your prospect, I would think that’s genius. Like the moment it pulled the curtain back and showed the ‘Wizard of Oz’ scene back there, I’d be like, “Dang, that’s it. I’m sold.” I think it’s a cool way to demo it.
So, before we dive into our main topic for the day. I wanted to revisit our goals. Kind of do a quick status update on the goals that we set back in December of 2016 because we’re almost through the first quarter of 2017. We haven’t in the past revisited them until a complete year later. And so, this time I figured we’d just take like a couple of minutes and quickly go through the goals and see how we’re making progress on those.
So, your first goal for 2017 was to log at least 100 days of exercise this coming year. And if you’re on track to do that then you would be approaching 25 days of exercise.
Mike [09:23]: Approaching 25. Yeah.
Rob [09:24]: Right.
Mike [09:24]: I’m probably at 15. Something like that. So, I’m definitely behind. It’s just not something I’ve been able to get to every single week. But there’s definitely those times where it’s not too hard to get to at least two or three a week. But then there’s other times where stuff comes up and I have to deal with it and I just kind of fall off the rails for like a week or so at a time. But I’m a little behind. It’s not outside of the realm of possibility for me to get it back up there though. So, I’m hoping to kind of play catch up a little bit.
How about you? I think you had a similar goal of two days of exercise a week. How are you doing?
Rob [09:55]: Yep. I would say I am exactly on pace. There were weeks like when we went to Cancun in late January for seven days. And I exercised every day. So, I had seven straight days because you just have a lot more time and it was gorgeous there so it was easy to get out and run. And then I’ve had a few weeks where I don’t do anything – which is a bummer. I wanted to be more consistent like two days a week. But recently, when we moved here we have an elliptical. I ran track for nine years. I ran the hurdles and my right knee is a little messed up. So, when I run on asphalt it’s actually kind of hard. I can do it but I kind of pay the price for it. So, we have an elliptical which is like a glider so you don’t have the impact. And that was busted for a while. And then I finally figured out how to fix it within the last month. And since then I’ve been at least two days a week. Between two and three. I am currently feeling quite good about that. And, frankly, I kind of need it to work off the old winter weight. And just walking around and riding my bike to work and all that. I can tell it’s starting to take a toll on me. So, I want to definitely keep up the two days a week. And, hopefully, it should be warm here in the next month or so to be able to start riding to work again.
How about you on your next one?
Mike [11:07]: So, my second one was blogging publicly at least every two weeks. And that’s a complete fail at this point. I’ve blogged once and I should be at least four I think. Is that about right?
Rob [11:17]: No. Six.
Mike [11:17]: No. Six. I should be at six by the end of this month.
Rob [11:21]: So, to me this feels like a distraction. To me your number one goal should be Bluetick getting 25 customers, getting to launch, all that stuff.
Mike [11:30]: It is.
Rob [11:30]: I know that this is a nice to have but even when you said it in December, if you go listen to the episode, I was kind of like, “Why do you want to do this?” I get why but do you really want to do this? Is this something that you think you’re actually going to do or is this kind of a punt and it’s basically replaced with your third goal that you’re about to go into?
Mike [11:50]: I think you’re right. I think it should just kind of be replaced and – If I’m going to do any sort of blogging, it would be more content articles and things like that for Bluetick. It wouldn’t really be on my personal blog. So, there’s really not much point to me doing that stuff. Maybe it could lead to book sales or something like that but that’s really not like a major priority for me at this point. Really it’s the third thing on the list which was making Bluetick profitable and that’s sucking up almost all of my time at this point.
Rob [12:15]: Cool. And we might as well just do your last one now. What’s your third goal that’s probably going to take precedent over this one?
Mike [12:20]: Well that is that. It’s making Bluetick profitable. And I think that’s going in the right direction. If people are signing on and demos are going well, I’ve got to start putting together my launch sequences and going out to my email list. But one of the things that I’ve been much more focused on lately is getting the product to the point where people can kind of self-onboard and without having me to sit there and say this is what you need to do or walk them through it.
I had a meeting yesterday with somebody who I kind of brought on on a temporary basis as a UI and UX consultant. I walked him through an onboarding process and he looked at it and he said, “There’s very obvious ways for you to improve this.” So, he’s going to sit down and work out what the priorities of those things are because it’s kind of difficult for me to understand what those priorities are because I’ve been so close to it for too long so I really want that external opinion to say, “This is what doesn’t make sense. This is what is easy to understand without any additional explanation. And here’s how we can go about approaching and tackling those problems. And this is the order that they should be done in.”
Rob [13:19]: Very cool. So, my second goal was to have one to three new angel investments. I have done zero so far. But there is one company that is doing kind of follow on round and I think I’m going to put more money into them. Given the pace that I’m likely going to do these and that it is such a sidebar for me, I would kind of include that under the umbrella. If I do follow on rounds, I know there’s less due diligence and less work to be done. But I think putting more money to work in startups is my intent here. I would say I’m on track to do one here in the next month or so and then we’ll see what the rest of the year brings.
And then my third goal was to not start any new projects. Just to run the three MicroConfs we’re running; the two podcasts; continue driving Drip forward; and take a break from kind of the chaos of always starting new stuff. One exception to that was if Sherry decides to write a Zenfounder book that I would be second author on that. And so far, this year due to health issues in her extended family, she has not begun that. But I have hopes that in the latter half of the year that might get going. So, so far, on track for that as well. I mean, it’s kind of a nongoal. We discussed in December it’s to not take on any new ambitious stuff and just kind of let things settle.
So, I think that’s about it. Do you want to dive into what we’re chatting about today?
Mike [14:33]: Sure. So, today’s episode what we’re going to be doing is we’re going to go through, essentially, a prioritization framework to help deal with task overload. I’ve started using this framework. This is based on Anthony Eden’s blog post called ‘Aligning Projects with Business Goals.” We’ll link that up in the show notes.
Anthony is from DNSimple. He had sketched this out inside of our private founder café community a couple of months ago. But he’s refined it since then and he put out a blog post on it. In this blog post he talks about the fact that he’s running this large team and it’s got a bunch of different people and they were able to kind of keep track of all the different things that needed to happen and what they’re priorities were. But as the team grew and as different people’s responsibilities changed it became more difficult to prioritize things across the entire business. So, he essentially developed this framework to figure out, “What should we be working on? What’s the most important? What’s really going to drive the bottom line for the business and help it stay in business and make them grown?”
Some of the basic problems that you’re trying to really solve with a framework like this is the fact that there’s always more to do. If you look in any given bug tracker, for example, or any task management system. It feels to me like anything I’ve ever used, the number of tasks that are in there go up over time rather than down. You think about these burndown charts and those are great if you have a sprint where the number of task is defined for a particular time frame. And it’s going to go down. But in the background, there’s always new things that are being added. So, those things are just being added faster than you can clear them out. And it almost doesn’t matter the size of your team because as you add people there’s more that you want to accomplish and there’s bigger things. But some of those things are not worth doing. And this helps you prioritize those things and really help clearly see what is and isn’t worth doing.
Rob [16:12]: Yeah. I agree with you on the to do list. That’s there’s always more work to do. That’s where I think sprints can be helpful because they do give you a sense of actually accomplishing something. You kind of limit the scope; you go for two weeks or a week – however long your sprints are – and then when you’re done, you do cross this big thing off the list. And then you’re able to reprioritize and attack new ones.
I think the other thing that I do with both my to do lists and with our issue tracker in terms of Drip is we are pretty guarded. I guess me personally I am very guarded about what actually goes on that to do list. I don’t just throw everything I think of on there. If I’m just brainstorming and thinking of notes of like, “Yeah, maybe I should do that.” I put it in a notebook. Or I put it in a separate Trello board. Typically, it’s in a notebook, to be honest. Because unless, I revisit it – unless it comes up again – unless I stumble upon it when I kind of flip through my notebook every now and again. And if I see it again and I’m like, “That’s genius. I have to do it.” Then that goes on the to do list.
But I see peoples to do lists sometimes and I’ll ask them, “Why is that on there?” And it’s like, “Well, it was an idea I had.” And it’s like, “Well, then it’s not a ‘to do.’ It’s just an idea. Figure out a different place to put it.” And the same thing with feature requests. You don’t want customer feature requests. You’re getting five of them a day. You do not go into your issue tracker. That’s not the place for them unless they’re completely cordoned off. Because otherwise it just fills it up with all this noise and you’re just going to have hundreds and hundreds and then thousands of feature requests or ideas or whatever. And you really want to have them in their own repo. What should be in your issue tracker is stuff that is actually at least in the realm of possibility that it’s going to be built.
Mike [17:44]: It’s interesting you say that because I put customer requests in there and then I put the customer’s name as a tag on it and then, once it gets to what I look at as kind of a critical mass – like if I see enough people are asking for that particular thing – then I reprioritize it to say to, “Hey, this is something that we’re actually going to look at.” But there’s a lot of things in there that one person asked for. There was a question that came up it and it just kind of gets into this – I think we categorized it with a special category that just basically says that it’s a customer request that we’re probably not going to do anytime in the near future unless we get a lot more people asking for it.
Rob [18:15]: Yeah. That makes sense. Here’s where that may start to break down. As an example, Drip gets more than 100 feature requests a month from external people. And we get about 25 requests per month from internal. So, we literally get – no joke – 125, at least, feature requests per month. And how many of those can you build. Five, maybe. So, after six months you’re going to have 720 things and you don’t want those in your main issue tracker. You want them off. They can still be in the same repository but they should be off on a separate view that you’d never have to look through if you’re actually trying to – I shouldn’t say never have to look through. You don’t have to look through every time you’re trying to pull stuff up in the development queue. You do want to review this queue, obviously, every month or every three months and kind of look through because certain ones are just going to come up over and over.
I found that trying to keep absolute exact count of these things is not helpful. The ones that bubble up to the top are the ones that you just know it. Like gut feeling you hear the requests over and over or you know that it’s a really good idea and it’s something that a lot of people will use.
Mike [19:15]: Yeah. At my scale, I don’t have that problem yet.
Rob [19:19]: Totally. Yeah.
Mike [19:20]: Kind of more to the point here is like there’s never enough resources to do everything. And even as you add resources, it almost doesn’t matter because the things that you want to do, you’re still just not going to have enough resources to do them. And there’s always these little things that get added which somebodies got to look at it and evaluate it and, even if you decide to do it, it just gets added onto the list. So, you need a way to prioritize these things. That can be really challenging to identify what is the most important thing when there are so many things to get done. And even if you have this shorter list, it almost doesn’t matter if you split it up into these are the critical things and these are the noncritical things.
I remember seeing a Dilbert cartoon about that. It’s like here’s how to get everything done. Create two lists, put all your critical stuff on one list, create all your noncritical stuff on the other list. Do them both and if you don’t, you’re a loser. It’s not possible to do everything. So, having this framework allows you to establish some objectivity and remove your personal, mental perceptions of the situation about what is important and what’s really not because it removes your own biases towards certain things. Let’s say you just talked to a customer and they say, “Well this is a problem.” Your natural inclination is to weight that more importantly because of the fact that you literally just talked to that customer versus using a framework that allows you to create it as – to take a step back from that and objectively evaluate it.
Rob [20:38]: Yeah. This is hard. Especially as, basically, a product owner or a product manager. Even if you don’t call yourself that, if you’re the founder for the first while – definitely through product market fit and probably after – you’re going to be a point person, a key player involved in deciding what gets done. And there’s always 10 times more or 20 times more that needs to get done or that could get done then you can actually get done. It’s like the 100 feature requests but you can build five. So, that’s always going to be there. So, then you have to figure out what is it that actually needs to get done. And there’s a bunch of different approaches to this and what we’re talking about today, of course, is the framework that Anthony Eden laid out in his posts.
Mike [21:19]: So, let’s start digging into this framework a little bit. The idea of this framework is that you classify the different things that you’re doing based on different criteria. What this does is it gives you a basis for measurement that can be applied uniformly across all of the different tasks. There’s some things that he recommends – it’s really just a spreadsheet and you have the title and description of the things that you’re working on. Then you put in different factors.
The first one is effort. Effort is essentially a broad measurement of how difficult or how time consuming it’s going to be to implement that. With this framework, you can use it either on a feature by feature basis or on a project by project basis. You can have, basically, subtasks in there and add them up and say this project this project is more important than that one. Maybe you’d do some averages in there. I think that might be a little bit more difficult just because there’s 50 tasks for one project and only 10 tasks for another. It might be difficult to add them up as raw numbers but you can see between those two projects if one comes up with a score of 25 and the other one the highest task comes out with a score of 10, the one that’s 25 is clearly more important to do.
Again, going back to that first one, effort is something you would put in as a column. And this rated one through three. It’s small, medium or large. The thing I really like about this is that it removes timings and time estimates associated with it. Small, medium and large – you can look at that and ballpark any particular task. You don’t have to be good it either. That’s the best part. Because we’re terrible at doing really good estimates. If you say something’s going to take you two hours, it might take three, it might take four. Is that considered small, medium or large? I would probably say small because it’s not a lot of effort. Medium, to me, would be like a couple of days. Maybe a day or two. And then larger would be at least a week if not two or three.
What about you? How would you kind of classify small, medium and large?
Rob [23:07]: I really like his approach here. I think in the old days as a consultant we had to give quotes that were basically down to the hour. We would have to say, “This is going to take six hours to build that feature.” And you just don’t need to do that when you’re building a product like this. So, I like the idea of effort; one, two and three; and whether you make your small, medium and large match exactly what Anthony’s saying in this post. Or whether, given your time frames, those are different durations of time. I think it’s really nice to keep it simple so that you’re not – you don’t want to put in so much time in analysis that this becomes cumbersome. You’re taking your best guess at it and having a one, two or a three, it’s a five second decision. With almost all features you’re going to be able to slam it in the bucket pretty easily.
Mike [23:50]: The next one Anthony lays out is urgency. And this is essentially a raw estimate of the time sensitivity for something. This is rated between zero and two. Zero is no deadline; one is a deadline within the next six months; and, then, two is a deadline within the next three months. What I found a little bit odd about this was that the deadline within the next three months, there’s nothing there that says, “This needs to be done right now.” I think that that’s both helpful and not helpful at that same time. Because if you’re trying to onboard a customer and they need it right this second, then it kind of puts a cap on how much the urgency impacts the total score. And we’ll get through the other three factors here but, once you go through these, there’s a calculation that you put on these based on the numbers that you assign and that comes out to a score for this particular task. It makes it easy to relate it to the other tasks.
Do you think it’s important to have a score in there for urgency with a deadline that’s less than three months?
Rob [24:43]: I do. So, here’s the thing. It depends on what time horizons you look out at. I think in your early days like where Bluetick is, I think you should probably have no deadline, two months and one month. Or no deadline, one month and two weeks. Because your timelines are so much more critical. Because you need to move way faster right now to try to get to product market fit as soon as possible. I think as a product matures and the team grows this could feasibly get longer. Even now with Drip, I’m thinking and looking ahead six months, nine months, but I’m not actually planning. I just have ideas of what we’re going to build. So, to me the zero, three and six month is a little too broad for us. I would probably, for us, have zero, one and two or zero, one and three months.
We typically plan fairly tight. We plan about 60 to 90 days out because I find that so much changes by the time you get there. New priorities come up, new feature ideas come up, competitors do things. And you have performance issues that suddenly you need to turn your head and try to scale. So, there’s a lot that can change in 90 days in the life of a startup so I would just compress this. But the gestalt of what he’s saying here is still the same.
Mike [25:54]: Yeah. And that’s something else to kind of point to as a side note. Even though some of these things are written down in such a way that there are those raw numbers of like six months and three months, feel free to change those things. Make whatever the framework you use fit into what it is that you’re actually doing because Anthony’s business is much further along than Bluetick, for example. Not everything that he has in here is going to directly apply to what I’m doing. That doesn’t mean that you can’t make some changes or modifications that will help if fit your situation better. So, if you look at it and it doesn’t quite fit what you’re doing, feel free to make those changes. Especially if it’s going to fit what you’re doing.
The third criteria in here is the impact. And what the impact is that it’s a value that indicates the potential impact on profitability. And this is rated anywhere from negative two to positive two. And negative two is a significant negative impact; zero is little to no impact; and, then, two is a significant impact. I really like this because there are some things that you are going to do which will probably have a negative impact on your profitability. They may make things worse for you. And then there’s other things where, if you do that – let’s say you make a pricing change and you increase prices – that could have a huge impact. And it’s just when you start adding those things, it allows this to adjust the priority up or down based on what those numbers come out to.
Rob [27:07]: Yeah. You know what I like about this? Often times when we’re talking about what features to build, I will ask whoever we’re talking to – typically it’s Derek or someone else on the team – and I’ll say, “Will this help us retain more customers,” – meaning keep them from cancelling – “Or will this get us new customers?” In essence, is it a marketable thing that new people will sign up for? And that’s what Anthony’s encapsulating with this impact score. And I like how simple it is and I like that it combines all of that into a single number.
Mike [27:36]: The fourth one is a risk factor. This is an indication of what is going to happen if this is not implemented. This is a very simple rating: zero to two which zero is little to no risk; one is some risk; and two is a significant risk. This risk factor could be a bunch of different things. For example, if there’s paperwork that you need to file with the government, then if you don’t do it then you could go out of business. Especially if it’s like a lawsuit that you have to respond to. And then there’s other things where it’s a feature that somebody had asked for. Is it really going to make a huge a difference to you if you don’t put hover text over a button, for example? Probably not. Does it help the application? Does it make the user experience better? Yes, but is it risky to not do it. And the answer, in that case, is obviously no.
Rob [28:21]: Yeah. I also think of stuff like scaling. There’s a risk factor of, “Do we need to upgrade the database server? Do we need to optimize the piece of code to make it five times faster?” And it’s like maybe all the other ones before are like the impact will be really kind of zero. Like it’s no impact to customers. The urgency, well, it could be the next three months but as soon as you introduce a risk factor of, “If we don’t do this, we risk slowing down. We risk performance issues. We risk upsetting people.” I think that’s a nice piece that this captures.
Mike [28:53]: Or you risk some sort of security setting. It’s like, “Hey. We need to make some sort of a structural change in the database and if we don’t do this, then there’s a risk that customer data could leak from one customer into another.” So, that’s another way that risk can kind of fall into it.
The last one that he has here is innovation. This is an indicator of what type of influence that the task has on your long-term growth. This is rated from zero to two. Zero is little to none; one is ahead of the curve; and, then, a two is groundbreaking. I’ll be honest. I wasn’t real fond of the term innovation, so – I forget what put it on my spreadsheet – but I had changed that to say how is this going to impact long term growth. I think that’s actually what I called it was long term growth opportunity. This is very nice to be able to relate that back and say, “This is not going to make any difference or it’s going to make a huge difference.” And I think you can also consider this in relation to what your competitors are doing and what your long-term vision for the product looks like. If this is going to open up new doors for you to go into a completely new market, then that would be either a one or two. But if it doesn’t do any of that, then it’s probably a zero.
Rob [30:02]: Yeah. I think a lot of things would be a zero. Kind of day to day of I need to add these settings. I need to add this screen. You think about merging subscribers in Drip, like we talked about earlier. Is that really innovative? To be honest, it is one. It’s ahead of the curve because most apps don’t have it. But it’s not groundbreaking. Like when workflows or something like that really jumped us ahead. So, I can see where this applies.
I don’t necessarily think of it in terms of innovation. I typically think of it in terms of impact. Once we get down and see the multipliers, I want to see how innovation plays against impact because I could see removing innovation altogether because most of the time I don’t want to innovate unless it has a major impact. Does that make sense?
Mike [30:42]: It does. But remember, the third one on this list was impact. So, that’s why I went through and started changing some of these names.
Rob [30:48]: Right. I was going to say; I’m only going to build an innovative thing if the impact is high. So, I’m not sure why I also need to say it’s innovative. Because the impact is going to be high and the innovation is going to be high. It’s almost like, to me, innovation tracks with impact. If all these go together in the same direction, they’re correlated, then there’s no reason to have them. You should just have one number. The only reason that you should have all five of these is if they go in different directions based on what you’re building. That’s what I’m still trying to get my head around is how impact and innovation, I think, are different.
Mike [31:16]: And that’s why I said that I played around with the terms when I put them in my spreadsheet because the difference between impact and innovation was not very clear. I changed impact to say short term profitability impact. And then innovation was long term growth impact.
Rob [31:32]: Oh, nice. Okay. That’s cool. I like that actually.
Mike [31:35]: Yeah. It separates out, “Hey. You need to do this.” And it’s more of the profitability impact is like, “What’s the direct result that’s going to be short term for us in terms of financials?” And then the long-term growth, “What is this going to look like for us six months, 12 months down the road?” We may do something that doesn’t really change anything now but what would be the impact of that in 12 months? And it it’s something small in the UI, very little innovation associated with it. But something like with Drip – workflows – it’s probably going to have a small impact now but 12 months down the road, 18 months down the road, it’s huge because it gives you so many more things to do.
Rob [32:14]: So now that we have a spreadsheet, you put down all of your scores for all of your different feature ideas or even if they’re not features. It’s just development ticket ideas basically. How do we score these things?
Mike [32:26]: The calculation that he has is you take each of these things and you multiply them by different numbers and you add or subtract them based on what they are. So, the impact and urgency you multiply each of them by three and add it to get the score. The risk factor you multiply by four. And then the innovation you multiply by two. You add those numbers together and then you subtract the effort times three. The larger something is – and remember that effort can either be one, two or three so you’re going to be subtracting either three, six or nine from your final score.
So, something might be very risky if you don’t do it now and it could have a huge impact. But if the effort is large, it could really reduce the score associated with that. I went through this a couple of months ago when Anthony had first posted this in Founder Café was that there were things that I felt were much more important and then looking at the score that came out of it – which he calls priority but I like to call it score just because it’s a numerical calculation – it’s very easy to look at those scores and just sort by that score and see relative to each thing what is really important to the business and what’s not. And I found there were things that rated up there as like 15 or 17 and then there were things that I thought were more important and they only rated like nine or 10.
I feel like there was a dividing line between things that were less than a score of 10 and things that were more. Those things that were more than 10 really felt like they were truly important.
Rob [33:48]: Yeah. I think this can be a really nice kind of guide to help you not just make gut feeling decisions and – I don’t know that I would go directly down these in priority order and build in that order – but I think it can give you a really nice framework or guide as the best way. Maybe if something was a five, I might make it more than a seven or a higher priority than a seven because I know of somethings maybe not captured in just these numbers or in the multipliers or whatever. But, that aside, as you look through these it seems like all the bases are covered and, if you put accurate numbers in each of these and you multiply out the score, I think there’s a lot of value in doing that.
Mike [34:25]: Yeah. I actually thought about that because I was looking at the things that scored lower than I thought they should. And I really tried to go back through the different columns and say, “Is this score justified? Should this be more urgent? Should it have a larger impact?” And I could make some variances here and there. But realistically, when I started looking at everything together and scoring them in the same way, I really couldn’t forcibly take that score any higher. And it’s not to say that you can’t prioritize starting something in advance because, obviously, if something is a large-scale project that’s going to take you three or four months to complete, you have to remember it’s going to take three or four months to complete and you may have to start it now in parallel to you doing other things. But you’re not going to be able to start it today and be finished with it tomorrow. That’s just not going to happen. So, you do have to take that into account when planning. But I think that it does help you in terms of deciding objectively what you should start planning to do versus the things that fall much lower on the list that just aren’t as important as you thought they were and maybe you put them on the list and assign them to somebody and they actually don’t need to be done.
Rob [35:30]: Yeah. I think this could be helpful definitely for when you’re getting started as kind of product owner. If you just have so much stuff on your plate that it’s hard to decide and you kind of need a guide. I really think that there’s some value here.
So, if you want to dig into that a little more, we will link that up in that show notes. It’s on blog.dnsimple.com. And thanks to Anthony Eden for sharing that with the Founder Café community and now the Startups for the Rest of Us community.
If you have a question for us, call our voicemail number 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt. It’s used under creative comments. Subscribe to us in iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening and we’ll see you next time.
Episode 331 | Transitioning from Productized Services to SaaS with Brian Casel
Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Brian Casel, Founder of AudienceOps, about transitioning from productized services to SaaS. Brian discusses what AudienceOps was like 6 months into development, he touches on team management and how he handles developing a new product while supporting an existing one.
Items mentioned in this episode:
- Audience Ops
- Ops Calendar
- Brian on Twitter
- Brian’s website & newsletter
- Brian’s Productize course
- Boostrapped Web Podcast
- Big Snow Tiny Conf
Transcript
Mike [00:00]: In this episode of ‘Startups for The Rest of Us,’ I’m going to be talking to Brian Casel about transitioning from productized services to SaaS. This is ‘Startups for The Rest of Us’ episode 331.
Mike [00:17]: Welcome to ‘Startups for The Rest of Us,’ the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you built your first product or you’re just thinking about it.
I’m Mike.
Brian [00:25]: And I’m Brian.
Mike [00:26]: And we’re here to share experience to help you avoid the same mistakes we’ve made. How are you doing this week, Brian?
Brian [00:30]: Doing good, Mike. Thanks for having me on.
Mike [00:31]: Yeah, no problem. So, for the audience here, in case they’re not familiar with who you are, Brian Casel was the founder of Restaurant Engine which he sold a couple of years ago. He’s also been a speaker at MicroConf and he is the current founder and CEO of Audience Ops. And then he’s also the co-host of Big Snow Tiny Conf which I attended a few weeks ago, and he’s also the co-host of the Bootstrapped Web Podcast with Jordan Gal. Did I leave anything out?
Brian [00:57]: Yup. That’s about everything I’m focused on right now. I also write about productized services and things on personal blog. But yeah, these days I’m really pretty much all in on the audience apps business, that’s what I’ve been doing.
Mike [01:10]: Yup, and we’ll link a bunch of those things up in the show notes. But one of the things I want to talk to you today about was the fact that you’re essentially running a business that is a productized service called Audience Ops. And for the listeners who aren’t familiar with it, can you give a brief description of what Audience Ops is and what it does?
Brian [01:26]: Yeah. So, Audience Ops is a content marketing company. And we’re going on almost two years now since I started it. And so basically, we make it easy for businesses to do content and do it well. And now, as we’re going into 2017 here, we’ve kind of expanded our line of different products to help accomplish that goal. So we’ve had our service side of the business and basically, there are two versions of the service now. There’s the content service where we write the content.
We basically write your blog content for you and manage the whole process from start to finish. And now we have Audience Ops Express where if you’re doing content, you can send us your drafts and we will handle all of the legwork to get it published like proofreading the images, the formatting setup, transcribing your audio or video, whatever it is that you can basically send on limited content pieces to us and we’ll handle all the legwork from there.
So that’s the service side of it. And then this year, we’re now in the process of launching our software called Ops Calendar. And that’s essentially a content calendar tool that streamlines and automates a lot of the parts of the production process for doing content. So it’s got like smart checklist which automate recurring tasks and delegating those based on one year content as publishing. You can track analytics to see traffic and conversion numbers on a post by post basis right there in your calendar.
You can manage a list of content ideas and have those going to your calendar and into production schedule social media. So it kind of pulls all the disjointed pieces of doing content marketing all together in one place. And so that tool has been in development for the last six months. And right now in March 2017, we’re just now rolling it out to – so we’ve had some beta costumers in it and now we’re starting to roll it out to customers on our early access list.
Mike [03:11]: So before Audience Ops, you had run Restaurant Engine. Now, would you have classified that as a productized service?
Brian [03:18]: Yeah. So I think Restaurant Engine evolved into a productized service. It started like purely as a SaaS. It was a website builder for restaurants. And what I learned in the first year or two was that those customers really valued the done-for-you aspect. I was doing concierge onboarding just to get people onboard. Like, we will set up your website for you, started doing that for free just to get them onboard. And then I started charging for it and then we started requiring that service for all customers. And eventually, it became kind of that software plus service productized service model, if you will.
I mean, that’s where I really started to learn the value of combining software with service. So not only providing the tool but providing the done-for-you aspect. But then when I started Audience Ops, having really sunk my teeth into that productized service model, I decided to start that business with the productized service model first as a way to launch it, establish it, grow revenue really quickly and also just grow its, like its brand if you will and our credibility in the content marketing space which now two years into it are what we started this process about 18 months into it, we’re able to expand into other products for this same space doing content marketing.
Mike [04:32]: I think what I find interesting about the journey is that you started out with Restaurant Engine trying to build it into a SaaS product and realized that that was not going to work and you transitioned it into a productized service. And then when you started Audience Ops, you kind of made the deliberate choice of, “Hey, I’m going to create this as a productized service because I know how to sell that.” And then now two years into it, you’re looking at creating a SaaS based on that productized service.
Brian [04:56]: Yeah, essentially. I identified a few specific pain points through the process of delivering our service and doing content on a regular weekly basis, and we’ve used a variety of different tools and we still do. But having identified those pains through the process of doing content, that’s what led to the initial concept for Ops Calendar and then that also led to validating that other people have those pain points too which eventually led to investing and building it and getting it out there.
Mike [05:28]: From I guess a boarder perspective, you seem to have done the gamut of all the different types of products. You’ve had your productized course which is especially an info product. And then you’ve also had a productized service and now you’re working on a SaaS product, and previously as I said before, Restaurant Engine was intended to be a SaaS product and it didn’t turn out that way.
But I guess, could you contrast a little bit the differences between starting in a productized service versus starting a SaaS? Because obviously, I think that there’s timeline differences and there’s experience differences and there’s all these things that go into one versus the other. For the listeners, can you contrast those things a little bit which one’s easier? What are some of the pros and cons of doing a productized service, for example, versus a SaaS application or just kind of the classic SaaS?
Brian [06:13]: Yeah, sure. So, in my view, just from like a viability standpoint, the idea of building and launching a SaaS product requires a pretty heavy investment of time and money. Whether you’re a developer or not, and I consider myself a non-technical founder. I mean, I do the design and the frontend stuff but I don’t code the backend. So in my case to build a SaaS software, I knew going into it, that would require investing quite a bit of money into hiring other developers but also a lot of my time. And I knew from experience of running Restaurant Engine that it takes several months to, maybe longer, to even build the initial version that users can actually use and then a year or longer to even make it a viable recurring revenue business that could potentially replace part or all of your income.
And so, that was the math that I was looking at in 2015, when I was looking to get into my next business. I was considering various ideas. Coming out of Restaurant Engine, I was looking at different ideas of what I should kind of sink my teeth into as my next business. And I look at making it a productized service first because I knew that that’s something that I can actually launch to paying customers very, very quickly, even charge a higher price point for it and have a recurring revenue model with that.
And literally within the first 30 days, we had our first clients onboard for Audience Ops for our done-for-you content service. And that grew pretty quickly over the first 18 months to a point where it enabled me to build a team around it, build a process and a system, and then ultimately, well, really early on, really, I was able to remove myself from the day-to-day process of delivering that service because I had the team and the systems in place.
So that freed me up to focus on growing into other products. I wouldn’t have really been able to make the math work on building a software from the very beginning and that’s why I went with the productized service. But secondly I wouldn’t have identified the pain points associated with doing content in terms of how it would relate to a software tool until a year or two into it. So I think both kind of led to that.
Mike [08:24]: Right. So it’s partially a function of the runway, so to speak, and the time that it takes to get up and running. And then there’s the other side of it is the learning component about how do I actually solve this problem in a way that makes sense for the customers of the product.
Brian [08:38]: Yeah, absolutely. I mean, this is a fully self-funded business. That’s how I’ve always handled it throughout all of my businesses up until now and still going forward. And so, we’re very cash flow sensitive kind of profit first type of mentality from start to finish. And that’s ultimately what made it possible for me to even consider investing thousands of dollars a month to just hire developers, not to mention the cost of marketing a new SaaS product. So yeah, lie this business has been working off of the profits from the productized service and then that continues to fund the development going forward.
Mike [09:13]: One of the things I wanted you to help kind of contrast for the list of terms is the difference in financial and starting that service based or productized service business versus starting a SaaS. So, you’re about six months in on the SaaS application. You said you’re spending a couple of thousand dollars a month for developers. So, ballpark are we talking somewhere between $12,000 and $20,000 that you’ve put into building the SaaS so far?
Brian [09:37]: Yeah. I’d say that’s about accurate probably closer to 20 so far.
Mike [09:41]: Okay. So, about negative 20 and this is after 6 months. And for the Audience Ops service, in six months, roughly what was the revenue?
Brian [09:50]: Well, six months in, it’s probably somewhere around maybe 10k to 15k a month MRR. And so early on in like the first three to six months, I actually took it deliberately very slow. We took on a few clients early on and then we kind of paused the service to get our process as in team employees, and then started to ramp up against starting from six months, probably around the 12-month mark. I think we were up to somewhere around 30k MRR. And I think it was probably around that point, around 10 to 12 months into the business.
I mean, I basically had my own salary kind of covered. I’ve always just kind of paid myself the base amount of what I need to live and support my family. And so, again, as the productized service, I’ve been able to cover that from pretty early on in the business. But then by around 10 to 12 months in is when I started to put aside whatever extra profit that was left over after all expenses were paid from the business and after I was covered. And I’ve put it aside maybe roughly 2,000 to 3,000 a month in profit. And that grew and that deviated from month to month.
So, I started doing that around 10 to 12 months in. And then by around 18 months is when I had a bit of a savings, like a business savings account saved up, and then I invested that to start. That basically jumpstarted the investment into hiring developers, but still through this day, the services continue to fund the development going forward.
Mike [11:19]: Yeah. And I kind of want to make that distinction very clear because just in terms of finances loan, SaaS scene is kind of a holy grail on the software world because it’s recurring revenue. But at the same time, if you’re looking at a productized service, you said to yourself that Audience Ops was making around $15,000 a month and you just literally said, you were taking it slow. You could’ve probably pushed on the gas harder if you wanted to. But six months in, you’re pointing $15,000 a month from it. Whereas six months in on the development of the SaaS, you’re still technically a zero because you’re not charging customers yet. You’ve spent closer to $20,000 on it so you’re at the negative.
And just kind of do the math on those and you’re probably at – if I had a guess, we’re probably at $60,000 in revenue from the productized service versus zero and plus you’re also running the deficit because you’ve spent $20,000 on it. And it’s just a very start contrast between those two things. And I think it begs the question, if you’re doing well with that productized service or it’s easy to build something like that and get it up and running and make it profitable, why would somebody even ever want to do a SaaS?
Brian [12:22]: Yeah, that’s a good question. So, we see this a lot, right? You look at those top-line MRR revenue numbers and they seem so dreamy. I refer it to many and they would seem very dreamy to me looking at it just a couple of years ago. The reality of the productized service model is that there are a lot of cost associated with it. Obviously, there’s more people involved. Like, we have a pretty large team. Our team is fully remove all over the world but all of our writers and all of our project managers are in the U.S.
So as the revenue goes up and as we bring on clients, our costs go up and our team grows. And that’s what led me to the decision that, “Okay, this year in 2017, I need to look at diversifying our product line and growing into more scalable products such as software and even our Audience Ops Express services is a little bit more scalable than our content service.” That’s not other say that the content service is not able grow and scale. It’s just not as scalable as something like a software service.
The tradeoff of course is that the productized service can grow much quicker. It can remain profitable the whole way through. Whereas the SaaS, even if you’re charging somewhere around $99 a month or more for a B2B software which may seem like a relatively higher, I don’t know, these days it’s all relative price points, right, but it just takes a long time to get enough customers to make that viable. And I realized that going in. And so that’s why I continued to work both sides of it basically the service side and the software side.
And with the service especially a recurring productized service, we deal with a lot of the same issues that a typical SaaS would turn and optimizing our onboarding process and retention and that sort of stuff. So yeah, it all kind of plays into it.
Mike [14:14]: Yeah. I mean, I think that there’s that confusion when you start looking at those numbers and saying, “Oh, well, the business is making $15,000 a month and it’s a service business.” But you don’t realize that there’s got to be probably five or six different people involved and they’re all working part-time in a business like that. And it’s the manual labor or just in general the labor cost associated with running any productized service are all around providing those services because it’s not like the software side where whether you’re running something once or 50 million times, it almost doesn’t matter to you. The cost is almost the same versus if you have to pay somebody to do something once, maybe it’s $50. You have to pay them 100 time to do it, it’s 5,000.
Brian [14:54]: Well, yeah. I mean, the way that I was looking at it especially going into this year was as the service keeps growing. Like, if the service were to double or triple in size in terms of clients and revenue, that would mean that our team would close to double at least. And then I started to look at like, “Well, what does that picture look like?” And then that’s just a very large team with lots of people and I wanted to get into. I still want to keep the team relatively small.
The other side of this is people think about productized service is like, “Well, that’s just kind of consulting or that’s like freelancing or building an agency,” and yes, it is manual services. There’s no doubt about that. But the way that I approach it is it’s a very focused, systematic, process driven service where we really do one thing and we have a very defined production line, and I’ve got people in place who handle very specific pieces of the process.
So unlike an agency which might take on anything and everything. If you’re a marketing agency or a design, development agency, like you take on so many different projects and different types of clients, for us, we bring on a client. They go through our standard onboarding process then they go into our standard delivery model for content and production and publishing and it works pretty well. We’ve got a fantastic team of talented people but they all really rely on our processes. And that’s what enables me to not be involved in the day-to-day service stuff.
I do coach the team a bit and I work on our processes and things but my role is really to make sure that the operation runs efficiently and then to free up most of my time to work with the developers and design the SaaS and then think about marketing and all that kind of stuff.
Mike [16:33]: Right. I guess the underlying point there is that when you start a business or anybody starts a business, the person who is the founder generally can do most things. And it’s very easy to, I think, fall onto a trap where you look at something whether it’s a specific problem or a service that somebody’s offering and say, “Well, I can do that faster and cheaper and offer it at even a better price or maybe a higher price,” because you’re offering higher quality. And then you almost trick yourself into thinking that, “Oh, well, if I scale this up, let me just multiply myself by 10 and I’ll have 10 times revenue, 10 times the profit margin.”
And I think what inevitably happens is your profit margins tend to go down because there’s management overhead that you don’t take into account as you build out the team. And I imagine at this point, your Audience Ops is at a point where you’ve got middle management, so to speak, that are managing teams of different people whether writers or the people who are posting the content. I mean, there’s a lot of stuff that goes into it and people don’t take into account that there’s that management overhead that will eat into the profit margins.
Brian[17:32]: Yeah, exactly. I mean, we pay the writers and we also have like client managers who are client facing. So I’ve kind of delegated the client facing communication stuff even like calls and emails and stuff. And then we have a team manager and her job is kind of more internally and she kind of keeps track of the people on the team and keeping them updated. And then I’m looped in like I have every two weeks to do a call with the managers and I’m in touch with everybody on the team pretty regularly.
So, I would say there’s one more piece to this on how the productized service relates to the SaaS. It’s not just about a funding source to invest in the SaaS. It’s also, I built it as Audience Ops the company. We’re a content marketing company and like I said, we wouldn’t have identified the pain points that would led to the SaaS product unless we have done the service. But also, I think it gives us a lot of credibility in terms of building software tools or even our training stuff if we hadn’t done content marketing at this level of scale and we continue to do it and I use content marketing heavily in my previous company.
So I think those kinds, like establishing the service and the company as a content marketing focused company with that sort of credibility leads in nicely to – it’s almost like an obvious next step for us to release software tools for doing content market.
Mike [18:54]: Now, I guess kind of playing off for that a little bit. Because there’s overlap in terms of what the service does and what the Ops Calendar does, what sort of team over lap did you have with the new product, with the calendar itself. Because obviously, you’ve got all the writers and the managers in place to essentially optimize the entire process around publishing content for your customers. How much of that were you able to reuse when building the Ops Calendar?
Brian [19:19]: Yeah, it’s a good question. Really largely, the people working on the Ops Calendar and the service are mostly separate. I mean, we’re all in the same slack room together but I did have to go out and hire. So we have two developers who I brought on specifically to work on Ops Calendar, just given the technology that that’s built with, we didn’t have that type of developer in house. We did have a WordPress developer who I’ve been working on with.
So Audience Ops also sells a couple of small WordPress plug-ins like our content upgrades plug-in and we built and launched that over a year ago at a really great WordPress developer who builds that and he continues to maintain that plug-in. So I did loop him in on Ops Calendar. So we have just released the WordPress integration between our calendar tool and your WordPress site. And so, since he’s the WordPress expert and I had been working with him before, I brought him in just for that piece. But beyond that, really from day to day in terms of developing the product, I’ve been working with the developers and then the team is a bit separate.
I am of course looping the team in on the progress of Ops Calendar and right now as the tool has kind of matured a little bit, now we’re starting to actually work it into our process for delivering content for our clients and for ourselves. And I’m starting to use it for my own content on my own blog. And so the team on Audience Ops is essentially a customer, if you will, of Ops Calendar, obviously we got paying for it but it’s working through a process and clients of Audience Ops service were using Ops Calendar to serve them as well so they could access to it as well.
Mike [21:00]: Right. The underlying challenge I think is that you had to essentially bring on new team members in order to develop this product just because you didn’t have that talent or the focus that you could divide off from what they were currently doing into building this new product. It was really, you bring in a couple of extra people and put an umbrella around them or kind of a small divider that says, “Hey, you guys are going to work over here on this other thing and we’re not going to merge things together or have you guys work together on stuff until you reach a certain point where the product is essentially usable by the team,” and that could take several months between four and six months. You said that you’re at about right now, correct?
Brian [21:38]: Yeah, exactly. Yup.
Mike [21:40]: So, I guess what are the challenges associated with running those two different things side by side, because you’ve obviously got to keep the Audience Ops system up and running and making sure everybody is doing what they’re supposed to do, what your customers are getting service so you’re bringing on new customers. And at the same time, you’re also building this second product that has – I mean, you obviously got like the beta customers who signed up for it and agreed to pay for it early on. But what are the challenges associated with managing those two desperate teams? Because I think that there’s very big differences between them and the goals that they have and the responsibilities?
Brian [22:14]: Yeah. I’d say just the challenge for me personally is managing multiple things at the same time. So I do jump back and forth between working with the team on the service, coaching the managers, or improving our processes and systems there to these days really spending most of my time working with the developers and I handle kind of like the design and the user experience and the product, kind of managing the product on the SaaS side. That’s really where I spend most of my energy. I’d say a third thing that I do is just overall marketing for the business, working at our marketing funnels and making plans there.
Yeah. So I mean, it’s kind of tough to jump back and forth between those things but at the same time, I do think that that’s part of the role of the founder in a way. Obviously, I’m not doing everything myself. A lot of it is kind of managing and giving input on things. So a lot of the technical time-consuming work of coding software or writing content, that stuff is not necessarily on my plate. I’m taking more of a strategic level giving input, giving direction, and that sort of stuff. And that’s what I spend most of my time doing. That’s where I think where I add the most value to the team.
I think that, again, the services and the software are so connected. It’s not like what I did years ago when I was launching Restaurant Engine where I – like on the side I was doing web design consulting work, and then in my nights and weekends or early mornings or whatever, I would plug away at my little SaaS, bootstrapped SaaS startup where they’re completely separate worlds, and I don’t feel like that today. Like today, I’m really just building this Audience Ops business that has a line of different products but they all really serve the same mission which is to make doing content easy and effective for businesses, and yes, just kind of pushing on that in different areas of the business.
Mike [24:07]: So, I guess now that you have built this productized service and then in addition, you went in and started the SaaS application o the side and it’s obviously all in to the same umbrella, I think that there’s definitely a lot of advantages to what you have done versus I think that somebody have talked to MicroConf several years ago about having products that were very, very different from one another and not related. So you couldn’t leverage the same audiences and obviously in this case, you have created things in such a way that those audiences do overlap. They do kind of lead into each other in the same ecosystem. And I’m curious to know what is it that in building the SaaS app kind of under that umbrella, what would you have done differently next time that you maybe saw as mistakes or things that held you back this time going through that process?
Brian [24:52]: I think probably the classic thing that most especially non-technical founders face is just the pace of development. I think I had a bit of a learning curve early on there. And I’m not totally new to developing software. I had worked on Restaurant Engine and other things in the past. But I think on the one hand, we made a pretty good pace. Like, we’re actually launching it to paying customers now six months in, but at the same time, just having an understanding of like, “All right. We’re going to have all these features built out and ready to launch by certain dates.” I had probably two or three months into the development process. I had a wakeup call to see, “Okay. This is actually how long it takes to build even just the baseline architecture and the core parts of the app.”
And then what ends up happening was about four months into development, I decided to hire a second developer. So I have one full-time developer and now the second developer is on part-time just for the sake of increasing speed and being able to have two people work on different features simultaneously. And so that’s helped to speed things up a bit but yeah, that was one of the challenges I think.
Mike [25:56]: It’s interesting that you bring that up because I think you and I had talked a while back about the pace of development and I kind of – I actually warned you at the time because I ran into the exact same thing where I underestimated things and how long they would take and even after that, you kind of experienced the same thing. And I don’t think this is unique. I think that everyone does this to some extent. They look at something and say, “Oh, well, this is how long I think it’s going to take.” And then, things go sideways or there’s other things you just miss and don’t take into account. And it takes so much longer than you ever think that it’s going to. And I’m curious to know what your thoughts on why that is. I have my own thoughts and I kind of want to get your take on it though.
Brian [26:34]: Well, yeah, I mean, I’m sure you’re in tuned with the technical aspects of what takes so long. But for my perspective as, I don’t know, I kind of consider myself a semi-technical person. So –
Mike [26:45]: But I don’t think that that’s the problem. So like I’m a technical person and I still get it wrong. So I’m curious to know like as a non-technical person, what do you see is the problems and then maybe we can kind of collaborate to figure out, “Okay. Why is it that everybody gets this wrong, not just technical or non-technical people?”
Brian [26:59]: Well, I think one reason why we’re actually now able to get it out the door to customers like only 6 months in and not 12 months in is because I’ve started to make more decisions about, what are the features that we actually need and what are the features that can come later. And I think early on, I had a much longer list of features that I wanted to launch with. But now, as we get to this point, I’m a little bit more ruthless about speed and get it out the door. We have a very high bar for quality. So every feature that we do build has to meet a certain level of quality in terms of user experience and functionality and lack of bugs and all that.
But the decision to do that other big feature later instead of now, pushing those things off, definitely helps. And the way that I’ve been able to do that is by really being in constant contact with our customers especially that we have a group of 14 beta customers who prepaid and they were the first users to start using it a couple of months ago. I mean, regular communication with them as well as people on the early access list. And what I’ve been able to find out is there are few features that people just keep upvoting or keep asking about and keep hammering that these are the ones that they really care about. And then are few other features that I think are nice to have that we will certainly use. Other people may find nice to use but they don’t necessarily have to be in this version that we’re sending out to customers today. And so I think there’s that decision process.
I think the other thing is one thing again as like a semi-technical founder in the fact that I had to hire those developers that are new. So that we were just getting to know each other in the first month or two of working together. And part of the reason why it went so slowly early on was because they were not necessarily aware of how technical I could be for them to explain some of the technical challenges.
And so what would happen a couple of times early on was they’d hit some walls, some technical challenges with one of the requirements that I put in. And then they would kind of go and try to work on it and troubleshoot it for three, four, or five days at a time and I’m not aware of what that technical challenge is. But if they brought it to my attention earlier, then I could tell you, “Oh. Well, okay, I understand what the challenge is. We could just tweak the design in this way and just eliminate days of development from a user experience that’s not a big deal.”
So it took about a month or two for me and my developer to really get on the same page in terms of how we can communicate technical challenges. And once we got that kind of squared away, we’re able to move much faster because we actually are able to collaborate on those technical hurdles even though I can’t do the coding myself, I can help think through, “Okay, for a design standpoint, we can re-architect it at this way or, okay, this is what’s really important that that piece is not as important,” and we can communicate that much clear and that helps us move a lot faster.
Mike [29:55]: Yeah. Being able to prioritize those things is kind of critical and so incredibly important to the entire process that it’s hard to underemphasize how much that plays a factor into the speed of the development, how quickly you get things out the door. And one thing that you had said, the one word that jumped out while you’re talking was the word “ruthless” and being ruthless in terms of saying, “We are not going to do that right now because that’s not important.”
And one thing that kind of jumps to mind, Brian, as an example of when I was working on Bluetick was there was a password reset feature that you could literally see on the front page. You go there and you enter in your email address. And you would expect that it would email you and say, “Hey. Here is your new password or here’s a mechanism for using that.” And over the course of nine months, I had literally three people use it and it didn’t work any of those three times because it was never wired up. It was like we never implemented that feature. It was there, you could see it but then I would get emails from people saying, “Hey, I tried the password reset. It didn’t work. How do I get my password reset?” And I would manually do it.
But it would’ve taken a while to get that done. It doesn’t sound hard and it really isn’t but it takes a couple of days to get it right. And that was something, I kind of made the conscious decision to say, “This actually isn’t that important.” It was on the designs so it ended up in the UI. But that’s one of those things where I made the conscious decision that I’m not going to do this. And I’m sure you have your own examples of things where you’re like, “Let’s just remove that.”
Brian [31:20]: Yeah, absolutely. I mean, again, I’m constantly in contact with people who come through the early access list or the beta users and I’m always asking them, “Why are you asking about that? What are you trying to accomplish? Or what was it about the other tools that fell short for you?” And I’m always trying to get their underlying goal or their frustration, and then I’m trying to figure out like, “Well, can our app already do that or what is the feature that they’ll be waiting for?”
Just the other thing that I see just a lot in this community is I think a lack of a sense of urgency. And this comes back to the whole self-funding aspect. I mean, and also from a marketing standpoint and rolling out and launching a new product. I feel the sense of urgency because, A, we can’t just develop this thing forever and not have revenue, that we’ll run out of money too quickly. But B, people are joining this early access list and they’ve been joining it for six months or more and every day that ticks by that I’m not contacting them or inviting them to start using the app, I feel like ticks away at like the chance that they actually will still need the app when I do send them that email invite.
So, I’m trying to minimize that length of time as much as possible and I think right now we’re at the – I think that the app is beyond an MVP stage at this point but it’s like the minimum viable level of development that I can start to have customers use the thing, and even start to give me feedback and objections about, “Okay. Some users may use it but some users still may have objections.” And I’ve been getting that kind of feedback from beta customers but I think now is that next step to get it out the door.
Mike [33:02]: Yeah. I totally agree with what you just said about waiting too long for getting those people in there and having them use it. I mean, I literally run into that with Bluetick where because some of the development cycles took so long and the tech stack just took too long to get pieces in there. It got to the point where some people who were on that early access list, they kind of looked at and said, “Look, it’s been so long that either this just doesn’t turn out to be a need for me right now or it’s not a good fit, or let’s revisit this in a few months because right now it’s not a good time.” It’s disappointing but at the same time I also kind of expected that not every single one of those early access customers would eventually become a paying customer and you have to expect that. But at the same time, because it’s been so long on my side, some of those people are just not going to convert because they’ve either found other solutions or they’ve realized, “Hey, this isn’t actually a dire pressing need that I have.”
Brian [33:53]: Yeah. One thing that I’ve been doing. And so everybody who joins the early access list on the next page, they see a survey. And they’ve answered a bunch of questions that goes to my email inbox. I read and I reply to just about every single one of those. And what I do is, I just place a star on those responses to that survey that I think are just really engaged. And so, the ones who just send like a one-word answer to the questions, I probably won’t star them. But the ones who send three, four, five paragraphs and then they reply to my email and we have a whole email exchange, I give them a star.
And so those are going to be the prioritized people who I invite first and the first batch and the second batch. And so, yeah, I want to make sure that those people who clearly have this pain and they’re actively seeking a solution and they’re willing to give me all this feedback before even seeing the thing, I want to make sure that they get in there first.
Mike [34:45]: Awesome. Well, I guess any parting words of wisdom for somebody who is potentially thinking about transitioning from a productized service into building a SaaS.
Brian [34:55]: Yeah. I mean, again, I think I see it really as that bridge to build the company first and then expand into doing something like a SaaS. And I think the key is to get the productized service running to a point where it doesn’t require you to be in there in the day to day, so that you can free up all that extra time and mental energy to think about, “Okay, where does this thing go next and where are those opportunities for the next product that would make sense in this line of products from this business?” At least that’s how I’ve been thinking about it. And so I think the key is to put those systems in process and in place to free yourself up.
Mike [35:32]: Awesome. Well, Brian, I just want to say thanks a lot for coming on and talking to people about how to transition from a productized service into a SaaS. What are the best places where people can find you if they want to look up more information or get in touch with you about this?
Brian [35:43]: Sure. So, the site is audienceops.com, that’s where the services are and Ops Calendar is over at opscalendar.com. And my personal site is CasJm.com and that’s where I write a lot about productized services and my personal newsletter. And then I co-host the podcast with Jordan Gal, Bootstrapped Web.
Mike [36:03]: And then people can also get in touch with you on Twitter at CasJam, right?
Brian [36:06]: Yes. Yeah. I still use Twitter.
Mike [36:10]: Yes, that’s an iffy question these days. We’ll see what happens with Twitter.
Brian [36:13]: Right.
Mike [36:14]: Well, Brian, again, thanks so much for coming on. I really appreciate it. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt used under creative comments. Subscribe to us in iTunes by searching for ‘startups’ and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening and we’ll see you next time.
Episode 330 | Switching from Enterprise to the SMB Market, Staying Small Indefinitely, Dealing with Raises, and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about switching from enterprise to the SMB market, staying small indefinitely, dealing with raises, and take more listener questions.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of ‘Startups for The Rest of Us,’ Mike and I discussed switching from enterprise to the SMB market, staying small, and definitely dealing with employee raises and more listener questions. This is Startups for The Rest of Us episode 330.
Rob [00:23]: Welcome to ‘Startups for The Rest of Us,’ the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you built your first product or you’re just thinking about it.
I’m Rob.
Mike [00:33]: And I’m Mike.
Rob [00:33]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike [00:37]: Well, I don’t feel like I’ve made a ton of progress this past week basically because I’ve been dealing with taxes, but I did manage to convert a couple of more of my preorders in the paid subscriptions and added another customer on top of that to Blueticks. So, things are progressing I think like any other product launch ever. Like, they’re never quite as fast as you’d like but they are moving forward. So, it’s good to see.
Rob [00:58]: Yeah. Well, I mean, it’s not really a product launch, right? It’s just more of a product – it’s a customer development in the early. I’d say it’s like a prelaunch, right, early access maybe.
Mike [01:07]: Yeah. Yeah, that’s probably a more accurate description because I haven’t really gone through like a major – like a launch to a list or anything like that. I’m still kind of working through issues as I onboard people and trying to iron out the rough edges and stuff because there are certainly some of those that I’m trying to make sure that people aren’t running into or when they do that it’s lessened to some degree either through KB articles or through onboarding emails and stuff like that.
Rob [01:31]: Yeah, nice to develop that stuff at this point. So, if we bring the ‘Startups for The Rest of Us’ drinking game back, remember a couple of years ago? Should we do that every time you say that you added two more customers?
Mike [01:43]: I don’t know, it depends on what the rules are I guess.
Rob [01:46]: Right, right. [?] on my end also got my taxes out, so I am notorious for filing, what is it, extensions and wind up getting everything into my accountant in like late April or may and then he gets it out in June or July and it’s become a pain in the butt. So this year, I got everything done super early and I’m hoping to have everything filed on time. But I’m curious, you mentioned you didn’t get a ton of progress this week because of taxes. My taxes since everything is in zero and we share a bookkeeper actually, right.
I have two business plus you’re my shared business with MicroConf, but since tax is zero and the bookkeeper had done. I mean, my Drip and [Newmor?] group taxes literally took me less than 30 minutes a piece because I basically give my – my accountant already has access to it and I just kind of give him some heads up about different things. And then my personal stuff took a little more because it’s all piece of paper all over the place and you get all these W2s, but it probably took me less than two hours. So literally, maybe three hours to get everything done. Did it take you more than that and why?
Mike [02:45]: So on the academy stuff, there was some things that were classified wrong because of the – basically because of PayPal and selling things in Europe. So whenever something goes through our accounting software, it ends up creating three or four different transactions for the same ones because it does transferred from Euros to US Dollars and then back and forth. And then there’s an additional charge and if those aren’t classified correctly and mashed up correctly, then there are certain numbers that are off. And there were numbers that were off and I had to go through and find them, so.
Rob [03:19]: Boo, that’s no good.
Mike [03:20]: Yeah. I kind of got a system at this point for figuring it out but then on my own business taxes, there are some things that were misclassified the previous year because we were going to try in different revenue and we couldn’t do that because of when we sold tickets to MicroConf because we did it in the previous years. And then years passed, we didn’t do that in, I think, 2015. My accounting software is in zero as well, and there’s things in there that were not fixed the previous year. So like the numbers were way off and I honestly still don’t know how to fix them. I sent it over to my CPA eventually and just said, “Look, this is what these are. I know why it’s that way and I just don’t know how to fix it.”
Rob [03:59]: Got it. But how much did all that take you? Was it like a day?
Mike [03:59]: It was probably two, something like that.
Rob [04:05]: Really? That’s insane.
Mike [04:06]: Well, it’s just like finding the transactions that are wrong. And it’s like sometimes are not as easy to find as they should be. I honestly wasted too much time on certain piece. I mean, it’s not like it was two full days but it was like kind of hanging over me for that two days or so.
Rob [04:23]: That’s the thing I found, man, is as much as I’ve been able to hire people to help out with stuff like this, because I have a CPA and I have legal counsel and I have a bookkeeper and yet taxes still take several hours to get done. And when Drip was still independent, I had like a remote executive assistant/ops person. She was doing a bunch of ops work but I still found that there was hours a week that I was sitting there and not marketing, not looking at features or working with customers, but I was just doing stuff HR payroll, even though again, I had an ops person who was doing that, I was still involved in it. And that’s – I don’t know, man.
I think it’s a hard thing I found getting passed no matter how much I hire, no matter how much I find good people to do the things. The stuff slips through and you wind up doing stuff that isn’t necessarily fun. And that’s, I mean to be honest, post acquisition, I really enjoyed – I don’t have to do any HR now, and I don’t have to do – the only reason I’m doing taxes for Drip is because it existed last year until July, right? So we had to file for that but I’m actually kind of looking forward to things simplifying because the overhead me admin work around running a business is just, I don’t know, man, it’s probably my least favorite part of the whole deal.
Mike [05:34]: Yeah. I mean, the other thing that has kind of factored into it which isn’t directly related to it is that like my wife is looking to potentially acquire a fitness studio that is in our town. And so I’ve had to do like got through a lot of paperwork and tax things and stuff to look at, is it a good deal, is it something that she wants to go through with, is there actually a business there. So that kind of factor some of that time in there, which I don’t know how much time that actually was because it wasn’t like I was tracking the time. But I kind of lump it into that process.
Rob [06:04]: Very good. Anything else going on with you?
Mike [06:06]: No, not really. I mean I’ve got a few more demo schedule and going to be going through those over the next week or so but I’m starting to shift my focus over to like really detailing what my customer acquisition funnel looks like and why or not some of the automation behind it. So, taking somebody from, “Hey, they’re on my email list,” and then moving them over into like a survey and then getting the answers from that and then kind of picking and choosing who I’m onboarding and in what order. And then kind of wiring everything up to help automate that process a little bit.
Rob [06:33]: Nice. It’s good to start thinking of that stuff at this point. All right. So we have a lot of listener questions today, some really good ones. And then we’re getting a little bit behind. Some of these are from, well, this one’s from October of last year. So good old four-five months ago, and there may even be some that are older than this. So, apologies on that but I wanted to work through some of them so people aren’t waiting so long.
This one is from Daniel Cao and he says, “I’m an avid listener. Thanks for being so generous with your knowledge. We have an enterprise level SaaS product that we successful sell for $5,000 a month. However, each sale takes six to nine months and it’s a slow process. We can adapt the product to be suitable for SMB sized business, so that’s small to medium businesses, but they seem to only be able to bear $200 to $300 per month as a price point. We really want to pursue the SMB market but we see it’s 20 times as much work for the same end result financially. Are we insane? Should we just take the enterprise? Or is there something magical that happens when you go for the higher volume of small value customers. Many things.”
Mike [07:36]: I think the question whether you go in that, the direction of the SMB market and try to position your product there really depends a lot on what your longer term goals are for the business and whether that’s – a market that’s even really viable. I mean, if it’s taking you 20 times as much work for the exact same revenue, that alone should say no don’t do it. And I don’t know if there’s any way to kind of slice that or position it in a way that it doesn’t make it like that. I mean, you can always – like over time, you can generally drive the cost of a business down. And it sounds to me like this is one of those situations where the upfront cost of making it or fitting the products into the SMB market is going to be quite substantial.
But if you’re making $5,000 a month from each customer that you bring on, then yeah, it sounds like that’s a reasonably good way to position it and you could potentially like support yourselves while you transition the products. Is it worth doing that? I don’t know. I mean, I would take a look at that and say, “Well, how much lower can you really drive the prices? Are you going to be able to maintain the same level of support with those SMB customers? And dependent on the complexity of the product, you may or may not be able to. It sounds to me like my inclination just kind of a glance based on the 20x number. Is it you probably don’t want to go in that direction just because I think it will be very difficult to drop the acquisition cost by that much to support the work level that it takes to get those customers onboard.
There’s also the fact that some types of products just they seem like they would be a good fit for the SMB market but they just aren’t. Those customers as you said, they don’t want to pay as much as an enterprise customer. And the reality is that they don’t really need it that much. They may think that they do or they want to be in a position where, “Hey, we’re sort of a big company,” and they feel like they’re important but the reality is that, they’re not in the same situation as those enterprise customers and they just will not buy it or not buy it at the levels that you want them to. And at that point, it becomes a losing proposition.
Rob [09:30]: Yeah. In almost all cases, you want to get your prices up higher even if the sales process takes a long time. And the answer to the six to nine-month sales cycle is to just have more and more of those enterprises in the pipeline so that you’re constantly closing them, right. So if you only have five in your pipeline and you all started them today, then yeah, it’s going to be six to nine months until you close those five. But if you five that come in your pipeline today and five tomorrow and five the next day and five, then starting six to nine months from now, you’re just going to be closing a few them basically every day or every week or whatever.
And that’s where you want to get. Based on the information you’ve said, I don’t think there’s any way I would try to do a lower price offering at this point. The only reason I would consider doing lower price is if you’re in innovator’s dilemma situation where someone else is building a simpler, lower-cost version and they’re taking your customers from you. And someday you may have to do that if you become a big cumbersome entity like the Marketos and the HubSpots. Not that I’m such that cumbersome but Infusionsoft, Eloqua. I mean, basically, we’ve innovated Drip innovator dilemma them from underneath, simpler, lower cost, easier to use. But you’re not saying that here. You’re saying, “Should you go there so that you cut down on these lead times?”
I’ve never heard of an approach where you try to go cheap and go for volume because trying to get that volume is it’s a pain. It’s so much work. It’s harder to support. You’re going to need a lot more features because you’re going to have this broader swath of people having 10,000 customers versus having 500 or 200 customers. It’s the whole different ball game. So, if you look at how Jason Lim can talk and he’s kind of B2B SaaS, one of the experts in the world, his whole thing is start cheap or start as expensive as you can but you’re not a brand name so you got to start cheap and then work your way up. And you’re talking about going the opposite direction.
And I would almost not even consider this out of hand. Obviously, you never want to say never and there are exceptions to this. But I would guess it’s probably 1 in 500 businesses that should actually do what you’re suggesting. And so I’d say odds are pretty heavily against trying to go for SMBs. I think the last part of your question was, is there something magical that happens when you go after this market and the answer is not. It’s still a ton of work and it’s just a lot more customers to try to sell and support. So thanks for your question, Daniel, hope that helps.
Next question is from Rob at onlinetravelmap.com. And he says, “Hi, Rob and Mike. Thanks for making such a great resource. I’m working my way through the Blank and Dorf book, ‘The Startup Owner’s Manual.’ And I’m on the customer discovery part of customer development. They say to create three things that I’m having a hard time seeing other entrepreneurs create. First is an influence map, second is a customer archetype, and the third is a day in the life of. Did you create these for your businesses? And if so, how? I ask because it seems like more info than people would want to contribute.”
So for those who haven’t read ‘The Startup Owner’s Manual,’ Steve Blank is a guy who come up with the concept of customer development and later a student of his era agrees borrowed customer development as well as some of his other concepts and developed the Lean Startup. So Steve Blank has founded and/or been a venture capitalist. He’s founded a number of companies. He took several of them public. He had a bunch of axis. I mean, this guy knows what he’s doing. He’s been an entrepreneur in the trenches.
So in this book, ‘The Startup Owner’s Manual,’ they talked about different things. It’s like don’t create a business plan but create these influence map and the customer archetype and a day in the life and that kind of stuff. So, I guess and now that we know what that is, did you create these for your businesses and if so, how? You want to kick this off, Mike?
Mike [12:59]: Sure. I probably didn’t sit down and go through like those specific concepts like the way that he would’ve recommended and say, if he’s got templates and stuff like that, I’d certainly didn’t use them. I mean, I did write down people who I thought would be good influences or people that I could leverage to get to more customers. And I also wrote down some conceptual stuff about like who is the type of person who would use this, are they paying for it, or are they just using it and their boss is paying for it and stuff like that. I did not really go through a day in a life of but I thought about how the product itself would be use.
So, I did to some extent I would say did do these things but I probably didn’t document it to the nines when I was going through and writing it all out. The other thing is I didn’t plan these things in advance because – or at least not so far in advance that it turned out to be useless because it would’ve been based on pure assumptions. So, essentially what I did was before I really started to go down the path of building it, I thought about who it was that could help me and wrote down a list of names. And then I also thought about the people that I was having conversations with when I was going through validations and saying, “Okay. Is it possible or is it going to be difficult for me to get in front of more of those types of people?” So I used that to kind of identify what marketing channels to use.
But again, like of the life of, I didn’t really think too much about that just because I was focused more on how is somebody going to use this as opposed to if it’s consultant use or a freelancer, what does their day look like? I know that they get pulled in all sort of different directions and quite frankly, the best position for them to be in is to not really be in my product that’s doing other things. It’s supposed to work in the background for them.
Rob [14:37]: Yeah, and for me, no I’ve absolutely never created these things but I create my own versions of them. I just think what is the value proposition, what is it going to take to get this many people to the site, this many people to the funnel to grow this fast, what are the possible channels for that. I didn’t draw an influence map but I definitely had a list of folks who I thought could be – could help me out in some way, affiliates, that kind of stuff. But I mean, this is a bulleted list and a Google Doc, right. I just told that I had the HitTail marketing game plan and then I had the Drip one. It was all the marketing ideas that came up as I went through it.
Customer archetypes, you know, again, I didn’t do ‘The Startup Owner’s Manual’ but I wrote out, who do I think like the top three possible customers for these apps are, where are they, and you just kind of build this out, just research it and then forgot how you can advertise on those place. Or is it more organic, are they going to Quora? Then maybe I should answer questions on Quora, that kind of stuff. A day in a life, never done it. I know a little bit about it. I don’t know how that would be helpful for me. But the thing is, the problem is I do think the stuff is helpful for beginners but it’s like it just gets too deep.
You get this 600-page book like the ‘The Startup Owner’s Manual’ and they have this whole section on TAM and SAM, right, it’s like total addressable market and served the addressable market and target marketing, blah, blah, blah. And it’s like you have to go to think about those things but I think people just spend way too much time looking at this stuff. I mean, especially if you’re bootstrapping, the TAM doesn’t matter. The total addressable market does not matter for trying to build a $10,000 a month business.
It matters if you’re trying to raise funding because they need to know it’s a $100 million marketing and you need to prove that. So, so much of this is not relevant towards bootstrappers. I mean, you can grow a seven-figure business and never want to do any of these things. But with that said, I think the issue is that they have you thinking through based on all of these key resource hypothesis and the customer relationships hypothesis. I think thinking through them once is probably good but when you think about bootstrapping a business, it’s like, am I building something people want? How do I get there quickly and then how do I let people know about it?
Those are the three questions I ask and that’s what – the day we launched Drip, I had a 12-page Google Doc which is a bunch of bullets and notes and thoughts and just every podcast that I heard that gave me ideas that I thought could work I put on there. And by the end, I have this big list of tactics that I was then able to develop into a strategy and to leverage that and figure out what works and what doesn’t. And then from there you go to a spreadsheet. There’s a whole other system down there but these are theoretical and they’re business model planning. And Steve Blank is an academic. He did launch several startups but he’s a professor now.
And so he thinks in terms of these broad frameworks and often these broad frameworks are pretty high level and are pretty MBA type stuff. And in my experience, MBA type stuff does not tend to help you when you’re actually having wherever meet the road. It tends to help you really well if you’re raising funding, if you want to do a pitch, if you want to talk about, but nuts and bolts of actually getting customers is just a whole different story. I’d be really careful with spending a ton of time on these things you’re talking about, but I do think it’s helpful to do these extremely thin and quick versions of each of them and try to think through what are the questions that they’re trying to have me think through because I do think there’s benefit there.
Mike [17:36]: I think the important thing to bring up here at this point is that the reason why it’s helpful when you’re looking at going out for funding is that it forces you to think about things that you probably haven’t put a whole lot of time and effort into or that consideration, so that if you get into a situation where VC or an angel investor ask you a detailed question about something like this, then you’ll have an answer off the top of your head because you have looked at that specific question before and you won’t have to um and uh over it and come up with something on the spot. You’ve already thought about it in advance. That’s where it’s helpful.
It’s not helpful in terms of implementing your business and actually doing anything, because I think that what you’ll find is that, you can put together this plan and do all this stuff in advance, but things are going to change as soon as you start talking to customers and that’s really where – that’s where all the other things that Rob just talked about and moving quickly and having those lose spreadsheets and Google Docs that you work from, that’s the most important at that point. When you’re talking to VCs, they just want you to know that you have done your homework and really thought in depth about these things. And if you can answer some obscure question, then they’re more likely to fund you because of that because you can answer that obscure question.
Rob [18:46]: Right, and I mean, it comes back this quote that I say a lot which is about how I prefer to build businesses instead of slide decks, right, and this comes back to all the stuff we’ll probably look really good in the slide deck when you’re raising funding but it just doesn’t question how much. It’s really worth in the long term in terms of actually when we’re meeting the road. So I hope that helps, Rob.
For our next question, it comes from Liam Elliott and he says, “Hey, guys. First of all, I love this show. I want to pick a startup to run with but I’ll be in university for at least two and a half years starting in September. Is it possible for me to plan for growth as a one-man show? I want to avoid having to make the difficult decision of business or school somewhere down the road. Do you have any advice or war stories about the consequences of resisting natural growth in order to maintain availability for another area of life such as work or school during a predetermined period?”
Mike [19:38]: I feel like there’s a kind of a false assumption here that everything is going to be successful, and that growth is going to become very quickly and very easily and you’re going to have to make a decision down the road of, “Oh, do I stay in school or do I go with this business and do that instead?” I think if you look at widely publicized examples of people doing exactly that, you end up looking at people like Bill Gates or Steve Jobs. And those come to mind when you look at that stuff, but I don’t think that there’s too many other examples that do.
So, it kind of skews your view of what really happens when you’re trying to build something. I think that if you’re going to a university and you’ve still got two and half years ahead of you, then I would use that time to essentially build a business and practice with a lot of things where there’s marketing or a product development or doing anything related to customer development in order to put yourself in a position where when you get out into the real world and you have to actually start paying bills as opposed to taking classes all the time and not having to worry about that stuff. Then you’re in a better position to be able to grow the business.
From my own personal experience, I only know of one person who was going to college and ended up building a successful business while he was in college, and the end result of it was that he was one class short of getting his degree in photography and decided [?] I don’t care because he realized that his business was making more than enough money that he didn’t have to worry about it. But he had also started this business back in high school and he’d been running it since he was, I think, 17 or 18. And by the time he was 21-22, I mean, the business was making close to 7 figures and this was back in the shareware days and there was not a ton of competition. So ti was a very different environment at that point. And he still runs the business today but he also runs a couple of others as well.
So I can’t think of too many examples that really fit that mold of where somebody’s going to college and they build a very successful business and then they have to choose, do I want to grow this thing even more at the expense of quitting school.
Rob [21:34]: Yeah. I think that’s a good point. I think the odds of it happening are pretty slim. I think I’d be less worried about it growing and having you to decide and more worried about it just being a time suck, right, because even if it’s not growing, it can still be a huge time suck that you’re investing a bunch of time in. I think one thing to think about is like this is perfect for kind of the start small stay small approach which is the book I wrote in six-seven years ago. And it’s where you look for really small niches, right. You look for have [?] website just hold a few thousand a month. I had an in-voice that sold several thousand a month but very small, very self-contained markets, almost no competition. I had a few others ahead.
There were some e-books in different markets and they were just so small. I mean, they were literally between 500 and 5,00 a month each. And there was very little work to be done on a month-to-month basis and they were never going to grow to be $10,000, $20,000, $30,000-businesses. But that’s the like the perfect, I can imagine a better business to have while I’m going to school. Not much work, no danger of growing, not a competition so I don’t really have to fight it off. So that’s probably where I would think of going down more of this micro approaches like having whatever your talent is. I don’t know if it’s WordPress, plug-ins, or Photoshop add-ons or a Shopify app.
I mean, there’s these little tiny markets you can get into where it isn’t a ton of work and it generates a bit of money but you’re not endanger of this thing growing even if it grows to as big as it can be. It’s still only a few grand a month. So it’s an interesting thought experiment and I appreciate the question, Liam. I hope that’s helpful.
The next question is from a guy Louis and he says, “Hey, guys. You’ve responded to a number of my questions in the past and I appreciate that. I have another one. How do each of you approach scaling support? I heard Jordan [Gaul?] mentioned a StatusPage.io runs 10,000 customers, 1,600 of which are paid. They bring in 2.4 million AOR yet they only have one full-time equivalent support role. My business is growing via channel partners who while currently taking up a lot of my time, are helping me streamline support so I’m ready in the future to take on more. Currently, I use videos, flowcharts, and manuals, plus an online ticketing system, but I wanted to know what else I could consider to help reduce common questions and problems. What are your thoughts?”
So one clarification here is the StatusPage.io thing with 10,000 customers and one support person is a little bit of a – I don’t know. Maybe –
Mike [23:51]: Edge case.
Rob [23:52]: It’s an edge case, that’s a good way to put it. Because think about how simple – I mean I used – we used to have StatusPage.io replaced for it. It’s a simple app. There’s not much fare, so there’s not much to support. An app I own years ago was HitTail. It was a simple app. We had one part-time support person even though we had – I’m trying to think of how many thousands of customers we had. It’s just there wasn’t that much to do when you just get set up and then things run on autopilot. It’s very different. It depends on what your app is but you look at an app like Drip or an app like direction Bluetick has headed, Bidsketch, these are much more complicated apps, a lot of moving parts, a lot of things to get configured, a lot of things to think about, dozens, 50, 100 different screens of background process. I mean, there’s just a ton of things to know.
It’s just apples to oranges, right. There’s a reason that in StatusPages that one reasons can support 1,600 paid whereas in an app like Drip, maybe that’s five people that need to do the same thing. So, that’s not your question, I realize, but I wouldn’t try to think that every app can have that ratio. But back to your actual question of he says he uses videos, flowcharts, and manuals, plus online ticketing system. I’m assuming that a Help Scout or Zendesk, he’s wondering what else he can do to reduce common questions and problems. Go.
Mike [25:00]: Yeah. There’s only so much that you can do and I think that there was an attendee talk last year by a Ben Orenstein who talked about how he tried all these different things and he was watching from people’s shoulders as they were going through his app and he’s like, “Oh, they didn’t realize that they needed to do this. So let me put some text around that.” And he went to the next person and watched them and they didn’t see the text. He’s like, “Oh, well, maybe I need to make the button bigger.”
And he made it bigger and it still didn’t matter. And he tried all these different things and the reality is that there’s so much variation between customers that it’s very difficult to do one thing or even sometimes a combination of things inside of your app that will completely eliminate all support questions or problems that come up with that one particular feature. And if you would extrapolate that across the entire app, there’s no way to eliminate them all especially in any sort of application that has a level of complexity to it, above like a static HTML web page. And even that, you’re probably going to get questions about.
So there’s a lot of things that you can do. It sounds to me like you’re doing a lot of the things that I would probably tend towards. I would take a look at your support tickets and see if you can classify them or categorize them in such a way that you were able to identify the places where you are getting a lot of questions about and see if there’s ways to either put some wizards in or streamline the user experience so that maybe it’s a multistep process or something along those lines.
I’ve also seen apps that are out there that you can kind of integrate into your application that allow you to have a help page on the specific page of your application that points you directly to the KB articles that are relevant directly to that one page. But even with that, you still have to educate people that that’s where they can go for help on that particular page. So, there’s always going to be places where people overlook stuff and there’s literally nothing you can do to stop that.
Rob [26:49]: Yup. I mean, it’s blocking and tackling, I think, right? I think you get something. You’re going to have something, some in-app help, having a chat widget can be nice although you’re going to need more people if you offer that kind of real-time support. And certainly videos, flowcharts, and by manuals, I’m assuming you mean online knowledge base not a big 300-pound paper thing that you ship to someone like in the old days. I mean, our KB has been super, super helpful and people search that all the time. They want to find the answer right away. They typically want. It depends on your audience but they typically want to find an answer without emailing support because they know it’s going to take a while to get a response. So the more you can build that out, the better you are. So I don’t know if any magics over bullets here. I just think the more info you can get out there in a searchable fashion, the better off you’re going to be.
One hack that we do use, maybe this is something that I can throw out, is I went in. RKB runs on WordPress, and I hacked it since I still know a little bit of PHP. And I wired it up so that any time a question or anything’s typed into the box and we don’t have a result for it, we pop it into, in essence we send an email into an inbox. And then we have someone go through those once a week. And there’s a bunch of junk and there’s a bunch of stuff that we’re never going to do if we found people phrasing things differently, obvious repeated searches that we should build. So we wind up building KB articles based on basically people not finding information and we found that over time that the amount of searches that aren’t being found are the ratios reduced. So, that’s one clever hack but that’s not individually going to scale your support up, but everything – it sounds like you’re on the right track at this point.
And I think for our last question of the day, we’re going to take it from Dave. And he’s asking about raises and when to give raises and how do deal with them. He says, “We have 12 employees and every 6 months we evaluate them, have one-on-one meetings and give them raises. My employees are great and I don’t have any qualms in that area. We’ve been lucky enough that our employees like us and stick with us but this creates a small problem which is that after an employee has been with us for one and a half to two years, they’ve received several considerable raises. For example, my lead developer who started with us less than two years ago with 18 bucks an hour is now up to $31 an hour. That’s the biggest jump. But there are others who are heading in that direction. For that amount, I could almost squeeze in another developer which we badly need.
Now the company has grown and the employees are now more experienced and more valuable, but still it feels difficult to just by paying the same guy that used to pay 18 bucks an hour, $31 an hour. It isn’t a large a company and it’s not the type of place where people jump to upper levels of management and start adding values in ways they weren’t before. Actually, most people are doing what they did two years ago, fix bugs, add features, etc. At the same time, now that we’ve set this pace of raises, I wonder what the expectations are and what would be the reaction if I all of a sudden we said, ‘Sorry but you’ve reached your limit.’ In short, how do you deal with raises? How is it tied into the growth of the company? What do you think is fair”
Mike [29:36]: So I’ve never been in a position where I effectively doubled somebody’s salary over the course of a year and a half or two years. I think that that is asking for trouble in many ways, but it’s also hard to go back and change things if you feel like you’ve made a mistake in that particular situation. I think when you get to a certain point, you also have to probably let people know where the business is at and what your priorities are moving forward. And to kind of that point what I would say is go take a look – we’ll post this in the show notes but I would go take a look at [?] profit-sharing program that they put together. And it sounds to me like that might be an appropriate way to go where you’re not necessarily guarantying somebody that they’re going to get a particular raise, but at the same time, you’re encouraging them to work smarter and do things that are going to increase the profitability of the company without directly giving them money regardless of whether the business does well or not.
So, as the business owner, and this is an odd thing about entrepreneurship is that as a the business owner, you are the person who’s undertaking the vast majority of the risk. And if you can do a profit-sharing of some kind where you essentially shift some of that risk back to the employees to some extent, I mean, obviously, it’s like you want to pay them a fair salary but instead of giving them exponential raises every year which you can instead do is say, “Okay. We’ll give you a small raise and we’re going to implement this profit-sharing that allows people to get a much larger upside than they would otherwise in a way that is not guaranteed.” So I think that that’s probably the direction that I would go with something like this.
Rob [31:08]: Yeah, that was going to be my first suggestion is to not make it raises but to make it somehow based on profit in essence. You can’t base it on revenue either, right, because if you guys are growing then there’s not going to be a ton of profit, but if you can share in that then everybody shares in the upside. The other thing – I mean, I think this should be a cautionary tale for people listening. Obviously, I think giving someone a raise in two years from 18 to 31 is, unless they were drastically into market is just way too fast the pace and you have set an expectation now with these folks. So I think the answer, if you haven’t done that, it’s like don’t do that. You can give a raise every year, it’s typical. People tend to I think expect that. And I think that’s a good thing and if they’re solid that that’s fair. But going above and beyond has repercussions. There’s a reason that people don’t often give hefty raises every six months.
The other thing I would think about is what is market rate in essence, like where this person lives based on where their location is. What is market rate for what they’re doing? And if they’re over-market substantially, say, Marcus, 25, and they’re at 31 then have a conversation with them and let them know like, “Look, I know that market rate, you’re over-market rate, we really value but we just can’t continue to bump you up at this pace if it’s only one person who’s way over-market. And there are salary surveys and such. If people are still under-market, then perhaps you can just slow down the pace and just say, “Hey guys, we’ve grown to the point now where we need to do. We’re not going to raise every six months or we’re not even going to evaluate you every six months. We’re going to do it every year instead and you can slow the pace down there.”
I mean, there are options here and none of them are super easy because of the expectation that you’ve set, but I think that you’re asking the right question and definitely thinking about it well because then I think if you were to be flippant and just suddenly change policy, I do think that you’re going to need to have some conversations for sure. And I like what Mike said. I think I like the profit sharing idea just because it then becomes relative to the company’s success.
Mike [32:55]: I think the most important part of all that moving forward though is being a little bit more transparent about not just the company’s finances. And you obviously don’t have to share absolutely everything but let people know, “Hey, this is where the business is. This is the goals that we’re trying to achieve and the reason we don’t want to give you a massive raise moving forward or this year is because we need to grow the business. We need to hire support people. We need to do all these things. So we need to allocate the business resources which in this case is money.”
And then you can introduce the profit sharing, but it starts with those conversations. If you don’t have those conversations, you just drop it on people, then I think you’re probably going to start introducing more problems than anything else. I mean, you have to have those preliminary discussions first and set expectations around what the schedule going forward for raises is and have some preliminary discussions just to kind of float the idea.
I learned a long time ago that I took some leadership classes back in college and one of the things that they recommended was that, if you’re going to a group of people and you want to get their support on something, never walk in the door and just drop the idea on the group because what will happen is the people will shoot it down and there’s always a couple of people who are going to shoot it down because they’re not going to be happy with it. And everyone else doesn’t know which side to go on because they haven’t really heard about it before, so they don’t have all the facts.
And if you do that in this case like this, you’re going to just run into problems. So, float the idea to people. Talk to them a little bit about it beforehand. Get their input and you can actually – if it’s a small enough group with only 12 people, you could probably do that with every single person and just say, “Hey, let’s just keep this between us because I want to float the idea behind. What do you think?” And then everybody feels like they at least got some sort of a say in it or communicated with you about it.
Rob [34:34]: Good. Really good strategy there. So that’s actually how I approach the Drip acquisition with our employees. I went to everybody one by one. It was very time-consuming to have it, because I pretty much cover 30 to 60 minutes per team member. And there were some that were in person, some remote. Some of the conversations were different than others. And it was time-consuming but in retrospect, it was exactly the right way to do it because if I got everybody together, people don’t want to speak up. They don’t want to ask questions. But when you’re doing it one on one, that’s just so much easier. And again, it’s way more time-consuming but there are certain issues that I think warrant that in talking about an acquisition or employee pay, I think are probably two issues that do warrant it.
Mike [35:13]: Well, thanks for listening, everyone. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt used under creative comments. You can subscribe to us in iTunes by searching for ‘startups’ and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening and we’ll see you next time.
Episode 329 | How to Make Your Customers Successful
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to make your customers successful. Just putting out a functioning app isn’t enough, the guys talk through some points to help your customers navigate the ins and outs of your app.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of ‘Startups for the Rest of Us,’ Rob and I are going to be talking about how to make your customers more successful with your product. This is ‘Startups for the Rest of Us’ episode 329.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products. Whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob [00:25]: And I’m Rob.
Mike [00:26]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week Rob?
Rob [00:30]: Well, I finally broke down and I started listening to the book ‘Shoe Dog’ by Phil Knight. And it’s the story of Nike. Phil Knight’s the founder of Nike and I just kept hearing about it and I really don’t have much interest in the story of Nike from the outside. But it’s been on my wish list for probably – I don’t know – since the week it came out. And I just kept seeing it and I finally didn’t have anything else to listen to in the tech space and so I started listening to this book and instantly I was struck by how good of a writer he is. Just poetic. Like really amazing vocabulary. It just puts together very well. He’s not like a business guy writing a book. He’s like a writer writing a tale. And so it’s incredibly captivating from the start.
And then the other thing is, you get sucked into the startup story. And right now, I think he’s like five years into running Nike and it’s still like barely breaking even and he has a couple of employees working for him. But he works a fulltime day job as like a consultant like a Dloyd or one of those big three consulting firms. And he’s basically just pouring his money into this thing. And it reminds me of how quick everyone expects success these days with bootstrapped startups because that’s essentially what he was. And it’s – I’m trying to think if it’s the ‘70’s. It’s funny. Yeah. It’s got to be the late ‘60’s or the ‘70’s. And back then it just took a really long time to get traction. And so, all that to say, I’m about a third maybe half way through the book and I’m pretty riveted by the story. I begrudgingly kind of have to recommend it because it’s just a really good book.
Mike [02:03]: That’s interesting. I would imagine that for a company like that it takes a long time to kind of establish the traction. Plus, you’ve got all the manufacturing costs and everything else that as software people we don’t tend to have to worry about that stuff. Our biggest costs at this point are generally like the people who are building stuff not like the raw materials. And then on top of that, you’ve got to pay people.
Rob [02:25]: Right. Well, the trippy thing is he’s not even manufacturing at this point. All they’re doing is importing shoes from Japan. And he has an exclusive import of this brand called Tiger. He has exclusive for the western 20 states or something. And then someone else has the east coast. And that’s what he is. And he’s sold $1,000 his first year and then it’s $3,000 and then it’s $6,000. And each year is a doubling but he’s not actually making any money because he has three or four employees now. Most of them are paid way under market but they’re in it for the mission. That kind of resonated with me too.
I think of it as a bootstrapper. You know it’s funny when seven, eight months ago before the Drip acquisition we were paying people as much as we could and people were all in for us. And it was really fun to be working on Drip. And then when Leadpages acquired us they kind of told us, “Do you know that your people are under market and we should give then all raises?” And I was like, “I actually didn’t.” It never occurred to me because it seemed like a fair wage to pay. But when they actually look at big company’s salaries and they did a big comparison between what we were all making – that includes me and Derrick – we were just all under market.
The term I’ve heard for this. There’s a guy named Jason [Selby?] who I work with now. And he calls it combat pay. And he says those salary surveys are like if you work at HP or if you work at insert name of big fortune 500 company you don’t actually want to work for, then that’s where the salary ranges are. But if you’re actually working for a company that you love and it’s a small team and you enjoy your job, I know I’ve always been willing to take less money to enjoy my job a lot more. So there is a balance and you really see that. Back to ‘Shoe Dog,’ you really see that with them. There’s such a strong mission that people are kind of like, “Hey. Love the gig. Love working with you, Phil. And love what we’re doing.” And so, they’re just willing to work for basically whatever pays their rent. They’re not trying to maximize income.
Mike [04:08]: Sounds like that should be reversed as combat pay working for a large crappy company that you don’t want to be at.
Rob [04:13]: That’s the term, yeah. Combat pay is working for the big company meaning you get more pay because you essentially have a crappy job or a job that you hate is the idea.
Mike [04:23]: Cool.
Rob [04:24]: How about you? What’s going on?
Mike [04:25]: Well, I converted two more of my prepaid orders for Bluetick into paid customers. And then I also added another customer. And I did a demo a couple days ago for somebody who wants to add two or three different sales reps on it. We’re kind of going back and forth on that stuff now. And then, shortly after this call’s over, I have another demo. So, yeah. Things are moving forward in the right direction. It’s interesting using Bluetick to follow up with these people because I’ve had conversations with a bunch of people in the past and I basically throw them all into Bluetick and just let it go out there. It’s nice to see the product is doing exactly what it’s supposed to do. It’s getting the responses then I just pick them up and go from there.
Rob [05:02]: That’s cool though. Well, A: first of all, congratulations and whichever ‘Startups for the Rest of Us’ listener has the first week of March in the pool as to when Mike’s going to hit 25 customers, I think you’re first or second week, I think you’re going to be on a roll there. But that’s cool, man. To get another customer.
Mike [05:18]: That would be an interesting contest to run.
Rob [05:20]: I know. And have a pool with a bunch of squares each day for the next month or something.
Mike [05:24]: Yep.
Rob [05:24]: Good. Well, that’s cool. Good for you. And I think it’s great that you’re dog voting Bluetick with this. I mean, it’s only going to make you notice all the kinks and all the things that are wrong quicker and fix them without people having to tell you.
Mike [05:38]: Yeah. Definitely. There’s places where I’m running into where I want to integrate it into other products like Drip and Pipedrive and Google Spreadsheets and things like that. So I’m using the Zapier integration pretty well. And that’s anytime where an issue comes up that I run into where it’s like, “This is harder than it should be. Let me go fix that.” Obviously, I’ll just wire it up the way I need it to work but then look down the road at how can I fix this and make it better for people.
That kind of leads us into what today’s topic is which is that in having conversations with people, I’m going back to them and saying, “Now that you’re signed on, what is it that you’re having trouble with?” and getting those people on boarded. I’m starting to notice places where I know the application extremely well and if I need to go do something, I can just go do it. But for new people who are getting into it, they’re not familiar with it. Not necessarily familiar with the terminology or things that they need to do or even things that I want them to do. So, part of overcoming that I’ve just been doing some personalized onboarding sessions with them. But at the same time, I wanted to talk a little bit about some of the stuff that I’ve kind of identified and realized like just putting that app out there and having it functional, clearly it’s not enough for a full blown SaaS app. So I wanted to talk through some of the things that you can do to help make your app more successful. And, don’t get me wrong, I will fully admit that there’s certain places where I’ve completely fallen down on this so far. But I also recognize we need to do this at some point and it’s more a matter of prioritization than anything else.
Rob [07:02]: Yeah. And that’s what I like about this episode and the outline you’ve put together is that it’s right from your experience. These tend to be kind of the best topics to talk about. It’s what you’re going through at that moment and you’re trying to gather your own thoughts to come up with a plan. And that allows us to share it with the listeners as you’re going through it which I think is really cool.
So, let’s dive in.
Mike [07:20]: The first one is that you kind of need to take a look at your app and identify three things that the user needs to be able to do or needs to have done in order to be successful within an arbitrary time period. Whether that’s three days, seven, 14 or 30 days. Something like that. Just kind of draw a line in the sand and say, “In order for this user to be successful, I need them to have done these three things by that time.” So depending on your app, it may be at one end of the timeframe or the other but, ideally, you would like to try and get them through that as quickly as possible. If you can get them through in the first 20 minutes, awesome. But for some of those things it’s going to take time. In Bluetick for example, they’ve got a connector mailbox they’ve got to create sequences and then they’ve got to add people into those sequences. Those are essentially the three things that I’ve identified that they need to do those three things in order to get any value out of the product. If you don’t do those things, you’re not going to get value. You’re going to cancel. So I kind of monitor those things. I get a daily email that tells me who has done what along those different things when they last log in. All sorts of other information. But I’m really keeping a close eye on who has done what so that I can reach out to them and kind of help push them along.
Rob [08:26]: I don’t think there are always three. So for an example with HitTail, there really was just one in the early days and it was getting people to install the java script snippet. Because then that collected data and then they were done. As long as they had that data, they were getting suggestions. Long term they needed to be writing articles and doing stuff. But just for onboarding and them seeing value, they needed suggestions. Once the – Google did not provided it – then it became not installing the java script but using the Google webmaster tools kind of OOF process where they had to kind of log it in and suck out the data from there.
So it was really one step with HitTail. Later we added automated article writing that people could do. So maybe you could say it was two. With Drip – I talked about this in MicroConf a couple of years ago. Remember, I talked about the minimum path to awesome. And it was kind of like figure out when your customers get the dopamine rush from using your product and then figure out what the minimum path to that is. And I like thinking in terms of threes like you said. I don’t think it will always be that. I think with more sophisticated products like Bluetick, like Drip it will be three or more. We actually had different paths where if you were sending emails to customers, it was installing the Java script; it was putting some emails in a campaign like an onboarding campaign. And then – I’m trying to think what the next one was. It may have been setting up conversions to see if they converted. I forget what it was. And then for other people it was like if they use Stripe then we had them wire up Stripe so there was actually this fourth optional thing.
But yeah. And then you want to tell people how to do those in the app. We had the little bar across the top that we used to use. We don’t use that anymore. But it was kind of like a wizard that showed up all the time. Then you want to tell them again via email. And then you’ve got to at a certain point once you start scaling up you’ll figure out what the timeframe is that people can most often accomplish these things. With HitTail we realized they can install this Java script within the first five minutes and then they’re on boarded. And that was actually kind of nice.
I want to build another app like that, Mike. Where the onboarding is so [?]. Because then you look at Bluetick or Drip and by the time someone writes an email course, which we of course help them with and offered all this stuff, it’s days and days and you have to keep reminding them. So we realized that even a 14-day trial was probably going to be too short for people to really get any value out of a tool like Drip. That is why we landed at the 21-day trial. That’s kind of where we found it.
So, I like your thought process here. It’s mapping out maybe one, two or three things they need to do. Tell them in app, tell them via email and then figure out how long it takes on average and then that becomes your trial length.
Mike [10:51]: You’re totally skipping ahead of my outline.
Rob [10:54]: Oh, am i? Sorry. I didn’t read your outline.
Mike [10:55]: No. That’s okay.
Rob [10:57]: I got that off the top of my head.
Mike [10:57]: I think it’s a great lead-in though because, as you said, you can send them emails; you can have those in app wizards. I think there’s other ways to get in touch with them too and it depends on what your app is and what information you have about them. You could use SMS messages, for example. One of the things that I talked about was a concept you’d come up with several years ago called the Concierge Onboarding. And I do that for Bluetick explicitly for one step because connecting your mailbox is actually fairly difficult to do. So if I send somebody instructions on how to do it then they very well run into problems getting it done. So the onboarding session is I get their mailbox hooked up for them and I kind of watch over their shoulder, “Do this, do this, do this.” And even having stuff in the app, it only goes so far because there’s certain things that we haven’t implemented yet to make it easier. And we’re trying to get those done but it’s hard to do them. So, for the time being, I’m manually doing that stuff because I have to. But once they’re past that, the rest of the stuff I can rely on other mechanisms. But that one, at the moment, I don’t have any good way around it.
But I think that, more to the point, this is about finding the best ways to communicate and interface with the user to get them to that next step. And the default mode seems to be send them the information and let them do it. And some tools kind of target this market like Intercom that basically sits there in front of the user inside the app and says, “Do you need any help?” Or, “How can I help you out?” But it’s not active. It’s not really pushing the user and not really showing them, “You haven’t done this yet. Let me help you.” Or, “How can I help you?” Or, “Here’s instructions.” Does that make sense?
Rob [12:26]: Yeah. It does. There’s a lot of different ways to do it. I think the simplest one that you should get set up first that doesn’t require any code is to set up the email pings. And I know that some apps take this too far and a lot of apps are doing it now so it’s a little irritating but this was the game changer when I acquired HitTail is that they didn’t have this. And as soon as I added it, it completely rocked the trial to paid conversion rate of that app and it allowed me to start scaling it up.
So adding emails in and this just requires a little bit of time to write some onboarding emails that are like, “Here’s the benefit you get. Here’s what you can do. Here’s the easy step. We’ll do it for you.” And that’s the big thing. You’re talking about this Concierge Onboarding concept that other people claim they invented but, remember, I got into a Twitter thing where I was like, “Dude, you did not invent this.” And you went back through our transcripts from 2012 because he’s like, “Well, I did it in 2013.” And then you were like, “It was 2012 in our transcripts.” So thank goodness for the transcripts to kind of prove we were talking about it.
I remember coming up with this idea and saying Concierge. I loved that word. I’d never heard anyone use it in the context of a startup before or of onboarding. And we combined that and if you imagine, I’ll use the Drip example because this is where we started and we had a bunch of success with it early on. Someone comes in, they install the Java script and then they’re like, “Okay. You need a three, four or five-day mini course. You have not content right now.” This person’s not going to onboard. How do we remove every possible barrier to them getting that course done? So, right in the app, we gave them three choices. Number one: You can click here and we gave them scaffolding. It was blue prints. And so, poof, it prepopulates. Kind of hydrates a five-day email course with the right delays in between them and it has scaffolding kind of built into the email and you can just fill in some content and you’re done. The second option was – I see you highlighting exactly what I’m saying right now. Four bullets down the line.
Mike [14:14]: You’re skipping ahead again.
Rob: But I feel like it works in this context. And the second option was for them to click the button and we would do it for them if they provided us a couple pieces of content. We could build out that course for them. And that’s the concierge part you’re talking about. That’s where you’re actually doing something for them.
And then the third one, they could pay $499, talk directly to a writer. We did not mark that up at all and they would write a course from scratch if the person didn’t have any content. And we found that those three avenues – especially in the early days – very powerful at getting our trial to paid conversion was extremely high right off the bat. Even for an app without product market fit we were over 50% asking for credit card up front with trial to paid. We got that close to 60% at a certain point. So it was definitely a successful effort based on how hard it is to get on boarded in an app like Drip or an app like Bluetick because there is a bit of work to be done.
Mike [15:08]: Yeah. But I think you plan out those interactions and maybe there’s some sort of an escalation process where first it’s something inside the app and then you follow up with an email and then maybe after that you call them or send them a text message. Or send them multiple emails over the course of several days and maybe they get more – I don’t want to say violent – but a little bit more aggressive in terms of the language like, “Notice you haven’t done this. Can we help you?” And you kind of escalate what it is that you’re offering to do for them. Or how they’re going to benefit from them.
And you can alternate between positive reinforcement and negative reinforcement, I think. But the core piece, I think, at that point is to really plan out what the interaction schedule looks like for those users. If they do this, then great. Kind of reward them and move them to the next step. But if they don’t, do this. If they don’t do that after that response to them, try something else. And you kind of escalate what it is that you’re trying to tell them or communicate to them to get them to that next level. And planning out those interactions, I think is really important at this point.
Jenna of ProdPad had spoken at MicroConf Europe about how they used Drip to achieve this with what felt like constant emails. Like if somebody went into the app, they wired it up to Drip to have tags and events fired, it would essentially queue up the next email in a campaign to go to them to move them through this onboarding funnel. And, to me, it looked like, “Oh my god. You are sending these people a ton of emails when they literally just signed up for your app.” And if they don’t do something within 15 minutes, then you send them an email. And, to me, it seemed like overkill but at the same time she showed these graphs and charts that showed definitively that their user engagement had increased and they had these graphs and data behind it to prove it that it really was working well for them. And, obviously, it impacted the bottom line and allowed them to do a lot of other things. But the core piece of it is they got those people engaged and got them to move forward in that activation process.
Mike [17:15]: The next thing – I think this is more of a side point than anything else – but I’ve found that there’s this concept called deep linking inside of an app which the basic premise of that is that if you’re sending people communication via email, then you should provide links to take them directly to where they need to go inside of the app. And this isn’t something that we currently are able to do. But I think that it goes a long way in being able to send the user a button inside of an email that says, “Click here to view this dashboard or this set of data that you need to pay attention to now.” Because otherwise they have to log in then they have to navigate to the page and they have to remember where the navigation is. And for new users, I think, that that’s a little bit tough or difficult for them to follow because they’re just not as familiar with where they’re supposed to be going. If I say, “Go to the reports section,” that’s fine. But if I have 10 different reports there, then they have to figure out, “Okay. I’ve got to log in, now I’ve got to go to the reports section, now I’ve got to figure out which report it was that I look at.” And I think that that is an impediment to them adopting it and in getting to where they need to go and getting in and out of the app quickly to do their job.
Rob [16:58]: Yeah. I think this is a nice to have. It’s certainly not an absolute requirement but I think it’s something that you’ll want to get in after you get the initial kind of onboarding stuff built out. Because if you have to get them somewhere and you have to tell them instructions to click here and click there, you’re kind of dropping the ball. So this is probably something I would do pretty early on.
Mike [18:57]: Along with that goes personalizing the messaging that you’re sending to them. You definitely want to use some sort of a transactional messaging like the direct one to one communication. If you can use their name, great. Also be able to include data from their account in the emails that you’re sending to them. So specify, “Hey. You either haven’t logged in since such and such,” or, “We notice that this piece is still not connected,” for example. But I think you really want to dive in and identify the specifics of what it is in their account that you’ve noticed or identified as potential problems or places where they could get over that hump that will actually start to provide them value. And then remind them, “This is why you signed up for the this.” So that might involve incorporating dated from earlier in the process where maybe you surveyed them and they said, “This is the reason why I signed up.” And then kind of remind them of those things. Like, “This is what you said that you wanted to achieve and you’re not getting there yet.” And provide that information back to them and let them remember why it is that they originally signed up.
Rob [18:17]: Yep. More personalization equals more results. There’s just no question about it. Every test I’ve ever run, that’s where it will get you. I would say start off with a v1 that is less personalized and using a tool like Drip or autoresponders maybe in HeyWeb or MailChimp. I mean, they’re okay but it’s harder to personalize. But if you use a tool that can personalize really well then it makes it almost easy and in v1 you can stuff some stuff in there. Custom fields and such that talk about their plan. Talk about how much is left in their trial and be very specific about it. If you don’t have that control and you do just need to put in a static four or five email sequence without personalization, it’s better than nothing. Do it and make a note to circle back and improve it.
Mike [21:56]: That’s a good point. You can always circle back and go through those pieces again. You can add a little bit more polish to them. But getting them in place and getting the basic system up and running that’s extremely important. And if you can’t get that then, obviously, you can craft the perfect email. But if it’s not actually getting sent it doesn’t matter. So kind of get something in place so that it will go out there and you can iterate on it from there.
One of the last things I noticed was that you almost need to make sure that the user feels good about what it is that they’re doing and it is the right thing to do. And I’m not sure what my thoughts are on an all clear message or everything looks good from our side. But I think that there’s a lot of value in providing testing mechanisms and keeping in mind that the tool itself is not enough. You have to make sure that the user feels confident about what they’re doing and they’re not sitting there thinking to themselves, “Okay. Am I done? Should I click on this? Is this really the right thing? Are all these pieces set up properly? What do I do here?” And if you don’t give that person that sense of confidence then it makes it very difficult for them to be confident in the value that it’s providing as well. And kind of going back to what you had said earlier about having blueprints and the templates and the formulas in place that when you log into Drip, for example, one of the things that kind of came to mind when I was talking to one of my customers was – he’s like, “I’ve got everything set up but I’m not entirely sure what I should be doing.” So he sent me an email that said, “Can you look at this stuff?” But it’s because I don’t really have templates in place. And I recall that when you go into Drip and you set up a new campaign, it walks you through and says, “Here’s options. You can either chose from this blueprint that’s kind of off the shelf or you can create your own.” I think there’s a third option as well. But it gives the user a sense of well-being and, “I’m doing the right thing,” when they chose that blueprint. Because they’re like, “I don’t have to think about this,” or, “I don’t have to build something from scratch where I don’t even have a baseline.” It gives them that baseline.
And the last thing that I would say about this process is that in talking to your customers about the specific things that they’re running into is extremely valuable. And specifically, if you ask them about, “When you logged in or when you first started trying to do this particular step, what were you confused about or what didn’t make sense?” Because, as I said, it’s obvious to you what needs to happen next but, if it’s not obvious to them, then they’re probably not going to do it or they’re going to ask for help. And it’s more of what you had just said. In order to scale up your efforts and get past that critical mass when you start inviting dozens or hundreds of people at a time in to use the app, when they sign up it’s going to be very difficult for them to get in there and use the product and be effective with it. And you’re just going to be overwhelmed with having to follow up with all those people and track them down and say this person didn’t sign up or this person didn’t do this. How do I get them to move to that next step unless some of that stuffs automated? But if you’ve done those manual steps up front, then you can automate it later. But you have to figure out what those things are first in order to get it right later on in order to automate it.
Something else I’ve noticed is that it’s not as important for them to actually do it, especially with the early customers as it is to understand why they didn’t do it. Because obviously you can typically go in and do anything you want inside of your app for them, but doing it for them or showing them how to do it is not going to solve your problems down the road. You really need to understand why it is that they didn’t do it or what didn’t you communicate so that they knew what to do. Because that’s your fault. That’s not the apps fault. It kind of is the apps fault because you designed it but it’s not the customer’s fault that they didn’t know what to do. It’s your fault for not communicating it well enough so that they understood what they needed to do next.
Rob [19:54]: Yeah. That’s right. And it’s basically taking to do’s off of your customer or your users list. And the more you can do that and the more you can make them feel like they’ve accomplished things even when they didn’t have to dig in and do a lot of their own work or do a lot of the work themselves, that’s a good way to go. And the further you can get them along that journey towards that dopamine rush, like I said, you’re going to be a lot better off and you’re going to have more retention.
This may all sound like quite a bit of work but the interesting thing to think about is really early on you literally do this manually. And you can send these emails out of your Gmail account. I did that for the first probably 15 or 20 paying customers in Drip. We didn’t have any onboarding built into the app. We didn’t have any of this stuff we’re talking about. And that got us to, like I said, around 20, 25 customers until we had a little bit of revenue. I think we had $1,000, $1,500 a month. But more importantly I then knew exactly what the onboarding flow should look like. And I had all these emails that I had been boomeranging and using and so then turning that into just an automated course that got spit out was a snap.
In addition, right before we sent the email to the first big chunk of people, which I think was either 300 or 600 people on our launch list, that’s when we realized, “We’re not going to be able to do this manual anymore.” That’s when we invested one week of engineering time. And Derrick and I sat down and we said what is the best way we think to guide these people through. And that’s where we came up with the do it in the app and email them and kind of try to move them through the flow.
So we did spend time building out this whole onboarding thing but you don’t have to do this before you start to scale a little bit. We had a launch list of 3,400 people and I knew that we had to have something in there or else our trial to paid would be abysmal and you don’t want to waste that. You don’t want to waste all those people who are interested about your product because they’ll come in, they’ll sign up. They’re interested, they’re curious. And then if they don’t do anything, then you’ve lost them. That’s the whole point of this episode is to show you kind of the steps to get there. But you don’t have to do this all up front. You should get – like we’re talking about – 10, 20, 30 paying customers and then think about, “What are my next steps? How do I scale this up?”
Rob [25:19]: So I think that wraps up this episode on how to make your customers more successful with your product. If you have a question for us call our voicemail number at 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt used under creative comments. Subscribe to us in iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening and we’ll see you next time.
Episode 328 | Updates on Drip and Bluetick
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike give updates on Drip and Bluetick. Based on listener interest Rob dives into details on the continued growth and scaling and Mike talks about what areas he is focusing on to increase the number of paying customers.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of ‘Startups for the Rest of Us’ Mike and I gave our updates on Drip and Bluetick. This is ‘Startups for the Rest of Us’ episode 328.
Welcome to ‘Startups for the Rest of Us’ the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products whether you’ve built your first product or you’re just thinking about it.
I’m Rob.
Mike [00:27]: And I’m Mike.
Rob [00:28]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike [00:33]: Well, as I said on a previous podcast – I think we last recorded about two weeks ago and last week was the interview with Wade Foster. But last week I was at an alternative conference up in Vermont called Big Snow Tiny Conf.
Rob [00:46]: Why do you say “alternative?” Was there bands there playing emo music?
Mike [00:49]: Well, you know. It’s the whole alternative facts thing. So this was an alternative conference.
Rob [00:52]: Alternative facts. Nice. So that was cool. Brian Castle runs that and you were there with what – 10, 11 folks?
Mike [00:59]: Yeah. It was about a dozen people up there. Yeah. It was a lot of fun. The weather was a little bit better this year. The first day of skiing was absolutely phenomenal. And then the next day I got a little bit tired near the end of the day and I’m just like I’m just not going to go back up there because if I do I’m probably going to get hurt. So I decided to skip out on probably an hour or two of skiing which wasn’t too bad. It was a lot of fun. I think that virtually everyone who was there was also going to MicroConf this year as well.
Rob [01:25]: What was your highlight of the conference? I mean, it’s not really a conference, I think that’s a misnomer. It’s like a group. It’s like a mastermind group, you know. Which is super cool. But I think of a conference like with people standing in front and sometimes there’s sponsor tables and such.
Mike [01:40]: Right. Well, I mean the thing is everybody gives a brief presentation or a talk or a topic for discussion and we go through like a dozen of them over the course of those three days. I think the first day we did like two or three and then the next one we did four or five and then the day after that we did another four or five. So we’d ski for half a day and then there’s just talks and presentations and stuff like that for the rest of it.
It’s really interesting to see the types of things that people are working on that you either just wouldn’t think of as a business or you wouldn’t think of how to do those things as – like marketing plans or things that you can do to find customers or to drive sales. It’s just really impressive to see the types of things that people come up with.
Rob [02:21]: Yeah, I bet. It’s nice to get in-depth exposure like that to other people’s businesses. I think that a conference or a gathering of this size there’s a real unique aspect to it. You and I’ve talked about doing a super small – you know we didn’t even know if we were going to lend it the MicroConf name – but it was going to be something like 30 or 40 people. And getting them together over the course of a few days. And Big Snow Tiny is even smaller than that so I can imagine it being a lot of – Especially if there’s good chemistry between the attendees. I bet you could get a lot of varied and good advice from experienced founders.
Because that’s the cool thing right, it’s not eleven people who are dreaming of starting a business. I would guess that everyone there has a business and is making money and you all have different experiences so you’re going to get a lot of valuable – some not valuable probably. If someone’s running an ecommerce site and you’re telling them about your churn rate maybe that person doesn’t have a good opinion or an experienced opinion on it. But I’d imagine the majority of stuff you come away with is pretty detailed and pointed towards your particular case. I’m conjecturing here. Is that kind of how it feels?
Mike [03:23]: I would say so. To kind of correct you on a couple of things, in terms of where people are at, there was one guy named Chris who had started a business literally a week before. And it was based around running Facebook as to drive traffic to a website and then you pay a couple of dollars and you can have a physical letter mailed to a congressional member of your district or a senator or something along those lines. So basically what he does is he looks up the information of where to send that letter and then uses geolocation based on where you’re at and says these are the people that you would send this letter to and, by the way, here’s the template and it’s related to whatever the issue is that you are interested in. So if he drove ads based on EPA stuff or gun control or what have you –
Rob [04:08]: Immigration.
Mike [04:08]: Yeah, immigration. He’s got all these things templated and, based on which side of the issue you’re on, he will give you the template. You can customize it and then he will send it for you for a couple of dollars.
Rob [04:20]: That’s pretty cool.
Mike [04:20]: And he started it like a week ago. He was literally printing them out and putting stamps on them and mailing them. And he’s like, “This is all, I’m just validating, just kind of seeing what’s here.” He’s like, “It’s interesting. It may not turn into nothing.” But to me it was interesting. It was extremely interesting to see what he was doing and how he was doing it. We all gave him feedback and we’re all like double your prices.
Rob [04:38]: Right. Well, and it’s cool to see someone validating like that. Those are the fun days. As stressful as they are because you don’t know if you should do it or not. Like the validating stuff is just new ideas, you know they’re actually putting into practice. So that’s kind of cool someone attended at that stage.
Mike [04:53]: Yeah. And then you’ve kind of got the flip side where like a guy named Chad DeShon was there and he ran a Kickstarter campaign where he did like $2.6 million in sales of board game tables. So he talked a little bit about his experience outsourcing to China and having things brought over. And it was really interesting seeing, I’ll say, both ends of the spectrum where you’ve got somebody who is just starting out. They literally just started trying to validate this idea. And then somebody else on the other end where they’ve already got the money, they’re basically trying to get their logistics pipeline down to deliver everything to people. And it’s just amazing to see the differences between those stories. And they’re both interesting, I think.
Rob [05:32]: Yep. I agree. Speaking of board game tables. If you’re into board games, you need to check out BoardGameTables.com. That’s Chad’s business. Those tables are awesome. I have been eyeballing one for a long time. Just love that you can cover it up and leave. It has a felt surface but it’s sunk down. And so, let’s say you have a big D&D game spread out, it looks like hell and you’re going to run that for months if you have a long campaign. But you can cover it. And that’s the big plus for me is that it looks like a real table on top. Anyways. And there’s cup holders. It’s just designed perfectly to play board games. So a little plug for Chad there. I’ve been a fan of the tables for a while.
Mike [06:09]: So what about you? You went to SaaStr last week, I believe?
Rob [06:12]: I did. Yeah. I was in San Francisco with several folks from the Leadpages crew. And, as expected, SaaStr was – they said it was 10,000 people, I’m not sure if it was actually that many. It didn’t feel that big but it was a big conference. And the most value I got was from the team building, the comradery of hanging out with the folks from Leadpages because I don’t often get to hang out with five or six others at once. We had dinner together. We were doing happy hours together. It was just a fun time where you can really dig into some interesting conversations. There are only so many people in the world that have that much in common with you and know that much about your business and what you do and you know what they’re up to.
I was talking to the CFO and he’s like, “What would you think if we did this to pricing?” And it’s like, “Oh, what a cool thought experiment.” I was able to say, “Well, we tried that and it did this.” Or, “Here’s my opinion.” You would never set up meetings to talk about these kind of high level things that you’ve had. Almost thought experiments, to be honest. And yet doing it can be really fun. I enjoyed that part of it.
I ran into a couple people and I set up a couple meetings with folks. Overall, my crowd, I went through my whole rolodex like of all the MicroConf speakers from the past several years, like is anyone here? And they weren’t. I was thinking may be Heaton or Stella would be there. Jason [Cohen?], Dan Martell. Just anybody – because I would love to connect with them – and they weren’t there.
I ran into a few people but overall it was probably not something I’ll be going back to. It was just too big, the sessions are interviews and panels, which I don’t get a lot of value out of because they’re just not actionable and I can hear them on podcasts. I think you really go there for the networking. And the networking was actually with my own coworkers. So I started thinking it might have been cheaper if we spent a couple happy hours with the same crew.
Just my opinion of it. I respect the heck out of Jason Lemkin and like the SaaStr brand and I like what they’re up to. But a conference that big is just not for me.
Mike [08:04]: I think that’s a great way to get company funded happy hours. I think that’s what you’re going for here.
Rob [08:10]: Totally, right. That was it. So this week, by popular demand, we get requests to hear more about what we’re up to. And we like to do update episodes every once and a while. Frankly we could probably start doing them a bit more frequently. Today we’re going to talk through some stuff that’s been going on recently with me and Drip. And then we’re going to dive into what you’ve been up to with Bluetick. It’s been a few months, I think, since an update and I think there’s a lot to be said here.
So to kind of kick us off, Drip is continuing to grow and it’s growing quickly. And since we were acquired by Leadpages seven and a half months ago, I think we have six times more users than we did, I mean it’s just this crazy fast growth. It may even be more than tha, it might be like seven. It’s a lot. We have seven times the number of trials coming through each month. At every scale you imagine just almost 10Xing in every direction. And so that has been a focus of ours just scaling the technology. We hired a couple more engineers a couple months ago. I just hired one, we’re in front end who’ll start in a month. And then we have an open Ruby on Rails position.
And these are good problems to have. You need to scale stuff up. But what we’re trying to do is continue to ship features because that was the thing for a couple months we almost spent a lot of time just getting enough servers up to keep handling the queues and to keep everything running. We’re definitely – knock on wood – We’re out ahead of that right now. But that does continue to be a focus.
We have basically two full time engineers now. All they do is scaling and performance. And they’re just rewriting, they’re refactoring, they’re adding servers, they’re figuring out what’s going on here. I think I’ve said it before, now I understand how you can get an engineering team of 20 or 30 people on a product because you just have so much stuff that you are trying to keep going.
Mike [09:51]: Yeah. I’m curious about that a little bit more because if you were at a certain scale before and you were obviously at some point running into scaling issues to begin with, you’re looking seven and a half months down the road and you multiply your size by six from where you started. That’s a lot, I mean you’re adding basically an entire customer base just about every month at that point. So what sorts of things have you run into that have been especially difficult or challenging to resolve. Are there things that came up that you would never in a million have dreamed that you would have run into that and suddenly now it’s a problem?
Rob [10:28]: There are a lot of edge cases that come up. So there’s two things, one is just scaling to that level. Another one is when you’re sending tens of millions of emails and you have thousands and thousands of customers, the littlest bizarre edge case is just bound to come up. So we do find ourselves kind of troubleshooting things and trying to figure out how to best handle those.
In terms of scaling, I think there’s kind of three fronts and probably four. One is just the database. We continue to have to increase the size of the hardware that it runs on and give it more RAM and then give it more IOPS they’re called. IO per second that allows reason rights to the disk. And I find about every four months we have to increase something on that. It’s nice that Amazon keeps pace and continues to add larger and larger server instances because I don’t think, at our current pace – again, knock on wood – we’re going to outgrow what they have to offer. But the place that we hit – probably about three months ago – was when there was one aspect of Drip, where you know where you’re going and you just create ad hoc subscriber queries basically. You can just create a segment and you’re like anyone who has this tag and hasn’t visited this page and has opened this email. We just basically let you “and” and “or.” You’re almost building a sequel query it’s just with a nice visual interface. That can get incredibly complicated as you can imagine. Some people will “or” together 10 things and that’s like joining on 10 tables in the database and some of which have a billion rows. So that doesn’t scale. And we eventually hit the point where no matter how much hardware we threw at it for our largest customers it was still not fast enough.
So that was the big one that we really had to have that breakthrough on. And I talked about it on the show a few months ago where we were going to shard the database, which is just catastrophically complicated. And we figured out a workaround and it’s was just way to technical to go into here. But we figured out a way to just completely rethink and rewrite that whole piece of it, the subscriber querying, to where we’re not querying the database live. And we’ve seen 10X and up 100X speed improvements on that. It just completely changed the game. That was kind of the biggest pain point. And I think that improvement alone will give us a year, two, three years of more expansion now, which is a really good feeling to have.
It’s not to say other parts of the app won’t experience slowdowns. Your reports are always going to slow down as you get more data in the database. Other things like that. We are also adding read replicas now. We don’t just have a master database with a hot backup which is what we’ve had for a few years. We’re now starting to add other replicated databases that we can hit and not impact. You’re just reading from them, right, so we don’t impact the main database.
So those have probably been the biggest scaling things recently that we’ve been tackling.
Mike [13:06]: I think dealing with that centralized storage in the background for the database itself, that’s the hardest thing. I’ve seen a lot of different strategies for people doing that. Some of them just say, “Oh, well. We have a separate database instance for each customer.” And I guess that’s one way to go so you don’t have a multitenant database. It’s just each customer has their own. There’s all sorts of other operational challenges with doing that. If you have to make a schema update, for example, you have to make it across every single customer’s database. And that’s not always the easiest thing to do in the world.
It’s just kind of interesting to see the types of things that you’re running into. From my perspective, I’m thinking about the things that I might run into because you had just said, for example, the customers can create their own ad hoc queries. And that’s something that I started looking at and then I realized how complicated it was going to get and how difficult it could end up being because of performance issues. And I kind of backed off from it and I just said, “Look, just make it simplified for now and I’ll come back to it later.”
Rob [14:01]: I think that’s a good call. Yep. I like that we have this feature but it has obviously been quite a bit to keep up with, because as soon as you allow ad hoc stuff people will build crazy stuff and expect it to work. So I would almost lean, especially in the early days, lean towards not having it and having just a few canned things that people could do.
Mike [14:17]: In terms of the other aspects though, obviously just dealing with the scaling challenges alone is one problem, but what about building new features and what about customer support and onboarding. Do you have any things that get escalated from the customer support side that you need to deal with? Because I’ve run into some of the stuff recently where a single customer support problem can chew up easily several hours of time.
Rob [14:40]: Right. Luckily, and to Leadpages credit, pretty quickly after we moved over they started adding support people from their team and then they started hiring – I think they hire externally now. And we went from one support person when we were acquired. One fulltime. And I think we have six or seven fulltime now. And I have had to pretty much do zero work on that. And that’s the kind of thing that- Because how else could we have scaled that. I wouldn’t have had the time to hire that many support people. And they’ve done it with customer success, they’ve done it with sales, they’ve done it with marketing. All those aspects I’ve been able to hand off has freed me up to be able to focus on exactly this. I focus on scaling, focus on shipping features and hiring.
It’s pretty rare that stuff gets escalated. The support team is very, very good and most stuff doesn’t come back to me anymore. There’s just enough layers who know how to make judgement calls and it’s pretty rare something comes back to me. And that’s the support side which feels great, to be honest. As much as supporting your app is something you have to do, it’s not necessarily something, as product people, that we want to do. It doesn’t move the core product forward which tends to be my focus.
In terms of shipping features, we slowed down, I’d say, for the first couple months after the acquisition and then we started speeding back up and we’ve been at a pretty even keel hiring pace of an engineer every month. Maybe every two. That’s allowed us to continue to ramp people up. Like the two engineers we hired a couple months ago are fully ramped up and they’re shipping a lot of features now. So we’re probably at a faster pace than we were before the acquisition even with the scaling. And that’s purely just hiring new senior people who can get up to speed in a month and get it out.
So I’m pretty excited right now. I go through stressful times of, “Oh, no. Are we going to scale? Are we shipping fast enough?” And right now I’m pretty optimistic based on who we have and all the stuff that’s almost – there’s a bunch of features that are almost done. And that’s a good feeling to have. It’s not like everyone is bouncing around. It’s like there’s some things that are literally three or four pretty cool features within a few weeks of shipping right now depending on how we roll those out. That’s exciting because I think shipping features is what we do. That’s the dopamine rush.
Mike [16:44]: Very cool. What else is kind of on tap for you guys?
Rob [16:47]: Yeah. I think just to round it out and wrap up my part. Basically the free plan is still going strong and that’s got us a lot of notoriety in the space. And free plan is a long term play and it’s something that takes a lot of time and focus from a certain group of people to make that work. You don’t just start a free plan and then people magically convert to paid. You have to be very strategic about what’s the limit on the free plan, how do you think about getting people on a value that they get to that limit. And so there’s a couple people – at least two or three – who are thinking about this a lot and customer success is working on it and so far so good. It’s a long term play.
A few people have asked me, “How’s the free plan working out?” And it’s like, “It’s working.” But it’s like you can’t even tell until months after you start this thing until you get enough numbers to actually be able to make a judgement call on it. I can’t say, “Oh my gosh. It’s the most amazing thing ever and we’re going to do it forever.” And I also can’t say, “Oh, it’s not working.” It’s kind of like yeah. The early signs, even though we’re months in, the early signs are that things are going well and it’s bringing a lot of new folks our way.
So that’s it for me. Let’s talk about Bluetick. And for those who don’t know, it’s also an email app but it’s not really email marketing. It’s called Bluetick.io and you want to give the one sentence description of what it does?
Mike [17:57]: Yeah. It’s essentially a way of systematically and automatically following up via email with people that are, I’ll say, later on in your sales funnel. Kind of like after they’ve gotten into your marketing funnel, they have expressed some interest, this will essentially help move them through that early sales process where you’ve got a warm lead who has expressed some interest of some kind. Whether they opened up a bunch of emails or they sent you an email and say, “Hey. We just wanted to talk a little bit more about this.” And then you can use it to push them into like a conference call or something like that. And if they don’t respond to the first email it’ll send them another one and send them another one and kind of move them through that process automatically so you don’t have to think about, “Oh, is this the second email I’ve sent them? Is it the third? How long did I wait?” And you don’t have to manage that process at all. It just does it for you.
Rob [18:43]: You realize that was more than one sentence right?
Mike [18:44]: Yeah. I know, I know. I was giving examples of what it could do beyond that.
Rob [18:47]: I know. So you took pre-orders, you had some folks pay you – I forget. How much was it? The pre-orders?
Mike [18:53]: I gave people the option, more because I was just flushing it out. I said, “You set your own price and then tell me how many months of service that you’re willing to essentially prepay for.” And people paid anywhere from, I think it was around $40 a month to $100. There was one that was at $100. Everyone else was between $40 and $50. So then I basically went back to them, and my final pricing at this point is $50 a month.
Rob [19:18]: And so, have all the folks who’ve preordered from you, have they had a chance to get into the app and dig in? And how is that going in terms of converting them?
Mike [19:26]: I on boarded all of them, and I would say I definitely made some mistakes in that aspect. When I took the preorders I said, “I’ll onboard you and I won’t start charging you until you’re seeing value from it.” And the problem is that because that is such an open ended thing, it doesn’t force it to the top of their priority list. So this month what I’ve started doing is going back to them and saying, “Look, I need to draw this line in the sand for anyone who’s placed a preorder.” And I’m trying to put it towards the end of this month, which I may end up being three weeks out or four weeks out or something like that. But there’s going to be a line in the sand that says, “Look, up until this point, let’s get you on boarded as a paying customer and convert your extended trial into a paid subscription or let’s kill it if it’s not going to help you or, if you just don’t have time.”
Rob [20;12]: Yeah. That’s a good way to go. That’s why free trials work rather than often, especially if you’re a beginner, free plans versus free trial is a different thing. And the difference is free trial has an expiration date. And wether you do a 14 or a 21 or a 30 or a 60 or whatever it is, at some point there is that line in the sand. And that’s some time pressure to get someone to commit or not. I think it’s very good that you’re switching to that.
In the early days of Drip when I had preorder folks in there, I said the same thing. Once you get value out of it we’ll do it. And then about every week or two, I would email them and I had all these emails boomeranging back to me. And when I got a boomerang from someone, I would log in and I would look and see what are they doing in Drip, have they actually imported a list, are they sending email and then I would ping them and I would be like, “Hey. I see you’re not sending emails. Are you interested? Let’s get this moving forward.” And if they had emails, then my questions became, “Hey. Do you think you’re getting enough value out of Drip to pay $49 a month now?” That was it. And then I’d follow up every two weeks and eventually some people converted. I think most people converted and some didn’t and that was okay.
So I hear you. It sounds like you didn’t do that early enough. You said you kind of made a mistake with it. Like you didn’t have enough time – not even time pressure – but maybe enough follow up. Ha, ha. That’s kind of funny. Follow up. You go to run them through Bluetick.
Mike [21:27]: Actually, I am at this point.
Rob [21:28]: That’s cool.
Mike [21:29]: Yeah. I basically set up all the automation for that so it’s not going out to them. And I’ve got a whole sequence of emails that’s being sent out to them. So if anyone’s listening, yes, those are completely automated emails at this point.
But, no, I think for me it was an initial hesitation to really push forward. Because I kind of had it in my head like I made a mental promise to these people like, “You can have this until it provides value.” But that doesn’t do them any favors and it doesn’t do me any favors. It’s not helpful to either one of us. So there really needs to be that emphasis on some sort of a timeline or reckoning so to speak to just say, “Look, it’s got to move forward and if it doesn’t, that’s okay. I just need to know.”
Rob [22:06]: Right. You’ve got to channel your inner sales person and ask for the close. Cool. And you were telling me offline that you added a couple more customers.
Mike [22:16]: Yeah. Just yesterday I added one new customer and then yesterday I also converted one of the prepaid customers into a paid subscriber. I gave him 20% lifetime discount, applied his prepayment as credit so he’ll have several months of the service. And then after that it’ll start charging him on a regular basis. But basically gave him a credit for that and just said, “Yes, now it’s providing value so let’s just start charging you and we’ll cut into that credit.”
Rob [22:42]: That’s cool. Always good to get new customers. Is that your plan? To keep getting – because we had talked about awhile back you were going to do a public launch. But it sounds like you’ve continued to add a couple customers here and there every few weeks. What is the plan right now? Which direction are you headed?
Mike [22:58]: I was talking about this to my mastermind group last month – it was around the last time that we’d discussed it here on the podcast – and they actually talked me out of going through and doing the launch on the 31st of January.
Rob [23:10]: Why is that? What was their argument?
Mike [23:13]: Their argument was they didn’t feel like I had pushed enough people through the system and it wasn’t getting enough usage to help me identify the places where I would run into problems in terms of support or scaling or just answering questions accurately or in a way that doesn’t overwhelm me. I looked back at it at the time and I said, “Well. You know. Maybe you guys are right.” And I look back at it now in retrospect. It was like, “You guys were definitely right.” I really needed to back that off because there’s times where I will burn through an entire morning just going back and forth with people on support calls. Literally – I did it this morning as well – where somebody will say, “Hey. How do I do this?” Or, “Got this problem here.” Or, “I’m trying to import a bunch of people and what’s the syntax for this or that?” And I’ve got support documentation but I’m starting to find that there’s places where it’s just incomplete and there are a lot of edge cases where the questions just simply aren’t answered because they’re not well documented in the documentation. I can go in the code and look at it, and I can tell the person how it is but that doesn’t help them because they can’t just go to the support site and just pull it up because it’s not well documented.
Rob [24:15]: Documentation like KB’s are so time consuming to get started. I remember when we first started Drip it’s just like, there’s so much information that’s imbedded in your head and in the code. And trying to translate that into helpful articles and figuring out what people can help with, it’s hard. It is really hard. And if you recall, our early docs for Drip were me recording screen casts and it was purely a time thing. I just did not have time to write that all out. I got mixed emotions from that. People have said, “This is fine for now,” but often somebody was in an airport and the Wi-Fi wasn’t fast enough. And then another person was saying, “I don’t want to watch a three-minute screencast. I just wanted to skim an article.” And of course, creating an article takes a heck of a lot more time. I later circled back and paid someone to turn those screencasts into articles. Not to just transcribe it but to actually turn it into a well-written thing, take screenshots. And then we had a customer success person who had some free time. He then became the KB czar and he just started cranking out KB things. But as a one person show, you just don’t have the time to do all that.
At best, in my opinion, you’re going to respond via email and then you’re going to take that response, you’re going to paste it into a KB article and it’s not going to have screenshots and it’s not going to be fully flushed out but it’s going to be something. And I think that’s probably where you need to start.
Mike [25:33]: That’s, honestly, like what most of my KB articles are right now. People ask me how to do something and I took some screenshots and I sent it over to them. And then I took those same screenshots and I posted them into the KB article and said this is how you do this.
Rob [25:45]: Yep. That’s how you do it.
Mike [25:47]: It’s quick and dirty but it works and it doesn’t suck up a huge amount of my time. But then there’s things where, “How does this need to be formatted?” And I’m like, “I don’t actually know because that’s a library that I used.” So then I have to go figure it out and then come back to them with the answers. And, of course, while I’m doing that I also add in a couple of unit tests. Be like, “Hey. Does this actually work?” Because if the library gets updated, for example, and whatever gets through I want to make sure that those things still work later on.
Rob [26:12]: Right. So you’ve backed off from the public launch. And here’s the thing. Your mastermind group has more intimate knowledge than any of us. Including me. But certainly more than any of our listeners in terms of exactly where you are, how things are going. Just because they get so much more in-depth information about it. I think I know the folks in your group and if they’re recommending that I actually thing that’s probably the right way to go.
Did they not think you had product market fit and you still need to tweak some things and get some more features out? Or is it that – feeling like support. I think you mentioned that support might not be able to scale or something. And that sounds kind of like maybe work a few extra hours or hire someone to help you part time with that. I would probably dive in and not try to prescale stuff like that. You know what I mean?
Mike [26:59]: Yeah. I think what they’re looking for is me to get to somewhere between 20 and 30 paying customers before I flip the switch. I think there’s a difference between having people who are on the system and using it in name but not really exercising a lot of things versus somebody who’s paying for it and they’re probably using it a lot. And if they’re not using it, they’re going to cancel. So there’s that, I’ll say, scale that you get by virtue of just having people pay for it because they’re not going to pay for something they’re not using. By constantly using it and finding bugs or edge cases or integrating it more fully into the automation systems that they have in place, that finds those edge cases.
And it also helps me flesh out some of the marketing stuff. I worked with somebody yesterday who said, “Hey. It would be really great if, when somebody finishes this email sequence, if it could go over to the pipe drive and just automatically close out that deal or whatever.” And I’m like, “Oh. Actually you can do this and you can actually do it now. You don’t have to wait for anything.” And I sent them screenshots and I basically walked them through and said this is exactly how to set that up.
But that’s not something that is going to come up until I get to that point where lots of people or a kind of critical mass of people are using it that let me know that, “Hey. I have this question. How do you do this?” And then those different use cases can end up on the sales website to help attract more customers. It kind of feeds back into itself at some point.
Rob [28:19}: Yeah. That makes sense. I do think that that 20 to 30 paying customer mark is about the point where you really know that stuff is working. And then, of course, you realize when you get to 100 customers that you really didn’t know that stuff was working. But at least you know something. It was somewhere between 20 and 30 with Drip where we basically started doing those launches to the 300 to 600 emails on our list at a time. Sounds like you still have more work to do.
That’s the thing. It’s like launching is – You could launch today. You could just send out an email and get everybody in. And you may bleed everyone out because you don’t have product market fit or you might not be able to support them and so they get pissed off and leave. Or your onboarding may not be good enough or in existence and so you’re not going to convert them. Yeah. I don’t necessarily agree with that. I think the danger in stuff that you and I have talked about over the years with Audit Shark is that the launch just keeps getting pushed out. That you never get to that 20 to 30 customer mark. So I guess at this point your number one goal and focus should be getting to that mark. Is that the idea? It’s like getting one person a week, two people a week, whatever it takes and when you hit that then you’re able to pull the trigger.
Mike [29:28]: Yeah. [Heaton Shaw’s?] got a newsletter that he sends out – I don’t know whether it’s the same newsletter or not but he’s sent out something to his email list basically saying what’s the one thing that moves the needle for you at this point. And I read it and I thought about it and the one thing was basically moving people from either a trial into a paid subscription or just adding paid customers because those are the types of people who are going to be actively using it, versus the software sitting there in the background and possibly not doing very much for them. My focus at this point is just adding paying customers. One of the people who signed up yesterday, I started redoing some of the signup stuff on Friday so he couldn’t signup on Tuesday when he wanted to. So I ended up pushing him off and I said, “I’ll give you an invitation code. We’ll get you set up and then we’ll process your credit card later.” So I ended up doing that but he was thinking, “I’ll just log in and then I’ll hook up my billing stuff.” And I was like, “No, the billing stuff inside the app isn’t there yet.” And I honestly don’t care. It doesn’t need to be there right now. I can do that stuff manually. But I’m actively looking for ways to avoid touching any of that stuff because the product works. It does what it needs to do. So at this point it’s a matter of getting that marketing message right, getting the people in and getting them using it. And that’s my focus. Finding people who will actively use it.
Rob [30:46]: Yep. And I think, as your number one goal, I would focus less at this point on trying to scale documentation, or on trying to have stuff that people can find and you’re going to need to do, I think, a lot of hand holding for the time being. And I know it chews up time and you can’t really work on the product necessarily but that one on one time for those first 20 customers is going to be extremely valuable. I think if you have your launch list, you could start emailing one of those at a time. Like maybe do it in blocks of five or something. But pick five off the list. If you’ve surveyed them and you can tell which are most interested, you could start with the most or you could just go with the most recent and email five of them individually and be like coming from Mike to one person. Not a BCC. And be like, “Hey. Super interested in getting you onboard. You signed up for this. Here’s the big thing. Still in early access,” and trying to get, one at a time get people on boarded. Is that what you’re up to at this point?
Mike [31:43]: Yeah. This past week, I replaced a couple of pieces on the main page where previously it just had the email of course and it didn’t really say much about how you could sign up. Now I’ve replaced that and there’s a request invitation area right at the top of the main page. And if you enter in your email address it kicks you over to another page where there is a survey and it asks you to fill that out. Those replies go directly to me and it gives me some marketing information. But if somebody signs up for that and then goes through and fills out the survey, then I know that they are essentially more interested and I can pay attention to those people a little bit more.
You talked about emailing people individually. I can literally export my list of subscribers from Drip and put them into Bluetick and then just say, “Hey. Go ahead and just start emailing these people individually. Because that’s what it does. It emails people one on one. And I can send them into a sequence and try and get a response from them of some kind depending on what it is that I’m trying to get them to do. Whether it’s that survey or have a call or what have you.
Rob [32:44]: That’s cool. I like it. I think you’re making progress on the right things.
Mike [32:49]: Yeah. And it’s hard to figure out what is the right thing to be doing today or this week. At a high level, I know it’s get people in who are most likely to convert into a paying user because that’s kind of proxy for getting value out of it. But there’s all these other little things that kind of factor into that. And then, as I said, somebody can email you something and then it burns through three or four hours of you trying to figure out how to best help them and how to let them know this is what they need to do or this is how to do it. Or trying to do it for them and then show them after the fact.
Rob [33:19]: Two thoughts that I have with that. Number one: I think every task that comes onto your plate whether you’re pulling it off your Trello board or whether an email comes in. I think you need to ask yourself will this get the next customer on boarded or will this get the next customer paying me? And if the answer is yes – if it’s from a customer who’s trying to onboard and they’re struggling – then you do it. But if not and it’s from an existing customer who says, “Hey. Can you add this feature?” You can totally log that somewhere. But I would not stop then and build the feature. You know? Because your goal right now is to get to 20 to 30 customers. And so I would try to laser focus and ask that with every task that you start.
Mike [33:57]: Yeah. All the stuff that is taking up the most time is people that they’ve paid and they’re going through that onboarding process and its mostly, “How do I do this?” or, “Can you do that?” And some of it, like I said, it’s, “It would be nice to be able to do X, Y or Z.” And usually they can already do it. It’s just not clear how they get to that point so then I have to explain it and kind of mentally note it to say, “Look. I’ve got to explain this better.” Or explain it in a way that doesn’t make me have to repeat myself 25 times.
Rob [34:26]: Totally. No, that’s right. And that is something that, as you get more and more customers on boarded, it’ll become pretty obvious. Certain things will come up once. Don’t do anything about it. But if certain things come up five times, well now you should carve out a KB doc. Even a few paragraphs or whatever it is. Or improve that tool tip. You know, there’s something in the app you can do.
Mike [34:45]: Yeah. When the feature requests come in, I’ve been pushing people off and saying, “Yeah. I’ll put that on the roadmap.” Or usually it’s something that’s already on the roadmap. And then, because I use FogBugz for bug tracking, I’ll go in and I’ll create a tag with that person’s name. And then if the case inside of FogBugz ends up with enough of those tags that say these five people or these 10 people want it, then I’ll push it more towards the top of the list as being much more important. But if It doesn’t then it’s usually something that either surfaced up internally that maybe somebody mentioned in passing or I see it. And those are not technically all that important. Just because I want something in there doesn’t mean that it’s going to be genuinely helpful to everybody or everybody’s going to use it.
Rob [35:24]: Here’s the other thing that kind of comes to mind. You said the statement like, “It’s chewing up time. It took me a few hours to do this dealing with the customer.” I feel like you should hire someone to do something. It’s either going to need to be the engineering side or it’s going to need to be support or it’s going to need to be help with onboarding. It sounds to me like help with onboarding may be that number one. Because support, I think right now, is really heavily intertwined with onboarding.
Mike [35:49]: Yeah. There almost the same thing.
Rob [35:50]: Yep. So I think support and onboarding – again, when I think back to my experience with products like having someone there in the early days, typically I would do support for about the first 60 days of a product. Maybe 90. And then once we hit 20 or 30 people, I was finding someone to help with it. And then maybe a year – I’m trying to think into Drip when we hired Anna – but there was a real game changing moment when I was able to bring someone on who was a higher level. Who wasn’t just an email support person but could actually get on calls with people and do the onboarding. Which is something as the founder and the product owner you think, “Surely no one can do it as well as I can.” And what I found out is that Anna was way better at it than I was. Because she’s just more of a people person and she’s just better on the phone, she’s better on calls.
Sure, the first month she couldn’t do it better than I did because I knew the product inside and out. Two months, three months in it was game changing. So she became the defacto. She was onboarding, she did some light support, she did strategy stuff of like, “Here’s how you want to set it up.” She also did sales. And we never called her that. She was always customer success. But she did the upfront like, “Hey. Someone is thinking about using Bluetick. Walk them through a demo.” And it wasn’t a salesy demo. It was a, “Here’s how you would use this. Tell me about what you’re up to. Blah-blah-blah.”
And so, if you think about it it’s like sales/customer success/customer support. But we called it customer success because it was all about finding the right customers and making them successful. And this sounds like some magical combination that doesn’t exist but I’m now seeing a lot of folks who are able to do this. Especially at Leadpages. We hired two at Drip. We were a team of eight fulltime and two contractors and two of them were customer success because we found it so incredibly valuable. There time was just a multiplier for all of us. And now that we’re at Leadpages, they must have 10, 15 customer success people who are not just answering email queries all day. They’re actually involved.
So that would be my advice to you is that if you have any budget, even for part time, is to look for that person that can take that piece away from it because that’s the piece that you and I as product people I think are least good at. As much as you and I enjoy talking and we have this good podcast, we’re not great on the phone. We’re not great demoers. We’re not super people person like some of these folks are naturally. So I’ll throw that out there. What do you think about that?
Mike [38:04]: I think it’s a good idea. I’ll say my hesitation would be the fact that I think when people first get on to it and start using it, that’s when they have the most questions and then it tends to die down rather quickly. And I feel almost compelled to answer those questions a lot more because I know that they’re busy and if they email me in the middle of the day and they’re having a particular problem I almost feel like I need to drop what I’m doing to help get them through this particular problem because if I don’t they’re more likely to go find something else to do and either not come back to it for a few days or potentially not come back to it for a week or two. So that’s my only hesitation with that. And I don’t know what the scheduling would be like for somebody who would be doing that because I couldn’t afford to have them fulltime.
Rob [38:46]: Right. So you’d have to get someone part time. You’re worried about urgency.
Mike [38:51]: Yeah. I guess there’s other ways to solve that too. For example, I could say, “Okay, I’m only going to onboard people like Thursday’s,” for example. And then hire somebody and say, “Hey. Look. You only have to work the second half of the day on Thursday,” for example, “and that’s it.” It’s like these four hours. And then onboard first thing in the morning. And then let them come through with questions and stuff. And if it comes up after that, the next day or several days later, it’s probably not a big deal. It’s not as time sensitive. But if I have literally just signed them up and two hours later they’re emailing me with something, I feel much more compelled to answer right away.
Rob [39:27]: Yep. I think that’s a good way to think about it. And it’s tough. I realize it’s easy for me to say, “Hey. You should hire someone who’s really good at this with all your free time.” Because that alone is a big deal, trying to find someone. But I think that your number one goal should be getting new customers in. When I look at multipliers here, like what’s going to multiply your time right now? And what’s going to multiply and greatly accelerate you getting to 25 or 30 customer? I don’t think it’s writing more KB articles. There’s a lot of other things it’s not. And answering individual support requests, that’s a step towards it but I don’t think that’s going to help you get there faster. But throughout this conversation I think that’s kind of my one take away. And I realize it costs money to hire people. There’s all this stuff. But if you think creatively about it, I think there could be something there.
Mike [40:14]: I do think that like going back to the one thing though I don’t know is that onboarding side of things is necessarily the only thing either. I feel like it’s more outreach and going to the mailing list and trying to individually follow up with those people and say, “Hey. You expressed interest in this. Can we have a conversation about it?” Or go to the list of other people that I have who I’ve previously talked to and said, “Hey. When you get Zapier integration done, let me know.” And going to them and saying, “Hey. Let’s get you started on this because this stuff is there now and it’s working.”
Rob [40:42]: Totally. And I think you could still do that. You could still be feeding the funnel and you’d hand it off to this other person, in essence. And from the time they sign up it essentially goes into someone else’s responsibility.
Mike [40:56]: Yeah. I’ll have to think a little bit more about how to arrange that.
Rob [40:59]: Yeah. It’s a thought for listeners. You and I have not talked about Bluetick since the last time we talked about it on the podcast. So it’s not like we talk about this all time. I’m going just based on the last 20 minutes of information. But that’s kind of my impression of where I would probably go next. Because it doesn’t sound like code is your limiting factor right now. Would you say that -?
Mike [41:20]: Yeah. I would agree. I’m doing small bug fixes here and there but other than that there’s not major stuff being implemented at the moment.
Rob [41:29]: Right. And that’s how it feels because you and I, I think naturally we’d be like, “Well, you should hire a developer. Hire the developer so you don’t have to do that work anymore.” It doesn’t sound like that’s the right thing to do right now. I don’t think that’s going to multiply your time. It sounds like there’s a lot of support, customer success and potentially sales that needs to happen. And I think you doing it right now is great. I think very soon you should not be doing it as much. And you are going to have to shift back to the code. And when you do that, this person would be able to seamlessly ease into basically handling all that stuff for you which I think would be a good thing.
Mike [42:01]: Yep. I agree.
Rob [42:02]: Sounds great. Well I think we’re over time, actually. But again, from what I’ve heard from folks who listen to these episodes, they really like to hear what we’re up to and kind of dig in. So hopefully folks stuck around with us all the way through this point.
Mike [42:15]: Well, as you said we’re out of time so I think that wraps us up. If you have a question for us, you can all it into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt used under creative comments. Subscribe to us in iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening and we’ll see you next time.
Episode 327 | Supporting 700+ services w/ Wade Foster
Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Wade Foster of Zapier, about supporting over 700 services. Wade gives a brief history of Zapier as well as how they went from zero to 1.5 million users in 5 years. He also shares some early marketing techniques he used.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of ‘Startups for the Rest of Us,’ I’m going to be talking to Wade Foster about how they support over 700 services with Zapier. This is ‘Startups for the Rest of Us’ episode 327.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products whether you’ve built your first product or you’re just thinking about it.
I’m Mike.
Wade [00:27]: And I’m Wade.
Mike [00:28]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Wade?
Wade [00:32]: I’m doing great. Thanks for having me, Mike.
Mike [00:34]: Awesome. It’s great to have you on. I wanted to give a very brief intro to you and to tell people a little bit about who you are. You’re one of the cofounders of Zapier. Zapier is, essentially, the glue that holds together a lot of different applications and passes data back and forth between them. But I guess with that said, I’ll turn it over to you because you’re probably going to rephrase that much better than I possibly could.
Wade [00:54]: Oh, yeah. The old, “What does Zapier do question?” Glue is a good word. Connector, integrations is a good word. Honestly, it’s just this work for automation platform that lets you hook up basically any app you might be using in your business. A simple use case might be I get an email and it has an attachment. You can set up a little rule in Zapier that automatically saves those attachments to Dropbox. Something more sophisticated might be someone fills out a lead form on my site that’s being powered by a tool like say Unbounce and it pushes it through a tool like Clearbit that grabs a bunch of social data for it. Then based on some conditions it maybe decides, “I’m going to send this into my CRM and have a salesperson follow up with it.” Or maybe I’ll send it into a tool like Rob’s Drip and say, “Let’s nurture this user.” Something like that. So it can do a lot more sophisticated things as well.
Mike [01:47]: But it’s all about automating workflows in a business process and you really don’t necessarily see the product itself. You see all the results of it though. It’s always working in the background for you.
Wade [01:58]; Yeah. Exactly. Zapier is an invisible product in the sense of when it’s running. You set up the rules in Zapier. So there’s a UI for setting up the rules and how data should flow from app to app. But once you have that set up, Zapier just cranks away. So if you’re technical, it’s kind of like a Cron job more or less but on steroids.
Mike [02:13]: Cool. So why don’t you give us a bit of a brief history of Zapier. When did you start on it? How long did it take before you went from this whole idea of having it to going through a little bit about the validation process and then actually launching it as a product.
Wade [02:28]: We started Zapier in late 2011. So I guess a little before that, Brian and I, who’s one of my cofounders had been doing a decent amount of freelancing messing around with various projects. And one of the things that came up a handful of times was these little integration projects. So push these PayPal sales into QuickBooks for me. Or push this set of leads into Salesforce for me. Stuff like that. It was kind of annoying work to do because no one particularly likes doing API work it seems. But it was really valuable for these customers. So Brian messaged me on chat and said, “I think we can build a tool that lets these business owners or nontechnical use case users set up these sorts of integrations without having to employ a developer, an engineer.” And I found myself nodding my head saying like, “That makes a lot of sense.”
We actually teamed up with Mike, who’s our third cofounder and built off the original version of Zapier at a hackathon, a startup weekend if you’ve ever heard of those. And things went really well and we’re like, “Let’s really give this a go because this seems like something that folks could use.” We were back in Columbia, Missouri at that time and we decided, “We can’t go at this full-time because we need to have money and things like that.” You don’t just raise a bunch of money in the Midwest typically.
So we kept our day jobs. Mike was still in school. Kept finishing up school. And we worked on this nights and weekends. We tried to find ways that we could figure out if people wanted this. The best ways for that were looking into user forums. I distinctly remember Highrise, the CRM, having a thread that was several years old asking for Google contacts integration and had hundreds of comments on it where people wanted this thing. We’d go find for little bitty signs like that that showed, “If we could build something like this, people would be interested.” So that’s really kind of how Zapier got its start.
Mike [04:24]: Cool. One of the things that I’ll just point out is it’s pronounced z-a-p-i-e-r not z-A-p-i-e-r, right?
Wade [04:28]: Yep. Zapier makes you happier is the trick we always share with folks.
Mike [04:32]: Oh, nice. That’s a good way to remember it and let people know that’s how to pronounce it. Because I’ve honestly mispronounced it for years.
Wade [04:39]: Yep. We’ve heard z-A-p-i-e-r; z-A-p-i-A; z-a-p-i-A. Yeah. We’ve heard every pronunciation under the sun.
Mike [04:46]: Cool. That was back in 2011. Fast forward six years and how many apps are you managing right now in terms of the integrations?
Wade [04:55]: Sure. There’s 750 plus. I think 788 is the exact number. It changes daily. There’s a lot.
Mike [05:03]: How are you actually managing those? Are you responsible for every single one of those or is it really the developers behind the applications that are responsible for them?
Wade [05:13]: The vast majority are built and maintained by the vendors behind these companies. So you look at companies like Slack or HubSpot or Gravity Forms or Pipedrive or Drip. Those vendors have built and maintain their integrations on Zapier. Now we do a lot of work to help and assist with that because ultimately Zapier is our service so we feel responsible for the quality of those integrations but these days that’s how it happens. Originally we did build out the original 50 or 60 or so apps. But once we launched our developer platform, we started to expand the universe of people who could add apps to Zapier.
Mike [05:52]: I think that’s an interesting point to bring up just because when I was looking at Zapier and trying to think about how I could integrate Bluetick in it, my initial thought was that I had approach you guys and convince you that you should build an integration for Bluetick into this so that then it would be available through your platform. And you’re saying you’ve got this developer platform that allows the developers themselves to just build something, right?
Wade [06:15]: Exactly. Yeah. Early on we realized we were getting so many requests to add services to Zapier. And we just realized that there was just no way we’ll be able to keep up with the demand for this because we would have so many developers saying, “Build my app. Build my app. Build my app.” As much as we would want to do that, that was just not going to be possible for us. So we’re like we need to build a way that lets them do it themselves because the interest is so strong. So, in 2012 we launched v1 of our developer platform to kind of kick start that process.
Mike [06:48]: Yeah. So, this developer platform. Can you tell me a little bit more about what the process is for a developer who has an app and maybe they want to get it integrated into Zapier so that people who are using Zapier can send data back and forth between Zapier and that app and the other applications that you guys support? What’s the process for somebody getting started with that?
Wade [07:07]: It’s relatively straight forward. It’s self-serve. So you go to Zapier.com/developer and you can basically just start building against it. We have an API that we kind of call a standard, I guess for a lack of a better word. So if it fits those types of standards, it’s going to be super easy to set up because we automatically configure a lot of this stuff for you. If you kind of do authentication by OOF2 by the book, more or less, we auto set that up for you. If you’re end points are rest based JSON endpoints that can sort by descending order chronologically, you’re going to basically be able to just plug stuff into Zapier and it’s just going to work.
However, lots of services don’t have those things set up in what we would call the standard way, I guess more or less. I say standard because there’s lots of ways to do this stuff.
Mike [07:57]: It’s called a guideline.
Wade [07:58]: Guidelines.
Mike [07:59]: Recommended guidelines.
Wade [08:00]: Yeah. Right.
Mike [08:02]: And it’s not even –
Wade [08:03]: That’s not a problem, right. So we have this whole scripting environment where you can manipulate the requests to match our recommended guidelines, if you will.
Mike [08:13]: – yeah. And the two things that I came across when I was doing the integration with Bluetick and Zapier was that one: I didn’t realize how easy it was to get started. If you have a Zapier account, you just go into the developer platform and you can just create a Zap and there’s – I didn’t realize this – but there were three different ways that you can build it. You can build it as private so it’s just you that can see it. Essentially what that means is if somebody doesn’t have a Zapier integration you could almost create it for them. And then just not share it. You can keep it to yourself.
And then there’s the invite only which is where you would probably use it to invite some of your beta customers. And then there’s the global. And it’s interesting there’s that progression there. But you could build your own Zapier integration for somebody else’s product technically.
Wade [08:55]: Yeah. You totally can. People use that private state for like hobby projects and small little things all the time. That invite only stage gets used by slightly bigger companies to hook in apps that are their own internal tools, more or less, and invite their own employees or teammates in to use them with no intentions of ever having a public app on Zapier. You can have apps in any of these stages or intend to have an app in any of these stages at Zapier.
Mike [09:24]: And you essentially make sure that when people are pushing out new versions of it, they’re not breaking existing functionality, right?
Wade [09:31]: Yeah. We have this whole process. One for when you want a public app it goes [?] and things like that. I think that was one of the lessons we learned early on is that we would push out apps just because we wanted to move that number of apps supported count up. And we would probably skimp on a QA quality check sort of thing. But we realized over time that’s not helping anybody. It’s helping our ego, maybe, but the end user might suffer for that.
So we pushed folks through a quality check. And then when migrations or changes are made to apps that are live, there’s a whole migration process to mitigate some of those breaking changes for folks who are relying on it.
Mike [10:10]: Now how long does it take for somebody to go through that process? Let’s say that they’ve got an initial version out there integrated into Zapier’s developer platform and they want to push it live. Is there additional manual buttons that need to be pushed? Or is it all more or less automated?
Wade [10:25]: It really depends. If you have an API that already fits those guidelines that match us, you can physically do this really quickly. We actually have a video of our CTO adding Etsy in under six minutes because our API fits those guidelines that we have. You can actually do the integration super quickly if you’re familiar with it. And then if you’re not familiar, you have to read some docs and figure some of that stuff out which can take a little bit of time. And then, of course, I mentioned the QA process. So that you nail it the style guide right out the gate. Pay attention to all the rules and configurations that we suggest. You can nail it the first time around and that might take 24 to 48 hours for someone to go through the review Q & A process.
If you’re not matching those guidelines, it might be a little bit of work. It could maybe take a couple days of people time. If that’s the only thing you’re focusing on to maybe get that ironed out. I know, Mike, you just went through one so maybe you can comment for you on what your experience was.
Mike [11:24]: Yeah. My experience was probably more painful. I think you’re right in terms of the people time. But the reality is it’s not like that was my sole focus. There’s lots of other things that I was doing and working on. And changing, like with my product, the entire product is built on my API. So in order to make it work with Zapier, it was actually much more painful because if I made any changes to the API then I had to go into my client code and change all that code. And then I had to go to Zapier.
So it was actually significantly more painful. And the work around I ended up coming up with was I just created a custom Zapier endpoint and anything that needs to be done, I just send it to there and then I’m not affecting my client site code inside of the app.
Wade [12:05]: Yeah. That’s a consideration lots of apps will have if they already have users relying on a particular input and it doesn’t match our API guidelines, well, something’s got to give right there. I think your solution is actually a pretty common one what folks adopt just to say this is the way it needs to be done for Zapier so let’s make an endpoint for that.
Mike [12:24]: Cool. Moving on a little bit from the technical aspects of it. You went from zero to one and a half million users in five years. What made that possible?
Wade [12:35]: I think this is the magic of having 700 plus apps on Zapier, honestly. Every new app that we would add to Zapier, or later on that somebody else would add to Zapier later on, was a new user base that we could tap into. Really early on we started developing kind of playbook for doing marketing alongside of our partners. So every time a new app is launched on Zapier, we’re trying to get an announcement in their monthly newsletter or their feature launch newsletter. We’re trying to get listed in their integrations directories. We’re making sure that their onboarding email sequence, when they send out the advanced tips email, that Zapier is included there.
So we’re doing all sorts of things with them to try and continually just tap into their user base. We sent up landing pages for all the potential integrations that could possibly exist so we can start driving search traffic to it. Just lots of different ways that we can just try and tap into this existing user base that already exists and get those to us. That’s really been the bread and butter for us.
And then it’s five years of work. You just kind of make progress every single day and push yourself to be a little bit better each day and that kind of compounds upon itself.
Mike [13:54]: Yeah. It sounds to me like the couple of different things that you had going for you was one: I guess from external to Zapier. We call it integration marketing but it’s really integrating into other apps and, honestly, Zapier is one of the big ones that is pushed because you have such a large user base and there’s all these other apps that you are essentially cross promoting your app between them because it gives you that viral component. And that sort of plays into it as well and you’re in the middle so you get the benefit of both of those things.
Wade [14:22]: Yeah. Totally. You can leverage the fact that we have a big user base to reach to our user base. Like we launched that to an email list of a million plus. Plus, if you’re creative, you can go to the apps that are on Zapier and say, “We now have an integration through Zapier. Let’s do some marketing around this.”
Mike [14:39]: You know, what’s interesting is I’ve actually used – I don’t know if you’ve heard this before – I’ve used Zapier as essentially a search engine to find solutions to problems.
Wade [14:47]: Yeah. That’s more or less what’s happening more and more these days. It’s like our app directory has tons of stuff. We have a lot of content around the best apps for certain categories of things. So people more and more kind of look at Zapier and say, “If they’re on Zapier, they’re probably a pretty good app.” It probably means their open; they play well with others. There’s some other nice signals that they’re getting from our directory.
Mike [15:12]: One of the things that you talked about very early on was the fact that you had been working with different customers to try and do integrations from your previous company where you were just doing web development for people. What were some of the earliest things that you found that got you some initial traction with Zapier?
Wade [15:30]: I mentioned the forums earlier and that was probably the best thing for getting a handful of folks. So that Highrise forum that had hundreds of comments. I remember one on Evernote and I remember one on Dropbox. I remember one on Salesforce as well, that had these forums where people would ask for it. And I would drop into these forums and say, “I’m working on a project where I might be able to solve this for you. If you’re interested get in touch here.” And I would drop a link back to Zapier in a contact form. And a decent chunk of people would say, “This is what I’ve been looking for. It doesn’t look like I’m going to get an official support for a native integration so this seems like the next best bet.” And we would get a decent chunk of folks coming in that way. One link in a forum might drive 10 site visitors and five of them would fill out that form.
So early on that was just perfect for us because it was just the right amount of people we needed to test our assumptions, build out the initial apps we needed on Zapier.
Mike [16:31]: Now that sounds like an extremely high ratio of people who visited and filled that out. I mean, you’ve got 10 visitors which does not sound like a lot. Most people would look and say, “I really want to get 100 or 1000 or 5000.” But you’re saying that 10 was what really did it for you? That’s all it took?
Wade [16:48]: Yeah. For us, I think it was those forum posts were so – If you go back – I don’t even know if you could find them anymore. A lot of people have nuked their forums. But the comments in there were so visceral to these people. It’s like, “I need this integration so bad.” It was so needed for them they took time to write on a forum about it. Just the fact that we were offering that, I think, people were like, “Oh my god. There’s a way I can get this.” So they went through, clicked through and if it seemed like it was going to solve their problem then they were more than happy to give it a try. And so I think that’s why the conversion rates on those 10 visits were so high. It was just like, “This is a thing I’ve already raised my hand and said I’m begging for this. I need this really bad.”
Mike [17:32]: Right. The fact of the matter is that they saw your explanation in the forum and then they clicked the link and now they’re at a page where they’ve almost already raised their hand and said, “Yes. I’m interested in this.” And then you put it right in front of them and say, “Here’s a form to fill out to contact us and then we’ll talk.” So they’re already interested. They’re kind of past that point. So that’s kind of an interesting data point.
Wade [17:52]: Yeah. It’s like, you know, people who are like, “I want some Girl Scout cookies.” And we just walked up and said, “We got some. You want to buy them?” They’re like, “Yes, please.”
Mike [17:58]: Yes. I’ll take 400 boxes of Thin Mints.
Wade [18:01]: Yeah. More or less.
Mike [18:04]: So, obviously, it sounds like that one worked out for you really well. What are some other marketing techniques that you tried that just completely bombed? I think that that’s an interesting conversation.
Wade [18:13]: Good question. I think later on as we got bigger, we started experimenting with some of the different tactics you hear. And one of the ones that we tried was running joint webinars with a lot of our partners. This one was one we really struggled to make super effective for us. And I think it might be because we have this freemium low cost sort of thing and webinars took a lot of time and effort to put a nice one together and to get enough people on them. And so maybe that’s why it didn’t work. But ultimately we would do these things and we might get a decent chunk of folks to show up. Like we’d get 200 or 300 folks to register and maybe half of that would show up. But a lot of them would already be signed up to Zapier so it wasn’t helping us get new users. We were hoping that the partners, the app that was in mind, would promote this more heavily to their user base. But a lot of times they would just talk about it on their blog or on Twitter or something like that which didn’t ultimately drive much traffic to it.
And so, it was just a lot of time and work for relatively low amounts of people coming to us. We were just hoping to get it scaled out more. We still do some of these mostly just to make some of our bigger partners happy. But when we were really trying to do it, we did maybe a dozen of them and we really maybe only had one that was any meaningful result for us.
Mike [19:38]: Yeah. It sounds to me like if the intent was to help out the partners who are integrating into your app then that would have been beneficial for them but not necessarily for you because most of the people who are attending are already users of Zapier. It doesn’t really make a difference.
Wade [19:53]: Yeah. It was like these people, maybe they’re looking for some extra use cases for Zapier but that’s the kind of stuff we could have solved with an email and said like, “Here’s 10 use cases with this particular app. Go try these out. They’re probably pretty good.” And you don’t have to take time to put on a real time event sort of thing.
Mike [20:11]: Right. Cool. One of the things that comes to mind is that Zapier is primarily a remote company, correct?
Wade [20:17]: Yep. 100%.
Mike [20:20]: So last week’s episode, Rob and I talked about some of the pros and cons of a local versus a remote team. And Rob also talked about kind of hybrid approach that he used with building Drip. What’s some of the biggest challenges that you’ve found with running a remote team? You’ve got what, around 70 employees right now?
Wade [20:35]: Yep. I think the biggest challenge is it really forces you to be more disciplined around communication and information sharing. So you think for us, we hire all around the world as well. So we’re in about a dozen time zones. Right now, I have teammates that are sleeping or not working. If I’m doing work that is going to affect them, I have to make sure to document that either in code like in GitHub or it needs to be Trello or Quip or somewhere that they can take advantage of it. So when they come in and start to pitch in on the projects I’m working on, they can pick up where I left off and not have any dangling threads outstanding.
So I think really just being intentional about building that communication fire hose so that people can tap into the information that exists but don’t necessarily have to tap on someone’s shoulder to get it.
Mike [21:25]: Kind of related to that, have you ever thought about opening an office some place or is it your intention to just keep the company remote forever? Or at least until the foreseeable future?
Wade [21:32]: Yeah. We’re all in on the remote side of things. The benefits for us just so far outweigh some of the challenges. And the main benefit of course being the people that you get to work with. We’ve got some fantastic folks that are working with us here at Zapier that, if we limited ourselves to a 30-mile radius around where we live, we just never would have an opportunity to work with them. And it just makes recruiting easier because you can recruit from anywhere instead of that 30-mile field which turns out anywhere is a lot bigger than 30 miles around where you live.
Mike [22:07]: Yeah. And think that that is an interesting contrast to how Rob built up Drip and his team. His view on it was that they hybrid model for them worked really well where they did have an office but they also had everybody coming into the office a couple of days a week because the collaboration opportunities and the comradery really trumps that being completely remote and in different time zones.
And I’m not saying that one mechanism is better than the other, but I do want to point out that it seems to me like, depending on who the founders are and how they best operate and the types of people that you hire, either one can work equally well. It’s really just a matter of how well you put together the team and how well everybody gels together.
Wade [22:48]: Yeah. Absolutely. We’ve had folks that we’ve brought in at Zapier that didn’t work out. They realized a couple months on the job like, “Remote’s just not going to work for me. I just need to be around more people regularly.” It’s been relatively few but it has happened. And I think that’s just you as a founder but then also you if you’re going to be going to work for somebody has to just be honest about what’s a good work environment for you. What makes you thrive?
Mike [23:16]: So, along that line, what would be your advice for people who are looking to hire either remote contractors or remote employees? Are there things that they should be specifically looking for? Like traits in those individuals. Or are there specific red flags that you can think of?
Wade [23:30]: For us, the things that we really like are folks who have shown a propensity to start and finish projects independently. This could mean that they’ve got a side project that they’ve done a pretty good job with. It could mean that at their last job they started a pretty new initiative and saw it through. You know, kick started with the principle impactors. Just anyone that kind of just gets stuff done is a big one.
We look a lot for folks who are really good at communicating through written word. So folks who aren’t curt but know how to, hey, like an exclamation point or an extra emoji or smiley face goes a long way to giving those things that you don’t get like body language when writing is your principle medium.
I think probably the last thing that’s important which could sometimes be tough to judge because it’s kind of outside of what’s legally askable but it’s really nice if folks have a social circle outside of work. If they principally use work as their social outlet, it’s really going to be tough in a remote setting because there’s just not any people around to be that. But if they have family or friends or meetup group that they go to regularly. If there’s a co-working coffee joint where they’ve got a lot of friends or something like that that they can get locally. That really helps out too.
Mike [24:53]: You know, it’s interesting because that actually came up. We kind of phrased it differently. I don’t think we worded it quite as well as you did. But the basic idea was that feeling of isolation and, specifically, looking for what somebody has going on outside of work to maintain a social life. That’s a really good piece of advice I think.
Wade [25:10]: Yeah. We have a ton of families at Zapier and it seems like a lot of them get through family. But we also have folks that don’t have families and have friends or other social outlets to make it happen too.
Mike [25:21]: Cool. In terms of red flags, what are things that you would look for that say this person would probably not be a good fit for a remote working environment?
Wade [25:29]: Well, that communication one is a big one. If they feel like, “Let’s get on the phone to discuss everything.” Maybe your remote environment is set up to work through the phone. But that’s not how it is at Zapier. We do everything through Slack or some other written medium. If they can’t communicate well in an email or their always like, “Let’s get on a call to discuss that.” It’s like is this what it going to be all the time. You can’t get on a phone call with someone who’s half way across the world very easily to discuss a thing. You’ve got to figure out how to do it written and asynchronously.
I think that’s a big one. And really it’s the opposites of some of these things. It’s like do they not get stuff done. You can ask them about a time they shipped a project. Or if you’re hiring for a customer support role, talk about the customers you supported. And you can pay attention to what do they think is impressive versus what do you think is impressive. If they’re like, “I helped out 10 customers over email today.” Well, for us that’s not super impressive. We’ve got folks that are doing 60, 70, 80. So that’s totally different volume of work.
So you can just ask those behavioral interview type questions to figure out is this the type of person that gets stuff done? Or do they tend to not be that motivated, I guess?
Mike [26:43]: So when you’re actually going through the process of hiring somebody, do you do phone calls for them or Skype interviews? Or is it all through email?
Wade [26:52]: We do both. We have an application form that asks some questions that we think will elicit responses that tell us how they will do the job. And then we do a follow up phone screen that makes sure they understand the role. Makes sure we understand who they are and get a sense for is this the type of person that is going to be a good communicator, they’re going to get stuff done, that they can empathize with other teammates. Kind of some of the values that we have here at Zapier.
And then we have a second interview which is a skills test interview where we actually have some scenarios that we’ve built out that represent the work of that role at Zapier. So we run them through that skills test. And that skills test has probably been the best addition to our hiring process because it really makes sure that folks do have the underlying skills to be successful at Zapier.
Mike [27:43]: One of the things I’ve encountered is that you make the process sound rather lengthy and the reality is it sounds like it’s only about three to four steps long. But I think for somebody who’s building something in their living room or from their kitchen table that process sounds overly long and overly burdensome for them. But at the same time, if you don’t go through that process, it’s very easy to fall into a situation where you’re made a bad hire or somebody’s not going to work out. And then you spend three months stringing things along instead of just ending it and saying, “We need to part ways because this isn’t going to work out.”
Wade [28:17]: Yeah. And you know, from start to finish, it could go really fast. When we decide to review the applicants from the time where we’re like let’s schedule that first phone screen and go through that skills interview process. We’ve had that done, start to finish, in less than a week before. So it can go really fast if you’re dedicated to making it happen.
Mike [28:37]: I guess the next question I have for you is that you’ve established a substantial sized company now. You’ve got 70 employees. You’ve got one and half million users. What’s one of the biggest challenges you see for the business moving forward?
Wade [28:49]: I think the big thing is most companies don’t fail because of some sort of external factor. Most of them fail because the people inside the company, and likely the founders, honestly. So Brian, Mike or myself, mess something up. We do something that hurts the culture. People turn against us or we make some dumb decision that drastically affects our ability to ship a good project or ship good product. Something like that. I think I’m just constantly paranoid about trying to make sure that Zapier is a fantastic place to work and that we’re bringing in high caliber folks who can make sure that we are making good decisions and that we’re making good forward progress and shipping things fast and all the stuff that we want.
Mike [29:35]: Is that something that kind of as an executive team you guys meet and talk about? Or is that just something that you guys kind of keep in mind moving forward as you make decisions about the company? I’m just wondering how much of it is keeping this in mind versus being intentional about that.
Wade [29:48]: We actually do try and do this intentionally. So once a month when the executive team, we ask two questions of each member on the executive team which is: What is the biggest problem you and your team are having right now? And then a second follow up question to it is: What’s a problem that might pop up down the road if it’s not addressed now? And honestly, that second question is way more important to me because the problems that people talk about now are the stuff you already know about. It’s like, “We know that that’s a problem. We’re working to address it.” We’re going to get that fixed up.”
That second one is the stuff that people haven’t articulated yet. It’s stuff they haven’t shared. And usually it’s phrased such as like, “What’s a problem that will pop up?” But honestly when they answer it, it’s stuff that’s already popping up now. They’re sharing things that I’ve already seen this happen once. And so you know when you hear that, it’s like, “We need to start fixing that stuff now too.” So it really helps you cut off the problem areas before they get enough room to cause a really big issue.
Mike [30:50]: Yeah. I think that’s a really good question to ask yourself. I have a couple of things that I have on my monthly to do list that just kind of pops up on the first of each month that just says look at the biggest problems you’ve had this past month and then review what the goals are moving forward to reevaluate things and find out if there’s anything that needs to be either reprioritized or anything like that. I think intentionally thinking about what could be problem down the road that would almost be a business killer is probably something good to add to that list.
Wade [31:20]: Yeah. And I think the combo, like asking them together, is what’s really interesting. Because you get kind of those things that you already know about and you already see, and then you get it contrasted against some of the stuff that maybe you don’t see. And when a company gets to a certain size, those types of questions are really helpful. Especially for me. I don’t have the visibility to everything at Zapier like I used to. I used to do everything so I used to know everything that goes on as we’ve grown –
Mike [31:46]: Now that you’re CEO, you know nothing.
Wade [31:47]: – yeah. Right. It’s just a little tougher. You have to work harder to get some of those insights that you just learned by almost osmosis in the past.
Mike [31:56]: Right. You’re a little bit more removed. There’s a layer of abstraction between you and the actual problem so you’re trying to interpret things more than anything else.
Wade [32:03]: Exactly. And it’s like, “That is a problem.” So maybe I’ll actually step in and do some of that work. Like, “There’s a problem in support.” I’ll go back and do some support. I’ve got that skill set. I can jump in and see like, “How is that causing problems? How can I better understand this so that we can come up with a good solution here?”
Mike [32:20]: Cool. So I guess to wrap things up a little bit, where can people follow up with you or keep in touch with you?
Wade [32:25]: Yeah. Two places. Email: Wade@zapier.com. And then Twitter, I’m pretty active as well. @Wadefoster. I’ve got open DM so you can DM me there too.
Mike [32:33]: Great. Well, thanks for coming on. I really appreciate you coming and talking to us and sharing the experience that you had with Zapier.
Wade [32:39]: Yeah. Thanks, Mike. I’m really excited to be here.
Mike [32:41]: If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt used under Creative Commens. Subscribe to us in iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening and we’ll see you next time.
Episode 326 | Building a Local vs. a Remote Team
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about the pros and cons of having a remote versus local team. They also discuss a hybrid approach that Rob used with Drip that he believes is superior to either methods.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of ‘Startups for the Rest of Us,’ Mike and I talk about building a local versus a remote team, and we also weigh in on what I think is the ideal way to build a startup team. This is ‘Startups for the Rest of Us’ episode 326.
Welcome to ‘Startups for the Rest of Us’ the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:31]: And I’m Mike.
Rob [00:32]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
Mike [00:37]: Well, there’s a little bit of snow on the ground and, fortunately for me, next week I’m headed out to Big Snow, Tiny Conf in Vermont. So I’ll be headed up there with a guy named Jeremy from Forecast.ly. And then there’s about a dozen other people who’ll be meeting us up there, and a couple of days of skiing, and mastermind’s during the evenings. It should be a lot of fun.
Rob [00:55]: Sounds great. Who puts that one together? Is that the one that Brian Casel puts together?
Mike [00:59]: Yeah. It’s Brian Casel of Audience Ops and Brad Touesnard of Delicious Brains. The two of them put that together, and they also have a couple of sister conferences I’ll say. One of them is in Colorado, and that one is mostly put together by Dave Rodenbaugh but Brian and Brad are involved in that. And then there’s also Big Snow Tiny Conf in Europe which is done by Craig Hewitt. Brad I believe went to that one. That was last month. But the two in the U.S. are actually being held during the same week.
Rob [01:26]: Sounds like fun. And you’ve gone to at least one in the past, haven’t you?
Mike [01:29]: Yeah. I think I’ve gone to two so far. This is the fourth one. So this will make my third.
Rob [01:34]: That’s cool.
Mike [01:35]: Cool. What about you?
Rob [01:36]: I am also off to a conference next week. I’m repping Drip and Leadpages at SaaStr in San Francisco. So Jason Lemkin’s SaaStr has grown up to I think it was 5,000 attendees last year, and it’s supposed to be more than that this year. So it’s quite an event, and not something that I’ve ever gone to purely because of that. You know how we built MicroConf into the conference we wanted to attend. A 5,000-person conference is not a conference I like to attend. I just don’t love big groups of people. I’ve heard a lot of good things about it on a number of fronts in terms of the networking opportunities, just that everyone’s there, blah-blah-blah. I’m interested in checking it out, exploring that, and I’m already setting up meetings, and just meetups, and trying to figure out who’s going to be there that I can connect with that I haven’t seen in a while. It should be an interesting experience for me as someone who doesn’t particularly like these big – it’s a big multi track conference, and it’s a lot of the Silicon Valley stuff that doesn’t necessarily jive with the way that we grow and build businesses. So it’s going to be the assumption that everybody’s raising funding, the assumption everybody wants to get to 100 million, the assumption that if you’re not doing that, you’re crazy. That kind of stuff. With that said, there’s a lot of value still that can come out of – I really like Jason Lemkin’s thinking. I respect his outlook and opinions on so many aspects of growing SaaS businesses, and there’s a lot of folks who are going to be on stage that, I think, have a ton of knowledge and experience to lend to anyone starting a SaaS company. I do like that it is focused. It’s not just startups. I’ve been to some startup conferences where you’re just standing amid the health care startups, and the food startups, and the drone startups, and 3D printing startups. As much as I like those things as a consumer, I have really no interest in doing any of them as an actual business, and so I find that it’s less relevant. The more focused a conference can be, the more interested I am in it. So that’s it. I’m going to be out in San Francisco for four or five days just kind of getting it done.
Mike [03:31]: Yeah. You’ll have to let us know how it goes and see if we should multiply MicroConf by 100.
Rob [03:36]: I know. It’s just such a different conference. It’s not better or worse, it’s just a different way to approach an event. It’s such a different way than MicroConf. And it should be interesting.
Mike [03:47]: I just realized how terrible I am at math because it’s not 100 it’s –
Rob [03:51]: It’s 180. Because we have what, 220, 230 at MicroConf? And the fee is 5,000 – Yeah. So anyways, it’ll be good. I’m genuinely looking forward to it. I love San Francisco. I’m from about 30, 40 minutes east of San Francisco. The Bay area is my town, San Francisco is my city, and so I’d love to get back there, and I will probably see at least parts of my family who can make it out to see me in the city. I don’t want to sound like I’m not looking forward to it because I very much am. I’m just a little bit skeptical I guess that how much value I’m going to be able to get out of an event that’s that large. I’m excited to go in with both feet and see the rubber meet the road and see what I can get out of it.
Mike [04:32]: You just mentioned how close some family, and where you used to live in relation to San Francisco. I used to have a little joke in my back pocket where I would tell people I lived about an hour east of Boston just to see if they would catch on to the geography.
Rob [04:44]: Well, yeah, right. Because you’re west. East is in the water.
Mike [04:48]: Right.
Rob [04:50]: Indeed.
Mike [04:50]: So what are we talking about this week?
Rob [04:52]: This week we design an entire episode around a listener question. And the question is from Johannes Akesson. He says: “Hi Mike and Rob. Johannes from SQL Spreads at sqlspreads.com. One idea I have for a topic is the pros and cons of a local versus a remote team. I’ve been thinking a lot about this. So far, I have used mostly remote employees and only local subcontractors. I’m in the phase of growing my team and I’m thinking a lot about this. Should I go for a complete remote team, a mix, or 100% local? I see pros and cons, both from the companies and from a personal viewpoint. With a remote team you’re more flexible to work from different places or from home. It can be more cost effective and maybe easier to bring in part-time employees. With a local team, I see a lot of benefits like better collaboration, building a group of people pushing each other, etcetera. It would be good to hear your experience in this area.” So that’s what we’re diving into today. I don’t know that I had many opinions on this a couple of years ago. I think it was kind of like, “I’m building a lifestyle business.” This is four or five years ago. So everyone should always be remote and this gives me the most flexibility. And then as I dug into Drip and realized, ‘Boy, to really do this right I actually think you do need people to be able to see each other face-to-face, and not just once every three to six months at a company retreat or whatever. So, we’re going to dive into the pros and cons of being remote versus local, and then I want to dig in and talk about kind of the hybrid approach that we used with Drip that I think is by far better than remote or local. Ready to dig in?
Mike [06:17]: Yeah. Let’s get started. Why don’t we cover remote first?
Rob [06:20]: Yeah. Let’s talk about a couple of the pros of having a remote team. The first, and probably the biggest, advantage to it is that you can hire the best people no matter the location. This relieves you from having to live near a bunch of good software developers, and sales people, and customer success people, and HR people. It means that you can basically look worldwide and probably find better people than you can in your locale.
Mike [06:46]: I think there’s another advantage here which is also the cost of being able to hire people who are at the skill levels that you need and you don’t necessarily have to pay local rates for them. So whether that means going overseas, or just going to parts of your home country where it’s on the outskirts, it’s outside of a major city and you don’t need to basically outbid larger companies for the same level of talent. If you can give people that freedom to work remotely then it works well for them, and it also helps you because you don’t have to pay as much for the people who are just as talented as you would get assuming that you lived in a large city.
Rob [07:22]: Yeah. It’s a good point. And I think that’s the second advantage of going remote is that you don’t have to pay the wages of a major city – if that’s where you live – and you still have the advantage of being able to get people on your team. In essence, if you think about it it’s just like arbitrage. It’s like you might be able to live in a major city and then hire in a less expensive area. I’ve seen companies do it the other way, though, where they’re in a really inexpensive area and then they’re hiring out of San Francisco. I was always thinking to myself, “Why would you do that? I know there’s good talent there, but you can find talent outside of the Silicon Valley.” It was a really funny kind of almost reversal of how you shouldn’t do this. They turned the pro of going remote into a con.
Mike [08:02]: Yeah. That is odd. But sometimes, depending on the talent that you’re looking for, you may need to do that. It just kind of depends on who you’re looking for and where those people are located. You can’t always find specific types of people that you’re looking for in remote areas.
Rob [08:18]: I think the third and final advantage of remote that we’ll talk about briefly is this gives you as the founder a lot of freedom. You don’t have to go into an office every day. You can travel and it doesn’t matter. It doesn’t impact the business any more than if you were to be at home, or wanted to work from a coffee shop, or wanted to work from Europe for a month. Aside from the time zone, no one is going to notice the difference. So it really gives you the most flexibility and, I think, kind of the most freedom as a founder if that’s something that you’re looking for.
Mike [08:47]: I think there’s actually another pro here which is it gives freedom to the people that you’re hiring, so that – depending on what they’re circumstances are – they may want to — let’s say that they already have a fulltime job and they want to work part-time because they’re saving for a wedding, or they’re trying to go on a trip next year, or something along those lines. It gives them the flexibility to work a full-time job, and then, in addition, work on your things, or be a consultant and work on your stuff part time. There’s a lot of advantages to being able to hire somebody for part of their time, not necessarily all of their time. That’s, obviously, much more on a contractor basis, or a limited basis, but a lot of times it’s very difficult to build your business and then you happen to have an extra $10K coming in every single month and you say, “Okay, now I can hire somebody.” It doesn’t usually work out that way. You usually end up in a situation where you need some additional help and you might have a couple thousand dollars extra a month, but it’s obviously not enough to hire somebody fulltime. So you have to decide, “Am I going to hire somebody part time, or am I going to hire in advance of the revenue in anticipation of that?” And that’s obviously a little bit dangerous, but it gives those people some flexibility as well.
Rob [09:54]: Yep. That’s a good point. Let’s talk about the negatives, the cons of hiring remote. I think the first one, and the one that I noticed the most when we were remote, and then when we switched to a more localized approach, is that it’s hard to collaborate. Period. Even with the software and webcams and all the cool technology. The Slack. All that stuff. The digital whiteboards. It’s just harder to collaborate. There’s nothing better than being able to look face to face. Especially on the really hard problems where it’ll take you three, four, five hours of going back and forth in discussion, and these hardcore meetings, and these chance encounters, and overhearing a discussion. Those things just aren’t replicated the same way when you’re remote.
Mike [10:33]: Yeah. It’s hard to put your finger on exactly what the problem here is, because if you could then it would be a lot easier to say, “Okay. Well, let’s solve this in this particular way.” But there’s a lot of subtleties here to that collaboration problem which are not easily pinpointed. You talked about some of them where – the digital whiteboard, and SKYPE and headsets and cameras, and stuff like that. It helps to some extent, but I don’t think that it’s quite the same. You don’t get the same feel working remotely with somebody as you do if you’re working five feet away from them, or even 25 feet away if you’re in a larger office space. It’s not quite the same feeling when you’re trying to collaborate on particular problems. It’s also hard to get on a SKYPE call for several hours, to be honest. It’s difficult to maintain your focus on a particular problem, because there’s usually so many other things going on, and you’re at your computer so naturally there are other distractions that will come up like email. And if you are just at a whiteboard, for example, then there’s no popups coming up. There’s no additional notifications. There’s no other people pinging you on SKYPE or Slack or anything. You can kind of get away from that if you’re physically located next to each other, but you can’t do that when you’re collaborating over a computer.
Rob [11:45]: Yeah. I believe that, hands down, you will build a better product, and you will solve problems faster and better, if you’re all in the same location. I just don’t think there’s any way to argue with that. Now there are other pros and cons of both of these, but that one has just become ingrained in my mind over and over and over, in terms of being able to collaborate with people. This is not something you can schedule. You can’t say, “Well, every quarter we’ll get through and then we’ll get together and we’ll plan the next 90 days. Or every month we’ll get together for two days.” It isn’t the same. It’s not the same as being able to interact and collaborate on a day-to-day basis on an ad hoc basis where you’re hammering out a bunch of stuff. Especially in a startup, with as frequently as things change. I can imagine being in a fortune 500 where you have this waterfall approach, and you probably could plan out months at a time and things move so slowly that there’s no need for those ongoing conversations. But when you’re remote, it makes it harder. The second con, or negative, of remote is – it’s a subtle thing – but it’s this lack of comradery, or lack of team unity. I know you can get together every three to six months and all hang out in a house and it’s really cool, and the buzz you feel from that does carry over for the next week or two. But you’ll notice that it fades, and that being together every day – like we were in Fresno with the Drip team – it really was like that kind of all the time. It’s weird to say, but we went out to lunch once a week. That was staff meeting. We hung out outside of work because we liked working together so much. We developed friendships. And there was just this thing of everyone being on board with the mission of the company, and doing the best for the team, and it meant there was a lot of cohesiveness in our thought, and a lot of unity and everyone trying to help each other out a lot and getting things done very quickly. Going out of our way to help each other in a way that when you’re remote, yeah, you’re totally – you’re friends, you’re colleagues, you’re cordial. But, again, there’s that unspoken – that thing that you just can’t get when you’re not around folks in person every day.
Mike [13:45]: The next thing is a little bit country specific, and this pertains specifically to the United States, but it you have people that are located in multiple states, then you are considered to have what’s called a tax nexus. And a nexus is essentially every place where you have an employee working for you, you are considered to have a nexus there, and you are supposed to be collecting taxes from people who order your software in those locations. Now there’s a lot of subtleties here that you have to deal with in terms of whether or not you’re offering software as a subscription or it’s a downloadable product. But that said, it complicates the issue when you have contractors and employees working in different locations, whether it’s in your country or in foreign countries, and sometimes, these tax nexuses can be established even if you just have an employee who’s working in another country, for example, and then you are then subject potentially to collecting taxes for people who order your software in that country. It becomes a complicated headache to some extent, and governments certainly don’t make this any easier. They want their money, to be perfectly honest. But they don’t really consider the ramifications for much smaller businesses, or ones that operate entirely online because, quite frankly, that’s not really their concern. Their concern is the retailers, and they’ve never really quite caught up with the times in terms of being able to make an easy way for you to collect taxes based on sales over the internet.
Rob [15:09]: Yeah. This is something that most people don’t talk about, but if you start hiring people randomly, especially in the U.S., if you hire 10 people across 10 states, your tax nexus becomes very large, and it becomes very complicated. It’s not just the amount of money you’re paying. It’s a tremendous accounting headache just to track all of that. So really be, I would say, be careful before hiring new employees in just any random state, because it will get complicated on you quick. The fourth negative, also relates to this, is the additional administration time for every state that you run payroll in. I know that with paychecks, as I even tried to add states, it was a nightmare. With Gusto it was a little easier, but someone on my team had to go out and get the unemployment number from the state which is some random website. Then there was the disability number. And then there was the actual state income tax number. There’s all these numbers and each of them took 30 to 40 minutes of filling stuff out just to get some type of approval. And then it took three weeks to get it. And then I couldn’t run payroll while we were waiting on that. It was just this whole project that I wasn’t counting on. So as you add states, count on four to eight hours of killed admin time right at the start. And then plan on dealing with a bunch of kind of bureaucracy, in essence. Then they screwed one of them up and it didn’t work. Again, it’s just one more thing that really isn’t moving your business forward. And it sounds like a small thing of like, “Oh, I’ll just kill a day doing that.” But it’s a lot more of a pain in the butt than I think you realize. And then every time you run payroll now you’re paying all these multiple states – Gusto does that for you – but anytime there’s confusion, or a dispute, or whatever it’s more manual interaction that you’re dealing with. It’s just that added accounting complexity.
Mike [16:50]: I’m just going to point out that every time something goes wrong, which it inevitably will, it chews through several more hours of your time. Let’s say that you chew through four to eight hours just setting things up, and then you have to wait for three weeks for things to go through with the state, they might not have been correct. Or they may have left out something. I remember having to go just to the Department of Motor Vehicles here in Massachusetts to get my license when I transferred it over. I ended up going back four times because they said, “Oh, you just need this and this.” And I’d have to go back and they’d say, “Oh, you need this other thing.” I’m like, “Well, why didn’t you tell me that last time I was here?” Finally, by the third time, I just said, “Is there anything else I need? Is there a list of everything that I need?” And they said, “Oh, yeah. Here it is.” And there were two other things that they didn’t tell me about. It’s the exact same thing when you’re trying to pay payroll taxes, because there’s all these things that they’re not going to tell you about, and every single state has a different mechanism for getting all that stuff done. Some of them require certain things. Some of them don’t. It’s just a mess. And, like you said, if any little thing goes wrong, or if one state changes rules a little bit, or requires a sign-off, or a signature, or a new piece of paperwork filed. Sometimes it’s quarterly, sometimes it’s annual, they expect you to know what those things are and they won’t tell you in advance. There’s no mailing list or whatever you can sign up for that says, “Hey, here’s all the things that you need to know about running a business in such and such state.” None of them do that. It’s kind of a fighting against the machine at that point. It’s just awful.
Rob [18:11]: Yep. I’ve run into it. Another negative of remote is that it does take a unique employee to make it work. Not everyone is able to work remotely for sustained periods. A, it can be isolating, even when you’re working remotely with a team. B, folks get distracted – and especially over long periods of time. Like, you hire somebody, six months they’ll be good, a year they’ll be good. Two or three years into it a lot of people really run into challenges of just being able to stay focused, stay motivated without folks around them. Because it’s the norm to be in an office. As sad as that might be, or as disturbing as that might be, that’s how we’ve done it for the past 80 years since offices were invented, or 100 years or whatever. So people are used to having that interaction with other folks and, as a result, I’ve known founders who have hired people and they’ve worked out really well on the technical side, but they haven’t been able to be productive and to really produce long term as a remote employee in essence.
Mike [19:06]: I think part of that goes back to what you said before about one of the cons being a lack of unity. It’s just that comfortability that you get, the socialness of working with other people. Because as you said working remotely is very isolating and if you don’t have a mechanism in place, or a system in place, for getting out – whether that’s you or the people who are working for you – then it can be very easy to fall into this trap where you basically fire up your laptop every day and you work for eight hours and you don’t leave the house for days or weeks on end. Long term that’s going to be detrimental, and that’s part of why offices work so well, is because you get that social aspect that, as humans, we kind of need that. Whether that is social engagement at work or outside of work. But if you don’t leave the house to go to work then it isolates you that much more. Especially if you’re sitting there for long hours working on code, or different things, and you’re not really talking to a lot of people. It can be very difficult both for the founder and for the people who are working for them.
Rob [20:03]: And then the last couple cons for going remote or having a remote team. The first is time zone complexities, and this depends on how remote you are. If you hire someone in Europe or in Asia and you’re in the States, you’re talking nine to 12 hours’ difference, if you’re on Pacific time versus Asia. I think it’s even 14 hours’ difference. That becomes kind of a pain in the butt when you have this day or two-day delay because everything’s asynchronous. We’re trying to hire within three time zones, three hours’ difference of Pacific when we were in Fresno, and I felt like that was a pretty good way to manage it. I think trying to do an eight or nine hours off reduces even more of the ability to collaborate, and the team unity, and that kind of stuff. So depending on how you arrange it, this may or may not be a major con for you. And lastly, this kind of plays into needing unique employees, or unique team members, to be able to pull it off. But, unless you’re on top of things, some people will naturally start to slack off. It may not happen in the first week, it may not happen in the first month but over time things will come up, and they realize that they don’t need to, necessarily, clock in and clock out, because I imagine you’re not running a startup like that. I think that you can see people start to become less and less productive over time unless you do hire people that are really able to stay focused, or there’s some other thing that’s motivating them, because if they look at it as a job, there’s always something else that they can be doing. They really need to be bought into whether it’s working with the team, or the vision that you have, or loyalty to you. Because if you don’t have that, people will inevitably try to find ways to basically not put in the full-time work.
Mike [21:42]: Yeah. I don’t think that that’s necessarily intentional. It’s just a matter of how things tend to work out, in terms of the workloads and the ways that people put time in. So, if you’re working remotely it’s very easy to get up a little bit later and then call it a day early, for example, and you don’t think very much of it because sometimes you’re just thinking about things after work or you start including that extra time. It’s difficult to track it as well. Most of the time the founder’s got other things going on that they’re not going to track that. For them, their sole focus is working on the business and trying to get things up and running and, quite frankly, micromanaging employees or contractors is not at the top of the priority list. You don’t want to have to do that. This can be a problem longer term. I think in the early days it’s much easier – and by early days, like early on working with somebody – you tend to not see this very much. But as time goes on it can become a problem, and then it becomes difficult to address because you don’t have the clarity of when they’re working in the office, and not that them being in the office equates to productive time, but it’s difficult to judge how much people are actually working or how much time people are putting in.
Rob [22:52]: Yeah. I like that thought. I agree with you. The sentiment is that most people won’t do this intentionally, but it can happen pretty easily unintentionally.
Mike [23:00]: Yeah. And then it becomes uncomfortable to bring up.
Rob [23:03]: Right. And that’s the thing. If you’re going to build an organization and you’re like, “Boy, we’re a startup and we’re going to be cranking on this for a good solid two years, and then we’re going to sell, or then we’re going to IPO” or whatever it is. Then a lot of these things don’t matter. These are longer term things that if you want to build a business that’s sustainable, and that is actually generating revenue, and you’re thinking out two, three, four, five years, some of these things will creep in. And these are not often talked about because so many of the startups that we see remote workers and how all that works just haven’t been around that long. There are a few. There are a couple. Like Basecamp comes to mind and Buffer. But most of the big high profile ones, or even just the ones that we hear about in our circles are like, these are like one and two-year-old companies, and there’s a lot of stuff that’s going to creep in after that. Let’s switch over to talking about local, and just doing the traditional having an office, you hire everybody in the same locale. When I say everybody, I mean almost everybody. Sometimes there’s a really specific position that you may need to hire remote for. But imagine it’s like someone who’s kind of an independent contributor and they don’t need to work with the rest of the team on a day to day basis. So, I’m saying mostly local here. The pros to this are kind of the cons of being remote is the ability to collaborate, look eye to eye, work on hard problems. The comradery and the unity of being able to go out to lunch with people, of being able to be in the room and have conversations and plan things. And number three, I’ve found that that all builds into the team basically being more invested in the business outcome, or in the outcome of the startup, than if you were to build a completely remote team. I do think there are ways to work around these and to, even if you are remote, to try to get as much benefit as you can from these. But I don’t see that there’s any way that if you’re remote that you can possibly nail these three as good as being local in the same office.
Mike [24:48]: I think some of that has to do with the fact that you’re not getting the feedback from the business, or the founder, when you are working remote. For example, if you added some code to the product that really made a difference for a particular piece of it, and you work in the same office, it’s much easier – and probably much more common – for somebody to say, “Hey, great job doing that. I really appreciate that you did that.” Versus if you’re remote, then those people have to make it a point to kind of go out of their way to provide that feedback to the people who are working remotely. So, as you said it’s not that it can’t be done, it’s just that it’s more difficult and you have to put forth a conscious effort to do it. In those cases, it’s more likely to get swept under the rug, or just not addressed, or you’re not giving that feedback to people because you’ve got other things that you’re thinking about that are probably overtaking a lot of the other things that come to mind including that feedback to the people who are working on stuff.
Rob [25:39]: Right. And, of course, you can do this in Slack or via email or something, but it doesn’t have the same impact as looking someone in the eye and, in front of everybody else, being like, “You totally rocked this. Nice job.” Something we did at Drip when we were coming up, and we still do, is have stuff we call “launch juice”. It’s fire cider. It’s a nonalcoholic, very strong – I think it’s like habanero and honey and apple cider vinegar. And we do a shot of that when we do a big launch of anything. So, major features. So maybe we’ll do a shot once every month or two. And that’s just a really cool thing that you technically could ship bottles and shot glasses out to everybody and then all get together on video, SKYPE and then do it together. But there’s just something about being in that room, pouring them, and being like, “Cheers team! We totally rocked this.” And doing it together that you just can’t quite get with a remote team. All right. So let’s talk about some of the drawbacks of being local. The first one is that it can be really expensive. You can higher salaries, especially if you live in a major city. The second is the talent pool may be thin if you don’t live in a major city. If you need to hire six developers and several support people over the course of a year or two as you’re growing, if you don’t live in a major city that’s actually a lot harder than it sounds to find people who can all make it to the same office that are of the quality that you’ll want. And I think the third one that comes to mind is just the expense of having an office and of having to manage all that. And maybe there’s even the admin costs of having to find that and sign a lease, and the commitment, and how all that shakes out. Again, referring back to my experience with Drip, we were in a good position that we were able to find really inexpensive office space in a little local tech hub called Bitwise Industries in downtown Fresno. It was a revitalized warehouse building, in essence, and so our lease term was not very long. Our lease cost was exceptionally low compared to other founder friends who I talked to. But I would have done a co-working space, and just rented out more and more desks, or rented out more and more office space, rather than sign some big three to five-year lease, because that would never have felt comfortable to me. But this is another thing that you have to think about if you’re going to be local that is not even on your radar if you’re going to be remote.
Mike [27:49]: The other thing is that you have probably a lot more competition for the types of people that you’re looking for. Even if you are in a smaller area, the pickings are thin in terms of trying to find those employees or local workers. But at the same time you’re also competing against other companies that have open job listings. I remember when I had an office over in Hudson, Massachusetts here, because we were in the same region as Monster.com, all of our job listings that went out to Monster.com inevitably got pushed down by, quite frankly, them, and several other large companies that were in the area. And it was very difficult to get noticed by people who were out there actually looking for jobs. Then once you did get noticed you tended to get a lot of people coming from the recruiters saying, “Hey, let me try and help you fill this position.” which just drastically increases the cost for that position to just find somebody. So there’s a lot of things that go into it that just increase the costs overall. The other thing I’d probably mention here is that you’ll find that there’s probably less flexibility for the people who are coming into your office and saying, “Yeah, I’ll come in for a couple of hours to actually do an interview.” And those people are looking for the type of 9-to-5 job that they’re willing to come in the door and spend eight hours there and then go home at the end of the day, versus the types of people that are looking for a remote position. Maybe they’re looking for it because they can only work a couple of hours in the morning and then a couple of hours in the evening. And the scheduling flexibility that those people are looking for is different than the type of scheduling the people who are local are looking for.
Rob [29:27]: Yeah. I think that’s actually a really good point and something I left out. Another pro of going remote is that people look at being able to work remote as a big perk, and so you may be able to find people who think differently about work, or just who are more willing to come work for you and wouldn’t necessarily – there’d be too much completion if they were only local. So, that remote ability allows you to basically land folks who you otherwise wouldn’t be able to. Cool. I think those are kind of the pros and cons as we see them. The approach that I want to lay out that we stumbled upon with Drip was this hybrid approach. It’s where we spent about 40% to 50% of our time in the office and then the remainder of the other 50% to 60% remote. And by remote, I just mean we worked from home or from coffee shops, but we found that it was crazy in terms of our ability to collaborate. We would all come in on let’s say Tuesday and Thursdays, and so we had all the touch points, we had the unity because we did the lunches, we had the comradery. The team was invested in the business outcome. We were all in one state. It’s like the Goldie Locks zone is what we found. It eliminates the time zone complexities, the tax complexities, and it allowed us to solve really hard problems when we needed too on a recurring basis. But we also were able to go home and do maker time. And that was a big deal for developers especially to be able to two and a half to three days a week – depending on what they wanted to do – and be able to basically be on their own. Of course, we were all communicating via Slack and stuff, but it really helped them get stuff done on the days they weren’t in the office, and then to use the office days as the days to have the interpersonal and the collaboration time. I think that if I were ever going to grow another business – which presently I have absolutely zero plans of ever doing it again – but if that were ever the case, I would strive really hard for this in-between, hybrid approach of having people that are local enough that a couple of days a week together is a possibility.
Mike [31:26]: I think with the hybrid approach you’re kind of trading certain cons for pros in some situations, and then trading certain pros for cons in other situations. For example, if you have that situation where you’re coming into the office a couple of days a week, yes, you get the pros of being able to collaborate with people, and getting the team unity, and lots of other things that you wouldn’t get from a remote team. But then you’re also accepting the responsibility that you still need to hire people who are reasonably remote. You can’t just expect them to commute for four or five hours or whatever. So, you’ve still somewhat limited yourself in terms of the geographic region that you’re hiring in. But there are a lot of benefits to, what you said, that hybrid approach. Some of it has to do with concentration and being able to just take a couple of days and focus on the problems, and then revisit it and come back to a physical meeting place where everybody’s working together and get all that comradery that we had previously talked about.
Rob [32:17]: And I’ve got to be honest. I think before really building the team at Drip, and at our peak – I shouldn’t say at our peak, because we’re actually higher than that now in terms of employee count – but when we were acquired we were at about 10 people, and there were two contractors, eight employees, and five of us were there in Fresno and five were remote. But before growing that team, I hadn’t realized the value of this collaboration and the comradery/team unity piece, but it became very apparent to me as we grew the team, the value of those things. And that’s why I think we landed on the whole hybrid approach.
Mike [33:52]: Well, Johannes, I hope that answers your question. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt used under creative comments. Subscribe to us in iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and well see you next time.
