Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Brianna Wu, founder of Giant Spacekat, about sex and software. They discuss many racial and gender issues that face the software community.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of ‘Startups for the Rest of Us,’ we’re going to be talking about sex and software. This is ‘Startups for the Rest of Us’, episode 322. 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 project or you’re just thinking about it. I’m Mike, and today we’re going to be sharing our experiences to help you avoid the same mistakes we’ve made. Today’s episode is going to be a little bit different. Today we’re going to be talking about sex and software, and today’s episode starts with a listener question. This listener question comes from [Simmore?], and he says, “Hi. I was wondering if you could do a show on what we can all do to reduce the amount of straight-up misogyny female coders and founders face. Last week I followed a tweet from Justin Jackson – and we’ll link that tweet up in the show notes. He says, “That led me to a presentation by Jenn Shiffer at the XOXO Festival. I also watched the Talia Jane presentation at the same festival. The amount of vitriol these women suffer is incredible, and I just don’t understand why it has to be that way. Where does all this anger from men in tech come from? What have you guys seen in your experience? My experience is as a consultant, and there’s an incredible amount of sexism in IT consulting, but I don’t think I’ve seen all this anger – or at least this level of anger – played out in front of me as a past manager. I love the show, of course, and it would be nice to hear what your own goals are in terms of women and female coders in the new year. Also, since I am black, what has been your personal experience in goal-making around diversity in general? Thanks, and I’ll see you at MicroConf.” I think that there’s two different pieces to Simmore’s email. The first one is that there’s two different questions in there. The first one was: “Where does all the anger from men in tech come from?” And the second one is: “What are your goals in terms of female coders and founders in the new year? Also, since I am black, what has been your personal experience in goal making around diversity in general?” I do want to touch on that just a little bit from the perspective of running MicroConf. For a little bit of perspective, we don’t ask this question outright to our attendees. We don’t ask them, “What’s your racial makeup? What is your gender?” It’s just not something that one, we feel comfortable asking. And two, it’s really just not relevant to people coming to the conference. I talked to Zander a little bit about what we kind of believe that the makeup of female to male attendees is. It seems to be that it’s about 15%, but obviously that is based off of names, so it’s a little bit difficult to get exact numbers. In terms of what we do at MicroConf, one of the things we do is we do some active outreach to female entrepreneurs to make sure that they’re able to attend if they want to. I’ll say that we do take some liberties with the waiting list to make sure that people are able to get tickets if they need them, or if they want them, to help with that diversity, to make sure that females have a chance to get to MicroConf. In the past, MicroConf has traditionally sold out extremely quickly. To help out with that just – because if you’re not sitting there at the button it can be difficult to get a ticket. That’s one of the things that we do. Another thing that we’ve done is we implemented a code of conduct at the request of an attendee a few years ago. If you go out to the MicroConf website there is a code of conduct. It’s based on a publicly available standard for codes of conduct that are out there. Another thing that we do is we actively recruit female speakers. What we’ve found is that there is a tendency for female founders to not apply to speak at MicroConf. We do have an application process, but it seems like we do not get as many who come forward and say, “Hey, I would like to speak.”, so we actually go out and actively approach them and ask them. Another thing we’ve done is we have actively set aside pools of tickets for female entrepreneurial groups. So we’ve gone out, we’re approached those groups and said, “Hey, here’s a pool of tickets that is kind of separate.” It helps to bypass, I’ll say, the tickets going off the shelves very quickly, so that there are opportunities for female founders in those groups to purchase MicroConf tickets if they would like to attend. The last thing is we also have MicroConf scholarships. The past two years we had a couple of scholarships that have been given out. One went to Francesca, and another one went to Shannon. Both of those scholarships were actually given by MicroConf attendees. The MicroConf attendees said, “Hey, I’d like to do a scholarship.” It’s not something that we made a big deal about, and it’s not something that we talked heavily about, but those are the types of things that we have done at MicroConf. In terms of the question itself about where this anger comes from, my best guess is probably that it’s rooted in history. Humanity has thousands of years of history illustrating that people in positions of power are going to do whatever it takes to maintain that power. And, quite frankly, if you look at the balance of power over the past few thousand years white men have largely been at the top of that power structure. And, by extension, other white men have benefited from that arrangement. If you look at that historically, those people tend to be afraid of change. They’re genuinely afraid of women, or anyone who’s different than they are, from having those types of power, or perceived power, over them. I don’t think it’s just a gender issue, but it is also, to some extent, a racial issue. The bottom line of this is that Rob and I don’t necessarily feel qualified to answer the first question which Simmore posted, which was, “Where does all this anger come from?” Because, one, it’s not something that we really feel, but it’s also not directed at us. So, what I did was I went out and I decided to find somebody who I would see as an expert in this particular space, and I want to introduce you to Brianna Wu who is the founder of Spacekat games. Brianna, how are you doing today?
Brianna [05:00]: I’m doing excellent. I’m doing fine. It’s a pleasure to be on.
Mike [05:03]: Excellent.
Brianna [05:04]: I do want to say my company’s name is Giant Spacekat.
Mike [05:08]: Oh, I’m sorry.
Brianna [05:08]: Not Spacekat games. No worries about that.
Mike [05:10]: I apologize.
Brianna [05:12]: Can we go back to some of your answers to that previous question a little bit?
Mike [05:15]: Sure.
Brianna [05:16]: I am a software engineer, so something I think about a lot when I’m trying to solve problems is I ask myself if my underlying assumptions are correct. I assume you kind of do the same thing, right? I want to go back to what you were saying at the very beginning of this, where you said you didn’t feel comfortable asking attendees about their race and gender, because you didn’t feel comfortable with it and you didn’t think that was relevant. Is that an accurate assumption of how you feel?
Mike [05:48]: I’ll be honest, it’s not something that we feel is necessarily important to us asking the question.
Brianna [05:54]: Right. To us.
Mike [05:56]: Let me rephrase that, because I know how maybe that sounds. It’s more of a question of: Do we need this information? I guess, in retrospect, in even asking that question, maybe we do. I’ve never really considered that before, to be honest.
Brianna [06:09]: One of my first jobs was in politics, and I used to use the term “African American” when I was talking of racial issues, until someone that was black came up to me and said, “You know what? Black people, we don’t use that term so much. It’s kind of one that’s more about white comfort in discussing racial issues, and I very much prefer to be called “black”.” That was a real eye-opening moment for me, so I want to give you the other side of what it’s like to attend the conference if you’re a woman. This is a conversation I have several times a week. A friend is thinking about going to X, Y or Z Conf, and women in the tech industry have our own secret spaces to talk to each other. And the first thing we ask is, “Hey, I’ve just been invited to speak at “X” Conf. Is this safe? Does anyone have good experiences with this? How many women are there?” Then we’ve kind of had to form our own groups to give feedback about that, because you’re thinking like, “Oh my gosh! I could be uncomfortable by asking a question for a second.” The woman on the other side of that is asking really difficult questions like, “Am I going to be sexually harassed if I’m at bar with alcohol? Am I going to be treated fairly and equally?” Something I would really encourage, not just you but anyone out there that is in a position of privilege, to push past that and realize it’s not comfortable for me to be on your podcast today talking about this stuff, but it’s absolutely necessary, because women leave the software industry at a rate over three times of what men do. I would also say, you used the term “female coder” repeatedly when you were discussing this. I would just be honest and say most women I know prefer to be called “women”. Female coder signs like [Ferengi?]. It’s kind of demeaning way to talk about women. That would be my feedback about that.
Mike [08:00]: Got it. Okay. A lot of that makes sense. So, I huess, going back to your question of me about why we don’t ask that. In some ways it seems like there’s almost a boundary that I’m stepping over as the host of a conference, where I’m asking somewhat personal information about like, “Okay, are you male or female? What’s your racial makeup?” Stuff like that seems like why would I need to know that? How is that perceived from the other side?
Brianna [08:26]: I would say this, I’m an engineer. I can’t fix a bug in software right if I don’t have error reports, right? So you’ve got to measure data to figure out where you’re going wrong and fix it. I think it’s wholly relevant, if even internally you’re not putting together numbers about your number of women speakers. By the way, when we talk about this stuff, far too often people of color are left off this list. For me, in the things I do, I am very, very aware of how many people of color I hire, how many women I hire. Frankly because we’re such a company that is heavy with women working there, we have to go the other way and make sure we hire men enough. That would just be my feedback about that. You can’t fix something if you don’t measure it, or even understand if you have a problem in the first place.
Mike [09:18]: I think that also goes to how you ask the questions as well. You can’t just drop a question in somebody’s email box and say, “Hey, are you male or female?” I would at least say preface it by some meaningful information, or at least a couple of sentences about why it is that you’re asking that kind of stuff.
Brianna [09:35]: Sure.
Mike [09:36]: Okay. What are your initial thoughts on Simmore’s question itself about where some of the misogyny itself comes from?
Brianna [09:43]: I think it comes from a very predictable place. I was a child in the ‘80’s and the ‘90’s. This was a time where you really were punished for being a nerd. I remember liking Final Fantasy as a child and getting picked on mercilessly about that at school. I think it’s really true that a lot of geeks grew up and they kind of have a little bit of a chip on their shoulder. They feel like the underdog, and I think especially with women there is definitely a culture where a lot of software people maybe are kind of sensitive around women, or sometimes have some animosity against us that maybe they don’t understand. What you’re dealing with, at its core, is a culture filled with men who genuinely believe they are too smart to be sexist, but they have these really aggressive tendencies that they may not understand. It makes them uncomfortable. They’re very, very, very quick to reframe things to protect their privilege. I’ll give you an example. Oculus, which is a company that makes some technology we’re very interested in – virtual reality – they had yet another terrible scandal that broke two days ago, where one of their software people has been alleged of soliciting an underage girl for sex, a very serious crime. If you put this in context of their crisis of leadership of, A, not hiring women, B, having a founder that’s literally spending tens of thousands of dollars funding hate speech, it’s a really troubling pattern. I was discussing this on Twitter and I was instantly besieged by someone that believes he’s an ally to women in tech, but is instantly minimizing it, is excusing it, and is just throwing every argument there to say this isn’t a problem. That man believes that he is an ally, but, on an unconscious level, he is derailing and minimizing the conversation about structural bias, and that is everywhere in our industry. The way you will be able to know if you’re on the wrong track is if you’re looking at this problem of women in tech, or people of color in tech, and you’re say, “I know what the problem is. It’s those other guys.” No. You need to be saying, “I know what the problem is. That’s me.” I’m not just telling people to practice what I preach, yet for, me as a white person, I realize that I have tremendous advantages in our field, even as a woman. So I’m constantly asking myself, “Am I hiring enough people of color? Am I interviewing enough people of color? Am I networking with enough people of color? When journalists call me and say, “I’m looking for references.” Am I passing off enough people of color to them?” It’s that kind of constructive engagement that really makes you part of the solution, instead of pointing fingers.
Mike [12:42]: Going back to one of the things that you had said earlier, which was a lot of people feel like they are too smart to be sexist, for example. I’ve had conversations with people along that lines like, “Oh, I have two daughters. I can’t possibly be sexist.” You can almost find political memes around that too. It’s not hard to look for that type of thing. Are there specific signs that somebody can look for? I think a lot of the listeners to this podcast are more of the truth seeking variety. They’re really looking for validation of their ideas and thoughts and beliefs, and mostly that deals with marketing, but I feel like that applies in this particular situation as well. How is it that you identify the things that would say, “You know what? You aren’t too smart for this?” What are the canaries in the coal mine, so to speak?
Brianna [13:30]: Yeah. One of the things I said is imagine if you had a friend that was going through a divorce, and that friend was talking, and they’re like, “It’s just so hard. I’m not sure if I’m going to be able to see my kids again. I’m really upset about losing my partner. I’m not sure if I’ll ever find love again.” Imagine if, while you were talking to that person, you turn the conversation to yourself, and said, “Well, yeah, but how’s that going to affect me? Are we going to be able to hang out and goes see movies all the same?” It would be really obnoxious, right? In the same way, very, very, very often when women start talking about what our lived experiences are, men are so quick to turn the conversation to themselves, and talk about how this affects them, and I’m trying to think of a constructive way to say this, but I can’t. It’s just obnoxious. A really good hint that you’re on the wrong path is if you’re saying, “Well, you just feel this way because there aren’t enough women applying.” Or, “Well, what if I’m trying to apply to a job and I don’t get a fair shake? What if I don’t get into this conference because they’ve got a quota system?” This is all a good sign that you’re more concerned about your privilege than the problem. We all have work to do. I really want to emphasize this. I think something feminism could do a lot better, and I think “outrage culture” has a lot to contribute to this, but we’ve built this culture where everyone is one mistake away from being a villain for life, and I don’t think it’s a very good way to go forward. I myself, if I’m a half way decent ally to people of color these days, it’s because I’ve made so many mistakes along the way, and I’ve learned from them. We need to have a culture where men can make these kinds of mistakes and we can have an honest dialogue about it, and they’re not branded as villains for life. I think that we’re really missing a more constructive way to move forward on it.
Mike [15:32]: I guess going back a little bit, where you had said that one of those tell-tell signs is saying, “How does this affect me?” or interjecting your own thoughts on it. Previously you had come out with a couple of examples there of what those red flags look like, and I have friends who have said, “I have two daughters. I can’t possibly be like this.” Is that along those lines as well? Is that perceived as sexist? Because, really, I was trying to contribute to the conversation and say, “Look. This has been my experience.” Does that overshadow what we were talking about? Or is that perceived in a good light or a negative light?
Brianna [16:06]: I would take this in two parts. First, I want to check my own privilege and say I’m a non-parent, so I’ve never raised children, but I would say this, when a guy starts talking about how he’s raising daughters, a red flag that goes up for me right away is a lot of men bring sexist attitudes into their role as father. I think we see a lot of controlling things with that. We see a real culture of violence, sometimes, and ownership over their daughters. To me, I don’t read that as good or bad either way. I’ve certainly met a lot of sexist fathers throughout my career. As far as your own fears about that –
Mike [16:49]: What I was referring to is really the fact that I was bringing that up as an addition to the conversation.
Brianna [16:56]: Don’t stress it.
Mike [16:56]: No. Well, I think that it’s important to figure out what are your motivations for bringing up a particular point, because I’ve been in situations – and seen conversations go – where somebody will bring up something, and there is almost a sense of one-upmanship about, “Let me tell you this story.” And I can see that playing into this type of conversation, and how people portray themselves to each other, and how people talk to one another. That’s what I was more getting at.
Brianna [17:22]: No. I think that’s dead on. I want to step out and take a little bit of a meta view for a second. At my studio, Giant Spacekat, for our last game we had all women working on our team. It’s not a format that I’d have going forward, but it was how we shook out. I was really stunned by how different our culture was. It was hyper-collaborative. In other engineering environments, where I’ve worked with a lot of men, there does tend to be that sense of one-upmanship of, “I’m right here.” And, I hope this is okay to say, but it just seems like it’s boys with toys almost. At my studio, where it was all women, it was hyper-collaborative, and it was awesome. It was us validating each other, and trying to get input, and working on things together. It was just an entirely different culture. I do think that a little bit of that culture of one-upmanship, I don’t think it’s a particularly healthy trait of the software industry, and I think one of the reasons that teams with better gender balance tend to be more productive. I do believe when all genders are represented it brings a kind of stability, and a diversity of viewpoints, to the table. I think that’s very valuable.
Mike [18:34]: Yeah. We’ve noticed at MicroConf, when we started out back in 2011, the conference has always been very collaborative. Everyone is really comfortable sharing, for example, revenue numbers, and discussing specifics of how their business is doing. But one of the things that comes to mind is that most of these people come to MicroConf and then they leave and then they’re working in their own world and they may have a team, they may not. They’re usually only one or two people working on a particular product or project, and then they go out, they do their thing, and they come to MicroConf and they collaborate. But when they’re out working on their products, and in their business, they tend to be alone, or they tend to be working with very, very small teams. I wonder how those two things play together, because it seems odd that those types of people would go out and be as aggressive as they need to be to run their business and then come to a place like MicroConf where there is this community – or in the Founder Café – and then they’re very collaborative. It seems like those two things are very much opposed to one another.
Brianna [19:31]: Yeah. That makes a lot of sense. I want to touch on, for a second, that kind of bias that when we start companies we tend to seek out people around us that kind of mirror our values. I think a really big bias of this in the startup world this is this is why such a tiny sliver of startups have women or people of color on the board, because it is a culture that really pushes women and people of color away in ways we’re not willing to think about. I would use my own experience at Giant Spacekat and say I did this the other way, being a woman founder. When I started my company I looked for people, unconsciously, that looked like me. We had way, way, way too many white women on my team, and I realized that that was my own bias. We’ve got to get past this point where our own comfort is our highest priority, because it is right now. It leads to use cases that are just terrible. We’re talking about VR right now. If you look at the VR marketplace right now, for Oculus games or Friv games, most of these are made by teams of two or three people, always men. There are so many sexist assumptions built into these games as you play it that make it really damage VR from being able to pick up the mainstream. A lot of these games assume you’re a certain height. Most of them don’t contain female avatar options. All of them assume that you’re a man as you play it. It’s just really insulting in ways that I think these teams haven’t really thought about.
Mike [21:05]: Is that a function of the fact that it’s only two or three developing it, and so they tend towards doing things that are comfortable for them, and are also easy access to them, and more a lack of resources as well? I mean, if you’re going to create 30, 40, 50 avatars, I would imagine that that’s a lot more work than it is to create one or two. Is it a function of time and resources? Or is it a combination of that and the fact that they just say, “Oh well, I only have time for this, so I’m going to concentrate on getting something out the door.”?
Brianna [21:34]: This is what I would call an excuse. You and I both know the features that get into a product are the ones your team cares about. We all know this. GSX, the way we do it is we list every single feature as a gold, silver or bronze tier. Gold must be done; silver can be done; bronze is nice if we get around to it. The features that are on that top priority list make it into the game. So the answer to this is simple: the men making these products don’t consider it a priority, and by everything you just said, it’s not a priority. A guy can certainly do this well. I’ve seen it done, but it’s just not important to them, and that’s reflected in the software we use.
Mike [22:15]: Right. It’s more of a matter of paying attention to that kind of thing and making it a priority, as opposed to just saying, “This is on the feature list and one or two is good enough.”
Brianna [22:24]: Yeah.
Mike [22:25]: We’ve talked a little bit about some of the subtle things that go on. What are some overt examples? I don’t think that this is something that is front and center for most men in the industry, but what are the more overt things that you’ve seen?
Brianna [22:38]: This is such a good question. We have a real tendency in software development to network in a way that was created by men for men. I could not even count how many times I’ve been at a bar at night alone – been the only woman there – with a bunch of men that are drinking alcohol. This is something I think dudes don’t even think about. I have had so many friends in that situation that have been sexually harassed. In two examples I’ve had friends who have been sexually assaulted. In one example I had a pretty close friend of mine have her boss basically force himself onto her at night while everyone was drinking. There was some really inappropriate contact that was made. This is something that is much more of a problem than men realize. Our setup here is built in a way that networking is very difficult for, say, women over 30 with children. You’re not going to find many moms that are going to be out drinking at 11 o’clock at night at a bar to work on their career. But this is like where 99% of the stuff happens in the game industry. There’s overt things. A lot of men tend to treat women they run into in professional circles as someone to date. I want to take a step back and say I realize that feminism and women are sometimes – I think there’s a little bit of a lack of empathy for what it must be like for a male geek when he’s just lonely and looking for someone to be a partner. He’s looking for romance. And I realize there’s a sense of maybe sometimes it’s a sensitive spot for them. I have empathy for that. But it is so wildly inappropriate at the same time to treat a woman that’s coming in to network with you professionally as a potential partner. It sends every single signal out there that you’re not valued for your skills, or who you are. You’re just a potential date. I think we’ve really got to change the culture where women and people of color are treated as the professionals we are, rather than just women.
Mike [24:48]: I don’t necessarily think that that’s just a software industry thing though. Because there’s –
Brianna [24:51]: No.
Mike [24:52]: – that’s definitely a problem. Obviously, sexual assault is an issue regardless of what industry it is. But I’ve also talked to female founders who have just said, “Yeah. I don’t go to evening events, or after-conference activities, because I don’t want to put myself in a situation where people are drinking and going to get out of control, and I just don’t want to have to deal with that.” I guess it can effectively minimize their opportunities for networking just by virtue of them not being willing to put themselves in situations like that. Whether it happens or not, if they’re uncomfortable attending those networking events then it puts them at a disadvantage outright.
Brianna [25:28]: Yeah. That’s dead on. And I would say look at the outcomes, right? I hear this a lot. It’s not just software. My husband is in biotech, who is head of IP for a company that’s listed on the NASDAQ that just had their IPO. There are plenty of women that work at his company. So why is it so many other industries their rate of women might be lower, but it’s not as embarrassing as software is? Why is this? Well, it’s the culture, stupid. So I think we need to own these problems rather than minimizing them.
Mike [26:00]: What sorts of things can be done to help change the landscape, so to speak? How do we go through and start enacting some changes?
Brianna [26:08]: I would say, for me, I hire a lot of people. Something I make a lot of personal efforts to do in my career is to network with people of color, because I realize without effort on my part I’m going to only be talking to white people, which is unconscious racism. I would say to anyone out there, when you see a woman that seems smart and accomplished on Twitter, follow her so you’re getting that voice in their feed. Make a deliberate effort to go out there and network with people of color, so you’re hearing that perspective and adding it to your own. I never hire for any position without thinking about who my candidates are ,and asking myself if they’re diverse. That’s very much a constructive thing you can do. If you don’t hire, and you’re just on a team, I think you’ve really got to check your own unconscious double standards. What is beyond frustrating to me, as a woman engineer, is it doesn’t matter what I say, or what I do, or what I have a technical opinion on, it gets challenged and bullied and just really hyper-questioned in a way that my male colleagues do not. I was at WWDC a few years ago, and I was talking about Apple’s metal API’s that were announced at a party. I’m sitting there talking to a guy, and he was like, “I was giving opinions on it, I write Unreal for a living and this is literally my field of hyper-expertise.” And this man just starts talking over me, and lecturing me, and “mansplaining” things. I had to take a step back and say, “Hey, you know the article you’re talking about right now? I wrote that.” He just blinked at me twice and kept going. There’s this culture of – it seems like it’s just something in a dude’s mind where if a woman questions a guy on something it gets just doubled-down on, or there’s this defensiveness that comes up. So I would get on my knees and beg anyone out there to really think through those unconscious double standards you might be holding women and people of color in your life to.
Mike [28:16]: Could you talk a little bit more – because it’s the second time you’ve used that phrase “unconscious double standards”. I’d like to know what other ones are there that we might have?
Brianna [28:25]: Sure. I think you can look at the last election and see very clearly there were double standards that Hillary was held to, with her ethical behavior, versus the dudes. This is all the way. It’s with when you’re applying for positions, I think womens’ experience is judged in a different way than a man’s is. I think all too often female communication styles are discounted. A really good one is, I think, that often women’s voices – you know, some women have kind of a vocal fry, or a higher pitched voice, and I’ve seen the way that they’re not taken seriously. There are all these double standards in what women say and do in our careers where we’re really beaten up about it. There is a great cartoon that came out this year where it was talking about women leaders, and the communication style we have to adopt. For a man, he could say, “I need this done by Tuesday.” If a woman says that she’s going to be considered abrasive. We have to adopt communication styles like, “What do you think about having this done by Tuesday?” It’s all these things where we’re constantly dancing around male ego and it’s absolutely exhausting.
Mike [29:37]: Shouldn’t the question in general be, “What do you think about having this done by Tuesday?” I’m not saying that from a female perspective. I’m saying that from a general project management standpoint, because just because you think that it should be done by Tuesday doesn’t mean that the other person – especially if you’re working with a bunch of contractors, or even employees. It almost doesn’t matter, but there are a lot of things that go on that are not necessarily in your vision at the time when you ask that. There’s a difference between, “Hey, this is deadline. We really need to have it done.” There’s ways of phrasing that stuff anyway that are much more collaborative in nature. Because I’ve worked with contractors who you tell them, “Hey, I really need this done by Tuesday.” and they’ve got a holiday coming up and you don’t know it. For example, if you’ve got people who are working overseas, you’re not in that culture so it’s not on your calendar. It is on theirs. You have to be at least aware of what’s going on and, unless you ask the question, it’s very easy to get into a situation where you say something, say, “Hey, this needs to be done by Tuesday,” and you’re completely neglecting all the other things that that person has going on.
Brianna [30:38]: I would say this with all respect, Mike, but I think the exchange we just had here is a really good example of what can make women sometimes a little frustrated in our careers. I completely agree with you. That’s my management style. I work through consensus and collaboration, and I believe that if someone is good enough to be in the door that they’ve earned a little bit of leeway with that. So we do work that way. But I think we’re so quick in our field to minimize any point that a woman is making about this. I’m going to be really direct with you here, women are held to very harsh double standards whenever we show leadership, or try to draw boundaries, and the things that we talk about are negated, or minimized, or put aside. Ask any woman that is in a position of leadership out there if she has to alter her communication style to not threaten men. She will absolutely, 100%, tell you that she does. I just think that’s really important. These are the realities that we face.
Mike [31:43]: Yeah. I totally agree. I definitely think there is that double standard there, depending on how a woman would phrase that. What are the types of things that communities and community leaders can do to help enact some changes here? We’ve talked a little bit about the stuff, I’ll say, on more of an individual level. But what can communities, like MicroConf and Founder Café and Startups for the Rest of Us do to help with these types of situations?
Brianna [32:08]: Well, always make sure you’re having enough women come in the door. Network with women. Organizationally, you need to create a culture where women are not afraid to speak up. By the way, this is a trait for any good leader. In software development it’s just a reality. We have a lot of introvert engineers. I’ve worked with more than a few engineers who are on the autism spectrum. To me, good leadership is creating an environment where everyone gets a say, not just the loudest voices in the room. I think being very active about having a culture where maybe those people that speak a little too much – and I’m in that group – would kind of be checked a little bit, and you ask for consensus from other people. That’s incredibly important. I would also say when issues come up those need to be taken very seriously. Every woman I know is terrified of HR, because HR very generally speaking, exists to protect the company, not protect the woman. In my entire career I only know one or two women that have had sexual harassment incidents that have had a good outcome by HR. There are standards about that out there for that. Make sure you’re holding yourself to that. I would also say really think through your interviewing process. In the game industry I can’t tell you how many times I’ve heard a story about a woman going to interview for a job and it uses male pronouns, it assumes certain things, or she’s interviewed in a room with posters on the wall of half-naked women. You’ve really got to think about your culture and ask yourself what kind of messages you’re sending.
Mike [33:54]: What would be better ways to – for example, you said job listings or job interviews – what would be better ways of referring to that in a job post, for example. Do you say, “He/She?” Would you say, “He or she?”, or would you try and avoid gender in any way, shape or form?
Brianna [34:09]: I personally try to talk around gender issues. I’d be honest and say I – like a lot of other people – am still kind of trying to figure out how to speak in a way that doesn’t exclude non-binary people. It’s kind of something that only first came up two years ago really in the mainstream. I, myself, try to just leave gender out of it whenever I can. That’s a personal style thing, and I fail at it sometimes.
Mike [34:36]: Going back to the communities, do you have any other recommendations or thoughts on networking events that could be a little bit more collaborative in nature? As I said before, one of the issues that I’ve seen is that female founders tend to shy away from going to evening events, especially ones where there’s alcohol involved in any way, shape, or form. I have talked to people who have said, “I have been sexually harassed at such-and-such conferences. Is MicroConf safe for me to come to?”
Brianna [35:03]: I guarantee women are having a conversation back channel a lot more than to your face.
Mike [35:07]: What sorts of things would you recommend, or could we look at?
Brianna [35:12]: I would say this. I really doubt that my company will ever have events with alcohol at it. I realize that there are some people in our field that kind of need alcohol to feel comfortable, but from my perspective I’m always thinking about my safety, first and foremost, and I just can’t allow something that would compromise that. I think, just to really be honest with you here, the threat of sexual assault is something men don’t ever have to think about, and women think about all the time. I personally don’t do that. I’m also increasingly skeptical about the value of face-to-face networking. I think it definitely has its place. I do most of my networking on Twitter, and in private groups on Facebook, so I’m always looking for those kind of personal relationships. I think lunch networking events, and coffee, are hyper-productive, so I’m always looking for those kinds of places that are just a little bit more congenial.
Mike [36:10]: One of the other things I want to touch on was that I recently read that you’re running for Congress. What prompted that?
Brianna [36:16]: Just to be really open. I try to steer away from politics as much as I can in my technical career, but honestly, on election night I was 30-feet from where Hillary Clinton should have accepted the presidency, and she didn’t. And, like a lot of other marginalized people, I’m really scared about my rights under a Trump administration. It’s something I’ve been thinking about for a long time. There’s really this meta-question of: How can we go further than we are right now. I personally believe that we’ve reached a real asymptote with what writing about sexism, and talking about sexism, is going to accomplish in our field. The truth is I could come on a 1,000 podcasts this year, like this one, and talk about the same thing. I’m not sure it’s going to get us much further than where were are right now. I think the next step is to have women involved in the legislature. The guy I’m going to be running against has spent his entire career crusading against women’s rights. He’s pretty terrible on technology issues. Even stepping beyond being a woman in tech, I think there’s a much larger issue here. Our federal tech policy sucks, and it’s dumb.
Mike [37:30]: I think that’s an understatement, by any stretch of the imagination.
Brianna [37:35]: It really is. I have to say this. One of the women I’m hoping to serve on a technology subcommittee in the House when I run, you know when the Mirai Botnet came out a few months ago, and completely took out parts of the internet in the United States, this woman went on CNN and blamed a botnet, which is it happened because we don’t secure Internet of Things devices and allow them to be rewritten in a way that can attack our technology infrastructure, and she blamed it on freaking SOPA like, you know, pirating movies and software. It’s just like it’s a policy position that was literally written by Verizon. I am angry about that, and our poor technology policy. It’s not just stupid, it’s endangering our national security. So a lot of the reason I’m running is I want to be a voice in the Congress on privacy rights, on the EFF, on all of these policy issues where – with all respect to the politicians in the Baby Boomer generation – I absolutely respect your service, but I think as someone that is kind of native to this technology, I simply understand it better than most people do, and we need people in Congress fighting for privacy rights; people holding companies accountable when their data is breached in horrific ways, and endanger all of the people that have had their information stolen. It’s a very wide array of issues, why I’m running. It’s not just gender equality. To be honest, that SOPA thing really made me mad. I think there’s a certain point where every generation needs to step up and commit ourselves to public service. And again, there are a lot more Baby Boomers in the Congress than there are Gen-Xer’s, and I just think it’s time for us to serve.
Mike [39:24]: Well, again, Brianna, thank you very much for your time. I really appreciate you coming on the show. So this is episode 322, and if you have any comments or thoughts on the show, head over to the website startupsfortherestofus.com and you can leave some comments on the website and talk a little bit more about this episode. If you have a question for us, you can call our voicemail number at 1-888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt used under Creative Commons. 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 321 | How to Take Your SaaS Upmarket
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to take your SaaS upmarket. Some of the steps they discuss include, raising prices, modifying your pricing page, asking for annual contracts, and how to give demos.
Items mentioned in this episode:
- Drip
- BlueTick
- Better Cater
- Close.io
- Product Demos That Sell Book
- Anna Jacobsen attendee talk from MicroConf 2016
Transcript
Rob [00:00]: In this episode of ‘Startups for the Rest of Us,’ Mike and I discuss how to take your SaaS up market. This is ‘Startups for the Rest of Us’ episode 321.
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, Mike?
Mike [00:32]: Well, I added another paying customer to Bluetick this past week. It’s been a little bit of a challenge just because the automation pieces are starting to become much more integral and important to the whole thing. I’ve been looking into Zapier Integration and how we can put that in place, and going through the different documentation and stuff that Zapier has out there you can create a private Zap that you can just share with certain people. But in looking through it it seems like there are probably a bunch of places where we need to make these minor tweaks here and there in order to make it easier to use with Zapier and make our API a little bit better.
We’re looking at those things right now. There’s lots of tiny details to iron out but things are looking well so far.
Rob [01:14]: Yeah, adding a new customer is always good. With the Zapier integration, we have rolled at least two different versions – maybe a third – to ours. We ran into some struggles early on with wrestling with Zapier around. It wasn’t as intuitive as we found some other systems to be. I think they’ve done some good things. I don’t know that they’ve corrected it, but they’ve at least improved that over the past year or two since we integrated. It is more complicated than you want it to be. You have to think about a lot of stuff. It’s not just a typical hidden API endpoint. There’s almost like client-end stuff, and your passing [?] back and forth to power their UI. It makes sense, given the tool they’ve built, but it’s a lot more work than the standard integrations that we have done.
Mike [01:56]: Yeah. The other thing I’ve noticed is that when it comes to objects that have lists of things in them then it – I won’t say it completely falls down – but it definitely makes things a lot more challenging when you have situations like that.
Rob [02:08]: Sure. We received a voicemail from someone who wanted to stay anonymous, so I’m not going to play the voicemail but he works at a health insurance company and he also listens to the podcast. He had a comment about your comment from, I think, a couple of episodes ago where you were mentioning insurance premiums and how it seemed like the insurance companies are price testing and just increasing to test to see how much people will pay. He had a good point as an insider at a company, he sees how these things work. He said that the regulation on them is so tight that they have a really tough time. They’re not supposed to make more than X-dollars. They get penalized if they make more than a certain amount of money. I don’t know how that’s all regulated, but it was really interesting. He said that premiums just are going up. But they have been going up for a long time. It’s funny. I was thinking back to when I first became self-employed – right around, I think, it was around 2001 – when I became a consultant. I went and I got Kaiser, which is a U.S. based HMO. I got coverage for myself and my wife and, if I recall, it was like $130 a month, and it was quite good coverage. If you look for the same coverage now I bet it’s like $1,000 a month. So it’s been going up for 16 years, and some folks will blame it on the Affordable Care Act, but it was a disaster before that. Since the late ‘90’s it’s just been – or maybe it’s like 2000, 2001 – it’s been ratcheting up 10%, 20% every couple of years. All that to say, it was kind of cool to hear his perspective in the sense of the costs are going up. Our healthcare system is kind of jacked up, but that, in his experience, he said his company and the people there they really do care about helping people stay healthy and trying to help them. He said that’s the general inside. It’s not this big conspiracy theory that a lot of us think it is, is what he was saying – at least at his company.
Mike [03:53]: Yeah. I can totally see that. My experience with it was really just looking for health insurance over the course of three or four years, where literally every year it was going up by what seemed like massive amounts. I could go out through an insurance broker and the differences between them would be literally $300 or $400 in the same year for the same type of coverage from a different company. It didn’t really make a lot of sense. And because everything’s so obscure it’s really hard to make apples to apples comparisons between some of those companies. I would trust his judgment over mine just because I was totally speculating about it. It is very frustrating to be a business owner and have to spend your time trying to figure those things out.
Rob [04:31]: I agree. It has always been a headache, and I’d say it’s even more of a headache now and costlier than it has been in the past. So the only other tidbit of news I have is that me and my family are heading to California for the holidays, and it’s just in time. We had a day yesterday here in Minneapolis where the “feels-like” was 30 below, and that was really interesting. What’s interesting is the day before it was probably 15 below, I think, 15 to 17, but the sun was out and we were all outside on and off for an hour or two. We just had to gear up, there wasn’t a ton of wind – it was humidity that caused it to be really that cold – and we were building snow forts and doing all that stuff. But the 30 below, that was different. That air temperature was pretty gnarly, so we were only outdoors as much as me absolutely needed to be. I think we’re going to enjoy our seven-day trip out here to Santa Cruz, California.
Mike [05:24]: I think I did warn you about the temperatures there.
Rob [05:28]: Oh, yeah. The weather almanac warned me about the temperatures there. Alright. So today we’re talking about how to take your SaaS app up market. It is a listener question from Anthony Franco, and he’s from bettercater.com. He says, “Thanks for the podcasts and for MicroConf. Looking forward to attending my second one this year. I have a question about enterprise sales. We’ve launched a SaaS and had a good amount of mom-and-pop small businesses sign up, but now we’re looking to expand into more enterprise level customers. What are your tips and suggestions on how to target larger enterprise level customers compared to small businesses? Specifically, what are some changes you’d recommend on the sales side and the sales process, or maybe even general features enterprise companies expect?”
That’s what we’re going to do here. We’re going to take the next 15, 20 minutes to talk through this. A clarification I want to make is this episode is about taking your SaaS up market in general. It’s not about shifting from $20 a month customers to true enterprise customers. When I think of enterprise, I think of fortune 1,000 or fortune 2,000. You know, $50, $100, $200 million companies. And I don’t think that’s relevant to a lot of us, and I actually don’t think that’s probably what Anthony was thinking. But the idea of going up market – so maybe now your selling $20 or $50 a month plans, but you want to also sell to customers who might pay you $200 or $500 or $1,000 a month, I think it’s a really good thought experiment, and I think there’s a lot of questions we can ask about whether you should make that move, things you should be aware of, and then some steps to take to make that shift. Because going up market, there’s a lot of pros to it in terms of your just going to grow faster. You need a lot fewer customers to grow a lot faster.
Mike [07:01]: I think this is a really interesting question, and very cool topic to dive into. Let’s talk about some of the questions you would have before you would even decide to make this move. What are some of the questions that somebody might ask themselves?
Rob [07:11]: Sure. I have a handful of questions here. The first one to ask yourself is, “Can your technology scale to support larger customers?” In a lot of instances this answer will be “yes”. If you have just kind of basic crud app that’s used to manage finances or something, and doesn’t have a lot of external integrations, doesn’t have a lot of queues, doesn’t have a lot of moving parts, you’re going to be fine. But if you run an email marketing app, or you run something that has to do a lot of data crunching, moving from customers who mostly have 100 or 200 records in your database to customers who have 10,000 or a 100,000, it’s going to be a big shift. We’ve seen this as DRIP has grown that our largest customers are the ones that put, by far, the biggest strain, and it’s exponentially more of a strain on everything; all the infrastructure and the queues. This is the first thing to think about as you’re thinking about bringing on larger customers.
Mike [08:00]: I think going along with that you kind of have to have a basic understanding of where the choke points in your app are right now, and what sorts of thing that an enterprise customer would need – or a larger customer would need – that would essentially stress those areas. Are there customizations that could go in there? Are there other integrations that are going to cause places to start to fall down? There’s a very big difference between when you’re displaying data when your customer only has, let’s say, 50 or 100 contacts in there versus a 1,000 or 10,000. Those are two entirely different mechanisms that you need to account for when you’re displaying information to the customer. It’s not even just, “Can the technology itself scale, and can your backend, but also are you able to continue presenting the data from your app back to the customer in a way that’s easy for them to understand and get around. Because if they can’t find what it is that they’re looking for just because they’ve dumped so much data into it, then it’s going to make it difficult for them to even use your app moving forward.
Rob [08:58]: Right. The answer to this one may be, “Well, we don’t know if we can scale. We think we can, and if we get an enterprise customer then we’re going to throw a bunch of money at new servers, and a bunch of time at making sure stuff works once they’re in.” That’s okay, as long as you don’t have weeks or months of work to do once they get in. I don’t want to tell you to over-engineer or go in and gold plate your entire app at the thought that someday you may have an enterprise customer. It’s more about just thinking through, “Where are the places where this is probably going to break, both from a UX perspective and from a performance and scaling perspective.” The second question you should think about – and this one may be the most important actually – is do you have the staff to handle an enterprise sales process, or a process where you’re selling to larger customers? You’re going to need to be doing lots of demos. You’re going to need to be doing phone calls, video chat, and you’re probably going to have additional support burden from selling to larger customers.
Mike [09:52]: I think this stuff that’s extremely challenging when you’re running it just by yourself, or maybe you’ve got a couple of contractors who are either doing development or support. It’s very difficult to scale up to that point and be able to continue juggling all the different things, especially if you’re early on and you’re really not making a fair amount of money from it, and you’re not fulltime on it. If you’re looking to do this before you even get to the point where you are fulltime on it, it’s probably going to be very difficult, because let’s say that a customer has to have a call in the middle of the day. Unless your schedule can allow for that then it’s going to be difficult for you to get away and start scheduling those. In addition, if you have some strict time schedules, in terms of like when you spend on development or marketing, it’s going to be difficult to be able to have your days divided up by those different sales calls or those different support calls. If those are forcing themselves into your schedule, it makes it difficult to give the appropriate amount of tension to all the different things that you need to as well as grow the business.
Rob [10:51]: The third question you should ask yourself before making the move is: Do you want to deal with the negatives of selling to larger companies? Because, obviously, the higher price point and the ability to grow faster are the positives, and the negatives are things like longer sales cycle, a lot more handholding throughout the whole process. Having to convince multiple people to purchase often. Instead of just having a single point of contact, you’ll have a committee who’s trying to make the decision, or it’s two or three people on a team. It’s just more headache to go through. They’re going to have questions about things like your Terms of Service, legal structure, privacy, security and on and on that you never received from small vendors, or from small customers, I should say. People who, again, are paying you $40 or $50 a month, they don’t tend to ask these kinds of questions, and so you’ll have to spend a lot of time up front figuring out the right answers. Again, they expect a lot more handholding, and more calls and meetings that someone is going to need to handle, because this sales process you kind of have to earn these higher price points. They don’t tend to just come and hit your pricing page and self-onboard like a lot of the lower-end customers are used to. The fourth question you should think about is: Do you have any case studies that you can use during this process? You may not be able to jump up to customers who are paying you $2,000 or $3,000 a month if you don’t have anyone paying you more than $59 a month, as an example. So you may want to ratchet your way up and look for customers in the $100 to $500 range, and get one or two that are in there, and then look up from there at $500 to $1,000, or $500 to $1,500. You can gradually move your way up, because if you’re talking to someone who is in essence going to be your biggest customer and they ask you point blank who is your biggest customer now, it’s really tough to tell them it’s someone that’s 1/50th your size, but it’s not as bad to say, “Someone who’s half your size, or three quarter your size.” It’s a lot easier to do.
Mike [12:38]: Even if they don’t ask directly who your largest customer is, they’ll very often have questions about how have other customers who are our size, or have done X, Y and Z, been able to scale the services inside of your product, or accomplish such and such solution to a problem they may particularly have. If you don’t have examples of those types of things based on a larger customer base – and by larger I mean customers who are larger in size – then it’s difficult to answer those questions in a way that you’re not being deceitful. You really don’t want to start stretching the truth or, obviously, outright lying to customers, because that’s just going to put you in a bad situation later on. For whatever reason, it always seems to come back, and you will have to answer questions later on, or there’s going to be misunderstandings. That’s not a position you want to be in. You’d rather be in a position where you’re collaborating with them and being honest and upfront with them, and letting them know exactly what it is that they can expect, and what sorts of things that you’re not going to be able to do for them. The first steps are being about to, kind of, as Rob said, stair-step your way up with some larger customers to help answer questions down the road of those other larger customers.
Rob [13:46]: The fifth question you should ask yourself is: Do you have the cash runway to make this happen? Going through this enterprise, or this large company, sales cycle, these things can take three months, six months, nine months and from a standing stop it can be a lot of manpower and effort and time, which is money, that you’re basically spending before you get that first check. So think about whether you have the runway to make it work.
Mike [14:11]: I think that goes just back to the point that this isn’t something that you want to try and do on day one. I think this is something you gradually grow into when you’re trying to expand the market for your product or your trying to increase the rate of growth, and increase the revenue that’s coming in, and those types of things. This is not something that you want to really tackle on day one, or even day 30, when you really don’t necessary have the app or the marketing itself straightened out, and you can’t go to those customers and have a legitimate face on the business such that it’s going to be able to solve their problems. If you don’t have the cash runway in order to get out three months, six months, nine months where you’re actually landing those customers on a regular basis, then it’s very difficult to make ends meet in between that time, not just beyond that.
Rob [14:55]: The sixth question is: Will you offer phone support to your larger customers? My take has always been that we don’t offer phone support. Sometimes we have a few priority queues where people can get it via email, but this is a tough decision, and it’s going to be to each business owner to decide this. The hard part is if you go through this whole demo sales process, and then you’re handholding, and you’re getting them in and you’re getting them on boarded, then they have another questions and they Skype you, or they, “Hey, could we just jump on a call so you can explain this?” Then it’s really a support thing. You have to be able to make that transition at that point, and have them not feel like you let them down or misled them. At that point you’re like, “You know what? You got email support at myapp.com and they’re going to help you out.” That’s something you need to think about how to handle up front, because people get an expectation if they’ve talked to you three or four times, you’ve answered all their questions, you’ve helped them get set up, that they’re a liaison, and they want to go to you every time they have any questions about the app.
Mike [15:43]: There’s a few different ways I think you can handle this. When you are giving demos, a lot of times the question of support will come up and you can probably just be blunt with them and say, “Look, we don’t offer phone support. At least not a “call in and you can talk directly to somebody”, but there’s the email line and you can send it in. We answer them pretty readily. If we need to get on a phone call with you because it’s warranted then we will, but at the same time – in order to help reduce the cost that our customers are paying – then we start with email and it can be escalated from there.” I think that that’s a good way to at least address that issue but, again, there’s going to be customers out there who, if you don’t have a phone number that they can call then that’s going to be a deal breaker for them. You have to just understand what your customer base looks like, and whether or not that’s going to be acceptable to them.
Rob [16:29]: And our seventh and final question you should think about before the move – and then we’ll dive into some steps of actually making this move – is how do you repeatedly get in front of larger customers? Do you already have a funnel, or already have channels where larger customers are arriving at your site and they’re asking for phone calls? Then you’re golden. This actually was the situation we were in with Drip when I hired Anna about 18 months ago. She became basically sales and customer success. She also did some marketing at the time. She handled the demo and the sales process, and I knew that we were getting – I don’t remember, maybe one a week, two a week – of people who said, “Hey, I’m interested in using it. Can I jump on the phone with somebody?” But if you’re not in that situation, and you’re not already getting inbound interest, it’s probably good to think about how are you going to get in front of these larger buyers?
Mike [17:15]: That brings up another interesting point. If you’re not able to get in front of those people on a repeated basis, or they’re not already coming to you through whatever inbound marketing efforts that you have, then you have to make a decision. One, are you going to shift your business to do more outbound efforts to reach out and directly contact these larger customers? Because that, in itself, can be a fairly large endeavor. Are you trying to pursue something that your marketing campaigns are simply not set up to handle? And if that’s the case then you’re going to have to change a lot of the things that you’re currently doing. I think it’s a very different story if you’re going and trying to move your product to up-market but you’re not getting any sort of interest, versus you already have that inbound interest and you’re essentially just trying to remarket your SaaS app a little bit and tweak some things in order to be able to serve those and not automatically turn them away based on what your marketing collateral on your website says.
Rob [18:09]: All right. Now that we’ve talked through those, let’s look at seven steps for making this move; for taking your SaaS app up market. The first one is to raise your prices, or, at a minimum, have an expensive tier that these larger customers will kind of automatically fall into. With usage based pricing like let’s say CRM, let’s say Close.io, it’s going to be based on the number of logins; the number of sales people, or people who need access. A larger customer should almost, by definition, have a larger team, and they’re going to have 10, 20, 30 people, so if you just price it based on that you’re going to be golden. Similar with if you run support software, anything where the stuff that your users see is different for each user, then it’s a no-brainer to charge based on the number of logins. If you have something where it’s more usage based – let’s think about email service providers or proposal software, or invoicing or whatever – you’re going to want to find what the metric is. An email service provider will charge based on the number of subscribers, and larger customers tend to have bigger lists, so this makes sense. You have to find that level where you can either have that high end tier that they automatically fall into, or, if you’re going to go after this, you have to raise your prices across the board just to be able to afford everything we’ve said above. You can’t be selling to large customers and charging them $30 or $50 a month. There’s just not ROI in it, because the time it takes to work with them is so substantial.
Mike [19:29]: I think it was at last year’s MicroConf – not the one six months ago, but a year and a half ago – when Lars Lofgren had been talking about different ways that people are selling their software and services and how they’re, essentially, packaging together what the different pricing tiers are, and what the different switches are. I think that this is an interesting area to get into, especially if you don’t have a product where there are going to be a lot of people using it and you don’t have that per user pricing that you can toggle. The one that comes to mind that I distinctly remember was something like WebEx, where a large company that wants to use WebEx for their sales team, they are naturally going to have more people on their sales team, but it’s difficult to justify charging, let’s say $150 per person when you have this per user pricing tier and really the sales reps can actually just share a login and share an account. In those situations, it really doesn’t make sense to do a per user pricing model just because a $50 or a $75 a month plan can support three or four or five different people. It makes it very difficult for you to make more money when you’re trying to charge based on that particular feature.
Rob [20:40]: The second step for moving up-market is to modify your pricing page, and to basically add a tier – typically to the far right, depending on how your page is structured – that is the “Call Us.” The high volume tier, where it says, “Call us for pricing.” You can call this enterprise if you want. We’ve found in our space there are people with really large lists that are not enterprises, which is why I’m differentiating that and just talking about larger customers here. So figure out a good name for it, and get a phone number on there, because if you are going to do this you’re going to need to be able to connect with folks, these larger customers, over calls.
Mike [21:13]: I think the interesting point here is to try and figure out how to best guide people towards that. When you have a pricing page, or even just talking a little bit more broadly in general about your website, you have to be a little bit careful about the types of examples you use even. One thing that had come to mind was that if, for example, your pricing, if you have a $9 a month pricing plan, that can immediately turn people away who are large, because they say, “Oh, well, there’s this $9 pricing plan here, and the highest plan is only $35” for example. Those customers are going to look at that say, “We’re far too big for this company to even be able to handle us, so we’re just not even going to bother.” They won’t even talk to you. They won’t reach out for a sales demo or anything, because they look at the pricing page and they say, “This is just obviously not for us.” The opposite of that can actually be true as well. If you have prices that start at $100 a month, then a lot of your customers right now are only really able to afford $30 a month or $40 a month, they’re going to look at that high price and they’re going to say, “This is too expensive for us.” You really have to be a little bit careful about how you’re positioning the product, and how you’re putting your pricing page together, and the types of examples that you’re using inside the images and examples that you have on the website. Those are a couple of different things to keep in mind. You want to appeal to most of them, but at the same time that can be very difficult based on what it is that you’re selling because you don’t want to exclude anyone either. At least not exclude anyone who would be a good fit for using the software.
Rob [22:42]: The third step is to consider adding your phone number to the top of your website. You may want to say, “For sales questions, call this.” and if someone calls and asks for support, you may need to tell them, “We’re not able to do that. You’re going to have to email support queue.” I’ve heard having your phone number at the top of your page is a good thing.
Mike [22:58]: There’s a bunch of different services you can use for this. Skype has its own “Skype In” number, so that’s one option. There’s also a service called Grasshopper, and you can get virtual phone numbers for that as well. People can call those, and you could either route it to a voicemail, for example, during certain hours of the day, or you can route it to different team members depending on how it is that you have your team set up. So there’s a bunch of different ways that you can accomplish this. Another one that you could also use is Kall8.com. You can just purchase a phone number there, and when people call into that number you can just have it go directly to voicemail, take the number, and then have it sent over to you via email. Then you can call the person back at your own time. I think that in some cases, just having a phone number there, even if nobody calls it, that can help with sales. But there is the opposite of that scenario, as well, where somebody might call that and then be turned off by the fact that nobody ever answers. You do have to be a little bit careful about that but, again, there are options for having a phone number there if you don’t want to use your own cellphone number or your home line or business line or whatever.
Rob [24:03]: Right. The idea here is you’re trying to generate this inbound interest. It’s trying to get people on the phone, because that’s the way that you are going to sell these larger priced plans. The fourth step for going up-market is adding a “requested demo” button all over the place. You’re going to ask for some basic contact information, then you’re going to ask one or two qualifying questions, such as, “How many users do you expect? How many subscribers are in your email list?” Something that can define that they’re in that top tier, because if they request a demo and they’re not in that top tier, it very well is not worth, in essence, the time investment to give a demo to people who are going to pay you $30 or $50 a month. You want to have something in there to qualify them, otherwise you’re not going to know which of these demo requests to respond to. The way that we’ve scaled this at Drip is if people are below a certain number of subscribers then they do see a demo but it’s a prerecorded demo. It walks through the app and then it offers to bring them in for a trial. Of course, if they’re above a certain subscriber rate then they get a call from us, or they get an email with a Calendly link, and it sends them into the demo flow. We have this link on our homepage, we have it in the global top nav and that’s what I’d recommend for you as well if you’re going to go after these types of customers. Our fifth step is to learn how to give demos if you haven’t already. I have two recommendations for this. There’s a lot of good information on this, but I’d recommend you read Steli Efti’s book. He’s the founder of Close.io and he knows a lot about how to give demos. His book is called ‘Product Demos That Sell.’ We will link that up in our show notes. I think the book is very inexpensive. It might even be free; somewhere between zero and $10. It’s a complete no-brainer, and it’s one of the best books I’ve seen on this topic. The other recommendation I would say is to watch Anna’s video. Anna’s on my Drip team. She did an attendee talk just about six, seven months ago here in MicroConf 2016 in Las Vegas. We’re going to link that video link up in the show notes. She basically walked through how we developed the Drip demo process. I think it went through four or five different versions. She talks about why we made certain changes at certain points. It’s a short watch, about 12 minutes. She gave us a lot of thoughts about how we structured things and why.
Mike [26:13]: There’s two different types of demos. Going back the previous step in this which was step four, adding the “Request a Demo” all over the place. There are the demos that you give that are simply prerecorded, and then there’s demos that you give in person. When you’re giving a demo in person a lot of times you will have these questions that come up either at the end of the demo or in the middle of it. Those are the types of things that you probably want to write down, so that when those questions come up you can have a better answer for them. When you’re at the end of the call, if you’ve hopefully recorded it so you can get better at them over time, you write down the questions that were asked of you and then come up with, essentially, standard, boilerplate answers that you will give to those that will improve over time as your offering gets better, and as you give more of the demos. You don’t want to start making up answers to people’s questions on the fly and have them sound like they’re unrehearsed or like you’ve never been asked before. You have to answer every questions and you have to think of answer on the spot then it becomes a little bit less believable and less, obviously like you have answered that question before. If you write them down you can come up with those answers and it sounds like it’s off the cuff, even though it’s not, even though you’ve actually heavily thought about those things before.
Rob [27:27]: And just to clarify, when you said video versus in person, you meant video versus live, right?
Mike [27:32]: Oh, yes.
Rob [27:33]: Yeah.
Mike [27:34]: Yes. That is what I meant. That’s correct.
Rob [27:35]: Both of them are over video, but one is prerecorded, in essence.
Mike [27:39]: Yeah, that’s what I meant. It was prerecorded versus live and not in person but yes.
Rob [27:44]: Cool. So step six is to ask large customers for annual contracts. As you’re doing this sales process it’s pretty standard to get 12 months’ payment up front. This is great for your cash flow. You’re going to get a really big check. Typically, they won’t balk at it. Sometimes they’ll say, “Let’s do six months, or let’s do a quarter.” You can work with them on that. But since it is something that’s somewhat standard with these guys it’s kind of a no-brainer to do this, because the worst thing you can do is go through this whole process, you invest a lot of time, you get them signed up, and then they cancel a month or two later. That’s unlikely to happen, but it’s a real bummer to do that. If you can get that whole year of cash up front, it’s really something to consider with your larger customers. Our seventh and final step for moving your SaaS up market is not a hard and fast rule, but it’s something that I would recommend, because it’s going to be super tempting to do, and it’s: don’t do custom work, because pretty much every call you get on is going to be a company asking for something custom for them. They’re going to say, “This looks great, and we would just use it if you could wire up some code to hit our API and put it into our custom CRM system.” You know that that’s like eight hours of work, and you know that you could pull it off but it really, really is a danger zone to do this, because then you’re on the hook for a lot of stuff. You’re on someone else’s timeline, and you need a consulting contract, so you’re going to have to go spend time to do that. Then you’re going to find out their API is really buggy, and they’re going to blame you, and you’re going to blame their developers. Everything goes wrong and it’s a huge waste of time. I’ll just say that. So don’t do custom one off work that is really more like consulting stuff. Again, not a totally hard and fast rule, but I think probably more than half the calls you get on someone’s going to ask you for something like this. If you’re building a product company, you want to stay away from this. The other thing that is kind of on the fence we hear a lot is, “Yeah, if you’d just build this one feature, and all your customers could use it, then we would become customers.” For the most part, we don’t do this. We sometimes, if they actually are requesting something that is already on our roadmap, we will tell them that. We will say, “We could bump it up a little bit for you. If you’re willing to, in essence, sign a contract and not send us the check yet, but that you’ve agreed to do it we will,” move up the priority. Move it sooner in the roadmap. Again, if we were going to build it already. But if it’s something that someone suggests that really no other customer is going to use, you’re a product company now. It’s just not something that I would recommend, unless – and here are the exceptions, right, and this is where it depends – unless you’re in very early stage and you’re trying to get a big name customer on who you think can do a lot for your brand and they’re going to pay you buckets of money, then I would consider building a one-off feature and probably “feature gating” it, so that you have a checkbox in an admin console somewhere where only that customer sees it, because you don’t want to support that for everybody. You have to make a call at a certain point. Is it worth this however many hours of work to get this customer on board based on the amount of money they’re going to pay you and perhaps the amount of prestige they can lend to your brand. You have other thoughts on doing custom work?
Mike [30:45]: I think I agree with you in general. You really want to avoid the custom work if at all possible, and I think that it’s probably a good realization to have that even if somebody says that they will sign up for something, if you build that one feature and it sounds like something that a lot of your customers could use, then you have to heavily weight that on whether or not you do it. It’s up to you as to which way you go on that. One thing I would say to keep in mind about all of this though is that there are some questions that companies will ask solely because they want to hear an answer, and not because they actually care about what the answer is, or whether you do that. For example, they might ask, “Can you implement feature X, Y, Z?” And they don’t actually care if you can implement that but it’s hard to tell just from the conversation without directly asking them is that something they really need or is that a deal breaker. You can turn that back around and the question you can ask is, “Is that important to you?” From there that’s where you take the conversation. Sometimes it’s just curiosity. They just want to know, “Hey, can you do this?” And it doesn’t matter what the answer. They just wanted to know. I’ve had this conversation with people before, and I’ve had them ask me stuff like that and I’ve asked, “Is that important to you?” “No. I was just curious if you could do that.” In your mind, it’s very easy to go down the path of, “Okay, well they asked me this question. How would I go about doing this? How would I implement this?” Then you start talking, essentially, you’re talking yourself into implementing it for them, and they didn’t even care. That’s a very fine line that you have to ride and just keep in mind that sometimes the customers actually don’t care. They’re just asking because they want to ask, or because it was something that came up in some other meeting.
Rob [32:21]: Thanks for the question, Anthony. I hope that helps give you some ideas on how you can go after larger customers.
Mike [32:27]: I think that about wraps us up for the day. 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 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 320 | Business Model Breakdown of Amazon Go
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike do a business model breakdown of Amazon Go. They talk about the biggest challenges the store may face including security and delivery logistics. They also explore the technical and social impact of the idea.
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 do a business model breakdown of Amazon Go. This is ‘Startups for the Rest of Us’ episode 320.
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 [00:26]: 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 [00:31]: Well, as soon as our predictions episode went live a couple of weeks ago, we had a few comments to get posted into that thread. It looks like at least one, and perhaps two, of my predictions literally came true within weeks of us making them.
The predictions episode went live on the sixth or seventh of December, but we actually recorded it two weeks prior to that. One of my predictions was that there would be at least one more high profile bootstrapped startup self-funded acquisition. And I’d specified that by “high profile” I mean it’s a big company. It’s not some sale of technology. I was thinking it was actually going to be a much larger funded company acquiring somebody, and, sure enough, big congrats to Dan Norris and his team, because WP Curve looks like they were acquired. I think they announced it on maybe around December seventh.
Mike [01:17]: That’s awesome. Congratulations to Dan and the entire team for that. I also want to point out here that acquisitions were one of my predictions from the previous year. So, technically we’re both right on this one, I think.
Rob [01:29]: That is really funny. So you predicted for 2016 – which technically we’re still in – that there would be more acquisitions than IPO’s or something. And then my prediction really is for 2017, but I think it counts. As soon as we make the prediction –
Mike [01:41]: I think it counts.
Rob [01:42]: As soon as you make it, I think if it happens after that then you’re correct.
Mike [01:45]: Right.
Rob [01:46]: It was pretty cool. It was cool to hear that news, not because it made the prediction correct, but just because of all the work Dan’s done building his businesses and sharing with the world his experience in writing ‘Seven Day Startup’, and his content marketing engine book. He’s just done a lot of stuff. And now he’s doing Black Hops Brewing. He started an entire beer brand, like a microbrew, in Australia.
Mike [02:07]: Yeah. He started that a while ago, actually while he was running WP Curve. It’s been interesting to follow those things. One of the other predictions somebody pointed out was that I had a wearables prediction for last year and, apparently, Pebble decided to shut down and sell off all their IP’s. I think at the time that we recorded the episode we hadn’t been aware of the, but that’s another one. Then you also had an unmanned drone delivery previously happened as well. That happened about two weeks or so after we recorded the episode.
Rob [02:35]: It looks like on December 14th or something. So right there in time. They’re talking in New Zealand about how Domino’s Pizza’s going to start doing unmanned drone deliveries, and then Amazon did one in the UK. It was literally December 14th, Amazon completes its first drone powered delivery. I think this was yesterday. It’s kind of interesting timing. I guess these things are, I don’t know. I wouldn’t call them obvious. It’s funny, our predictions in the past, a lot of them never come true, and then we make a few predictions here and two or three of them come true within two weeks. It’s really odd.
Mike [03:05]: I do want to say congratulations to Cristoff and Benedict for selling out FEMTO Conf in Germany. This was on my list of predictions as well that more of these types of things would be popping up. But, to be fair, I knew about this one in advance, so I don’t know if we can really count that as part of a valid prediction.
Rob [03:22]: Very cool. So what are we talking about today.
Mike [03:24]: Today we’re going to do a business model breakdown of Amazon Go. If you’re not familiar with this we’ll link it up in the show notes, but you can go watch a video from Amazon that talks about their Amazon Go store. Essentially, it’s a new type of convenience store that doesn’t have any cashiers. There’s no checkout lines. There’s not even a self-checkout aisle. You just walk in, pick up your stuff, and it recognizes who you are based on when you checked into the store, and it keeps a virtual shopping cart for you while you walk through the store and pick things up. If you put something back it takes it off your shopping cart. Then when you leave it just bills your Amazon account and automatically charges you through that account so that they don’t have to swipe credit cards or anything like that. First reason I wanted to talk about this was because it’s a little bit different than something that we typically talk about. Typically, we talk about things in the self-funded, or bootstrapped, entrepreneur space. I thought it would be interesting to talk a little bit about a business that doesn’t necessarily directly relate to the things that we do on a day-to-day basis, but the other piece of it is being able to objectively look at business ideas. Part of that is when you’re evaluating your own business ideas, or your own products, and trying to get it into different markets, being objective about those instead of — obviously you want to be optimistic about the things that you can accomplish and achieve but, at the same time, you also need to maintain a certain amount of objectivity, and be able to recognize where problem areas are. I thought that by digging into some of the pros and cons in areas where Amazon Go might have some issues getting to market, or where things will work out in their favor or not based on the advantages and disadvantages, that they have that you can kind of extrapolate those things and be able to more objectively look at the things that you’re working on in your day-to-day or month-to-month.
Rob [05:08]: Yeah. I think it’s a good exercise to run through a business model like this – something that someone who’s trying to innovate on the model, in essence. I also think that it’s just a nice way to kind of wrap the year up. It’s a fun little diversion to talk about something as interesting as this, that is essentially a big company really trying to turn retail on its head; a big company that, while we think of them as a retailer in quotes because they’re ecommerce, they really don’t do much in terms of brick and mortar, and they’re trying to figure out how to automate all the things, and I think that’s a pretty admirable goal. So let’s dig in. By the way, if you haven’t watched the video – it’s a two-minute video – I really do recommend that you go check it out, because I was blown away by just the coolness factor of walking into this thing. You walk in, you push a button on your phone – which I’m sure it’s an Amazon Go app or whatever – push a button to let it know you’re in the store, then you just walk around, grab some stuff, and you put it in your bag or whatever. Then you just walk out and it charges you. This is where Amazon has innovated in such an incredible way. Online is the one-click checkout in Amazon Prime, where you only have to think about shipping. I spend so much at Amazon that I imagine that they’re going to name an entire building after the Walling family here pretty soon. It’s because of that innovation, right? It’s the one-click, no think, “I just know that it’s going to come, and it’s going to arrive from them.” And I think it’s the same thinking going into here. They’re just trying to remove all friction for buying stuff. Anytime I think about going to the store I think, “Ugh! Am I going to have to wait in line?” You have to whip out this archaic piece of plastic that’s been around for 30 years, and it’s slow. It works most of the time, and on and on and on, whereas it’s like if I can just be in and out I think it’s a really cool idea.
Mike [06:46]: Yeah. So to give a little bit more background about this. There’s one pilot store for the Amazon Go idea that’s currently located in Seattle, Washington. It’s only open to Amazon employees, and there’s not really any public information about a wider rollout. They’ve talked a little bit about possibly having as many as a couple thousands of these throughout the United States between 2017 and 2020, but they’re real sketchy on the details, and it’s not really clear when this pilot program rolled out. The idea is that it’s a small store. It’s only about 1,800 square feet, which is larger than the typical convenience store in the United States, but it’s also much smaller than a regular grocery store, which is anywhere from 45,000 to 60,000 square feet. So it really fits into that convenience store market. As we go through these we wanted to talk about a bunch of different areas, but the first question that I think we wanted to ask was, “Why would Amazon want to do this? Is this just a PR stunt, or is this something that’s really viable?” And as we talked about very early on, if you looked at their advertisements for the drone technology three years ago, you would have looked at it and said, “Well, it’s been three years. It’s just a PR stunt.” We talked about that right at the beginning of the episode. They just did their first unmanned commercial flight. So it’s interesting to look at this and say, “Well, they’ve got this idea. They know it’s going to take them several years, and that’s why they’re working on this pilot store.” I think that that’s a fascinating way to start, and I think that it’s very analogous to the way that entrepreneurs will start rolling out products, and work with a few individuals or trusted people that they can rely on for feedback, and get that feedback that they need, innovate, figure out what the kinks are, work those things out, and then roll it out to a wider audience. It really seems to me like that’s what Amazon is doing. I don’t think that this is a PR stunt. I think that they really believe in this. Now, will it actually work out in the end? Who knows. We’ll see. But it looks to me all indications are that they fully believe in this and they’re trying to work out the kinks right now. That’s why they’re using their employees to do that.
Rob [08:45]: Right. I don’t see it as a PR stunt as much as proof of concept, right? A MVP, where I bet they’ve been in labs working on this for a while – for a year or two – trying to figure out the technology. They say that they’re using visual recognition and all this other stuff. I’m thinking couldn’t you just use NFC base from your phone, or Bluetooth or something like that, but maybe that’s just impractical. I’m obviously not super up to speed on all that stuff. But why wouldn’t this be viable I think? What’s the biggest concern that you’d have in building this? It’s someone’s going to come in and steal a bunch of stuff. That’s the big thing. That’s why you have someone in the stores to make sure people don’t just come in and walk away with the stuff. And the question is do we think Amazon has the engineering prowess, and the money, to fund this to make that not happen. I think they do. I think that in order to get into the store, if you have to push this button on your phone or it doesn’t let you in the store, then now they know who you are, and if you went and stole a bunch of stuff, why can’t they just charge it? You know? That’s the whole point. I guess if someone snuck into the store, you snuck a friend in – I think they’re going to be able to figure ways around this, and that’s why they’re only rolling one out. They’re going to just see, and if that does happen I bet they’ll figure out, “Well, we do need a person on site at every store just to make sure people don’t steal stuff.” And at that point, they’ve figured out a lot of stuff. So do I think this is viable? Absolutely. I don’t think it’s a PR stunt. I think that Amazon has – they’ve come from shipping normal ecommerce sites, where you think back 10 years how long it used to take to get a book from Amazon, and it was whatever it was; a week, 10 days. Then they said, “We’re going to do everything two day, as long as you pay for Amazon Prime.” Then they have same day in a bunch of places. Now they want to go to basically instant. They want to go to where they can either deliver it directly to you, or you can just be walking down the street and Amazon is everywhere. It’s interesting when you talk about it being a convenience store, because that’s technically correct, but when I think of convenience store I think of like Circle K or Seven Eleven, which is kind of a – I don’t know – I’ll just say a crappy convenience store. I don’t tend to buy stuff at convenience stores. But the pictures they’re showing here is of – it’s almost like Whole Foods level quality stuff. It’s a convenient store with a lot of more higher-end stuff that you or I would probably be more likely to purchase, rather than hot dogs that have been sitting on a spinner for six hours, and Slurpies.
Mike [11:04]: Yeah. I think that goes into the types of products that they’re offering into the stores a little bit. But I kind of want to step back a little bit to one of the things you talked about was just the security of the place, and dealing with things like hacking attempts and theft. As you said, having that pilot store, doing that as a proof of concept, and using Amazon employees. Those people aren’t going to be stealing from the store. They’re going to be exercising the system. They’re going to be trying to identify the edge cases so that they can work them out. I worked at Wegmans Food Markets back in the year 200,0 and we actually rolled out an online shopping project for Wegmans. It was only available in one store, it was a pilot program, and you could order your groceries online, and you would show up, and you would pick the stuff up. It was, I think, seven dollars, but it would save you an hour and a half to two hours of weekly food shopping. So if you had that extra seven dollars to spare, or you just want to throw it at it, you could just place your order completely online and you just show up at a designated time. You tell them when you’re going to show up. They’ll bring it out. They’ll put it in your car. I don’t even think you sign for it. They knew who you were, so you would just basically walk away with it, which was fantastic because your information was tracked. I think they verified who you were, but that was it.
Rob [12:15]: Sign me up. That sounds great.
Mike [12:18]: It was fantastic. It was different than some of the other online services where you would order it and then it would be delivered to you. This you actually had to go to a store, but you literally told them when you were going to show up and they would have everything all ready. And they would have people go out and do your food shopping for you. So, going back to the security of it though, because they’re having those people who are Amazon employees work in there and use the service itself, it kind of mitigates that particular problem. At least for now. It delays them having to solve that.
Rob [12:46]: You have to bet that they have already tested, and are going to have their employees test, “Try to steal something.” Like go, do it. Like the white hat penetration testers. Even though their employees aren’t going to do it intentionally, they’re going to probably try to game the system and figure out where the weaknesses are before they let real people in.
Mike [13:06]: One of the other things that you had brought up was the types of goods there. You had mentioned – this kind of played back into your thoughts of what a convenience store was. You mapped it back to Seven Eleven and various other types of stores. I had a little bit of a conversation about this with my wife, and after about five minutes or so she totally tuned out, which is why we’re having the conversation on the podcast, so that I can talk about it with somebody else.
Rob [13:33]: So that our listeners can completely tune out?
Mike [13:34]: So that our listeners can tune out. Of course. But in this particular case, if you look at the different types of stores out there… You’d mentioned that you probably don’t want to go there and buy a hot dog, for example. Is that something that they would offer? My guess is probably not. It seems to me like they’re positioning it more as something that you go in, you pop in there after work or something like that because you need something for dinner. You can buy pre-prepared meals and stuff like that and then just take them home and cook them — not pre-prepared, but everything’s pre put together and you just basically take it home and cook it. I feel like that’s the type of arrangement that they’re going for. One of the things they wouldn’t do, for example, is they wouldn’t couple it with a gas station, because there’s lots of other things that go along with that. You have to have people there manning it in case something goes wrong. In terms of the workers on site, I really feel like one of the challenges that they will have is that you still need to deliver stuff to the store. You still need to have the shelves restocked. You still have to have things get pushed to the front. There are some mechanical ways to do that, but you still have to have somebody on the back end kind of fulfilling some of those needs. Logistics don’t just take care of themselves. You can automate a lot of that stuff with Robots, but there’s only so far that you can go with that kind of stuff. You still have to have somebody there doing something.
Rob [14:48]: Right. I don’t see this as being a store with zero people in it. It’s probably a store with maybe 10% of the staff that you would normally need, or 20%. You know, some drastically reduced numbers. Because if you think about what Amazon does they do a really good job of cutting costs. That’s been their big thing is to drive costs down and get stuff to us very quickly. If you think about maybe the two guiding principles that Amazon has done since they launched in – whatever it was -’94.
I think that’s interesting to think about. You do still need to stock shelves, and eventually I could see them replacing that with some automated shelf stocking mechanism. I’m sure they have those in their big warehouses. But at first I would bet they’re going to have people in there doing it. And maybe at first they’ll have someone at the front door making sure nobody without pushing the button gets in. And maybe they won’t. That’s where it comes with these – they’ll run a pilot, and then it’s like launching an app, right?. You run your pilot, you see what happens, you see what people like and don’t like, you see what breaks, you see what needs to scale. Then I could see them automating things more and more over time, using human automation up front, and then with the big 10X, 100X thinking Amazon has, I can imagine that long-term they could feasibly want to completely automate these stores where there are zero people on site, but I would doubt that they would do that at the start.
Mike [15:59]: Yeah. In terms of the other logistics, you still have to get goods to the store. There’s a difference between shipping things to that location versus taking them in that location and then putting them on the shelves, or making them accessible for the customers. At Wegmans there was a fully automated and robotic warehouse, where – I forget how many thousand square feet it was – but it was just enormous. And they had, I think, two or three people there. And those two or three people were there solely to unload the trucks, put the pallets in certain places, and then machines would come and take everything and then stock it. Then when they needed something – they needed a pallet of whether it was frozen meat or what have you – they would just go over to a computer and hit a few buttons and boom, the Robots would basically go grab everything off of the racks and then pull it down and be able to deploy it so that the trucks could come in and pick that stuff up. It was fascinating that there was this massive warehouse and there was nobody in it. It was like a ghost town. It was very stark contrast to one of the other warehouses that we had in place there. I can see Amazon doing the same type of thing for, not just inside the store putting stuff on the shelves, but longer term. If you look at the way technology is going, you’ve got driverless cars. You could theoretically have a truck pull up and drop a bunch of stuff off, and then other Robots that would move things around inside the store. But I question how soon in the future that’s going to be. In terms of some of the technical considerations I’ve seen in this, there are questions about the item attribution and tracking. You had mentioned these a little bit it terms of the near field techniques for identifying items, or maybe RFID, or something along those lines. I could see a bunch of different ways that they could do that, but the question is how feasible is it to do that at scale? Pilot program will really eliminate a lot of those questions, or at least get answers to them, and it will help them figure out how to do things in the future. I don’t think that they’re really concerned right now on scaling that stuff. They’re just trying to figure out, “How do we fix this problem?” Or, “Where are the biggest problems that we have? Let’s prioritize those, and once we get to a point where we think that those are low enough then we can deploy this out further.” I don’t see that as any different than launching a new application or a new product. You have to figure out where those problems are, and then you get to the point where you say, “Okay, now we can start scaling this up. We don’t need a fulltime support rep, because we’re not getting the tickets that you would if you had launched it with problems.” One of the questions that comes up to me is, “What about the social implications of this?” And you had said with Seven Eleven this seems like a more upscale version of it, and kind of trends more to the Whole Foods type of store. But what are your thoughts on the social implications of a store like this? Is this something that you’re going to be able to make work in urban areas? Or does it have to be in a city? Are people going to be used to that type of thing? Are they going to get themselves used to it? Or is it something people are going to shun and say, “No. I don’t want anything to do with that.”
Rob [18:53]: I think just having the Amazon name on it. This is such a brand recognition thing. I think it will be a novelty at first. And I think if I saw one – the first time you see one, just like the first time you saw an Apple store, it’s like, “I’ve got to go check this thing out.” And if it’s a cool experience, and it delivers on what they say, I don’t see why you wouldn’t go back. But if that first experience is rocky, or maybe you give them two chances or something, I think it could be tough for them to gain traction, which I think is why they probably want to roll it out fairly slowly. I think that socially – this seems like just an urban thing. I can’t imagine rolling this out in a small town or something. But that’s just me. Just based on – it’s probably mostly based on the goods I saw in the ad itself. It just feels like something that that convenience, and that speed, and that transactional nature, I think, fits cities really well. People don’t necessarily want to take time to talk to the shop keeper like they might in a small town, so I do think this would be more urban oriented, and I think there’s plenty of room in terms of room for improvement in the grocery space. I think this could be interesting. There’s another implication here, and it’s of jobs. What about the jobs it will take away from people? I think there’s this whole conversation to be had around the idea of technology in general. It just takes jobs over time. It takes some, and it creates them. It “transforms” is probably a better way to say it. It takes from lower-skilled workers and it tends to create jobs for higher skilled workers. People protested – if you recall – the buggy whip manufacturers protested automobiles, and they said, “There should be no more cars, because they’re bad.” and it was going to put them out of business. And there were a bunch of strikes when automated, I think it was cotton gins, came out. The women who had done that by hand for hundreds of years. There were union strikes and all this type of stuff, and they said, “These things are evil, and it’s going to take jobs and you shouldn’t let them do it.” And so, you have to ask yourself this question is that, “Should we not have those things? Should we not have those advancements?” The same thing with factory Robots that are putting stuff together. They do take jobs, then they create jobs for people who can program and maintain the Robots, and they create other stuff. I think that is a thought process. It’s probably too deep into the weeds for you and I to specifically go back and forth on it in this particular episode, but I do think that’s something that’s going to start entering this conversation as they roll these stores out.
Mike [21:12]: Yeah, but I think that the idea of displacing the jobs, and really just moving those jobs from one place to another, is something to kind of consider here, because it ties directly into where would you put these stores? As you said, you kind of would probably tend towards urban areas, not towards the rural areas, and the urban areas are where those highly skilled workers tend to congregate. Part of the reason for that is that they tend to get paid more. The lower skilled workers don’t tend to live in the cities because it’s expensive to live there, and if you don’t have good marketable skills that demand that you get paid well for them, you can’t afford to live there. You can’t afford to live in New York City if you don’t make at least reasonably decent money, because New York City is way more expensive to live than other cities. So if you’re essentially replacing the jobs of those workers, and eliminating them, those people can’t really afford to live in those cities anyway, for the most part. Not to say that there aren’t a fair amount of exceptions, but you’re essentially displacing those skilled workers outside of the cities. It also ties back into Amazon having this awareness, or location information, about where their customers currently are, because they’re shipping to them already so they know what their addresses are, and they could use that information to identify, “Where is a good spot for a store?” I know when we worked at Wegmans they would spend a couple of years trying to figure out, “Where is the next store that we’re going to build?” And they would get all this demographic information from people, public sources. Try and figure out, “How much money do people make in this area? Is this going to be a profitable store? Or is it going to be a place where we’re going to lose money, or we’re going to have to shut it down? We’re not going to be able to do as many things as we want. Or are we going to be able to charge the prices that we want?” For someone like Amazon, if they can look at the average revenue per users of a particular area, and they know all this data around those people that says, “Hey, these people spend a lot of money with Amazon. Let’s put a store right in the middle of them.” Chances are good those people are going to shop there.
Rob [23:06]: Yeah. That’s the beauty of Amazon has your home address, and so they know the location of the people who probably spend the most on Amazon, or who buy high end things. They have big time information advantage over their competitors. I think one of the other social implications that I didn’t bring up when you were asking about that is that the store essentially requires you to own a smart phone, and that has some implication in terms of the income level of the audience, or the potential customer. And I think that’s another one there. They’re just basically saying that that is a requirement, and they know there are so many people with phones who are willing to spend the money. I think that’s probably a good bar to have.
Mike [23:44]: Right. One of the actual challenges like with a grocery store of any kind is that the margins on grocery stores, on goods that you buy at a grocery store, tend to be really thin. They don’t make a lot of money on most of those goods. They also have to deal with what’s called “shrinkage”, which is generally referred to as stuff where the goods are just damaged, or food spoils. Stuff like that. Those types of things count against the margins that you would make on most of the goods there. I think that because of their targeting at people who have smart phones, those people are going to tend to be better off financially, and are going to be able to spend more money, and they’re going to be willing to spend a little bit extra money in order to get the additional convenience that I think a store like this would operate. In a way that disadvantage, you look at that and say you can only target these people. Well, those people have money. That’s not necessarily a bad thing that you’re targeting those people with money.
Rob [24:41]: One thing I think Amazon’s doing really well here is they’re leveraging their brand. And I think if you think about what are the parallels in our space, think about someone like a Brennan Dunn, who has an email course, and then an ebook, and then a video course, and then a conference. And think of ‘Startups for the Rest of Us’ and how it has the academy, and I wrote a book, and you wrote a book, and we have MicroConf. We’ve kind of leveraged the trust people have in us. There’s a lot of examples of this online. But I think that’s something that Amazon has as an advantage, is that imagine in it wasn’t Amazon doing this, and if we heard that a brand new company raised a billion dollars in venture funding and they want to roll these out across the country. “A”, we wouldn’t be talking about it on this podcast, because it just wouldn’t be notable, and you’d be thinking, “This is never going to work. I don’t necessarily trust the brand. Are they going to be able to pull this off?” Whereas with Amazon they have deep pockets, they do things really well, they make things work that seem like they’re not going to work, and frankly, I by so dang much from them that, for me, it’s kind of a no-brainer to at least consider and at least give them a shot. I think leveraging that trust and that brand recognition is something that is going to do really well for them here.
Mike [25:49]: The other thing that is gives them is that the fact that they’re Amazon they have all these resources that they can bring to bear on it to solve all of the smaller issues so that when they do scale it up they have those issues taken care of. But you had just said, “Well, what would happen if this was some unknown startup who raised a billion dollars?” My first would be Webvan, which they rolled out a billion-dollar infrastructure back in the year 2000 and the whole thing collapsed on them. They just couldn’t make it work because the margins on groceries tended to be so low, so they couldn’t get all the delivery stuff taken care of. But by doing that pilot program, by concentrating on one thing, and leveraging their existing resources – which essentially provides them a runway. They’ve got billions of dollars coming in on a regular basis, and they can experiment with this one thing over here and see if it works; see if it’s something that they think is going to be able to turn into something big down the road. And if it’s not, it’s not a big deal. But if it is, then they can kind of put gas on the fire and push it for whatever they can get out of it in order to make it a long term profitable thing that they can roll out nationwide. And that’s really the key thing here, is being able to leverage your previous successes to future successes, and make sure that you’re doing things carefully in a way that it allows you to experiment without breaking the bank. If you don’t have that runway of some kind you’re really just rolling the dice, and it seems to me like Amazon is doing a lot here to hedge their bets.
Rob [27:13]: All right. So to wrap us up, what are the chances that you give this? That they roll this out, and they roll out thousands of stores and it becomes a big success?
Mike [27:21]: Thousands of stores?
Rob [27:23]: Is that their prediction? It’s like 2,000 stores by 2020?
Mike [27:25]: It’s wasn’t real clear. Those were kind of guesses that I’ve seen online.
Rob [27:29]: Got it. So maybe just say critical mass, whatever that means. That in most major cities when you and I go, maybe it’s not Starbucks level on every corner, but that it becomes a viable thing, like however many Apple stores there are, that there’s that many Amazon stores.
Mike [27:43]: Yeah. I could see that happening, and I could see that happening with probably the next four or five years. Whether they get to 2,000 stores in the next three years I don’t see that happening, because there’s a lot of competition out there. I could see them certain types of stores that are already in place and offering to essentially replace them. Go to the management and say, “Hey, would you like to convert this thing to an Amazon store?” But Amazon also likes to maintain control, so I’m not so sure that they would really want to do those types of partnerships. They would really just want to say, “Hey, we’ll buy you out. Or we’ll take over your space.” Something along those lines. They’re going to have to figure out what their profits margins on each of those stores are per square foot and find places where it really makes sense for them to do that in a way that can undercut competition around them and help make sure that the place stays in business. I say this is better than even odds. I’d probably say 60% or 70%. I’m hesitant to go higher than that, but given Amazon I’m also very hesitant to go less than 50%, 50% on it.
Rob [28:40]: Yep. I think it’s going to work. I am bullish on anything Amazon tries to do in terms of their ability to execute and do crazy big hairy audacious things. So I think that we will before long be seeing Amazon stores in a major city near you. And that wraps us up for the day. 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 319 | Questions about the Technical Side of SaaS
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer listener questions about technical sides of SaaS. Some of the topics include pros and cons of including marketing website in main codebase, SaaS quality, and re-engaging a cold email list.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of ‘Startups for the Rest of Us,’ Mike and I answer several listener questions about the technical side of SaaS, and we also talk about how to re-engage a cold email list. This is ‘Startups for the Rest of Us,’ episode 319.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers and entrepreneurs become awesome at launching 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, sir?
Mike [00:37]: Well, I think I mentioned a little bit in the last episode about some of the scaling issues I’ve been running into, and one of them I got kind of kicked into the groin this morning about. I logged in and checked in my server bill is on track to be about $500 more than I expected it to be this month. So I kind of have to drop everything –
Rob [00:53]: That’s not good.
Mike [00:55]: No. It could be one of two things. It could be just like I have the wrong size for the server. But my sneaking suspicion is that it’s actually a licensing issue. So I switched over from one program to another inside [Avisure?] and I feel like they’re charging me a heck of a lot more than I probably should be. Unfortunately, the billing cycle is already more than half way through the month, so I may have to just eat some of it which really sucks. But that’s one of the things that I’ve actually been probably more concerned about, is just am, “I storing stuff in the right way that I’m not going to get – I’m not going to run into this type of thing.” Because that’s my biggest concern is if I’m not actively in there looking at how much I’m paying for the servers every month then I could get whacked with this massive bill, and I just wouldn’t even really know it until it’s too late. And it’s like, “Okay, here’s your bill.”
Rob [01:40]: Yeah. That’s one of the dangers of this metered pricing. [?] the Google app engine. Something that I was doing for a while, when we were moving a lot of stuff around, and starting new servers and stopping, is I had a counter reminder. Every two weeks it would ping up and it would say, “Check AWS billing.” And it had a link right in, and so I would just log in and I would just look at the bill. And I knew sanity check about what it should have been each month, and so if we were a lot more than half that two weeks in, or we were a lot more at the end, then I knew we had messed something up. I did it every two weeks for maybe a year. I think I only caught something once, but it saved us probably $1,000 at the time. So that may be something you want to think about. The bigger danger – you know if it’s a mistake – because I’ve made several mistakes with AWS and accidentally purchased different things, and dropped $2,700 on some reserved instances that turned out to be not what we needed, like pretty gnarly stuff. But the bigger concern I have is, “Is this a mistake, like an accident? Or do you need that much in server costs in order for your app to run? Because that’s a much bigger issue, right. You don’t want to be paying out more than you’re making from your customers.
Mike [02:45]: Yeah. And, I mean, that’s one of my biggest complaints is just that the licensing behind everything in Azure – not everything, but in certain things inside of Azure, it’s very obscure. And so if you’re under one particular program with them – by program I mean like a licensing program. If you’re under one program with them, like you might be paying one amount. And then if you’re not under that, or if you’re on a pay-as-you-go subscription, you could potentially be paying four times as much for the exact same thing. And I’m just like, “I don’t have time to deal with this.” I don’t want to have to deal with this, but I have to. I kind of sucks. I don’t know. I have an email in to somebody at Microsoft right now to talk to them about it and say, “Hey, can we kind of move up the time table on our discussion about this.” So, I don’t know. We’ll see what happens here. But that’s kind of always been in the back of my mind that I need to pay attention to that stuff. And it’s just a distraction. You know?
Rob [03:36]: Yep. This is all the stuff that doesn’t provide any value for your customers, but you have to do it. This is like handling legal, EU compliance contracts. This is frankly handling HR when you get there. This is handling benefits and payroll, and even hiring support people, and it’s just expected [dev ops?] I see as that these are all required necessary things that if they’re not there, then it is a really bad thing. But it doesn’t provide value to your customer. It’s not about building the product. And so that’s the tough part, man, of kind of being bootstrapped, is if you had a bucket of funding you could at least hire some really good people because you could afford to pay them. And I’m not saying everything’s easier once you have that, but I see – as we started growing Drip, I really saw how having more money could make a big difference in how quickly you could move, because you don’t have to do everything yourself.
Mike [04:28]: It also allows you to ignore those problems that are at a smaller scale that if it was an extra $500 a month for three to six months, that’s not a big deal if you’ve got revenue and lots of customers to work with, because it just kind of evens out over all the customers. But when you’re still working with that really small number then it is a big deal, because you don’t really have the revenue yet to cover that and do lots of other things. So it’s a very different story. And I realized something when I thought about our episode last week where I was talking about some of the scaling issues. I went in and I looked at stuff, kind of based on that episode, and I was like, “Okay, yeah. I’ve really got to get passed this and just see what I can do to move forward, because I felt like I was turning my wheels a little bit, and I think even on the podcast it probably sounded a bit like that. So I went back and I started looking at things and I realized that what’s really happening – in terms of some of my scaling problems – is just a lack of visibility. Like I haven’t gone in and looked at certain things. It’s in the back of my mind, like that might be a problem but I’ve yet to go in and at certain pieces, looked at data, or taken measurements, or done anything like that. It’s kind of a lingering fear in the back of my mind, “Hey. You’ve got to pay attention to this, or you should go look at that.” But I just haven’t done some of that yet. And this is one of those areas where I haven’t gone to look at it and it’s in my mind as a scaling issue but nothing popped up as a problem until just now.
Rob [05:48]: Yep. I totally get it. So, for me, I don’t have a ton new this week. I’m actually flying out to Boston to speak at SaaSFest. So maybe I’ll see a few folks there. I’ve also got about three or four days of work that I’m cranking on. Something I forgot to mention last week in our goals episode was I did have a goal for DRIP revenue. And, I don’t know, I hinted around about it and didn’t say it, but I kind of wanted to say it so that it’s like on the record, and that I can revisit it next year and talk about whether we hit it. But I think we can 2x DRIP’s revenue again in 2017. This is a tall order now, right, because you’re talking large numbers. I’m talking about going from –
Mike [06:24]: Five customers to 10. Is that what you’re saying?
Rob [06:26]: Five to 10. Yeah. We’re talking about something bigger than that. So I wanted to put that out there and realized that I kind of wanted to get that on the record so we could cover it again in 12 months.
Mike [06:36]: Awesome.
Rob [06:37]: Today we have a bunch of listener questions. We’re getting some really good listener questions, and I kind of wanted to do a little theme episode where the first four really are – they’re kind of the technical side, technically related questions about software as a service. And so, our first two come from Ray Smith. And he says, “I love the show. I started listening at the very start in your first 20 or 30 episodes. Then I started a non-software business and I’m getting itchy feet to get back into software and I’ve been listening for the last couple of years. A couple technical questions.” So his first question is, “When creating a SaaS app, what are the pros and cons of having your marketing website and the actual SaaS code base combined into a single project?” I’m assuming he means like a GitHub project. Like same repo, right? Or if you’re in dot net, it’s an actual project. Stuffs not broken out. The idea is that when adding features, changes or bug fixes at the SaaS app, you can then update the sales website at the same time and push all changes in one go. So he’s saying there’s a lot of pros to it. What are the cons? Do you have thoughts on this either way, pros and the cons?
Mike [07:38]: I think both of them are a trade-off. I think that it’s perfectly legitimate to either have everything all in one project or to separate them out, and I can think of pros and cons for both of them. If you are going to integrate everything I think I lean more towards the cons for each of them, and it’s more of a, “Hey, just make sure you’re aware that these are the limitations, or that these are the types of things that you’re going to run into.” If you have them combined, then you almost need a developer to make any sort of marketing side changes, and that is not necessarily the greatest of positions to be in once you’re, I’d say, down the road a little bit. The other thing is that you are limiting the technology stack that you’re marketing site can be in. I know that a lot of people tend to go in the WordPress direction for their main marketing website, because it’s just so much easier to make changes and you don’t need a developer to do it, versus if you integrate that directly into your website, let’s say that you need to make some changes solely for SEO purposes. Well, then you’ve got all those things intermingled a little bit, and it makes things more difficult to deploy just because of the fact that you’ve got to push those marketing site changes and you have to push the app changes at the same time, and because those things are comingled you have no other choice. It’s very difficult to push them separately. Now, you can split them out into, let’s say, different projects for example, or you can deploy them into different directories and something along those lines, but it still runs into the future problem of having to bring somebody on who may be doing marketing, but now you have to have a developer go in an actually make the code changes. Those are, I would say, probably the biggest cons to it. If you do separate them, that problem tends to go away, but there are advantages to having them kind of all linked into the same tech stack. One of its which is like your signup process. You don’t have to have somebody go from one domain to a different domain to sign up. The other thing is that if you have them in separate in technology stacks, or even separate servers or sites, then you don’t have to worry about redirecting somebody from one site to another and then losing some of your tracking mechanisms for having them signup and then go to a different subdomain, for example. So I’ve run into this with Bluetick where my main website is on Bluetick.io, but then the app itself is on a subdomain. So in terms of where I have people sign up, I want that to all be done on the main marketing site, but because it’s a different technology stack than the backend application now I have to figure out, “Okay, how are they actually going to go through and signup? And how am I going to pass that information over the wall to the backend to have it do its thing so that they can login when they get to that point?” There is the cookie situation where you’re trying to track things with you various marketing tools. You want to make sure that people go through your sales funnel. But, again, those are things that you can do. You can get around them, but it’s just a lot of issues you’re going to have to be aware of.
Rob [10:29]: Yeah. I think you outlined it pretty well. I think when you first start something, I’d probably have them combined. But, boy, we hit a place where we were going to have to devote engineering time to breaking them apart. And once I brought Zack on who was doing growth marketing for us, he wanted to run all these split tests. He wanted to do things and we couldn’t. We were limited by the fact that the Rails marketing site was tied into the source code of the project, of the actual application. So I think if I were to do it all over again, I actually would probably split them apart now that I’m thinking about it. There were a bunch of shared styles. There were reasons for doing it, but I think, in the end, you’re going to want someone to be able to do stuff on the marketing site. And if you build it from the start and they’re already separated, then you don’t have to come back and try to separate it later. Because it was just hard for me to justify spending two weeks or whatever to rip it out. And, in the end, when we were acquired by Leadpages, that was one of the first things that they did. They essentially recreated the site over on a new domain and now we’re at Drip.co. It was a great move, because they do a ton of split tests. They change a lot of things very quickly. They can just iterate and go quickly. I think, overall, I would probably vote towards having two separate projects. You can have two repos, and you’re just going to want to deploy them together, or you can use some type of CMS if you want to. Ray’s second question is, “How do you handle data protection? Not security, but not losing customer data? I know you can do database backups daily, etcetera, but are there any good options for doing live backups almost instantly to an offsite location? One of my greatest fears is losing customer data.”
Mike [11:55]: This is such a technology dependent question. I mean, because if you’re running Windows in Sequel server, then you’ve got one set of answers. And if you’re running MySQL and using AWS, it’s a completely different answer. And then in addition to that, if you’re using any sort of key value parastorage from either AWS, or Azure, or Rackspace, or any of those other providers, then you have this secondary set of data that is not in a database, but it is important to have that along with your customer data. I don’t know how to best answer this just because it does depend on those things.
Rob [12:30]: I actually think the answer for any relational database is going to be the same. And I think your right for key value stores like [Retis?] or whatever, I would argue that most people use those for caching, and that it you don’t necessarily need to back them up unless you’re using them to perpetually store things.
Mike [12:45]: It depends on what you’re doing there though. In Bluetick, for example, I store copies of header information from emails that I’ve synchronized from their mailbox.
Rob [12:54]: Okay, so you store them in [Retis?] or in a key value store?
Mike [12:56]: Yes.
Rob [12:57]: Got it. So then that you’d have to back up. Now is that writing to disk every minute or two and then you’re sending that off to the equivalent of S3?
Mike [13:04]: It’s synchronized. It’s the equivalent of S3.
Rob [13:06]: Okay.
Mike [13:07]: Yeah, I would say it’s kind of like that. The cache doesn’t go away when the machine restarts or anything like that. It’s just a long-term data storage. It’s basically like a non-sequel database is more or less the best way to describe it.
Rob [13:20]: Right. I think his concern is – he says, “I know you can do daily backups, but can you do stuff that’s more up to the minute – instant backups?” And any RDBMS has log files, right? And if you’re putting those log files to multiple drives – now maybe they’re not offsite instantly – but you can basically do a point-in-time restore using those log files, right?
Mike [13:40]: Yeah.
Rob [13:40]: And that should work for MySQL and Sequel server and PostgreSQL and all those.
Mike [13:44]: Yeah. That’s generally how you would do it. For the longer term storage stuff, even in AWS or Azure there’s multiple ways of having that data be sent out. Usually you can use some sort of location specific storage where you’re going into a particular region of the country, or a specific data center, or something along those lines. The other thing that you could look into is having essentially a multi-site fail over. Now, that’s not something that you want to get into on day one –
Rob [14:11]: Yeah, you’re way out ahead of Ray.
Mike [14:12]: Yeah.
Rob [14:13]: Ray’s talking about whether to have his marketing site with his app at this point.
Mike [14:19]: Yeah.
Rob [14:19]: I think that you wouldn’t even want to think about that at this point. I think, “A” if you have two hot swap databases – or not hot swap – but you have a main database, and then you replicate out to a second fully developed database, a backup that’s essentially hot and sitting there at any time, that’s you’re instant offsite backup, in essence. Or if you put it in another zone or something. That’s probably the safest way to do it. But I don’t think you need that at the start unless you’re dealing with really critical stuff. I think having your log files put to multiple drives, and written out to S3, and then having a daily partial backup, and then it’s a weekly full backup. This is the standard stuff that DBA’s would do. That’s going to get you a lot of protection up front. You don’t want to over-engineer your SaaS app when you have 20 customers or whatever. And then I think down the line, at some point, you are going to want that fail over in case something crashes. But a lot has to happen for all of that to be gone.
/// [15:13]
Mike [15:12]: Yeah. And most databases that I’ve seen you can go down to like an hourly backup that’s just a partial backup, and then you do a daily backup, and then you do a weekly backup. So you take your weekly’s, you put them offsite, and then you do your daily’s, and then your hourly’s are based off of your daily’s. So at most you would have to put in – let’s say it fails on a Friday – you’d have six days’ worth of daily backups to apply, and then you’d have however many hours of hourly backups to apply. Which is not, you know it sucks, but it’s not a huge deal, and you’d at least have that hourly snapshot.
Rob [15:43]: Right. And Ray, that’s advice from two guys who are not DBA’s, who basically know just enough to be dangerous.
Mike [15:50]: Well, I actually know more than a lot of DBA’s that I’ve met. I do agree with Rob that all the stuff I started talking about with being able to store your data in multiple geographic locations, I wouldn’t even worry about that stuff. I would just go with the hourly backup at the most, and then just work from there. If something crashes, if it’s some customer data, it’s probably not that big a deal. Especially if you only lose like an hours’ worth.
Rob [16:14]: I don’t know that I’d say not that big of a deal. I do think it will be a big deal if it happens. Just the odds of it in the early days when you have a small amount of customers, it’s just not that likely to happen. And so, you’re right, you need these backups. You want to be able to restore from them. You don’t want to lose data. But there’s always this knob you can turn of how far do you go when you only have a handful of customers.
Mike [16:35]: Right. The one thing I would point out – because I’ve seen this happen to somebody before – is test the backups. Make sure that you can restore them, because I’ve seen somebody’s business be completely destroyed because they thought they were doing backup and they weren’t, and their backups didn’t work. They not only lost their entire database, but they also lost all of their customer’s information, and the way that they get in touch with all their customers. It was all gone.
Rob [16:58]: Pretty crazy. I remember that. Our DBA does that once a month. Takes all the backups and restores them onto a server and queries it and shows us the results. It’s kind of nice. Our next question is from Roger in the UK. And he has a question about a SaaS app accessing a corporate database. So he says, “I have an idea for a product which I’d rather implement as SaaS rather than the client installing the application, because the software’s complex, it’ll be updated regularly, and therefore, the client installing it would not be practical. However, it would require access to the corporate database of the customer. How easy is it to get a client to provide the database name, user ID, and password to a SaaS app so it can access their internal relational database?” Mike, did you cringe when you read this? There’s just no chance – the answer is there’s no chance ever that this will work. No chance they’re going to give it to you. Not only are they not going to give it to you, even if they created a read-only login. You’d never make your database to the outside world. You don’t open the firewall ports to it. So, I think it’s probably more useful to talk around what are the other options, because you’re not going to have any customers if you do it this way. Do you have other ideas, maybe, for how Roger could approach this? And if he needs access to their data, how he can do that? I also think we should probably discuss whether it actually needs to be a SaaS, you know, or they need to perhaps install it inside their firewall.
Mike [18:22]: I think that was what kind of came to mind for me. You almost need this piece of software that’s in their environment that’s running, that is separate from the database. And the closest thing that I’ve seen to this type of model is where you’re essentially providing somebody a virtual machine that they can put into their infrastructure that acts more as an appliance than anything else. And that’s probably the closest thing that I’ve seen. But I don’t know as you would get somebody to hand over the database name and credentials and stuff like that, unless it was to go into something like that where it is reaching in, it’s accessing the database, but if it’s an existing database, that’s a totally different story. I’m getting the impression from the way that this question was phrased that this is acting on an existing database, and it’s providing statistics and queries and additional indexing of the data that’s in there, which is a different type of problem that you’re solving then if you simply need the customer to install a database in order to run your app. So those, I think, are two very, very different situations. Now if it’s the first one where you’re trying to analyze their existing database, you really need to have some sort of a downloadable piece of software. And if they want the latest features you’re going to want to have them update.
Rob [19:34]: Or you could build and auto-updater in it, right? Something that helps manage that, and it allows them to pretty easily update. It depends on how complex it is, but this is not out of the realm of – like .Net’s gotten pretty good at being able to auto-update desktop and server apps.
Mike [19:48]: That’s problematic though just, because of the issues that you’re going to face with like user access control in Windows. It’s actually gotten much more difficult to do those types of things.
Rob [19:57]: Yeah. When I say “auto update,” I don’t mean in the background.
Mike [20:00]: Okay.
Rob [20:01]: I mean that it pings the add man and it says, “Hey, it’s time to update.” One-click update. Maybe that’s what I meant.
Mike [20:05]: Okay. Yeah.
Rob [20:06]: That is what I meant. I meant much more of that, where they don’t have to download this big zip file and read a bunch of instructions and run command line things. They click the button, and as long as you give it the user access control stuff, it’ll go out and download it, and verify, and install the MSI, or whatever.
Mike [20:22]: Yeah. Simplistic updated –
Rob [20:24]: There you go.
Mike [20:24]: – versus auto updating.
Rob [20:26]: Yep. That’s a good point. The other idea I have here is, I don’t know to what extent Roger needs his code to be able to access their database, but it just depends to what extent. If he needs to run queries across millions of rows, then yeah, he really does need direct access. But if not, and if you’re just pulling users out to look at something or you’re just pulling different things out, you could either ask the corporations to build like a small rest layer – like a little API on top that you’re hitting from the outside – or build it for them. If all of your customers are going to be running Sequel server and they’re all going to be paying you a tremendous amount of money – let’s say the average contact value is $50,000 a year, or $100,000 a year, then build a single rest API layer, and you know that it’ll run on Sequel server. And if they’re running Sequel server, they’re probably running .Net so you build it in C#. And if you’re on PostgreSQL then maybe you build it in PHP or in Python or Ruby. But you pick a language where you almost lay something on top of it, and it accesses it and then is a couple to communicate it, like as a “conduit” is probably the best word. They would still have to install that piece but it’s a server piece that’s just communicating out through, obviously, a highly secure mode of communication, encrypted and SSL and all that stuff.
I still think you’re going to run into people who don’t want to install stuff on their servers but, again, it really depends – without knowing more about the idea. Because people do install monitoring software on their servers. They’ll install NewRelic, or they’ll install Redgate. So it’s not that it never happens. It’s that you need to “A”, get the credibility and, “B”, really tell people what they’re installing, and what it’s going to do on their servers. And if it’s going to provide them a lot of useful information, I do think that you can get some people to agree to do this.
Mike [22:04]: There’s a big difference between installing something like a server performance monitoring software, and something that goes into the core of the database and pipes any sort of data outside of the local network. That’s a big problem. Those are two entirely different things, and any DBA is not going to want to do that.
Rob [22:21]: That’s right. Any CTO won’t want to do that, unless the value proposition is there and it’s worth it. I mean, that’s the thing. Without knowing what this idea is, are there other companies that are already doing this, and doing it successfully, and it’s the standard for this type of application. What if it’s offsite backup software? Yeah, they’ll probably do that, right? Because that’s the whole point. It needs to back it up, it needs to send it off site. But you’re right, if it’s a time tracking app, then the odds of that are much, much less.
Mike [22:52]: Yeah, but even you get to a certain level, or certain scale, with the type of customer that you’re targeting, they are going to want to be able to control those things in house. They’re going to want to install them themselves. And even with an offsite backup, there’s companies that do provide appliances like that and they just buy multiple appliances and they point them on opposite sides of the country and it just propagates the backups from one side of the country to the other. And the companies are willing to pay tens of thousands for each of those appliances and it maintains in their control. They don’t necessarily have credentials to all the core stuff inside of it, but it’s an appliance. They own it. They can do whatever they want with it, and they control where the traffic goes. It’s not like it’s reaching out to some external service that they need to completely control all the traffic going into it and out of it.
Rob [23:37]: There you go, Roger. You heard it here first. If you’re building an offsite backup engine, we’re recommending using an appliance, or at least having a better chance of doing it. Now I think that depends if your certain clients are willing to do that. Certain clients of certain sizes. I think if you talk to a small or medium-sized business – let’s say you talk to a dentist, who has a couple servers running something. Or you talk to a 30-person law firm who, definitely has IT folks and definitely has servers, but are they going to be willing to pay $20,000 a year for an appliance? Or would they perhaps prefer there to be a less expensive option for getting offsite backup. So that’s where I think if you choose your customer wisely, you could potentially find folks who are willing to deal with some of these different options we’ve thrown out. Our next question – it’s our fourth technical SaaS question, and then if we have time, we’ll move onto another. This one is from John Buford. And he says, “Hey guys. In episode 311 with Derek Rhymer, you mentioned “SaaS quality” several times. Can you describe how you measure or quantify SaaS quality? Is it based on the code base, or is it more aligned with overall business in terms of MRR, low churn, big list size, etcetera? Are the differences in quantifying SaaS quality as viewed from a seller of a SaaS app versus the buyer?” This is not a common term. I just happen to throw it out and say [?] is a really high quality app. And all I meant by that was the code base was pristine. It had a tone of test coverage. Zero or very, very few known bugs, modular code, really good coding standards, the deployment and architecture are all set up. Just everything you would want as a developer from a code base was there. In addition, it looks really nice. The design is really nice. It just feels like a high quality app. That’s all I was referring to. I don’t know if anyone else’s definition would be the same as that, but I was not talking about financials, or churn, or big list or anything like that. It really was specifically from more of the technical side of things. Moving on to our next one. We have a question from Chris [Cottom?]. And he says, “Hey guys. You’re both now working on businesses that deal with tons of email, so maybe you’ll have some insight into this question. Do you have any tips for reengaging with an email list, or with leads with whom you haven’t communicated in a long time?”
Mike [25:51]: Yeah. I think that if you’re trying to reengage with people then you’ll probably want to, I’ll say, prep the email engine a little bit, and have at least some idea of what it is that you’re going to be sending them down the road. So let’s say you got a couple thousand email address that you haven’t touched base with in, call it 10 months, for example. In a situation like that you probably want to map out what it is that they originally signed up to the list for, and try and translate to say, “Okay, we’ll how do I get back on track with that? Where did things go wrong? Why did they go wrong? And how do we get back on track with that?” And map out the next half dozen emails that are going to be sent. Now, I don’t think you need to write all the text for each of those six emails, but you at least need to have a conceptual level of what the bullet points are that you’re going to cover over the course of those next six emails, and when you’re going to be sending them. Because the last thing you want to do is send out an email to those people to kind of reengage with them and then drop off the face of the earth again. I would start out by doing that, figuring out what it is that you’re going to say to them. And then, in addition, the first few emails that you send out to them to kind of reengage with them, you probably want them to be a little bit shorter than you otherwise would. Try and provide some value up front. You don’t want to just launch into a sales pitch, for example, because it’s been a while and they haven’t seen emails from you. You don’t want to lead with a sales pitch at that point.
Rob [27:10]: Yeah. I think what you said was good advice, and I think you want to provide a lot of value in that first one. This is a make or break moment, and you’re not going to get most of the people back, but you really have to be sure you explain why you’re contacting them; why they were originally on your list. And then give them something free that should otherwise cost money. Or give them a really great tip. Or give them something – depends on at what scale you’re doing this. Are you doing this to 10 people? In which case I’d do some very custom something or other. Review their website or something. And if you’re doing it for 10,000, you can’t do that, but you can give away an e-book or video course or something that is of quality to basically apologize and get them back.
Mike [27:47]: It gives them a reason to stay on your list, is really what that is.
Rob [27:50]: Yep. That’s right. There’s a whole other topic. Originally when I read this I thought it was for reengaging people who are on your list but who just haven’t opened emails in a while – kind of people who have disengaged. But there’s a really good workflow for this in the knowledge base. We go to KB.getDrip.com and search for I think it’s like “reengagement.” There’s workflow blueprints there. There’s only maybe 20 of them, so it’s easy to flip through. In essence, it sends them an email and it just says, “Hey, I’ve noticed you haven’t opened emails in a while. I’m going to unsubscribe you, basically, and if you don’t want to do that, click this link.” And you get a small portion of people to hang around and reengage a bit. The good part about that is you’re actually increasing your sender reputation by doing that because, these days, Gmail and Yahoo and these ISP’s, they look at the domain that it’s coming from, and if your open rates are crappy then they start penalizing you and sending you either into spam or into the promotions tab. So keeping that high is a good thing. In addition, it can cut down on your costs. If you unsubscribe those people, then you’re paying your ESP less money because you have fewer subscribers but your open rates will be a lot higher. That’s a good question. Thanks for the question, Chris. I hope that was helpful. Our last one is from Ali, and it’s a question about whether email lists are really relevant/effective in the US. He says, “You’ve mentioned email lists for marketing and sales throughout many episodes, and it made me wonder are things really this different in the US? I’m from Saudi Arabia. If I would ask my colleagues who work in sales and marketing about using email lists, they would not even entertain the idea – not even as a last resort. From my experience, if you send unsolicited emails – and “unsolicited” is the key here – unsolicited emails they will end up ignored or deleted, and if you persist, your domain probably will be blocked altogether. It’s all about knowing the right people in a [?] organization” and some other stuff. It feels like maybe he’s confusing kind of cold outbound email versus spamming, versus opt-in marketing lists. You have some thoughts on this, Mike?
Mike [29:42]: Yeah. Well, as you pointed out, the whole difference between unsolicited emails and things that people have opted-in to because they want to hear more about a particular topic. That right there is the fundamental difference between those two things. I will say that there is some semblance of certain types of cultures would probably shy away from certain sales techniques. And you can even translate this not just into cultures, but different groups of people, one of them being developers. Developers tend to not want to call people on the phone. So those type of people will tend towards email lists and other types of marketing efforts which don’t involve them getting on the phone and actively talking to a prospect versus that email list. It’s much easier for them. And then if you take that the other direction, you can say, okay, what about an inside sales rep. They’re used to being on the phone all day. So their natural inclination is to pick up the phone and call people. I don’t think that it’s a whole lot different whether you’re talking about different groups of people, or different cultures, they all have their natural tendencies to do one particular thing. But that doesn’t mean that it’s always the right thing for every situation. You do have to take it into context a little bit. But the fundamental thing is just unsolicited versus opt-in.
Rob [30:56]: Right. That’s a big one. That’s kind of building that prelaunch mailing list. Now there is this whole other branch of essentially B2B cold email. So there’s the CAN-SPAM Act in the US. And, obviously, if you’re sending bulk unsolicited email to consumers, that’s illegal. And there’s no way around it. I’m pretty sure if you send individual cold emails pitching a service or something, that that’s illegal. I don’t know enough about cold email, because we don’t allow it at Drip. But I do know that B2B there is a carve out in CAN-SPAM where if you’re sending like a direct, one by one emails from one business to another soliciting stuff — there are companies like LeadGenius and LeadFuze – where I’m an angel investor – and that’s a little cottage industry that’s formed around sending cold email outbound one at a time to prospects. And that has had success. There are entire books, like “Predictable Revenue” that are written around this concept. You probably have some thoughts on this, Mike, having worked on Bluetick now for the past six to 12 months.
Mike [31:55]: Yeah. I looked into this pretty extensively because that was one of the questions that came up early on. Not only did I have it, but there were people who asked me specifically. This is more applicable directly to the US because of the CAN-SPAM Act, but there are three general classifications of email. The first one is the commercial one. Most people are more familiar with this because they think if of it as the spam laws that people are running afoul of. So there’s the three different categories. There’s the commercial, and then there is the transactional emails which is if you purchase something from someone, they can send you a receipt; they can send you follow-up emails, let’s say, for you to download something. It’s generally the emails that you would send to somebody in the course of doing business with them. And then there’s this third category which is called “other.” And the documentation that I saw literally called it “other”, which is interesting because they don’t put a very good definition on any of them. They specifically say that for commercial, you’re emailing somebody in an effort to sell them something. But if you, let’s say, send somebody an email and ask them, “Hey. Can we set up a meeting? I want to talk to you.” That’s not considered a commercial email. That falls into “other.” Pretty much anything that’s non-transactional, or isn’t directly pitching something for somebody to purchase, falls under “other.” So it becomes this very grey area where you get into that situation and it’s like, “Okay, well, this one might be spam. This one might be considered commercial, this one might be considered “other.” Transactional is the one that’s really well defined. The other two are not. And it does depend, I think, a little bit more on whether or not you’re emailing with a business, versus an end-user or consumer, so to speak. But there’s a lot of grey area there that people work with, which is kind of the reason why the ESP’s are the ones that tend to be the people who are enforcing that – not the Google’s of the world or other mailbox providers. They don’t necessarily care as much, because if you get your domain banned, they’re not the ones who suffer for it. But with the ESP – you’ve run into this with Drip – it’s your IP addresses that are at risk. Not the customers. That’s really why those ESP’s really crack down on those, and really want to make sure that you are not sending bulk spam because they’re the ones that are penalized for it and all their other customers. There are revenues at stake.
Rob [34:09]: Yeah. That’s right. You look at MailChimp or Drip and we have entire massive algorithms. I won’t go so far as to say their AI, but it’s machine learning stuff that’s looking at listed or being imported. It’s looking at different signals that people signup behaviors in the app. Certainly the open and the click metrics and spam complaints. We have this whole network of we’re approaching a couple dozen signals that we look at over the course of the lifetime of a customer, all the way from the first time they entered that form all the way through their sending and we flag a lot of people and manually review them, and we always try to educate, to try to help the customer understand what they’re doing. But when you have IP’s and sending domains that you’re worried about, this is the stuff you have to have in place or else, as Ali originally mentioned, if you were sending unsolicited, then the stuff will get marked as spam and then your IP’s get dinged and then you can’t get into people’s inboxes any longer.
Mike [35:01]: Right. According to the official guidance from the CAN-SPAM Act, if you go over to FTC.gov, they’ll spell out certain things. They kind of boil it down into seven points. One of them is don’t use false or misleading header information. Don’t use deceptive subject lines. You have to identify it as an advertisement. Telling people where you’re located, giving them a capability of opting-out of future messages. But again, these are for bulk emails. And if your sending individual emails, it kind of falls into this very, very grey area. If I send out 10,000 emails – or even, let’s say 100 – it’s a very different story than if I send out the same email to 35 people and I individually click send on each of those. It’s treated differently. I also think that because of all the grey areas there, you’re in a different world when it comes to interpretation of what it is that you’re doing. And if you were to send out 10,000 of them you’ve got 10,000 possible sources of complaint. And that kind of puts you in a much higher risk category, I would say, then if you’re just emailing a few people here and there. Or even just 1,000 people but it’s over the course of a couple of months or a couple years or something like that. It’s a very different story.
Well, thanks, Ali. I hope that answers your question. And I think that about wraps us up for today. 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 at 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. We’ll see you next time.
Episode 318 | Our Goals for 2017
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike make their goals for 2017. In addition to setting their new goals, they also talk about last year’s goals and how they did.
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 our goals for 2017. This is ‘Startups for the Rest of Us’ episode 318. 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 the word this week, Rob?
Rob [00:30]: The word is iTunes reviews. We have 510 worldwide reviews. A recent review is from a username that’s a lot of numbers and letters so I’m not going to pronounce it. But it’s just from a couple days ago. It says, “Great information but why do they talk so fast? Their podcast sounds like it’s being played at 2x speed and it’s annoying.” What do you think, Mike?
Mike [00:49]: I don’t know. I always play it at 2x speed anyways, so.
Rob [00:49]: I’m the one that talks fast. So here’s the thing. I actually do listen to it at 2x speed. We don’t speed the podcast up at all. I think maybe I just talk too fast. Because I don’t feel like you talk nearly as fast as I do.
Mike [01:02]: Yeah probably. It’s weird but I’ll talk to people whose podcasts I listen to and I have listened to their podcasts on 2x speed so when I talk to them I naturally expect it to be at 2x speed.
Rob [01:12]: Oh, I totally agree. So anyways, we love reviews. We don’t love it when you call us annoying. But we would appreciate if you could log into iTunes, click five stars. You don’t actually need to leave feedback or sentences or type anything. Just hitting that five star would be super helpful for us. Keeps us motivated to keep going and helps us get found in iTunes. On another note – quick Drip update – we’re hiring another person to help with – is such a task. It’s really our first non-developer hire. We’re hire someone to help with deliverability and kind of compliance and a bunch of internal stuff that’s currently spread – like I do some of it and Derek does some of it and our support team handles some of it. And it’ll be nice to be able to get that under one roof. So I think we have our number one candidate all chosen and should get that going here within the next couple weeks. How about you? Do you have any updates?
Mike [01:57]: Well, I got an email from Tyler Tringas, who reached out to me because there was a podcast episode we did a few weeks ago where we talked about some of the different books that were out there in the bootstrapped area. And he said it sounded like we were having trouble coming up with books that were kind of written in that space. And he’s got one that he wrote called ‘The Micro-SaaS eBook.’ And it’s actually being released for free from his blog. So if you go to microsaas.co. We’ll link that up in the show notes. But you can get it for free. It’s aimed at first-time SaaS developers. I looked through it. He’s got four chapters out there right now and I think he’s shooting for 12 or 13. But it looks pretty good. It’s definitely a good resource for anyone who has never developed SaaS before. It has some solid advice in there about what sorts of things you should just completely avoid. And it’s based on his experience building a Micro-SaaS of his own on the side where he built it up to, I think, $250K in annual revenue and it was for store mapping. So if you have a bunch of stores that you want people to be able to locate and put that map on your website then he essentially provides the capabilities to integrate that onto your website and allow people to search for the different store locations that you have.
Rob [03:04]: Very cool. So I was thinking today – it was actually over the last few days – you know, coming up in the late let’s say 2008, 2009, 2010 I was just all – and even before that – I was all about being solo. I think I’ve mentioned this maybe briefly before. But I think that working in an office and working on development teams and working for managers and stuff, I just didn’t enjoy it. And so I kind of turned that into this thought of I just want to be solo; and I don’t want to manage anybody; and I don’t want to work with anybody; and I want to be off on my own doing things. And then over the course of time, I found that I just couldn’t do bigger things when I was completely on my own. Even with a team of eight contractors or whatever. And so eventually I wound up hiring folks as HitTail grew and then as we grew Drip. I mean, it’s a really different way to approach building software. But the realization I had today was you know, last week several of my team members were out of town. Anna and Derek specifically were out for several days for Thanksgiving and so was I. I didn’t see them for about a week and then they were gone Monday and Tuesday and I was in the office and realizing like I actually really don’t like doing this solo thing anymore.
[04:05]: It’s been an interesting transition for me of how much my enjoyment of work now is about having teammates; and about doing things with the team; and working with people; and helping them do their best every day and helping them excel. And then they, I think, in turn do the same for me. They kind of motivate me to do it. So, it’s kind of a random realization. But I’ve been thinking, you know, obviously if I think years down the line and I think what am I going to be up to – I don’t honestly know if I want to do another solo thing where it’s just completely me because so much of the fun and actually so much of the biggest epic realizations and the big breakthroughs that we have tend to be when I’m talking and working with another person or two other people and we’re having these in-depth conversations. Kind of like the breakthrough Derek and I had a couple weeks ago. That just wouldn’t have happened on my own. I don’t know. It’s kind of an interesting thought process. What do you think about that?
Mike [04:55]: I wonder if that’s more of a factor of what your historical experience has been when working with other people. I mean, your last job was working for the City of Pasadena, wasn’t it?
Rob [05:06]: I worked there and then I worked for a credit card company in Los Angeles for a couple of years.
Mike [05:10]: Yeah, that sounds fun. No offense there but –
Rob [05:13]: Yeah. For sure.
Mike [05:15]: Looking objectively at both of those and, granted, in at a very, very cursory level it sounds to me like you probably weren’t necessarily working with people who inspired you to do better and were working on things that were extremely interesting. So, I would almost attribute that to where you came from and what your background was. It feels to me like you would have just changed what your viewpoint was based on “Oh, now I’ve got this team, and I’ve liked them, and I hired them, and we fit together well.” Versus, you know, you come out of this environment where you either don’t enjoy the job or the management and you’re just not having a good time. And you’re like, “Oh, I hate people. I want out and I want to go do my own thing.”
Rob [05:54]: Right. I realized that it’s not that I hate working with people. It’s that I hate working with the wrong people.
Mike [05:59]: Yeah.
Rob [06:00]: You know? And finding the right people really changed the game for me.
Mike [06:02]: I was trying to put it in a very polite way.
Rob [06:05]: Yeah. How about you? Anything else you’ve been up to this week?
Mike [06:08]: Well, I ran a last minute cyber Monday sale for my book and sold quite a few copies. I shipped out a lot of the physical copies of the book several days ago. And one of the things I found out was I was looking through the people who bought it because I had to go through and fulfill the orders for the physical copies because I have them printed on demand through CreateSpace. And one of the people who bought it actually lives right in my town. I have to reach out to him at one point.
Rob [06:33]: Yeah, that’s cool.
Mike [06:34]: It was interesting. I was kind of shocked because I was going through and was like, “Oh, I’ve got to send one to -“ wait. He’s like five minutes from my house.
Rob [06:41]: Yeah, totally. Got to get together for lunch.
Mike [06:43]: Yep. The one thing I have started to run into if anyone knows of a print on demand service for printing and sending out books that allows you to just upload a spreadsheet of those – because when a bunch of them come in it’s kind of a pain in the neck to actually go through so if anyone knows of something like that definitely let me know. I sent an email into CreateSpace’s customer support to see if I could just upload a spreadsheet but it’s kind of a pain in the neck.
Rob [07:05]: Yeah. I agree. Or something that integrates with Gumroad. Because I ran into the same issue with – my 10-year-old wrote the ‘Parent’s Guide to Minecraft’ book and whenever a new order comes in one of us has to go and manually enter it into CreateSpace to print it out and it seems like there should just be a better way. Like an API or something.
Mike [07:22]: Yeah. Like I said, I emailed them and asked them if they had any information on how to do that but it would be nice if there were other options out there that just kind of integrated, as you said, directly into Gumroad so that it’s all completely hands-off so I didn’t even have to worry about it.
Rob [07:33]: Right. And to be honest, when copies of my book ‘Start Small, Stay Small’ come through, I actually do have a VA who does that for me. And basically when I get the purchase conformation I forward it over to the VA and say, “Please send this book.” And you know the address is right in there so. It’s human automation. It’s not ideal but it could save you some time if you get 10, 20 orders like that again.
Mike [07:52]: Yep.
Rob [07:53]: So, what are we talking about this week?
Mike [07:54]: Well, we are going to be, I think, revisiting our goals from 2016 and looking to see how we did on them. And then discussing a little bit about our 2017 goals.
Rob [08:02]: Yeah. We’ve done a goals episode, what do you think? Four, five years in a row?
Mike [08:06]: I think so. Something like that.
Rob [08:08]: The podcast started in 2010, if I recall. So I think we’ve done it most of the years. It would actually be interesting to kind of look back at all the goals we’ve had over the years. Do you think it would be happy or like the Boulevard of Broken Dreams to look back over those goals?
Mike [08:21]: It depends on whether it’s you or me looking at them.
Rob [08:25]: Yeah. You want to kick us off with a couple of your goals? Looks like you had four goals from 2016 and I had three.
Mike [08:33]: On that list, there were two kind of major goals and the two other ones were more strategy related in terms of how I was going to accomplish them. I look back at them now and it’s probably a little more difficult to quantify some of these. But the first one was to launch my new product by early next year. My goal was to have early access by April 1st and then email my launch list by July 1st. I was able to get it, I’ll say, the MVP ready by April 1st but it certainly wasn’t ready for prime time. And in fact, it probably took four to five months after that in order for it to get to the point where it was not even minimally useable, but useable enough to start providing value. We’ve spent the last couple of months just trying to clean up a bunch of stuff and make it so that we can iterate faster on different features.
[09:17]: I’ll be honest, I’m kind of disappointed at how long it has taken to get some of these things done. But at the same time, I also feel that, right now, the product is actually in a reasonably good position and it’s looking better. And when I’m talking to people they seem excited by it. I was talking to somebody from Microsoft the other day and they just kind of called me out of the loo and said, “Hey, can we talk about how you’re using this [?]?” And I said, “Sure.” And I got on the phone and was talking to them. I was telling them about what my product does that runs on their platform and he was like, “This isn’t a discussion for now, but I’d love to hear more about it.” So, it’s nice to get that kind of feedback. And I’m getting inquiries from people and walking through what it is that they need and how it can best serve them. But it’s hard because I still get a lot of support requests as well. So, trying to balance between all of the different things and just juggle. That’s been, I’d say, the hardest challenge over the past couple of months.
Rob [10:07]: And so, your goal was to hit early access by April 1 and you kind of got there. We give you maybe an 8 out of 10 on that.
Mike [10:11]: Yeah.
Rob [10:13]: And your plan was to launch to your email list by July 1, which is about three months after that. When did you launch to your email list?
Mike [10:19]: I, honestly, still haven’t done that.
Rob [10:20]: Oh, wow. Okay.
Mike [10:21]: Yeah. I’ve been individually going to people and kind of picking them off of the email list and following up with them based on their interactions with the emails in there. But I haven’t done like a mass email to them to say, “Hey, come sign up.” So, I’ve gone individually to people who seem like they’re more interested than others. But I’m a little hesitant right now. As I said, Microsoft’s coming in. They’re sending in a couple of consultants to take a look at some stuff. But I have some concerns about scalability. And I think that until those are alleviated – Once they are, I’ll feel better about that but I’m a little gun shy about just dropping about 20, 30, 50 mailboxes on the thing.
Rob [10:59]: Oh, geez. That’s a bummer. That’s a real bummer to have that concern at this early stage. I know that you’ve been kind of cherry picking people out and adding a customer here or a customer week or a few customers a month. But I guess I hadn’t realized it was – what am I not paying attention or something – I hadn’t realized that you hadn’t emailed your list. Scalability, yeah, that’s the concern right now. It’s December 1 right now when we’re recording this. What’s it going to take to fix that? Like how long?
Mike [11:23]: I’m meeting with them next week, so I’ll have a better understanding of it after that. I really just want that second set of eyes looking over my shoulder who’s got some experience scaling out stuff like this. That’s really all it is. I mean, could I start adding one a day for the next 30 days? I probably could. Could I add 30 tomorrow? Probably not. It would probably work but, as I said, there’s a lot of hand holding that kind of goes into the product at the moment just to get people on it, get them using it. You probably ran into this early on with Drip where somebody would sign on, you put them in and then it might have been difficult to get them to add in their email addresses or to write the emails that went with it. And, of course, you can help them out with that. You can write them for them or you can offer to port emails over. But you can’t make them do certain things. You know what I mean?
Rob [12:12]: Right. Yep. To be honest, when we were doing it before where we had our onboarding built out like kind of walked them through it like a guided set up or a wizard, I used Boomerang a ton. I would just email somebody and then Boomerang it three or four days later and check in. I was essentially, I kind of had a poor man’s Bluetick. That’s really what you want. You really want a Bluetick that’s basically pinging people. I think you could [dog food?] your own product certainly for this onboarding. But yeah, that was it. It was a lot of questions and it was a lot of “Can I do this for you?” and it was a lot of “What do you think?” and it was just a bunch of hustle; is how I remember. And then once we knew the sticking points and kind of that minimum path to awesome where people got the dopamine rush from it then we built that into code and we built the actual guided setup with the bar across the top and the trial emails that go out to people and let them know what’s next.
Mike [13:00]: Yeah. Some of that stuff like the onboarding issues that people have run into, those are some of the things that we’ve focused on. So one thing, for example, when an email gets bounced if they send it to an invalid email address, it comes back. And the software previously didn’t know how to handle that. It just kind of ignored it. And it depended on whether or not it came back directly from the server or if it came back delayed in some way, shape or form way after it was sent. Depending on which situation it was in, it might do one thing, it might do another. At this point, it now handles that and it also marks those emails as bounced inside the application. But previously it didn’t do that. So you had not way of telling based on contact in the system how the system treated it. You also didn’t have a way to pause people; you didn’t have a way to just mark it as completed; you didn’t have a way to mark somebody as, “Hey, don’t ever contact this person again.”
[13:48]: There’s a lot of these – I don’t want to call them edge cases – but situations that come up where people are using the software and then they say, “Oh, I would like to be able to do this. Or mark somebody in this way. Or if an email gets bounced, I want to tag them automatically.” And some of that goes in to actual automation and some of it’s just how do you have field in here that captures this piece of information and is that something that lots of people want. So, those are the things I’m still kind of working through. But I am kind of moving in the direction of a public launch. The website itself, I got that ready, I think last week. And there’s still a lot of work to do on it but I, at least, got a new design and some webpages out there and I’m working on putting a full blown signup process in place for that.
Rob [14:29]: Right. And you don’t even need that to launch though, right?
Mike [14:31]: I don’t need that to put somebody onboard. I can manually walk them through but I want to get it to the point where I don’t have to manually do it. That’s really the –
Rob [14:40]: Oh, that’s true. Because when you send them the email, you want them to be able to go and signup on their own.
Mike [14:43]: Exactly. Exactly.
Rob [14:44]: Okay. Yeah. Got it.
Mike [14:45]: I can get somebody on Skype Call and walk them through it but I don’t want to have to do that long-term.
Rob [14:51]: And by the way, you and I have both used the phrase “an email.” What we really mean is “a launch sequence.” You’re not going to send them an email, “Hey, come and sign up.” You’re going to build some anticipation and you’re going to tantalize them and give them a little screenshot, screen cast action. Then you’re going to, boom, drop the hammer on them. Here’s the big discount. Time limited for that – right? It’s the standard?
Mike [15:09]: Um-hmm.
Rob [15:10]: Okay. Just making sure. I would hate to see you make that mistake. I know you –
Mike [15:14]: No, I’m definitely not doing that.
Rob [15:17]: Here you go. Our app is up. Probably once a quarter I just get from some random start-up that I must have signed up here about a year ago and I get this random thing, “Hey, Blaze app has” – I’m just making a name up – “blah-blah app has launched. Come sign up.” And it’s like “A” I don’t even remember what you do. “B” one email’s not going to get me to do it. “C” you didn’t build any anticipation. Just kind of making all the rookie mistakes and, I mean, you can obviously 10x your signups if you do it over a sequence and you build some anticipation.
Mike [15:47]: Yeah. One of the things I’m looking at doing as kind of a marketing tactic for this is setting up stuff inside of Bluetick to more or less just demonstrate how it works. As opposed to having somebody come to the website and go through a tour, say “Hey, why don’t you come over here, enter in your email address and you’ll see exactly how this works. This is what’s going to happen. This is what would look like if one of your customers or one of your prospects was on the other end.” And then just be very blunt and open and honest with them and say, “Look, I’m marketing to you. This is all automated but you wouldn’t know that probably unless I told you. And this is how you can make it look for the people that you are pursuing as leads.”
[16:25]: I did some of that when I was onboarding people and it worked really well. I had the little disclaimer at the bottom, “Hey, by the way, this is completely automated. I’m not touching anything here. And if you don’t respond then you’re going to get another email and here’s the time you’re going to get it.” It would be great to be able to have those things injected in there and use that as more of a demonstration of exactly how it works and what it’s going to look like from the other side. Because that’s one of the concerns that I hear from people is, “How is this going to look to my customers? How do I make sure that it looks like it is personalized and it has that warm fuzzy feeling as opposed to this was some bulk, automated, cold email?” Or what have you. That’s the thing. They want that illusion of personal touch and –
Rob [17:07]: Sure.
Mike [17:08]: – there’s some things that they don’t get that from.
Rob [17:10]: Got it. So when they enter their email and they click submit, they’re actually going to receive an email that says, “Hey, this is a sample.” Or were you going to just show them like a screenshot of a sample?
Mike [17:19]: My intent is to build out, essentially, a series of emails and workflows inside of Bluetick that will walk them through. And if they take certain actions, it will do different things. And at the bottom of the emails I would basically just say, “P.S., if you do this, this is going to happen. If you do this other thing, then that’s going to happen. If you don’t do anything, then this is what will be next.”
Rob [17:38]: Got it. But will they be receiving actual emails in their real inbox –
Mike [17:41]: Yes.
Rob [17:42]: – with this? Yeah. See, I think that’s super cool. I was going to say if not, you should do that. Because that’s the true demo of it is for them to really see what the customer sees.
Mike [17:48]: Exactly.
Rob [17:49]: That’s cool. So we’re 21 minutes in and we’re one bullet of 14. Let’s move on. This may be a little bit of a longer episode. My first goal for 2016 – so the one that I set a year ago – was to 2.5x Drip’s revenue. And at the time that I set this goal we were on pace at our current growth rate to hit 1.8x. I actually think we will hit – it’s going to be very, very close to hitting 2.5x. A lot of that help was Leadpages – the acquisition and then their marketing team. Something interesting that they did is when Leadpages acquired us and then did the $1 plan and then the free plan, is they actually nuked about $22,000, $23,000 in MRR. That actually set us way back on this goal. And this was just a personal goal that I had set up for myself. Leadpages goals for Drip are totally different. So that actually set us back and then we’ve since, of course, caught back up to it. So, anyways. Yeah, 2.5x I think we’ll either hit it or we’ll be really close. Something like 2.4. And given the level of revenue that Drip was at a year ago, this is not too bad. Not too shabby. How about you? What’s your next one?
Mike [18:54]: My next one was to rerun some of my, what I called ‘life experiments’ because back in 2015 I hadn’t done so well on them. And this year I’d say I probably did about the same as I did last year where they ran for a while, I was doing a bunch of different things and then things got busy with Bluetick and I kind of took my eye off of that stuff. So early on in the year it was good and then mid to late year I just didn’t do so much. So I kind of focused on Bluetick more than let’s say going to the gym and going to random events and stuff. There’s like a Renaissance fair that is south of Boston that I wanted to get to this year that I just didn’t get to. And then there is a gaming meetup nearby that I’ve been going to meets every week but I don’t go every week. It’s nice to get out and do things like that and just kind of meet new people. You work from home all the time and you don’t get out much so there’s not a whole lot of social interaction. So it’s nice to get out of the house and do other things. I really just want to kind of open my horizons to other stuff, to new things and get me out of my day-to-day.
Rob [19:54]: That’s what you mean by ‘life experiments?” Like the meetup and the Renaissance fair?
Mike [19:58]: Life experiments is more like trying new things and doing things that I wouldn’t normally do is more it than anything else.
Rob [20:04]: All right. My second goal for the previous year was to support Sherry with her ‘ZenFounder’ book. I was planning to be second author on a book that she had outlined and was planning to write. Kind of like a founder of mental health. Like how to stay sane while starting up type of thing. That’s still on the docket. To be honest, the Drip acquisition just decimated any time that I had to be able to contribute to that. And then the relocation and kind of the chaos that that created – planning for a move; planning to sell a house; shut down Sherry’s private practice; pull the kids out of school; find a new place to live; get the mover. Just everything that goes along with that was literally hundreds of person hours and it was all the nights and weekend time that Sherry probably would have spent writing the book. So this did not happen in any way, shape or form – and in fact, I don’t even know – I think she has maybe less than a chapter kind of drafted up. I think this will be on her docket here in the next year. I wouldn’t be surprised if she gets it all or mostly done in 2017.
Mike [21:03]: The third goal on my list was to be a lot more deliberate about where I spent my time. So to kind of draw delineations between work time and family time and then me time. And my intent was to work less and enjoy my off time a little bit more and generally be healthier. That went well for the first few months. And then after I got to that pre-launch beta period for Bluetick, things went downhill for probably four or five months. And then I think things are getting back on track at this point. So the last month or two I’ve been going to bed earlier, turning off all electronics and stuff like that. And just kind of taking it easy in the evenings. So, I don’t know. I’m not sure how to rate this one. Probably 6 or 7 out of 10 as opposed to anything else.
Rob [21:41]: Cool. And my third and final goal for the previous year was to make three to five angel investments in Bootstrapper. These are post-traction B2B SaaS apps. So in essence kind of going after the folks who are building real businesses rather than raising crazy rounds for B2C stuff. And I definitely made two investments and there was a third that is still in the works basically. And they’re having actually – I’ve committed to it but they’re having a delay in getting some paperwork together. So, I’ll say that I’ve mostly made this goal. In retrospect, five is just a little ambitious for me given how little time I have to devote to this and just how few really – I don’t know. I’m trying to say investment worthy companies that there are and that kind of came across my desk at a valuation that made sense. Since I am somewhat a small time angel investor, I’m not going to invest in rounds when people have valuations of $7 million or something. It just doesn’t make sense for me to write a check. It just doesn’t make economic sense. So for a deal to really be a fit for me and my skill-set where I can provide value, which is why I’m investing in things. Not just to get a return or to have a dog in the race, but I want to actually be able to contribute and offer advice, insight and opinions. It’s kind of niched down in terms of opportunities that I think are really a fit for me. I’m going to be moving forward keeping it kind of a more modest goal.
Mike [23:01]: My fourth goal was to be more complete with my planning. And the intent there was to create full plans rather than partial ones because I have a tendency sometimes to have things more in my head as opposed to written down on paper. I’ll scope out the first set of things really well and then after that I won’t drill down and write down a lot of the details until I get near the end of something. And then I kind of thrash a little bit. I did reasonably well with this. I would say that I definitely got to a point with Bluetick last year where things kind of went off the rails for a while and things are, as I said, kind of getting back in the right direction at this point. A lot of the plans that I came up with are starting to look like I can actually go back and pursue them. But some of the plans that I did put together, they basically just got delayed is really what it came down to. I do have a full blown marketing plan for Bluetick set out and I have a road map for the Product for Features and stuff. But even with that product road map things get moved around a lot which I’m not really comfortable with but, at the same time, customers are asking for stuff so I kind of have to slot in what they need versus what I think that the product needs just because they’re using it, they’re running into issues and it’s like those things need to be fixed.
Rob [24:11]: Yeah. And there’s a balance here between having a longer term plan of like, “Over the next 12 months I want to do this to revenue and here’s the general idea of how I’m going to get there” I think is one thing. And even having that in writing is probably good like “here are the tactics I’m going try. Here are the growth sprints or whatever.” I feel like planning product road maps is really difficult. Like we move ours around quite frequently based on customer request; based on response to the market; based on the realization we have of like “Oh my gosh, we shouldn’t have been doing this the whole time. We really need to get that in sooner.” Based on performance; based on someone trying to send spam through your system. There’s all these things that make you respond so my thing has always – we tend to roadmap about 60 to 90 days out. And I think if you’ve planned that out really well and have it written in order 60 to 90 days, I think that’s plenty of time. As early as you are where you’re still getting customers in who are going to find deal breakers for them. I’ll be honest, when we were at your point we were literally planning maybe a week out, sometimes two.
Mike [25:08]: Okay good. That makes me feel so much better because it was like I’m not anywhere close to 60 days.
Rob [25:13]: No, but we’re such a more mature product, you know. And we have more developers and you just have to do things a certain way. But you’re trying to just hammer out little things to keep your people around. And I think that when people have deal breakers and they’re like, “I can’t use your software until it has this,” we would drop everything and just do that. We would build that to get that next customer. It was like, “What can I build to get the next customer in the door.” So, all that to say, yeah, there’s a balance here. I think that having some long term plans but being really flexible with certain other ones at a different phase of your business I think is important. All right, 2017 goals. Looks like you have four, I have three. You want to kick us off with your first?
Mike [25:47]: Sure. So the first one is to log at least 100 days of exercises coming here. And under the umbrella of exercise I’m including both going to the gym and doing things around the house that are more physical exertion related. If I’m going out in the yard and clearing a bunch of brush and stuff like that. Moving rocks and stuff around. I kind of log that as a checkmark under the box of exercise for the day. Obviously, if I just walk up the stairs and back down or something like that I’m not going to count it. Because there’s certain things that you can do around the house that really should count as getting out of your chair and doing a little bit more than you probably would on a regular day.
Rob [26:23]: Is that why “exercise” is in quotes in the outline?
Mike [26:26]: Yes.
Rob [26:27]: Is that your case of exercising? That’s funny.
Mike [26:29]: Thanks for calling me out on that.
Rob [26:32]: Totally. My first goal is – it’s an interesting one. And it’s one that I’ve kind of struggled with and really had to think about. But you know I went on my retreat where I got strep throat a couple of weeks ago. And one thing I realized is that I really don’t want to start anything new in 2017. I don’t know if I can unequivocally say that I will not for the next 12 months start anything new but that’s kind of how it feels right now where basically you and I have the podcast, we run three MicroConfs now – two in Vegas, one in Europe – I have a podcast with Sherry and I’m still all in running Drip. And I’m still at the point where I’m kind of recovering from this year. Even the past couple years of just pushing hard, growing Drip and then the acquisition and kind of all the chaos and stress that created. And so, as I sit here today, I don’t really have the desire to do anything new. I’m talking like stuff that I might do and say, “Hey, launch a new app. Hey, write a book, start a new podcast.”
[27:25]: Whatever I might do with free time. It’s an interesting non-goal almost. It’s something that I want to – I don’t know that I’ve ever done this. You know what, last time I did this was in 2010 when our second son was born and I really kind of worked kind of the four-hour work week. I was working about maybe 10 to 12, 10 to 16 hours a week. That was when I had that whole portfolio of Micropreneur businesses – DotNetInvoice and stuff. It was right before HitTail. And that was a great time and I eventually got really bored and felt like what am I doing with my life. And that’s when I geared up and acquired HitTail and kind of 10x’d all my previous efforts. I think the one exception to this non-goal may be that if Sherry decides to really write the ZenFounder book, I want to do that with her. But I wouldn’t be, you know, the driving force. I would be probably adding my voice to it and helping her think through some stuff.
Mike [28:12]: I think there’s something to be said for intentionally doing nothing, so to speak. There’s times when you’ll go through like a rough patch or things are just really, really busy and you kind of need a break at that point. And you’ve been heads down on Drip for so long that running a startup is not necessarily the easiest thing in the world to do. It takes a lot of time, dedication and focus and it becomes something that you’re so focused on and you’re devoting so much of your energy to that there comes a point where you just kind of need a break I think. So it sounds to me like you’re probably close to that point or, you know, and it’s not to say that you’re just going to walk away and just go off and do something else as opposed to Leadpages. But coasting is not a bad thing.
Rob [28:54]: Yeah.
Mike [28:55]: You know you can’t always have a goal every single week. It’s hard to maintain that level of exertion for years on end. You can do it for a little while but you can’t do it forever.
Rob [29:05]: Yeah and it’s interesting. You use the word “coasting” and I guess I feel like I don’t think of it as much as coasting as just not starting anything new. I still want to be all in on the stuff that we’re doing, you know. I don’t want to coast on MicroConf; I don’t want to coast on the podcasts; and I don’t want to coast on Drip. I just don’t want to add anything new. Because it’s the new stuff, right. Like you’re going through right now. Just the tremendous amount of energy that that takes to get something from a standing stop to any type of worthwhile point, it’s a lot of effort. I genuinely do see this as a temporary thing. I do not think I’m done for life. But it’s almost like if you’ve ever burned out, it just takes a while to recover from that. I don’t know if I burned out or not. I just know that looking back on this year- there was obviously a lot of good that came out of it – but it was a very exhausting year. I’m looking ahead and think about just kind of being all in on what I have and not adding anything to that plate, it feels like a good thing to strive for.
Mike [29:59]: My next goal for 2017 is to make Bluetick profitable. And by profitable I also mean including my time.
Rob [30:05]: Woo hoo! So not ramen profitable?
Mike [30:06]: Yes, not ramen profitable. Something that if there was nothing else that I could make a fulltime living doing it. And I think that there’s definitely some challenges with this. I’m sure we’ll talk about them at length in some other episode, I don’t think we should do it here because we’ve talked at length about it very early on just the challenges of this past year. But I feel like it’s in a good spot at the moment. And even with some of the concerns I have about scalability, I still feel like a lot of the stuff is well written enough that it can be broken out and it can be made to work better without nearly as much effort as it took to get there. So we can talk about that some other episode. I’m sure we will. But that’s kind of my goal for the next year is to make sure that it is a profitable product moving forward.
Rob [30:48]: That’s a good goal, man. To me this is the number one thing that you could be focused on all year. And I think it’s really measurable. I think it could be a really good win for you. So, glad you have that in here. My second goal is to do between one and three angel investments this year. I’ve really enjoyed this process of getting to know founders and of, like I said, being able to offer advice and to be able to contribute financially and help their business get to the next level. I would think that even without trying too hard, I’ll probably just stumble upon one over the next year and I think top end might be three angel investments. And this is a way for me to feel like I’m really still in the game with these startups because I am invested and I’m seeing the monthly revenue growth and I’m seeing the struggles they’re going through but I don’t have to go through them first hand. And I can still do a 30-minute call or an hour call and I feel like dispense, “Here’s what I’d do in this situation.” But I don’t have to then go do it. This is probably my way of really staying in the thick of things without perhaps really staying in the thick of things.
Mike [31:53]: It gives you a layer of abstraction between you and the actual problems. My third goal is to blog publicly at least every two weeks. So that comes out to 26 total blog posts over the next year or so. But I’ve got a lot of ideas that I’ve written down that I just haven’t sat down and allocated the time to write those things out. But there’s still a lot of things that are just kind of jumbled up in my head so I kind of want to get those out. Somebody asked me before if I was going to write another book and I don’t see that in the near future. But I definitely see that, for me at least, writing about or documenting some of the things that I’ve been running into helps me get it, not just out of my system, but helps me think through it a little bit better and gives me a little bit more objectivity. I kind of want to make an effort to set aside the time to make that a priority and, not so much to get it out there so that people can read it, but more to get it out of my head and become more objective about certain things.
Rob [32:46]: This one’s interesting. I like the ambition of it. Are you like me where a blog post for you is like maybe between two and eight hours depending on how much time you invest in it?
Mike [32:57]: It could be. I actually thought a little bit more about this and – I didn’t write it down on the notes here – but my thought process behind this was to allocate between one and two hours per week to writing. And if it’s done at that point then it gets published and if it’s not done it still gets published. I’m really going to be working with hard deadlines in terms of the time that I’m allocating to it. So, it’s not going to be stuff that’s highly polished; it’s not going to be stuff that is extremely well thought through but it helps me get things out of my head. Because I write on a regular basis anyway, I just don’t publish it. So I think that by doing that it will give me that outlet to just put it out there and give people an opportunity to comment on it or talk about it or give it as points that could go up in discussions or what have you. I see it as just a way to get that stuff out of my head really, like I said. I’m doing a lot of that stuff now anyway, I’m just not publishing it. That’s not helpful for other people and that’s one of those things that I like doing is I like helping other people. And because the stuff that I write for the most part now isn’t published, it doesn’t do that.
Rob [34:04]: Yeah. I like the one to two-hour timeline for you. Or kind of a time box because otherwise I think – I do believe your focus should be Bluetick. And that if this goal distracts you from that that I should not basically. I think if you can set yourself a two-hour time limit every two weeks that’s perfectly reasonably.
Mike [34:22]: Yeah. And I think some of the topics are going to be related to things that I’m running into for Bluetick as well. I have some experiments that I want to run in terms of pricing plans and that will probably be turned into a blog post about what I’m doing and why. And other people might find it useful. They might say, “Yeah, that sounds great but it wouldn’t work for us and here’s why.” And that’s fine. But the idea is more for me to think about those things a little bit more objectively and by putting that tight time box on it then it forces me to finish in that time. Because you said that it could take you anywhere from four to eight hours to write a blog post. I could easily do the same thing because there’s not real end date for writing a blog post. It may take you an hour, it may take you 25 but if you don’t put that cap on it, it could easily go forever.
Rob [35:08]: My third and final goal for the next year is to exercise two days per week. I have typically been exercising about one day a week, one and half days a week. Kind of finding it hard to really carve out the time. But since moving to Minneapolis I have found since we live right next to a lake that it is so much easier to just get out for 20 minutes and just run. In our neighborhood back in Fresno, it just wasn’t really feasible. There were no sidewalks and there were all these busy streets and it just didn’t make a lot of sense. So I found this a lot easier. I think the challenge will be in the winter. I’ve run a few days when it’s in the 20’s and the low 30’s. I have kind of the proper gear for that at this point I think. So we’ll see if I’m disciplined enough to really carve out the time. But I’ve just found that the more I do that kind of the better I feel overall. It’s funny, I looked at this goal, you know, two days a week is about 104 days of exercise a year and you basically have a very similar goal of 100 days. So, I think both of us are looking to stay in shape now that we’re as old as we are, huh?
Mike [36:07]: Yeah. I mean, you look at the raw number of 100 and it’s like, wow, that’s a lot. When you break it down like you just said, two days a week is actually not that much when you look at it across the entire year.
Rob [36:19]: No, it’s not. And to be honest, I would love for it to be three days. I’d love for it to be every other day. But those just aren’t realities for me these days given what’s going on. So I don’t think this is overly ambitious. I think it’s very realistic. But certainly an ambitious one would be a three day a week exercise plan. And for my fourth – it’s somewhat of an honorable mention because I just can’t be as specific as I would like to be on the podcast – but I have goals for Drip basically. And these days there are some secret revenue goals, although I’m not as in charge of that as I used to be given that Leadpages handles the marketing so well. I have more product goals about giving certain features out and just making it basically the best marketing automation tool available. I’m not going to sit here and lay out the roadmap of everything we’re going to build but I definitely have some very specific things that in the next 12 months if we don’t build I will be displeased. Maybe by the time we get back here next year, I should be able to point backwards and say, “Hey, that’s when we launched this, this and that. Those are the three components that I was trying to get out.” I apologize for the vagueness in advance. But in retrospect, I’ll be able to talk a little more about it.
Mike [37:24]: Awesome. Well, I think that about wraps us up. I’m sure we’ll be revisiting some of these throughout the year. And it probably makes sense to take a look at these in April or May or so and just make sure that we’re at least on target for some of these. And if we’re not we can start revisiting that.
Rob [37:38]: I agree. And as a listener, 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 317 | Our Predictions for 2017
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike make their predictions for 2017. They also look back on the previous year’s predictions and evaluate whether or not they were correct.
Items mentioned in this episode:
Transcript
Rob: [00:01] In this episode of Startups for the Rest of Us, Mike and I talk about our predictions for 2017. This is Startups for the Rest of Us episode 317. […] Welcome to Startups for the Rest of Us, a podcast that helps developers, designers, and entrepreneurs be awesome in building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:26]: And I’m Mike.
Rob [00:27]: 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 [00:33]: Well, my wife and I rescued a cat this week. There was a cat that was coming up the driveway and our kids were looking at it. It was very friendly and it seemed, obviously, like a stray of some kind, but it got close to us and it was kind of rubbing against my son, and he was patting and he’s like, “Can we feed it?” and of course because you don’t really want to go feeding random stray cats, because they’ll never leave. But this one was like scrawny as all hell. It was probably only about four or five pounds when we found it, and it was full-grown, so it was just obviously in need of some love and care. But it was somebody’s cat. I don’t know whose it was, but we think that somebody just dropped it off. We took it to the vet and had them check it and see if there was like a chip in it, and there was nothing. Posted on Facebook groups and tried to find its owner and haven’t been able to find it, but over the course of about four days, it ate probably close to four pounds of food, which is just an ungodly amount of food for a cat that was that size. So we’ve decided in the end to keep it. So we’ve taken it to the vet, had its shots, and it’s been hanging around in the basement for the past week or so.
Rob [01:35]: Oh geez. Are you prepared for the responsibility? I guess cats are a lot less responsibility than dogs, but have you had a pet in the past?
Mike [01:42]: Well, we already have one cat, so right at the moment, that’s why this one’s in the basement. We’re keeping them separate for the time being, because our other cat is not, I’ll say, very friendly. I’m not exactly a cat person; I’m more of a dog person to begin with, but our upstairs cat is just, you know, she wants to be left alone, left to herself. She just wants to sit in a corner. She’s more a cat that’s like, “Pet me. Stop.” It just does not want to be involved in any way, shape, or form, unless it’s dinner time. So we’re keeping them away. This upstairs cat is definitely not particularly happy that there’s something in the basement, although, I don’t think she really understands what is down there, but she does not like going near the door anymore. She used to go down there all the time and now she’s won’t go near the door. So it’s probably going to be like a month or two before we can integrate them together. But we’ll see how it goes. The kids are in love with the new cat and like playing with it, and we’ve been locking one of them in a bedroom and then just letting the downstairs one come upstairs and hang out a little bit. But we’ll see how it goes.
Rob [02:42]: Sounds good. I wanted to bring up a subject we talked about last week, which was Wistia pricing plans. And when we were on the show, I’d said that Sproutvideo was cheaper. I think it has a –whatever it is – a $15 plan or a $25 plan. And I mentioned that Wistia is basically starts at $100 and I think you said that they had a $25 plan. But since then I went there – because I was talking to someone else a day or two later and we went and looked and it was like, they have a free plan that’s super limited. You get three videos. So it really is hyper-limited. And in essence, they start at 100 bucks at this point. Just to clarify.
Mike [03:18]: They used to, and it’s funny because I’m on their $25 plan. So I used to be on a $100 plan with them, and then they moved a lot of their pricing plans around and it made more sense for me just to switch down to their $25 plan. And then since then, they’ve gotten rid of that and now they only offer the $100 plan again.
Rob [03:35]: And so they start around $100 and then Sprout does have a $20, basically a $25 plan that is, again, it’s a bootstrapper plan is how I think about it, because it doesn’t have all the features that Wistia does but it is a perfectly competent platform and you can capture emails and do stuff – just not as much fancy stuff as you can with Wistia. Other thing for me is, first time ever this week going to Disney World. Actually taking the kids there as a surprise. I’m pretty excited to get down there and see what’s up. I’ve been to Disneyland a few times but I heard that it’s quite different. It’s a different scale. Have you been there? Have you been to Disney World?
Mike [04:10]: I have. I’ve been there I think twice. So we went down there with the kids both times and we took my mother-in-law once as well, just because she could help out with the kids. But it sprawls. There’s a lot to Disney World. Do you know where you’re going, or?
Rob [04:23]: Yeah. We’re staying in one of the resort hotels and then we have basically three days and we go to three different parks. So we’re not doing Epcot; we’re doing all the other three parks. The thing I’ve been really impressed with, with Disney is the level of technology that they’re using. So I’ve received basically a print on demand booklet that says, All-in family vacations, has the Incredibles on the front. You flip it over and it’s like your itinerary is all custom-printed inside, it looks really sharp. Then they send you the wrist bands and those must be NFC or something, because they say that’s your FastPass, that’s your key to your door of your hotel room. That’s your meal ticket. It’s like everything. And each of them is monogrammed. It’s etched with the name of the person. It’s really, really pretty impressive. And then I’ve been selecting FastPass stuff online in advance and I’ve been able to move that around and it’s super flexible and I’m impressed with the level of sophistication and really feeling like we’re not just going somewhere and going to spend days standing in line, but actually able to plan this thing and feel good that things are taken care of.
Mike [05:22]: When we went to Disney World, we went to a couple of the different parks. We went to Epcot and we went to the regular Magic Kingdom and there was – there was also, I think it’s Animal Kingdom?
Rob [05:31]: There’s a wildlife, yeah.
Mike [05:33]: So we went to those, but we ended up spacing it out a little bit. So we were there for about a week, I think, and we went to a different park every other day, and what we found out was that the kids were just wiped out by the end of each day. So the next day it was like a recovery day, and we would just stay at the hotel or go someplace else and not let them be as overwhelmed. And then the following day we would go to one of the parks. And we found out that that worked well. But they were younger then. So your kids are older than they were, so I think that they’ll probably be fine.
Rob [06:01]: We’ll see. I’m sure we’ll all be exhausted by the time it’s done, but we basically have three full days down there and then the two book end days are our travel days. So it’s nice to do it. And we’re actually recording a couple of weeks in advance, so this is over Thanksgiving, which is why we decided to do it now.
So let’s dive in to our predictions. In a true Startups for the Rest of Us tradition, we like to look back at the predictions we made last December. We made predictions for 2016. We each have four. We’re going to look at those, evaluate whether we think they became true, whether we think we were correct with them, and then we’ll wrap up the show with our predictions for the coming year. So you want to kick us off with your first prediction that you made last December for 2016?
Mike [06:41]: Sure. So the first one I made was that lots of churning would happen in the wearables’ category. And I had said that I didn’t think that I saw most of these going anywhere and that it’d be a few years before any of these became really big. And one of the things that I had mentioned specifically was that I didn’t think that the Apple Watch was ever going to be a big thing like the iPhone or the iPod. And I would say that this probably turned out to be true. I look at the landscape and I don’t see anything that came out where everyone was like, “Oh, I have to have that,” or, “I really want that.” And even Apple this past year came out with the Watch 2, and there wasn’t really a lot of hubbub about that from the community or from the people who were out there investing in those types of technologies. They looked at it and they said, “Yeah, that’s okay. It’s a nice incremental improvement, but the first one was not so overly impressive that it really made a big difference in my life.” I even saw some people who they said that they regretted getting it. And I think that there’s a lot of those different wearables, especially when you see things like the things coming out from Fitbit and various other companies. There’s just not a lot to them. They augment what’s going on already, but they don’t necessarily change how you live your life, or what sorts of things you do.
So again, I think that this came true or it just was status quo I’ll say more than anything else. But I think it’s going to be a while before the wearables category really starts to take off, because it’s going to be a while before people figure out what is it that the consumers really want or would really alter their lives or make them better. And I don’t think it’s really obvious what those things are. I think there’s a lot of opportunity, I just don’t think that there’s – there’s not that killer feature yet that people are like, “Oh, I absolutely have to have that.”
Rob [08:17]: My first prediction for 2016 was that single-round bootstrapping, also known as fundstrapping will become a common, viable option. And I would say that it has become more of a viable option. I’m not so sure it’s common. I had imagined more people taking this road. Although it is more viable, it is more popular, and I’m seeing more people seek this road as they hear about it, right, as we talk with the Jordan Gall or Justin McGill who have really done the fundstrapping model. Or when I had Bryce from India VC on the show a few episodes, that seemed to really resonate with people on the thought of being able to raise around, to get there faster, and to be able to basically quit your job from day one but not be beholden to VCs and not be beholden to this implied series A. I think it’s really appealing to people and it has a lot of the pluses of bootstrapping with some of the benefits of basically raising funding. And it’s a mix. So I think this is a partially accurate assessment. I think maybe I’m ahead of the game, but I do continue to believe in this model and I think it’s going to become even more popular over the next year or two, especially as a lot of the startups space and specifically the SaaS space continues to be really competitive.
Mike [09:27]: My second prediction was that we’re going to see a lot more bootstrappers in our circles concentrating less on making money and more on doing what they’re enjoying doing, and more or less living their lives in their own terms – less consumerism and less accumulating of stuff and more doing what they enjoy. And I don’t know, I think this one’s hard to gauge. I definitely wouldn’t say that this was an obviously accurate statement, but at the same time, I wouldn’t say that it was obviously proven to be false either. It’s somewhere in between, but it’s hard to measure that as well.
Rob [09:54]: I think we need to make more concrete predictions, because some of these are hard to gauge, you know?
Mike [09:59]: Yeah.
Rob [10:00]: So my second one was Twitter will become less relevant over the next year, returning to its roots, it’ll be journalists and technorati and it will be ripe for an acquisition. And this, of all the predictions I’ve made, perhaps over the past several years, this one I think was dead-on. And this was not – it’s obvious now that this is happening, but this was not on people’s radar a year ago. Twitter was still growing and people were on it and stuff. So I remember making this and thinking, “Boy, I’m kind of going out on a limb with this one.” And I’d say this is really accurate as we’ve heard lately with acquisition talks and failed acquisitions rumored, all types of stuff. So what do you think?
Mike [10:40]: I’ll admit. I thought that you were definitely going out on a limb on that one, but I’ve noticed that even I’ve stopped using Twitter nearly as much in the past 12 months as I have in the previous couple of years. So it’s interesting to see that. It’s not something I would have expected, but anecdotally from my own experience, I’ve used Twitter a heck of a lot less this past year than I have in the previous couple of years.
Rob [11:00]: And you’re not alone. You said growth is basically mostly flat-lined and the revenue is not growing as fast as people want. It’s still growing but the stock market doesn’t love the growth and then, like I said, there have been acquisition rumors that have fallen through. So I think I nailed it on this one.
Mike [11:18]: My third prediction was that there’d be fewer IPOs and more acquisitions in the tech space. And I also felt like there’d be more stagnation from the unicorn companies. And if you look at some of the classic unicorn companies like Airbnb and Dropbox, they still obviously exist and there’s nothing wrong with them – at least it doesn’t seem to be in terms of their business model – but they don’t appear to be doing anything radically different and they’re definitely not on the same growth trajectories that they used to be. It seems like they’re still growing but not nearly at the rates that they were before. And I’m not seeing anything new from them. I am seeing that they’re going through and acquiring certain technologies or other companies that will help augment their services, but there’s nothing so dramatically new there. I also haven’t seen very many tech IPOs this past year, but there have been acquisitions as well. So those acquisitions have continued to happen. Drip is an example of one of those things. You didn’t go IPO with that, but I don’t think you ever really had intended to do that either, but there was that acquisition and then there’s other companies out there that have been acquired in the past 12 months as well and it’s – I would say that this is probably more accurate than not. But again, like you said earlier, it’s hard to quantify because we haven’t really put any sort of benchmarks on these.
Rob [12:30]: My third prediction for 2016 was that public markets would continue to value companies lower than their private valuations. And what was going on at the time was that folks were raising these funding rounds from venture capitalists and the good companies were getting these really high valuations and then they would go public, and their per share price would actually be lower than their most recent round. It was like going public was a down round. And from what I’ve seen this year, it has continued to be that. I think there was a big hit. You know remember, we made these in November, December last year and there was a massive hit, especially to SaaS, to B2B and SaaS valuations last January, where I think SaaS valuations were right around seven times annual revenue and they were cut to about 3.3 within a two-week span in January. Now they’ve since recovered and they’re up in the – let’s say between four and six range, depending. But there has continued to be – I’d say this has continued to be accurate. This is something that was already playing out in 2016. I wouldn’t even venture to say what’s going to happen in 2017. It depends a lot on what the public markets do. But it’s an interesting twist in that if you looked 5 or 10 years ago, and especially even 15 years ago, during the .com boom, the public valuers were always higher than private, because that was the scale up, is that you’d raised your series A, your B, maybe a C – and then you go public and you’d get this big bump whereas people who were, you know, even as of last year, people who were in on the last round of investment were basically losing money when the IPO happened. So it was this interesting frothy market.
Mike [14:02]: So my fourth and final prediction last year was that drone technology was going to take a serious step forward based on the FAA regulations for registering drones over eight ounces. And I look at the technology itself and it feels to me like things have come a long way. Now I don’t know really whether that was driven specifically by those new regulations, but if you go look at toy magazines for example, or websites where they have drones as like a peripheral thing, not necessarily – you don’t want to go to a drone website where all they sell is drones, because obviously that’s – it influences in the wrong way. But if you look at things like, for example, a Target newsletter or a weekly flyer or something like that, you will see small drones in there that you really didn’t before, and they’ll have several different variations of them. So I do think that the technology has taken some serious steps forward – whether it’s directly influenced by those regulations, I don’t know for sure. My suspicion would be yes, but it’s hard to say definitively that that was exactly the reason. But I would say that this was relatively accurate.
Rob [15:00]: My fourth and final prediction for last year was that virtual reality would be a hit with the early adopters set in 2016. And I would say this is not accurate. I think it’s still too early. I just think we haven’t hit that. Even with early adopters, I know there’s a lot of headsets coming out and there’s AR fighting VR, and it’s a really interesting space to watch. But it still feels like early days and I definitely wouldn’t call it a hit yet. I wonder if in the next – it’s kind of hit eventually, right? So in the next 12 to 18 months I think things will go. But definitely didn’t happen as quickly as I had imagined.
Mike [15:40]: So those are our 2016 predictions. Why don’t we go into our 2017 predictions? Rob, why don’t you kick us off?
Rob [15:46]: So my first prediction for 2017 is that there will be another high-profile acquisition in the bootstrapped space. And by another, I mean, Drip being one that happened this year that is an example of our little community that started with a few bloggers and you and I talking on a mic and then getting 100 people together in a room in Vegas in 2011 has really grown, and not only in size but just in the apps we’re building and the impact we’re having both on our lives individually, on each other with all the masterminds that come out of the community that we built, as well as the apps that are coming out of it. And they’re becoming higher and higher profile, and so I’m going out on a limb and I’m saying that there’s going to be another – when I say high profile, I don’t mean a technology sale of a web app for a 3.5 times annual net. I mean another one that’s a big funded company or a larger company buying someone that we know – that we know by name in the Microconf circles, in our podcast circles, and folks who we’ve talked about in the past on the show. And I don’t know of anything that’s coming specifically or I don’t know specifically who it’ll be, but I have a few ideas and it’s just some potentials.
Mike [16:52]: Bottom line you’re saying you’re not cheating with insider information.
Rob [16:55]: Exactly. That’s what I’m trying to clarify here. This really is a prediction and not just me gossiping about rumors that I’ve heard or anything.
Mike [17:03]: Sure.
Rob [17:04]: How about you?
Mike [17:04]: Well, my prediction for 2017 is that health insurance rates are going to become a much bigger issue for self-funded companies. And I’ve heard talks quite a bit about this over the past – I don’t know, maybe three to six months I’d say – where people are starting to ask more questions from the bootstrapped community. And I think that this coming year it’s going to become a much bigger topic, just because the way the election went and there’s all these questions and uncertainty moving forward. And the reality is that if you look at the health insurance rates for a self-funded company if you’re self-funded, you’re running the business, and you’re the only employee, for example, you have very little data to go on in terms of what other people are paying for health insurance and what’s common and what’s not. So there’s all this obscurity around what should you be paying for your health insurance and what is normal? And I think that as people get more comfortable asking those types of questions, that’s going to come up – and I think it’s going to become a much bigger issue in our circles for people – not just in what it is that they’re paying but who they’re using and what’s common, what’s normal, and quite frankly – do they even need it? Are there other ways that you can go about solving this particular type of problem for yourself and for your family that may not necessarily be options for – I don’t want to say mainstream people, but for people who are W2 employed for like a large company. Are there other options that people in our circles are going to come up with that are helpful and useful in that specific situation that would not be generally applicable outside of that situation?
Rob [18:35]: And I would say this is already an issue today. So you’re saying it’s going to get worse?
Mike [18:41]: I’m saying that it’s going to get worse and it’s going to get talked about. I think that previously –I’ve seen a few talks about it here and there, and I’ve seen some conversations happening here and there, but I think that those types of conversations are going to become more mainstream in our circles, just because the sheer cost associated with paying for your own health insurance is starting to rise dramatically – and I’ve noticed this myself with my own insurance, where from one year to the next I might be paying $3-400 a month in addition to what I was paying before, which that can be easily 30-40%. And you look at that and you say, “Well, okay, what other options do I have here?” What I’ve seen is that some of the insurance companies, they’ll just jack up to your prices until they get to a point where you’ve decided that it’s no longer worth it for you to have insurance through that company, and then you’ll go to some other company. And I think what they’re doing is they’re essentially price testing on their own customers to see who’s going to tolerate those price increases and who’s not, and using the knowledge of their current customers to help them basically extract more money out of their customer base. And if a bunch of them cancel, so be it. If they don’t, well, that’s fine, they’ll get the extra money, and then they’ll kind of adjust that. But because not everybody’s health insurance renews on the same month of the year, they’re able to do that on a monthly basis – and essentially I feel like they’re price testing that month in and month out and adjusting their prices over the course of the year.
Rob [20:07]: And this is mostly a US only prediction, because a lot of the countries in the world take care of their folks and don’t let the insurance companies do what they do here. So my second prediction is that startup crowdfunding in the JOBS Act here in the states which allows non-accredited investors to invest through sites like Indiegogo, and they just launched this week – they’re crowdfunding. I’ve gone back and forth on this but I think I’m pretty confident that it’s going to fizzle out. It’s not going to have legs like Kickstarter and product crowdfunding has, where you do something and you get a product in the end. I think that people like to think about this idea of putting $100 into a bunch of different startups, and that that’s fun and exciting, and I think there’ll be buzz about it, but I don’t think it’s going to take off in any meaningful way. I think that like the good startups, and the best that are raising money are not maybe going to go to crowdfunding. That they have either the connections or they have the traction to get known angel investors and people on angel.co and institutional investors and that kind of thing, and that startup crowdfunding will probably be filled with a lot of noise. There’ll be some signal there but it’ll be people who basically can’t raise or aren’t able to raise through their network, and so it’s naturally – again, this is just my prediction – naturally going to be the lower end and the startups that are less likely to be successful.
Mike [21:29]: My second prediction is that the bar for building a SaaS is going to continue to become harder to reach. And I feel like there’s almost this tipping point that’s starting to happen, where companies are – instead of taking that approach where they go out and they do the customer development and do a lot of the upfront work that has traditionally been done to identify the market and the different channels you can use, and customer validation and all that, I feel like that is still a viable channel, but I think that people are going to start moving more towards the model of building a service around that offering first and offering more of a comprehensive, complete solution for people that’s all manual driven, driven by people on the backend, and then once they’ve figured out the market, transition into building software to kind of SaaSify the whole thing so that they can go mass market with it.
I’m starting to see this in a couple of different places, but I don’t think that it’s really become mainstream yet, but I think that this year we’re going to start to see a lot more of that because the risks associated with building a services company, I think, are dramatically lower than they are for building a SaaS where you’ve got this long development cycle upfront and then you start putting customers in it. And the funding that is required to do that type of thing is substantially more than if you were to build a services company where you’re charging people 500, 1000, 2000 dollars out of the gate, per customer – and yes, you’ve got a lot more cost behind it, but you’ve also got the ability to put in five customers, and that’s 10k in revenue – whereas if you have a SaaS offering and you put in 10 customers, you’re probably only getting like 5 or 600 dollars a month. And the revenue that is different between them is just – it’s dramatic. You can build a services based company like that very quickly, because you’ve got the revenue coming in. And well it’s very easy to make adjustments to the processes that people go through, but it’s much more difficult and much more time consuming to change a software package when you don’t have enough volume going through it to be able to justify or be able to clearly say, “Look, this particular piece,” or, “This feature needs to be changed,” or, “This feature needs to implemented.” You can change the processes much, much faster than you can change software, and I think that people are going to start to go in that direction and it’s partially due to the fact that that bar that people have as an expectation for how good a piece of software is when they first sign-on to it is so much higher now than it was two, three, five years ago.
Rob [23:50:]: So I actually think this is really already going on. This is the concept behind Brian Casel’s talk at Microconf here last year about productizing services. What are you saying that’s going to be different than what’s already gone on?
Mike [24:03]: What I’m saying is that we’re going to start to see a lot more of this type of approach, where people build – so like take for example, Brian Casel where he was talking about Audience Ops – and I think there’s a difference between just building a services-based company versus building a services-based company and then leveraging that into a SaaS product that you build as a follow-on for like the lower-end market that you’re not addressing because you don’t have the manpower and they’re not willing to pay that level. And I guess if you were going to point directly to Brian with Audience Ops, they’re coming out with the Audience Ops calendar. And that’s out on their website; you can go take a look at it, but they are moving in the direction where they have this Audience Ops process that they’re putting in place and they’ll do it for you as a service, but based on all the things that they’ve learned, they’ve said, “Okay, well, if we’re going to build a product out of this, how do we go about doing it and what needs to go into it?” They’ve already done all the customer development. They’ve learned all the different things that need to go into it, now they’re distilling it down into a software package that they can sell. That’s the model that I see coming to the forefront, where people will build the services company first and then build the product afterwards – as opposed to doing it the other way around or just going strictly on the software-only model.
Rob [25:12]: My third prediction for 2017 is that we’re going to see a correction in the US stock market and I think it’s going to be 20% or perhaps more. I’m not commenting on the broader economy. I don’t necessarily think that there’s going to be any type of recession or anything, but the stock market is averse to uncertainty, and that’s when the stock market does crazy things – goes up really fast or down really fast. And I think that if anything, our president elect, Trump, is someone who inspires uncertainty. I think some of the things that he’ll wind up doing over the coming year will probably have a negative impact on the stock market, and I also think that obviously it’s pretty obvious that interest rates are going to be coming up after historic lows and that always sends the stock market down as people come in and now put money into T-bills and other things that are going to pay higher interest rates. So I’m not one to have bearish predictions in general; I tend to like to have a positive outlook on things, but I for one I’m keeping my eye on the stock market and the economy as a whole, and thinking that we’re due for some type of correction, I think, that most people who follow the market would agree, that we’re probably pretty over-valued right now and that something needs to give there.
Mike [26:18]: My third prediction actually relates to that a little bit. And it’s not so much directly related to the stock market correction so much as it is about the uncertainty of the future. And I think that what we’re going to see, as a result of that, is that some of the more small-scale businesses or small-scale entrepreneurship is going to pick up steam, and I think related to that we’re also going to see a lot more of the small- scale entrepreneurial meet-ups around the world.
I think still Tiny Conf this past year is split out into three different locations. There’s the – there used to be just East and now there’s East and West and then there was the East, West and now there’s Europe. I think that we’re also going to start to see various meet-ups that are completely unrelated to those around the world as well. I’ve seen some start popping up over in Germany and in London, and I feel like this is the year where we’re going to start to see those types of things advertised a little bit more, and become much more common. Even two, three, four years ago, around here – like I only live an hour outside of Boston and I’m just not – I haven’t been seeing those types of things. And now I’m starting to see them. I’m starting to see them pop up even around where I live, which it’s interesting to see that because, yes, I live near Worcester which is I think it’s the second largest city in Massachusetts, but historically, there has not been a lot of activity around this particular space and I think that with the uncertainty that’s coming up, with the president elect, Trump, and all the other things, the interest rates going up, I feel like companies may very well start cutting back a little bit, and when those types of things happen, if companies start letting people go, there’s one of two things that usually happens with people that either leave their jobs – whether it’s voluntarily or not – they tend to either go back to college or they start their own business. And I feel like a lot more people are going to end up going out and starting their own businesses, because to them they’ve been working at those companies for a while, yes it’s been great but there’s starting to be a downturn and they say, “Hey, you know what? I’m a little bit too old to go back to school. I don’t want to. I’ve been down that road before. Let me go out and start my own thing, because I have the awareness or the knowledge of the different markets and confidence to go out and try my own thing.”
Rob [28:23]: As I said in the very first original micropreneur.com, reports that people could download – it was that Lead Magnet or opt-in reward – there has never been a better time in history to start a software company. And I think that’s continued. I wrote that in 2008 or 2009, and I still believe that today. My fourth and final prediction for 2017 is that the first package will be legally delivered with an unmanned drone. This will be somewhere in the world that I don’t think it’ll be in the US, due to the regulation, but I think some country in the world will not care and that a consumer package is what I mean, is someone paying for something. I know there’s already a disaster of the leaf drones where they maybe get medicine to places where the roads have been decimated by a flood or an earthquake or something, and that’s already going on. And in times of emergency, people are allowing that to happen. But I’m imagining someone either paying for something like from an Amazon or walmart.com or food – ordering food and having that delivered.
Mike [29:23]: I was just thinking tacos.
Rob [29:25]: Tacos is really good. And the reason I said legally is that there’s already been – there was a story two weeks ago in New Zealand where somebody took a drone, programmed it, and wrote and put a note on it and like a $10 bill and it flew down to this sausage store or like a butcher, I guess, butcher shop of some kind and it said, “Please, give me one pound of sausage.” And they put the change in an envelope and attached the sausage to the drone and then it flew back to the guy. And I think the cops sighted him. You’re not supposed to fly unmanned drones over people, you’re not supposed to fly them out of line of sight, and so it was there. So that’s why I’m saying the first packets actually legally delivered with an unmanned drone. And I do mean a consumer or a purchased product.
Mike [30:11]: I could definitely see this happening. I’m kind of with you. I’m not sure whether it would be inside the United States or not. My suspicion is not, but I could potentially see where they allow it in a particular test scenario or something along those lines. And so are you thinking that this would be something that is outside of a test scenario or outside of like tightly controlled circumstances?
Rob [30:32]: Yeah. I think that it’s going to be tightly controlled for the first year or two, period. I think that they’re going to basically program a drone to go do something and they’re not going to monitor it super closely, but that it’s going to be unmanned and not piloted. That it’s going to be programmed to do that.
Mike [30:48]: I don’t mean tightly controlled as in them not really paying attention to it, I mean tightly controlled as in, oh, they’ve got a government auditor on site watching the whole thing from beginning to end just to make sure that it works and nothing major goes wrong, and if it does then somebody can ask questions of that person. I mean more of a, they look at the laws that says that they can do it and then they just go do it. Does that make sense?
Rob [31:11]: Yeah, it does. I don’t know that it matters, whether there’s an auditor on site or whether – I don’t know. I think that if something’s delivered legally with an unmanned drone, whether the government is really active in that and it’s part of a pilot project, I think that fits the description of what I’m looking for. I think it’s similar. We can make another prediction about unmanned vehicles, right, about basically self-driving cars. I know they’ve – at least one state, maybe two, have kind of legalized them for test purposes, but I’m curious to see if we’ll start seeing any unmanned trucks or unmanned cars really starting to take shape here in 2017. I don’t have a prediction about it, but it’s definitely something we’re going to see unfolding here pretty soon.
Mike [31:53]: I think eventually, yes, but for the time being, I don’t know about that. I could see it being done on highways for like long haul stuff – I don’t know about inside of a city where you’ve got lots of things going on. I think that people would be a lot more hesitant about. But driving across the country a couple of thousand miles, I could definitely see stuff like that happening.
Rob [32:12]: Long haul trucking and stuff?
Mike [32:13]: Yeah.
Rob [32:14]: They’re saying that’s going to be disrupted pretty early.
Mike [32:15]: Well, if you have a question for us, you can call it in to 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 Commons. Subscribe to us on 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 316 | Subscription Pricing Models? Challenge Accepted.
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about overcoming challenges with subscription pricing models. They dive into how to test selling subscription based products, deciding between one-time, monthly, or annually, how to raise prices, how to lower prices, and how to avoid overpaying for support.
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 overcoming challenges with subscription pricing models. This is Startups for the Rest of Us, episode 316. Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, growing, and launching 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]: 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 [00:32]: Well, as I mentioned in last week’s show, I went up to Lake Superior to have my retreat, to do a bunch of thinking, and kind of relax. The day I went to leave Minneapolis to drive up there, I was feeling terrible. Like sore throat and all sorts of stuff, tired. So I drive up there kind of fever-dream-ish. I was in and out of conscious, but it was in a state where you don’t remember how you got there type of thing. So I got there, slept 13 hours that night. I get up in the morning and look at my throat with the mirror on my camera phone and it’s just brutal. White spots all over the place. Turns out I contracted strep throat right before my retreat.
Mike [01:12]: Well, on the bright side you probably didn’t have to talk to anybody.
Rob [01:14]: But this thing is – it was exactly that. I was like, “this is a real bummer that I’m not -” I couldn’t think well enough to actually do retreat work. I pretty much watched TV, slept, and listened to podcasts. But on the bright side, I didn’t have to be at home around everybody. Because you know, when you’re sick and you have two kids that are waking up early. You’re trying to sleep and you want to be helpful with them, but you’re kind of incapacitated. I didn’t have that guilt because I was just in this cabin overlooking Lake Superior. Kind of couldn’t think of a better place to be when you’re that sick. I was up there for three days. I was able to get some medication up there. Hour-round trip to the nearest clinic and I started feeling better by the last day. It was an eventful or uneventful retreat, depending on how you look at it.
Mike [01:55]: Kids running around when you’re sick? I know not what you’re talking about.
Rob [01:58]: Oh, man. It’s the worst. How about you? What’s been going on?
Mike [02:01]: Well, I got an email the other day from John [Salmans?], who is a attendee of MicroConf and he runs MarketTender.com. He published a list of podcasts called “The Ultimate List of Developer Podcasts.” We’ll link that up in the show notes, but there are dozens and dozens of podcasts on here that are aimed at the developer crowd. It breaks them down into different programing languages, and marketing, and front-end, back-end, all sorts of different areas. If you’re interested, definitely check that out. The other thing is that my youngest son has decided that he is going to become a professional YouTuber. So that’s a college savings win, I believe.
Rob [02:38]: Boom. That’s awesome. My son, my ten-year-old, has been talking about that for a long time. I’m like, I don’t know. I don’t want to get everything set up to do that. But I think it’s a good idea for kids to start thinking about that. That’s the future, right? I mean, I know it’s the present for a lot of adults these days, but for a kid to start tackling social media at this age, as long as you can keep them protected from stuff, is a good thing.
Mike [02:59]: As long as they’re 13 years old and can click that button without violating the law.
Rob [03:04]: Yeah. Exactly. So, hey. Circling back to that podcast list from John [Salmans?], there’s an entrepreneurial section, a category, and I just want to read a couple of the podcasts. You’ll probably recognize most of them. One is EntreProgramers, then there’s BoomStrap from Ian and Andre. Although I’m not sure if that’s still going. BootStrap with kids, with Brett and Scott. Although that’s not going anymore. And then we have TechZine, BootStrapWeb, and of course StartUpsForTheRestOfUs, and a couple others. RocketShip and a few others. So you definitely want to check that list out if you have a chance. How about today? What’s our topic for this week?
Mike [03:36]: What we’re going to be doing today is discussing subscription pricing models and some of the challenges associated with coming up with a subscription model. And how do you logistically go about testing a subscription based products? I say “subscription based products” as opposed to a SASS application because a lot of these things are applicable to any sort of subscription pricing model. So whether it’s a membership site, or a coarse that you’re running, or obviously a SASS application falls under that umbrella as well. But there’s a lot of different types of products out there that essentially fall under this umbrella. Productized service, for example, might come under this if you’re doing a recurring service for people over time, on a monthly or weekly basis. All those things kind of fall under this umbrella. So we’re going to kind of talk through some of the different challenges associated with one, just deciding what type of pricing model is appropriate, but then moving on to how do you raise and lower prices, how do you start building up the service while you have all these incoming costs and you’re not making as much money as you’re putting into it, et cetera.
Rob [04:39]: Cool. Let’s dive in.
Mike [04:40]: So the first one is how to go about testing whether you should be charging on a one-time basis or monthly or annual subscriptions. I heard the CEO of [Atlasian?] named Scott – I can’t pronounce his last name. It’s [Farakuar?] or something like that. He talked to businesses about software and he was asked this exact question. He said that if the value of a product goes up over time, then you should charge a subscription. But if it maintains the same level or the value of the products to the customer goes down over time, then charge a one-time fee. That’s actually a very interesting way of looking at it because if something is going up in value for the customer, then it’s something that they’re going to want to keep around for an extended period of time. Whereas like a training course, you buy it once. Or a book, for example. Once you’ve read it, you’ve kind of consumed that information and you’re going to move on. The impetus for you paying on a subscription basis on that is no longer there. So I think using that delineation of whether the value is going up over time or not as a determining factor in whether you charge monthly or on that subscription based one-time fee is a very interesting way to look at it.
Rob [05:43]: Yeah. Obviously there’s a lot of pluses and minuses to this. I mean, I think if you run a software company where you are actually hosting and having a different value over time, then a one-time fee is a terrible idea because you always need new customers to keep the servers on. But if it’s downloadable software, then a one-time fee most likely makes sense because people don’t want to download and host it on their own server and then pay you a recurring fee. I know there are some apps that do this, and frankly, they’re bucking the trend a little bit. Now, if you have a SASS app, then I thinking offering monthly and annual is the way to go. The test that I’ve seen people do is basically run it, test on the pricing page. See default to annual, see how many people go through and default to monthly, see how many people go through. Obviously you’re giving a slight discount. Maybe one or two months free, or 15-20%, whatever you want to give for annual, and then you do the math. Not only are you making more money, but are you getting more cash up-front or not. That’s a big deal if you’re bootstrapped.
[06:40] Now, if you’re running a membership site, it is a little bit different. Unless there’s a lot of ongoing expense, then I have seen some membership sites basically do a one-time fee that’s kind of a lifetime buy-in. Typically you want to have an asterisks there that says it’s the lifetime of the membership site, not the lifetime of the user. Right? Because the membership site may not be around for 40 more years, but the user may. So you have to walk a line there. As long as people get a bunch of value from the membership site, typically membership site lifetimes are between four and six months. These are average numbers I’ve heard based on these large swath of folks I’ve talked to in our own experience running a membership site. And so, if you give them a ton of value in that amount of time and they get their money’s worth, it doesn’t matter. The ongoing access is cool for them to have access to forms and such, but if three years down the road you do decide that they bought a lifetime access and I’m deciding to shut this down, you’re going to have very little push-back. People understand that this stuff has to change. I think that you have a question that is how do you really, logistically test this? And again, with SASS you just change it on the pricing page. With subscription sites or a membership site, I would just look at are you going to tend to want to do launches for membership sites rather than just have an open sign-up process? And you’re going to know your numbers. You’ll do one or two launches, you’ll see the numbers of one and do one or two launches the other way and see the numbers.
[07:56] I would compare and see what cash you’re getting from which one and it’ll be obvious. You will have, in this respect, if you change, you will have different cohorts on different pricing models. That’s okay. It’s a small technical challenge, but it’s not as much of a headache. Everything doesn’t have to be cut and dry with this stuff. It’s not as much of a headache as that probably sounds.
Mike [08:17]: Yeah. And I think that the interesting thing to keep in mind about what he just said there is that when you do a cohort launch like that, most of the stuff that is based around the pricing can be completely hidden. You don’t even need to have that one the website. So, as you said, you can have some people on one pricing plan and some people on another. And really, that’s kind of how you test it. A lot of the pricing information that you’re sending to people or that they’re getting is through their mailbox. It’s not going to be publicly available. It’s not going to be out there until the end of time. Now, something else to kind of keep in mind here is that when you are determining whether or not you’re going to do monthly, quarterly, or annual subscriptions, or just that one-time fee, there’s a difference between charging somebody a subscription and then allowing them to essentially finance the payments over time. So, I’ve seem emails from, for example, Rumi [Sedi?], who runs I Will Teach You To Be Rich. They have several different programs or training courses that they have offered where they will offer quarterly or monthly payments for six months.
[09:18] You’re essentially still paying the full amount for the whole course, it’s just spread out over time. It helps the person who is on the receiving end of it see it in a different light. They will look at that and say, “Well, I’m not willing to pay $1,500 for a training course,” but if they look at it and see that it’s five payments of $300 each, it’s the same amount but they look at that and say, “It’s only $300.” And they kind of mentally put a different spin on it than if it was a $1,500 up-front cost.
Rob [09:46]: Something else to think about here is can customers change pricing models after they purchase? They come on monthly so you can lower their risk and obviously have a 30-day-money-back guarantee or whatever and they’re paying you $30 or $50 a month – getting people in and having them get value and see that your site is legit. Then after one or two months, pitching them on annual is also not a bad way to go just to see how receptive people are to it. This is an approach that I’ve taken with several different apps. The thought of whether someone can change pricing models after they’ve purchased has to kind of play into the picture. I know that you don’t need to do all the selling upfront. You can wait until someone has got a lot of value. It’s kind of an up-sell, if you think about it. Someone is paying you $50 a month and you come in and say, “alright, here’s $500 for a whole year.” If you do that $500 upfront you’re going to get less conversion, right? If you do it after one or two months when you have a lot higher value, you can get a lot higher conversion rate on that.
Mike [10:40]: One of the next challenges with subscription pricing models is how do you go about raising prices? And this is a challenge I think for most subscription based services or products because you don’t really want to put the people who have gotten you to where you are in a position where they have to look at your product and say “I’m really not happy with this particular move or decision that you guys have made to raise your prices and I’m not happy about how you’re treating me. I signed on with the assumption that I was going to get this price for an extended period of time” – or potentially forever in their minds – and some of them may be extremely upset over the fact that you are now raising prices. One of the ways that you can combat this is to communicate in advance to everyone who you are raising prices for. Now, the other thing you can do is you can also grandfather those existing customers in.
[11:34] You can either do in perpetuity or you can do it in a specified time period. I’ve seen some companies where they’ll say, “We’re going to raise prices, but we’re not going to do it on you for the next two years.” So you’re going to maintain your price for the next two years, or maybe it’s six months, or twelve months, whatever you decide. Whatever makes sense for your business based on the lifetime of your customers. You can go about increasing prices for everyone else or everyone new who signs on, as long as you make sure you communicate that to the people who are currently customers. Tell them, “Look, there’s a price increase coming. It does not affect you.” I think that’s the big piece of that. You want to make sure they know that that is not going to affect them.
Rob [12:13]: Yeah, I think that’s a big deal. I’m a big fan of grandfathering. Perpetually, if you can. But obviously, if you look at the way Netflix did it, I think they grandfathered for a year or two and then it went up a dollar or two. I don’t know, it was inconsequential. At the time there was little bit of hubbub upfront, but when it actually happens there are a few people who feel threatened to cancel. You’re always going to get somebody who cancels, so don’t let one out of a thousand people scare you into not changing it. It really is an interesting idea. I’m a big fan of grandfathering. You’re not trying to piss off your existing customer base. We’ve seen this happen. Remember when Intercom was going to raise prices? They were going to double or quadruple their prices. It was a substantial change and they weren’t going to grandfather for like a year. There was a huge uproar and people were coming to Drip and saying, “if you can build this one feature, I’ll move over here.” Because they were so upset about it Intercom actually backed off on that price increase. There was such a backlash. It wasn’t one in a thousand, it was like 20%-30% of their customers that were on Twitter and railing on it. So you do want to be careful and thoughtful on it.
[13:14] Big price increases, I think are really tough even if you grandfather for a year or two if you’re going to do a substantial price increase. It’s going to have some backlash. The other thing to think about that I’ve used pretty successfully a couple of times – actually, several times – is to announce the price increase upfront, let all of your customers know, “you’re grandfathered, thanks for your support, the product keeps getting better, you’re going to keep getting it for the price you have. And if you know anyone who you think could use it, now is the time to get them in. If they start their trial before X date, which will probably be sometime in the next two weeks, as long as they start their trial before X date, then they’ll get the old pricing.” And then you tweet that, you blog post that, and you promote the heck out of that. You’ll get a big spike in trials there. You will kind of suck the air out of the month or the following month because you pull anyone who is even thinking about trying you rushing in. So you’ll have a really good month followed by a mediocre month because you’ve just front-loaded it. But it really is a nice way to get a nice bump of customers. I’ve seen it work both with Drip and with [Hittail?].
Mike [14:13] : And off this particular topic is how do you go about raising prices when your business model for the product or service is going to fundamentally change? If it was, for example, a SASS product before and you’ve come to the conclusion that you really just can’t support people either at that price point or they’re just not being successful with the product and they need a lot more hand-holding, you may need to 5X or 10X the price to make things work and make the product successful for the vast majority of your users. Sometimes this comes into effect because you went down the route of having a free version of the product and your servers just got way too overloaded and there’s so much stuff going through there it’s difficult for your back end systems to keep up. You’re not getting the conversion rate from the free users into paid users to be able to support the infrastructure for the product. In cases like that, you have a fundamental shift in what your business is even offering.
[15:12] I think those are extremely difficult situations. I’ve seen it done in a couple of different ways and I can’t think of one where they did it really well. I think part of that is just the fact that people have signed on with this expectation that you are offering X and that’s what they are there for and you say, “We can’t offer X anymore, we’re going to offer Y instead.” Quite frankly, you’re just going to piss a lot of people off at that point. I mean, you can only do so much in terms of grandfathering or pushing them off on to a different product or service. You can find other substitutes for them or help migrate data to other services that are going to be a better fit. I think the one exception to that where I have seen people do it well recently is with Basecamp where they have come out with additional versions of Basecamp. Basically what they’ve done is they’ve left everyone sitting there with that version of the product and they rewrote it from the ground up. Then they said, “If you want to move to Basecamp 3,” for example, “you can go from two to three, but you can’t go back. So once you’ve gone to version three, you can’t go back to version two. But anyone new is going to get version three. Anyone on the old version can stay there as long as they want.” They’ll continue to support it, but they won’t develop anything new. As a customer you kind of have a choice to migrate everything to the latest version. Maybe that comes with a price increase, but that’s probably one of the best ways I’ve seen it handled. Rob, what have you seen from this?
Rob [16:30]: Yeah, one example that comes to mind that you raised offline is [Indinero?] and what they had launched. It was like a $30 product and they got up to 30K MRR or something and they just couldn’t grow because it was too low of a price. They 10Xed their price and they went with a productized service which, to be honest, would be a fine move. It’s fine to get into a market and then adjust it. The mistake they made is they just stopped supporting their product and it was so buggy and they kind of left their customers out to dry. You and I both used it and we used to recommend it to people. The product just went sideways really bad. They tried to rewrite it but they just didn’t support it well. They were non-communicative. You’d get an email and support would respond two weeks later or something. They didn’t handle the actual logistics of it very well. But the idea of going up market is, I think, a good one. I think doing everything you can to help those existing $30 customers would be what you can do. You don’t want to basically tarnish the reputation of the founders of the product itself.
[17:29] If there’s a way that you can straddle both worlds and grandfather existing, that’s cool. If there’s not a way you can do that, you just have to give people enough time. Because it’s an accounting system. You have to give them six months or a year. If I recall, they gave us 60 days to move off. Which is like, no! I have stuff to move off of here and I have taxes in six months. You kind of want to think this through from a customer’s perspective. Think about how much pain you want to cause everyone and how much do you want to piss people off? Because are they going to give you a chance the next time? This world of startups is not huge and you have a reputation that you’re going to want to kind up uphold.
Mike [18:01]: With [Indinero?] I think the big problem was that they had so many free users that they just couldn’t support them. And I don’t know what the stats they actually had were, but I’m assuming it was one out of ten people were paying customers. Their systems were buggy, as you said, and slow, and there were lots of things going on. They couldn’t keep up with it. In retrospect when you look back at it, what they should have done was say, “Look, if you’re a free user you’ve got 60 days or three months or something like that to get off the system and then we’re going to shut down your account and we’re going to only focus on the people that are actually paying for it.” They did have that free version of it and we were above that. So we were a paying customer, but as you said, they didn’t give us very much time to switch. I think that’s the real issue. When you don’t give your customers enough time to react, depending on how integral the product is to the business of your customers, that’s where things can become the biggest problem.
[18:54] So let’s talk about the opposite of this. How do you go about lowering prices for a subscription model? I think that if you have a subscription based product, if at all possible, this is something you want to avoid, I think instead – Rob, I think you took this approach with Drip at one point. You were looking at the products and looking at Drip and people were saying, “I like it, but it’s not worth it to me at this price point. It’s overpriced for what I feel like I’m getting compared to some of the other things out there.” And instead of lowering the price, you actually looked at it and said, “How can I offer more value for the product instead of lowering the price?” I think that’s a perfectly legitimate and probably the best way to go in this particular situation.
Rob [19:34]: Yeah. The idea of aspirational pricing is what I call it. To realize that if you’re charging $10, $20, $30 a month for a SASS app, it is really hard to get past the 10-20K mark. You just need a lot of customers to do that. You need a really big funnel. So if you are already priced up market and you go $50, $70, $100 a month it just makes it easier to cross that threshold and to start growing at that 5-10K a month mark. Which is when it becomes interesting, in my opinion. So the thought here is lowering pricing – the problem with it is – I can’t imagine lowering pricing and not doing it for all of your existing customers because otherwise you’re screwing all of your customers. Right? If they’re paying $50 a month and new customers can get in for $30 a month, I don’t see a way that you can justify not lowering across the board everyone’s prices. The challenge with that is then you’re decimating some MRR that you spent time building up. That’s actually a move that LeadPages decided to do after they acquired us.
[20:29] Our lowest tier was $49 and Clay wanted to move towards a free plan. Our first kind of toe dip into that water was to do a $1 plan with up to 100 contacts. When we did that we looked at everyone who was under 100 contacts and they were going to be downgraded. It was like $22,000 in MRR that just disappeared overnight. That was a big choice and it was one that Clay had to make because it impacted the bottom line. Later we moved to the free plan, but it was much less of a hit because we had a bunch of people on the $1 plan. But I couldn’t imagine starting a $1 plan and not downgrading everybody. There’s really little justification for doing that. The reason LeadPages could do that is because they’re ‘a big company and they can wait out the massive support burden and all the stuff that comes with $1 or the free plan. But as a bootstrapper, I’m with you, Mike. At any cost try to avoid lowering your prices and instead think about how can I offer more value? Ask you customers. Figure out what you can do to justify the current prices that you’re charging.
Mike [21:28]: I’ve had services where I’ve been a paying customer for them and had an account and I got their website and for whatever reason I’m logged out. I take a look at the pricing page and their current pricing is lower than what I’m paying. And I contacted support at that point and said, “Hey, what’s going on over here?” And they were like, “Oh, we’re testing prices.” I’m like, “Well, that’s great and all, but I’m a paying customer here. You’re charging me three times as much as what you’re advertising here.” What I’m always told is, “If we roll this out to everybody then you can get that pricing.” I’m like, “Can I get it now? Because that’s what you’re advertising.” They said, “No.” So you kind of have to be careful about how you choose to deal with your existing customers because I think you can make them angry if they see that there is that lower price available to anyone new and you’ve been supporting them as a customer for a long time.
[22:18] I think that’s definitely something to keep in mind. The other thing that you can do is offer a credit of some kind to your existing customers. So, if somebody is paying $100 or $200 a month or something like that and you dropped the prices by $50 or $100 a month or something along those lines on the plan that they’re on, you can give them a credit and either drop it by a percentage for the next three to six months or you could just say, “We’ll give you a credit for the next two months,” until you’re back to the point where they’re paying the same amount as the new customers. I think those are two different ways of dealing with it. If you’re offering a percent off as a discount over six months, it’s less of a hit to revenue than if you were to offer them just X number of free months over a time period.
Rob [23:02]: Yeah, I like that. That’s a pretty good way to think about it and I think most customers would likely be okay with that, especially if they’re using the service already and you let them know, “I have to lower prices, this is what’s going on. We’re bootstrapped and we don’t have the cash to just decimate this. Can I give you a credit?” I think that’s a nice kind of in between. And if there is a real pushback you can decide if you want to let some folks truly downgrade versus giving them a refunds or whatever is required. I think that’s a creative way to think about doing this if you do find your back against the wall.
Mike [23:34]: The next challenge is more of a logistical one when you’re building up the product. How do you go about avoiding overpaying for supporting and building your subscription product? This goes along the lines of user subscriptions that you have to purchase in order to just host or build your product or offer it as a service to people. And the money that you’re making doesn’t match or even meet what you’re paying for those other services. Let’s say that you have a product that’s costing you $1,000 a month for hosting costs and you’re only making $500 a month for it. You’re essentially financing your service for the customers. How do you go about dealing with that aspect of building up your service?
Rob [24:15]: I think there’s a couple ways. One, there’s ways to kind of do it on the cheap. I know we talked about [Wistia?] and it’s $100 a month, but there is a service called SproutVideo which, admittedly, does not have all the features of [Wistia?] but it’s like $15 or $20 a month. So you start there. And yes, you’re going to have to migrate later. Yes, that’s going to be a pain. But if that $80 difference is something to you, then you’re just going to have to put in the time to migrate it at a later date if you later want the features. So that’s one way to kind of do it on the cheap.
Mike [24:43]: [Wistia?] changed their pricing, so it’s only like – they actually have a free plan and then they used to have a $25 plan.
Rob [24:50]: That’s interesting. Okay, so maybe [Wistia?] is not a good example, but if you’re spending $1,000 a month on hosting on a membership site, then you’re doing something crazy. My guess is you could do it cheaper. Maybe a less reliable way, but you can find a cheaper alternative. An example is when I launched the Academy. I launched it on WordPress with a WordPress plugin forum on [Dreamo?]. So literally the costs were $10 a month and I think I was embedding the videos there. I don’t know if [Wistia?] was around in 2009 when I was working on this, but I did it really on the cheap. That created some issues later on, three or four years later. Forum stuff was out of date, WordPress was in shambles. WordPress wasn’t in shambles, but the plugins and the stuff that we used was kind of a nightmare. But it did allow me to get out of the gate really inexpensively. Another way is to basically presell it. You’re not putting in all this money in upfront and with a membership site especially, you’re going to be selling based a little bit on your personal brand, a little bit on the promise of the content you have. So go create some content.
[25:50] You can host that for free on YouTube or super cheap on Vimeo. Then you can put it on your blog or put it out as emails or as pdfs. Any way it can be free. Build the list, show what you’re going to do, and then say, “I’m launching a membership site where I’m going to put out awesome stuff like this, but it’s going to be even better.” Paint a picture for them of what it’s going to be and then presell the thing. You know, essentially coming back to the Academy when I launched it, I had two weeks of the content done. I was only two weeks ahead of the people who were at the forefront. When I initially sent those emails I sold I think 100 subscriptions at $50 a month, if I recall. It was a long time ago, so don’t quote me on that. But I’m pretty sure that that was what I presold. It was $5,000 a month. So right then I knew this is what I can put into it. It obviously grew from there, but that was the basis to say, “Okay, I can pay a few hundred dollars a month for hosting or I can afford to hire a designer to do this a little better.” I think that’s another way to think about de-risking this for you. Membership websites are a little easier to do that with. Info products are a little easier than with software.
Mike [26:54]: Yeah, preselling is obviously one of the ways to go with this, but another thing to keep in mind is for the different services that you’re paying for, hosting costs and all that stuff that goes with it. Do you really need them? Or can you go with a lesser version of them? Yes, it can be a painful experience to transform them or change them over to a different system later on, but at the same time you want to [?] your bets a little bit. If you don’t have enough information to really decide how much money you should be putting into it or how many customers you’re likely to get in a certain time frame, you kind of have to [?] your bets a little bit and figure out where you’re going to put your money and how you’re going to invest in the product moving forward. Because you don’t want to be spending a ton of money upfront for three, six, nine months before you get to the point where you are past the break-even-point. That’s something else to keep in mind is that break-even is different than revenue. There’s typically a minimum number of customers that you need to make any product profitable. You need to know roughly what that is. And along with knowing what that is, you need to understand what the time frame and growth trajectory of the product is.
[27:59] If you’re only adding five customers a month at $50 a month, then you’re growing at $250 a month of MRR. But if you’re running at a $3,000 loss every month, it’s going to be a long time before you get to the point where that product is paying for itself. And you’re probably not going to be able to support that. Those are the things that you really need to keep those numbers in mind when you’re building this out and determining what services to pay for. The last thing, I think, here is that when you are trying to figure out what those services are and on what you can spend a little bit less money, you can run it by some of your early alpha customers or people that you’ve talked to or prospects about what is important to them. Use that as a basis to figure out where you should be spending the money. Because a lot of times, you’ll look at something and say, “I really want this,” but at the end of the day it might not actually matter all that much to your customers.
[28:51] As Rob said earlier, when we built the Academy, we built it on WordPress. That’s technically free and there’s obviously a lot of work that goes into building all the different modules and stuff that went into the Academy, but that’s not something that you should probably be paying a heck of a lot of money for right out of the gate. I think we made this mistake ourselves when we switched over to a different platform and we were paying $1,000 a month for it at one point. Quite frankly, it didn’t work out. We thought that it would and fortunately this was much further down the road when the revenue was there. Had we made that mistake early on from day one, I don’t know if the Academy would have ever succeeded.
Rob [29:29]: Free like a puppy, Mike. It was free like a puppy.
Mike [29:33]: Yes.
Rob [29:36]: It took some work to get us out of there.
Mike [29:38]: So the last challenge to tackle is what is the product itself doesn’t work out? What do you do with your existing customers? Do you guarantee that they’ll get this at the same price and the same service level forever? We talked a little bit already about being able to modify the price, but what we didn’t really talk about is what happens if you go out of business or you just can’t support the product anymore because it’s losing too much money. And businesses stop operations all the time. This sucks, but small business owners understand when other small business owners are having a hard time. If the finances behind a product are not working out, there’s lots of companies and apps out there that have simply shut down and ceased to operate. Now, when you’re forced in that situation you do want to go essentially the same route that we talked about earlier.
[30:26] If you’re going to raise prices or shift your business all dramatically, you have to let people know and give them ways to get their data out. You have to give them other options that they can use. If you just flip the lights off one day, people are going to be pissed and they’re going to remember that later on. Those are things that you absolutely want to avoid. But communicating with people as frequently as possible and helping them either transition to another product or service or getting them the data they need. Whether it’s raw database exports into Excel files or something along those lines, you have to make sure they have what they need in order to be able to take their business elsewhere and take their data with them.
Rob [31:04]: Yeah. Shutting a service down is tough. I think it depends on, again, whether it’s membership site versus software. This does happen and it’s something that we all deal with and it’s disappointing. But I think you’re right. The more notice you can give people and the more reason, if you can really explain to people what happened here – that you’re running out of cash or that it was never a viable business. The more time you can give them and allow them to export their data and giving them instructions on how to import it onto another comparable service. Even talking to that comparable service and letting them know, “Hey, I’m shutting down and I have 70 customers. Is there any way you can help these folks with a transition?” I think you kind of owe it to your reputation, I think you owe it to the customers who believed in you to do everything you can to help them do that. If it’s more information, I feel like allowing folks to basically download everything so they can take it with them. It is something they purchased and they can use it moving forward, but if you need to shut down a service, again, just talking to folks as a person and letting them know what’s going on with you. Is it a health issue that you’ve gone through? Is there a life change? A divorce or a death or something that is just catastrophically wrecking your ability to run a business? Or was it just not a viable and you couldn’t do it?
[32:16] That’s kind of how I would approach it. That wraps us up for the day. Again, this episode was based on a question asked by Marcus [Beale?] in FounderCafe. If you’re interested in joining close to 1,000 bootstrap startup founders around the world, go to FounderCafe.com and apply to join. 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 exerpt from Out of Control by Moot. It’s 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 315 | On Attending Conferences, Opening a Bank Account, and Project Management Tools
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about attending conferences, opening business bank accounts, project management tools, and more listener questions.
Items mentioned in this episode:
- MicroConf
- Gelform
- Codetree
- Teamwork
- Startups For The Rest Of Us Episode.167
- Startups For The Rest Of Us Episode.277
Transcripts
Rob [00:00:00]: In this episode of “Startups for the Rest of Us,” Mike and I talk about attending conferences, opening business bank accounts, project management tools, and we answer more listener questions. This is “Startups for the Rest of Us,” episode 315.
[Theme Music]
Rob [00:00:21]: 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 [00:00:31]: And I’m Mike.
Rob [00:00:32]: – and we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike [00:00:36]: Well, I recently added another MicroConf sponsor, and I don’t think we’ve talked too much about some of the previous sponsors that we’ve added. One I want to talk about this week is stagingpilot.com, and this one – the sponsor for it was from Hire Auto last year, and he sponsored – he didn’t really have a product at the time – his name’s Nathan Tyler. This year after coming to MicroConf, he validated his idea, went out there and got a bunch of paying customers. Now he’s got what seems to be a pretty viable product going with stagingpilot.com. Essentially, it’s all built around the idea of being able to automate the testing environment for a WordPress install. So, if you’ve got a series of plugins – maybe you may be running Agency or something like that – and you’re trying to build plugins and manage the WordPress infrastructure for some of your customers, it allows you to automate all of the different tests behind that, similar to like you might do unit testing, for example, to make sure that your deployments go well. This allows you to do it at scale for Word Press deployments. It’s a little different than what you would get from WP Engine, where WP Engine makes sure that the site itself works. This makes sure that the site isn’t all jacked up with all the different things, because obviously that can happen when you’re doing WordPress plugin development. I had a pretty extensive conversation with him about it, and how it fits into the audience, and I think it’s a really good fit.
Rob [00:01:52]: Awesome. And if you’re interested in becoming a MicroConf sponsor yourself as you’re listening to this, email us at sponsors@microconf.com.
Mike [00:01:59]: So, what about you? What’s going on this week?
Rob [00:02:01]: Well, last Friday – I guess I should set the stage first here. As you scale an app up, you’re going to run into certain performance issues, you’re going to have certain bottlenecks, certain pages, certain cues, certain things that just slowly grow, and they get slower and slower over time. At a certain point, you just can’t wring any more optimization out of the code and out of the hardware. So there’s a couple things that we’re looking out and we’re seeing, like, “We’re going to hit that here soon.” DRIP’s obviously still doing well, and we’re ahead of stuff in terms of performance and in terms of spam complaints and such, but there’s been this one issue that we’ve been trying to solve, and it’s always been, “Well re-write this piece. Add another index. Add more RAM to the database.” By the time you get a quarter of a terabyte of RAM in your database and it’s still not performing the way you want it to, you’ve got to take a different approach. This thing, on and off, has been plaguing for us for, like, two years, but every three to six months we’ll see a decline, and then we have to come back and revise it. So, Friday afternoon, we were getting ready to take a really big plunge and do a major lind of overhaul, something that would’ve taken a lot of developer time and would’ve probably fixed this for good, but it would’ve added a ton of complexity to the database. We’re basically like, “If we don’t think of something better by Monday, this is what we’re doing.” It was, like, Friday at three, and Derek and I were just sitting there looking through the app. I was like, “What really are the pages that don’t work?” I kept saying, “What if we just load this asynchronously?” “What if we store this in a completely different database?” “What if” – I just kept throwing what-ifs out, and we were just bouncing back and forth. Then we eventually – it was almost like magic, but we stumbled upon this approach that was a massive breakthrough. As soon as Derek’s eyes recognized it, he looked at me, and he said, “That’s how we’re going to approach it!” It was a totally different approach. What was interesting is like the hair stood up on the back of my neck, and I could feel this electricity, like “We just stumbled on something that is an absolute game changer.” It seems like we have maybe one or two of these a year, is kind of what I’ve been saying. I think of when we realized automation rules had to go in the app, or workflows, or these other things. This isn’t necessarily a new feature, although it does allow us to build some other features, but it is just a complete game changer for us. It was stoked. Then four or five hours on Saturday we just could not stop talking about it. Then we were texting about it. Yesterday, it was like, “Oh, and this could also do this.” and, “This is how it’s going to change this.” I mean those moments – those are the moments I realize this is why I do products. I love those huge breakthroughs where you launch something epic, or you figure out how to solve a really hard problem, and you just figure out a completely new way to do it. It’ll take like one to two weeks. It’s actually not that much work. We think it’ll go pretty quick, but it was quite an eventful weekend, at least in our heads.
Mike [00:04:44]: And the interesting thing about that is that your customers will probably not notice it or see it [laughs].
Rob [00:04:50]: Yeah. Well, there’re some customers who are at the edge – in terms of list size and history – with us, who are just starting to see the cusp of this, and that’s where we knew, “We need to address this now before it gets bad.” But you’re right. The vast majority of our customers will never know. They just will know that it’s lightning-fast and, I guess, that’s thanks enough.
Mike [00:05:12]: Yeah. That’s one of those things like the typical story with an IT department. Whenever things are going well, they’re like, “Why do we pay you?” When things go wrong, they say, “Why do we pay you?” [Laughs].
Rob [00:05:22]: Yeah, [laughs] totally. Exactly. Obviously, it’s been a good few days because of that, but other than that I am actually leaving to go on my annual, semiannual – I’m not even sure – retreat. Since we moved to Minneapolis I haven’t been outside of the city, really. So I’m driving four hours north. I’ve heard that Lake Superior’s really pretty sweet. A lot of people have recommended it to me, and I’m looking forward to taking a couple days away from the family and just really relaxing. I haven’t slowed down since the acquisition started, really, so it’s been since January. I haven’t even thought about what’s next, in terms of for DRIP, or me personally, or all this stuff. So, I just feel like I’m backed up on the vision process for the next several months.
Mike [00:06:05]: Very cool. So, are we talking about this week?
Rob [00:06:07]: This week we’re actually resuming the questions that Corey Moss had sent us. He’s from gelform.com, and he sent us an email with a big chunk of pretty interesting questions. In fact, when we did a call for questions 10 or 15 episodes ago, we were down to basically zero questions in our queue, and now we have a nice chunk that’ll last us a little while. So, thanks to everyone who has sent us questions. Let’s dive into this first one. Corey asks, “Do you guys still go to conferences anymore aside from MicroConf? Do you still go to Business and Software? What do you hope to get out of them? Do the two of you really need more networking?” Then he has a smiley face there. How about you? Do you go to other conferences?
Mike [00:06:43]: Not as much as I used to. I think that probably four or five years ago I probably went to more conferences than I do now. I think at this point I tend towards the smaller ones, so obviously I go to MicroConf. I haven’t been to Business and Software, I think, in two years or so even though it’s kind of right in my backyard, but the audience is, I would say, not quite the best fit for me, just because I remember one of the last times I went there I sat down and somebody next to me introduced themselves and said, “Hey, I’m so-and-so, and they talked for a minute or two. So, what do you do?”
I said, “I write software, and I bootstrap a company,” and this and that.
He was like, “I’m a venture capitalist.”
I’m just like, “Okay. We don’t have much to talk to you about,” [laughs] and that was literally the end of the conversation. We really just did not have anything in common. I’ve started to find that that’s more common in the upper-end conferences that I go to.
I also go to the Big Stone TinyConf conference, which is coming up in, I think, January or February.
Rob [00:07:37]: Which is more like a ski retreat, right, with a dozen people. Yeah.
Mike [00:07:40]: Yeah.
Rob [00:07:40]: I almost wouldn’t call that a conference, because you don’t sit down in a chair and listen to talks and such.
Mike [00:07:45]: No, no. It’s a little different. I tend more towards the smaller gatherings of people, I think, these days.
Rob [00:07:52]: Why do you think that is?
Mike [00:07:53]: Lack of time, to be honest, and part of it’s just I like the aspect of being able to get to know people as opposed to going and sitting there as an attendee in an audience where the talks may not necessarily be relevant to me. I think that’s the general feeling I have for a lot of the other conferences that are out there. Obviously, MicroConf is kind of an exception to that just because it’s aimed at people like me, but there’s not a lot of other ones out there in that particular space, so that’s probably it for me. I do enjoy the networking opportunities, and so when I do go to larger conferences that’s probably what I spend the bulk of my time on; talking to other people, learning what they’re doing, listening to what other techniques that they’re finding are working or not working, and just generally getting to know more people. I think that those relationships provide you value beyond the conference and for years to come, whereas, like a conference you go sit down – and that’s kind, I guess, a weird take on it from somebody who helps organize a conference [laughs]. But that’s a lot of where the value comes from for people who’re attending MicroConf. It’s not out of line with that. I think that it’s just a recognition of the place I’m at now is a little different. Obviously, it’s a very different story when you’re paying for a conference out of your own pocket, versus you’re being paid by your employer to go to a conference and learn stuff and bring it back to the company.
Rob [00:09:12]: Yeah, I think it’s hard when – we’ve essentially designed MicroConf to be the conference that we want to attend, right? That was the original goal in 2011, and each year that’s the question I ask myself. So, we invite the speakers that we want to hear. We make sure the right people show up, and we build the schedule around what we want to do. It’s hard – considering it is my idea conference to go to – I have found it harder and harder to go to conferences that are not exactly that. Like you said, if you go to a conference in San Francisco – I went to Jason Calacanis’ launch conference. I like Jason Calacanis and what he’s up to and what he’s doing for the community, but the conference itself just wasn’t applicable to me. I was hoping to connect and network and stuff. I knew I wouldn’t get much out of the talks from the VCs that would necessarily apply to what I was doing. It was cool, but I probably wouldn’t go back – not because it wasn’t good, but because it really wasn’t for me. It wasn’t for me, where I’m at and where I want to go. I guess all this to say I do still go to conferences, but it’s only when I speak. That pretty much tends to be my rule now, and the reason is it allows me to network with the other speakers, and that tends to be what I’m there for now. I think that’s where I get the most value personally, based on where I’m at.
[00:10:25] With that said, I, like you, went to a ton of conferences. When it was basically earlier in my career when I was trying to learn all this stuff and I needed to meet more people. What are conferences good for? They’re good for meeting a lot of people, building your network, learning from the talks. I think those are the main things and main reasons you’re going to want to go. If you find that either the talks aren’t geared towards you, or the talks aren’t at the level of advancement, or sophistication, or whatever that you’re at, you tend to have less and value over time. I still think there certainly are good conferences to be had out there; and, again, if I was earlier in my career, I would probably be going to more, because you kind of have to say yes to everything at that point until you get your feet under you.
[00:11:02] All right. Next question from Corey is, “How do you organize your bank accounts for side or lifestyle business projects? And have you tried opening an online business account recently? It’s a fiasco?” I have tried opening an online business account recently, and it is a fiasco. I’ll agree with that. But, Mike, it’s been a while since you’ve, I guess, had side projects. You have a corporation, right? That’s no longer a side project, because that has to have its own bank accounts and everything. But did you ever intermingle stuff, like do sole proprietorship and have it in the same bank account? How did you do that?
Mike [00:11:35]: No. I’m trying to think. I think when I first started out I probably had things mingled together, but that was more than 15 years ago. I kept track of what was going where, and I didn’t do that for very long, to be honest. I really moved over towards having a dedicated bank account and dedicated credit card for the business itself back in ’99 or so. It’s been a long time since I’ve done that. I do things in my books to keep things separate. So if I have expenses for a particular project, or for a particular product that I’m working on, I do try to keep some of the expenses separate so that I know what I’ve spent on it and what the return on it is. So inside my books I’ll give my bookkeeper explicit instructions about, “This particular expense,” or “this type of expense goes for this product. This one goes over here,” and try and keep the different revenue streams separate so that I can at least see what I’m getting in terms of revenue from a particular product and what I’m paying out for that product. It makes it easier to figure out, “Is this making money, or is it losing money?” If you have everything mingled together then it becomes very difficult. sS I try to keep those separate, but there are times when things are not so clear-cut. For example, I have a couple of different webservers, and they’re not dedicated. I have five, or six, or eight different sites running on one of them for example; and they run behind several of different products. What do you count that against? I don’t really count it against anything. I just kind of say, “This is kind of a blanket infrastructure cost for the business, and I’m going to pay for it regardless of whether I’m running this product over here or not.” I try to do that just so that I get a sense of where I should be spending my time, or what the profit margins are on different things. I think that that’s a generally good way to go. I’m sure that there’s better ways to handle it, but at the same time is it worth me spending the time to figure out the optimal way to do that? Chances are probably not. It’s just not a good use of my time, and at the end of the day it doesn’t matter. I’m really just looking for some guidelines, or data points, that I can look at, and that’s it. I don’t need down-to-the-dollar things, because I’m not buying and selling a lot of different apps. If I were to try and sell one of them, I’d have to go back in there, and I’d try to figure out exactly how much – what percentage of my hosting costs were attributed to this or that, and that would be a lot more difficult; but you kind of have to do that. The other question he has is, “What sort of a fiasco is it to open up an online business account?” That’s a total mess. I mean it –
Rob [00:14:03]: I think that was just a declarative statement rather than a question, yeah.
Mike [00:14:07]: Yeah.
Rob [00:14:07]: Yeah, it used to be easier. I think the Patriot Act really jacked it up here in the States. I don’t know if the rest of the world sees that as well. I have to admit I started the [Numa?] Group, which was just consulting – it was freelance projects – in 2002, and I made it an LLC I think it was 2009. I had seven years when it was just a sole proprietorship, and it was because I didn’t have a ton of liability, based on my judgment. I wasn’t doing things that I thought could get me sued. During that time, I started off, like you, using my personal bank account – like the main checking account – and realized within a few months that that was a [glooch?]. Even if it was only 1,000 or 2,000 bucks a month in side income I just wanted to have in a different place. I just then spun up another checking account under MySocial, basically, and that is pretty easy to do, actually. To open one from scratch with a new EIN, like for a new corp, is a pain in the butt. But, honestly, with Bank of America, or Chase, or one of these banks, it can be just a couple clicks. You submit the thing, and then they’ll just have it open within a day or two. To be honest, if you’re just doing small side projects and, by your judgment, you don’t think you have a lot of liability, and you’re not going to do an LLC or a corp and you’re going to do just a sole proprietorship, that’s not a bad way to go. It all depends on – say it with me, Mike – “risk tolerance”. [Laughs].
Mike [00:15:19]: [Laughs].
Rob [00:15:19]: Remember when that seemed to be every episode for a while. Haven’t had to say that in a while.
Mike [00:15:23]: Yeah.
Rob [00:15:24]: Cool. Next question is, “Do you think swag makes a difference in marketing side/lifestyle business projects?” With “swag,” I’m assuming he’s meaning, like, t-shirts and hats and – I don’t know – USB sticks with your logo on it. What do you think, Mike?
Mike [00:15:38]: I would seem to think that it depends on the type of business. I almost feel like if it’s stuff that exemplifies the things that you are doing for your customers, then it can make a difference. For example, the business credit cards from moo.com, for example? I think that those are an interesting thing that you can give away, and it does exemplify what your work is, allowing people to either order a single, custom business card, for example. Or, maybe you send it to them as an example of what it is that you can do for them and say, “If you want more of these, we can print more, and here’s what the price is for them.” or, “Here’s a link to the other stuff that we do. In terms of giving away things like t-shirts, I don’t know. It depends on what the context is. I think if you have a targeted list of people, or group of people that you’re going after that are all going to be congregating in one place, then that’s good from the marketing side of things. If you’re looking to build rapport with your customers, or just to give them a little bit more than what your competition is giving them. Let’s say that you have some accounting software, for example, and for every person who signs up and they’ve stuck around with you for three months, you send them a free t-shirt. There’s a few things that factor into that. First one is the t-shirt – you don’t want it to be something that’s extremely cheesy. It can’t be something that’s low-quality that’s just going to end up in the trash bin because, ultimately, that’s actually going to reflect worse on you than if you sent them nothing at all. But if you send them a really nice one, they’re going to remember that, and they’re probably going to mention it to their friends.
[00:17:04] I also think that you have to be careful when you do that to not plaster your logo over the top of it such that it’s so inherently obvious that it’s an advertisement for you and for your product. You have to position them such that it’s something cool for them that they’re not going to be embarrassed by. I have no shortage of t-shirts that I’ve gotten at baseball games that I’ve gone to for the kids where some local health insurance company is handing out their t-shirts, and they’re like, “Hey, here’s a free shirt,” and I’m like, “Okay, great. Now I have a new dish rag.” [Laughs]. You have to be conscious of those types of things. I think that it can work. It just depends really on what your goal is. Trying to establish that rapport with customers – especially ones who maybe talkative online – if you have a business that lends itself to being talked about online, that could be useful for the advertising. At the same time, I would probably lean much more towards giving those types of things that are inherently useful to your customers that you want them to remember you by – not because you want to give them free stuff or want free advertising out of it, but because you want to be genuinely thankful like, “Hey, I just want to say I appreciate you as a customer, and here’s something for you.”
Rob [00:18:14]: Yeah, I agree. I think it’s not super important. I think if this doesn’t excite you to print t-shirts or to get swag made, you absolutely don’t need to do it for a lifestyle business project. It depends on what we’re talking about here. When HitTail got to the point where it was doing 20 or 25 grand a month, yes, I spent, I think $700; and I got 100 t-shirts made. They said “I survived Panda and Penguin” on the front. They had the HitTail logo on the back, and Derek designed them, actually, when he was still a contractor on HitTail. I did that because it was fun, and because I wanted to have t-shirts, and I was kind of proud that for the first ever I had budget to print t-shirts, and I was going to MicroConf, so I wanted to give them away to people. It was just something I was talking about. But do I think that those ever moved the needle for me by spending that $700? Probably not. It isn’t something that I would because you think it’s going to grow the business, per se. But I think, like you said, if there’s a lot of word of mouth and you do send it to the first – someone gets their first keyword suggestion, or their first conversion, or their first whatever, I think it’s kind of a fun thing to do. Maybe that’ll get you a tweet here or there. But overall, I don’t think this is a needle mover, and so if it’s something that’s going to be a distraction and is not fun for you, I would say don’t even bother with these with smaller projects.
[00:19:22] This next question is, “Are you guys still in mastermind groups? Anything changed in the way you run them or how you participate?”
Mike [00:19:29]: I am still in a mastermind group. I’ve experimented with having more than one mastermind group, and it didn’t really work out well for my schedule. In our mastermind group, we’ve tried changing the format a couple of times a little bit. It used to be the three of us would just go for about half an hour each, and then the call would end. We’ve recently transitioned a little bit to doing more of a hot seat approach where one person gets about an hour, and each of other two people get about 15 minutes apiece, and that’s worked reasonably well. Not everybody always needs to be on the hot seat, but we do alternate it, so if one person thinks that they need it then we’ll just say, “Okay, yeah, it’s your turn. You can have that slot,” so to speak. It’s a little bit of experimentation, I guess. I don’t think that enough has significantly changed that I would say, “Yeah, this is something that really moved the needle for us, and you have to try it out.” Things are just going as-is, and I think that that’s probably pretty common for most businesses, or most mastermind groups. It’s either working out or it’s not, and there’s not going to be some major changes that you introduce that are so earth-shattering on a fairly regular basis. There will occasionally be some things you try and they work out, and then there’s just things that you try out and they don’t.
Rob [00:20:37]: If you’re interested in our take on how to structure a startup mastermind, go to episode 167, which is “How to Organize and Run a Startup Mastermind,” and then episode 277, “Five Ways to Structure Your Startup Mastermind.” We’ll link those up in the show notes as well.
[00:20:51] My answer is, yes, I am still in the remote mastermind, right? I moved from Fresno to Minneapolis four months ago, so the one with Derek and I and Phil Dirksen in Fresno, since it was in person, we just decided to put it on hiatus for now. We do still video chat with Phil. It’s probably every month or two, and so we kind of do a mastermind. It’s just a lot less frequent. Then my other one has had some type of membership and stuff in terms of people coming in and out, but it is definitely still on. I really haven’t changed anything in our approach, because what we’re doing is working. Corey’s next question is, “Both of you seem to be doubling down on products.” That’s kind of funny. That’s the whole podcast, right? Since episode 1, [it’s?] doubling down on products. We have 315 episodes of doubling down on products. “What did you think of Justin Jackson’s experiment of 100 products?” Are you familiar with that at all, Mike?
Mike [00:21:44]: Yeah, I am.
Rob [00:21:44]: Yeah. What do you think?
Mike [00:21:46]: I think Justin’s experiment with 100 products – it’s a really cool idea. I think that it’s something that, if you’re not sure what you should be doing, I would definitely advocate that you try doing something along those lines. There’s a few different, major benefits of building that many products. The first one is that you learn quickly how to get a product out the door and how to launch it and move on to the next product. It’s not to say that you should always move on from one product to the next, but you get that feeling of being able to launch, you get the process down, and you become more comfortable with it, because I think when you first launch your very first product it’s difficult. You’re very hesitant, but if you have a schedule that you have to get 100 products out there as quickly as possible, you’re going to get over those fears because you absolutely have to. You have no other choice. In doing so, you start to develop an affection for certain types of products that you develop. Over time, you’re going to be able to see that – after pushing out 25, 35, 50 different products, you’re going to start seeing which ones resonate with people and which ones don’t just based on the sales and revenue streams and things like that, and you’re going to figure out, “Where are my talents best put, and where are there places where I just don’t do as well?” I think that those things will help lead you back to what should you ultimately end up working on. I think that there’s definitely cases where there’re some people who are probably better at just launching a bunch of small products, and that’s – I don’t want to say that’s all they do, because that’s obviously a lot of work – but there’s a certain type of person who is attracted to that because it’s always something new. I think you’ve mentioned in past episodes that you get bored by the same thing after two or three years. I’m kind of the same way, because you always want something new. You’re always looking for either the next big thing or, the new, shiny object, so to speak. If you have that to such an extreme extent that launching a new product every three or four days works out well for you, then great. There’s absolutely nothing wrong with that. But that said, maybe you’re the type of person who only wants to work on a couple things, or you want to work on the same thing for several years and build it up and then maybe sell it off. Building that many products gives you a much broader view than if you only worked on one thing and that was it. It’s almost similar to somebody who’s worked as a consultant for 50 different companies. You’ve gotten to see 50 different companies; whereas if you’re building those products, you get to see 50 different products getting launched, and you get all the inside view on it.
Rob [00:24:10]: Yeah, I think if I was early in my career, I would consider something like this. I feel like 100 products is overkill, and a little bit of a – I don’t know – like a circus or something. A “sideshow” is probably a better way to say it, right? It’s like picking 100 is just this huge, almost ridiculous number. It’s going to get you a promotion, and so in that sense I think Justin did a good job, because I’m sure this raised his personal brand and such when people heard about it. But earlier in my career I would have totally thought it might be interesting to launch a product a month for 12 months, or something. I actually really dig in. I think as I’ve gone on in my career I’ve learned you have to focus on something for long enough for it to have legs. You really can’t bounce from one thing to the next, or else nothing takes hold. That’s just been my experience, and I prefer to focus on things really intently for, like you said, one, two, or three years, and figure out if they’re going to work and push them into that place. Imagine if we had launched Drip and then given it a month or two and then said, “Nope. Not growing. We’re going to bail on it.” Could’ve happened, because it wasn’t growing for the first several months, because we didn’t have product-market fit. It took six months or whatever after a grueling five-month launch. Then it took another six months to get to where we had product-market fit. Sometimes you’re pushing a boulder uphill, and I think if you’re going to do something big and impactful – and I don’t even mean “impactful” like a $100 million company. I just mean a mid-six-figure or seven-figure company. I think bouncing from one thing to the next is probably not the ideal thing, but then again, if you’re trying to learn quickly, I think that – and if you are not shipping, like you said, and you’re kind of scared of shipping, or you just haven’t gotten there – shipping a bunch of stuff will just get you over that fear. Our next question is for Mike. Corey says, “Mike, does your wife understand what you do? How about your kids?”
Mike [00:25:47]: I really don’t know [laughs]. I think, to some extent, yes – much more so than I would say that my parents understand what I do, because my parents, if you were to ask them what I do, they’d say, “Oh, he builds computers” –
Rob [00:26:00]: Right.
Mike [00:26:00]: – which –
Rob [00:26:01]: Isn’t really it [laughs]. You did that 20 years ago, right?
Mike [00:26:05]: Yeah, exactly. It’s just not quite the same thing. I think my wife probably has a much better understanding now than she probably did when we first got married, because when we first married I was still dabbling in a lot of different things and trying to figure stuff out. At this point, I’m full-time on the stuff, so I talk to her on occasion about what’s going on, or how different things are going, or what some of the different challenges are, so she gets it I would probably say much more so than our circles of friends, so to speak. Most of them, they’re probably going to say – if you asked them what I did, they’re like, “Oh, he works with computers,” but they wouldn’t necessarily really understand what it is that I do.
Rob [00:26:39]: Yeah. I think back when I was doing all the micropreneur staff and I had a whole portfolio of products, and I had all these websites – I had eight or nine things going on, and I was buying and selling, and I was upgrading and rehabbing and all this stuff – it was complicated, and most people didn’t get it. But once I had HitTail and once I had Drip I could just say, “Look, I have two sides of what I do, the personal brand side and the actual software side,” and then just to say, “I run an email marketing app” – most people get that. Actually, my ten-year-old gets it pretty well. I don’t know that he understands what I do day to day, but he has a pretty solid grasp of it, and I bet he could explain it. If someone asked my six-year-old, yeah, he knows I work on computers and I check email, which is kind of cool. Next question is, “Do you work from home or from coffee shops? Any experience with co-working spaces?”
Mike [00:27:22]: I work from home. I’ve tried working at a co-working space, but it didn’t work out for me mainly because I had to work from my laptop. I can work from my laptop, but I’m not nearly as productive as I am at home, because I’ve got a two-monitor setup. I’ve got a 30-inch monitor next to a 20-inch monitor, and although most of my environment is duplicated on the laptop, it feels too constrained and limiting for me – just because I don’t have the visibility, all the different windows and the giant monitors. It just feels different for me. If I’m sitting there writing an article or something like that, I can kind of get that type of work done, but for most other stuff where I’m alternating between different browser tabs, or working with marketing software, it just doesn’t really work for me. I’ve never really found the co-working space to be particularly helpful in that regard.
Rob [00:28:08]: Yeah, I worked from home pretty consistently for about ten years, and towards the end I was definitely feeling it. I just felt isolated and wanted to get out more, and so as Derek came onboard with HitTail and Drip and we started having co-workers locally, so to speak, even before we had an office, we used to meet at coffee shops and work. I always felt a little less productive, because I didn’t have the extra monitor, although I did use to bring an iPad. I forget what that app is called, but you can actually use it as an external monitor, which is kind of cool. Aside from that, we did do a co-working space. When it first opened, it was called “The Hashtag” in Fresno, and it was the only one for tech folks like us, and I signed up as a charter member. I didn’t work from there very much, but then that turned into the [Bitwise] office building that all of us were in in Fresno when we moved away. That was actually really cool to get a little office. It wasn’t very expensive. I could leave monitors there, so we bought extra monitors. We had desks. We had a door that locked. That was the way to go. If you can find something inexpensive enough, and close enough – it was less than 15 minutes from my house – and then that allowed us to have a dedicated space to really hammer on things, and to be able to collaborate. It was two of us in this 10 x 12 office. We eventually, I think, had four people in that office, although we had to alternate days because we couldn’t all fit in there at once. It was kind of funny, but I think co-working spaces are cool as long as – I’d really like one with an external monitor, unlike you, where I take that for granted these days.
Mike [00:29:32]: Yeah, there’s a co-working facility near me where you can essentially get a dedicated office. I think it’s around $400 a month for your own private office. I’m looking at their website now. One of them is – it’s $225 a month to get a dedicated desk, so then you could put additional monitors and stuff there, and it’s $500 a month for a private office. Either one of those options would probably work well for me, but there’s waiting lists for them. I’m just like, “Eh, well, whatever.”
Rob [00:29:59]: Yeah. We had that 10 x 12 office with the door that locked. We basically put two, and eventually three, desks in there. That was only like 250 bucks, and that’s the beauty of bootstrapping in a place that’s not expensive. Fresno is one of the cheaper areas of California, and that was a benefit, I guess. His next question is about project management. He says, “What project management style and tools do you use?”
Mike [00:30:24]: I’m not even really sure what this question means [laughs].
Rob [00:30:27]: What the style is? Yeah. Well, I’ll go first on this one. My project management style is to figure out what we’re building next. It’s very agile – with a lower-case “A” – meaning we move quickly. We don’t define – I don’t even know what we’re doing in three months, right? It’s basically a 90-day – give or take – idea of what we have, and the roadmap just exists with Code Tree, right? We’re in Code Tree. It’s just a – imagine it’s like GitHub Issues, but with a nice UI sprinkled on top. We enter things in there. We spec them out per issue, and then we basically have them in the order the developers should be working on, and they’re just working through their stuff. We don’t do sprints, where we gather them all up. When a developer gets done we all test it, and then we throw it into production. I don’t know precisely what that style might be called, but it’s definitely just a fast way to do things, because there’s not a lot of overhead. We’ll frequently go in and – if we have an idea, or if we know we need to do something – we will go in, write it on a whiteboard, everybody gets a round – “everybody” being two or three people- and then we take a photo of it and throw that in the issue. Everybody who is there knows what the sketches mean, and that’s our spec. We don’t write up – I remember writing up waterfall specs 10, 15 years ago that were these 40-, 50-page Word docs. Just insane to think about doing that these days, how long that took. Then in terms of tools, like I said, we use Code Tree, which is actually the app that Derek built on the side, and then he sold it. I interviewed him about it a few episodes ago. We used that to manage issues, and that has both a [Camp?] and Trello view, and it has a list view. The developers like the Trello view, and I, as someone who needs an overview, I like the list view of it. Then personally, for my own to-dos and stuff, I use Trello for that and then my Google calendar all the time. Good grief! I’ve so many events in there that, like, ping me at two o’clock on this day to think about this, or to go through this label in my Gmail, or to make sure to do whatever. I mean, half the things on my Google calendar are not meetings. They’re almost like reminders to me or things to be done.
Mike [00:32:23]: Yeah. Most of the development stuff that we do is all based out of FogBugz, so we keep everything in there. Then if anything needs to get done we just assign it somebody, and then we have a couple of what are called “virtual users,” where we’ll assign something to a virtual user because we don’t necessarily have somebody to work on it, or it’s just not something that is terribly important for us to work on right now. For example, inside the Blue Tick project, there’s this Blue Tick unassigned user. It’s a virtual user. If anything needs to go in the backlog, or we’re not sure what to do with it, it just gets assigned to there. Then we have a couple of other virtual users we use for certain things, but generally speaking, if it’s on our to-do list – things that are assigned to you tend to be no more than about ten or 15 items long. Then beyond that there shouldn’t be anything on your open, assigned list that isn’t something you’re actively working in the very short term. It should all be stuff like, “This has got to be done, and it’s got to be done soon,” and by “soon,” within the next two to three weeks or something like that. It’s kind of like you said. You don’t really look too much further beyond that, because the things that are there need to get done. I think if you get too many things on your task list, then things will start to get lost. They start to get pushed, and if they get pushed, there’s always going to be other stuff that surfaces up as more of a priority. Once that to-do list gets too long, you start to pay attention to it less. I think that the whole project management system is – and I don’t mean just FogBugz. I mean anything that you can possibly think of, once you get too many things on it, you start to not pay attention to them, because they’re so far down on the priority list, or there’s other stuff that always comes up. Some things will always fall through the cracks, and they’ll always end up at the bottom, and it’s almost worthless to have them there. That’s why we use our virtual users to just kind of shuffle those things off to the side so that we don’t have to worry about it.
Rob [00:34:08]: Yeah, I think you make a good point there, and that’s, I think, being disciplined about what you let in your issue tracker is a big deal. I think just, in quotes, “throwing” everything in there that any customer requests is a really bad idea. I think for customer requests you maybe can have a label in your support software. Like in Help Scout we have that. It’s says, “Feature Requests.” That’s okay. I think there’s hundreds and hundreds of them in there. But if something catches our eye as it comes in, and we think we really want to build it, we’ll throw it in unassigned. If it’s obviously a critical issue or a bug, we’re going to get to it right away, but not just polluting and overwhelming your list, and getting hundreds of things in your issue tracker. It just becomes unmanageable. I think that’s a good point you’ve raised.
Mike [00:34:44]: Yeah. The other thing that I use is I have a Teamwork account, and I use Teamwork quite a bit for any of my recurring tasks. I have a set of Marketing Monday tasks that are in there that are recurring tasks every week, and I know that those things need to get done, and as I finish them off I just go in and check them off. I also have a special project off to the side that I use for household chores, to be perfectly honest. As things need to get done, whether it’s vacuuming, or mowing the lawn – things like that – I have all of our vehicle maintenance and stuff in there, so every three to four months I have oil changes and stuff like that in there. It’s mostly for those things that you don’t think about it until it’s way past the time that you probably should’ve done it, so having those things surface to me at that time allows me to say, “Okay. Now I need to pay attention to this. This is something that I need to do,” as opposed to getting four, five, six months down the road and you’re like, “Oh, wait. Did I get the oil changed?” “Did I have the tires rotated,” stuff like that. I have a lot of regularly recurring maintenance tasks that’re in there, whether they’re business-related or non-business-related. Then I have different projects in there for some of the different things that I have going on. I also have a separate project in there specifically for my bookkeeper so that anything that I have that comes up as a – like if I have a receipt, I have a special forwarding address that I just forward it over there. Then I can just add a quick, little note that says, “This is for that.” It just cuts off additional overhead or communication emails back and forth between my bookkeeper, because I’ve already said, “This is what this is for,” and I don’t have to answer it down the road, or wait until she goes in, looks at the books and says, “Hey, what’s this WP engine thing?” or, “What’s this thing from Digital Ocean?” I don’t have to worry about it, because I’ve already given her a heads-up, “Hey this is what this is for.”
[00:36:22] I think that about wraps us up for the day. If you have a question for us, you can call it in to our voicemail number at 1.888.801.9690; or, you can email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “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, and we’ll see you next time.
Episode 314 | Management Lessons for Founders
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about management lessons for founders. This episode is geared towards how to manage a team of people and discusses the two extremes of a highly involved micro-manager versus allowing people to work independently.
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 management lessons for founders. This is ‘Startups for the Rest of Us,’ episode 314.
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 [00:26]: 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]: Things are pretty good. Getting some positive feedback about episode 311 where I interviewed Derek about what it’s like selling a $128,000 side project. Did you hear that episode yet?
Mike [00:40]: I actually have not. It’s on my list. I haven’t gone to the gym in a couple of weeks, so.
Rob [00:45]: Totally. Now everyone knows that we don’t preplan these intros. That was a genuine so, you know, you have to circle back and let me know if you liked it. But I’ve gotten several emails and I think there’s a comment on the post itself of people who just really liked the inside look of what that was like.
Mike [00:58]: I’ll read the transcript. How’s that?
Rob [01:01]: Yeah, do that. That’s how you always approach it. Cool. And the other thing is MicroConf tickets are on sale which has been kind of fun. And this year – you know, for folks who follow the podcasts – we have two MicroConfs now in Vegas. And they’re back to back in early April. And we went with a starter addition and a growth addition because what we found is that it was hard to build a conference that catered to both ends of these spectrums, right. Of someone looking for an idea, vetting an idea; trying to get to launch; trying to get to fulltime revenue. For everyone to be able to live off it.
And that’s where starter addition basically ends. It’s all the stuff that you do in the early stage. And then growth addition is for folks who are already living off of it and are looking to grow it. And it’s been pretty cool to see kind of the distribution of folks who’ve gone to growth versus starter. And to see a lot of people are going to both of them.
But there are still tickets available which was kind of the goal of doing this, right. We’ve typically sold out. By the time we launch to the public, we sell out in what, five minutes, three minutes. I mean it’s been kind of ridiculous the past few years and this gives a lot more folks the opportunity to come and learn from the speakers and, of course, the other attendees in the hallway tracks.
So, if you’re interested go to MicroConf.com and by the time this airs you’ll either be able to still signup for the list or, perhaps, even just click right through and buy a ticket.
How about you? What’s going on?
Mike [02:11]: Well, I’m planning on casting an early vote for the election tomorrow. But I hate myself already, so, I don’t know. It’s kind of a mixed bag I guess.
Rob [02:20]: You know like; can you take a shower?
Mike [02:21]: Yeah, I don’t know. I almost wish that I could vote for nobody for the next four years and just be done with it. But whatever.
Rob [02:27]: Yeah. So I actually purchased a shirt and it’s got Cthulhu on it. And it’s says ‘Cthulhu 2016, why vote for a lesser evil.’ And so I think that should be our write in.
Mike [02:37]: I think that there’s other ones that have been out there like ‘Pedro for President.’ So –
Rob [02:40]: Right. I also have another one that’s ‘Underwood Underwood 2016.’
Mike [02:43]: Yes. I like that one too.
Rob [02:46]: Cool. What else? What’s going on with BlueTick?
Mike [02:48]: Well, I’m currently mired in support tickets and bug fixes. But I also added two paying subscribers this past week. So, things are going well. It’s just a matter of kind of going through those and – the unfortunate thing is that when there are certain things that go wrong, they create more support tickets than the actual problems that are causing those things. So, sometimes there’s this cascade effect where one thing that goes wrong or needs to be fixed will create like four or five support tickets and they’re all related to the same thing. Which kind of sucks to have to go through each of those and try and figure out are they related or are they not.
But the issue we ran into was there was data that was being displayed incorrectly and come to find out we had to go back through and regenerate some of the data because it just didn’t exist at one point. So we were tracking some information and we didn’t start tracking that information until several months in. And we got to a certain point where we’re showing all these statistics and things like that. And there’s some things that are included and then there’s historical data which doesn’t exist because it wasn’t included until then. So all the numbers looked off. We had to go back through and figure out, “Okay, well, is our logic wrong? Yes, actually logic is fine but this data is actually missing.” So we had to go through and regenerate all that data.
And then when doing that, it caused some other things because we’d fixed the data and then we had to modify how it was displayed but they were out of sync. It was just kind of a nightmare. But we’re at the tail end of that at the moment. I’m onboarding somebody else new tomorrow. I don’t know.
Things are looking up. Things are going in the right direction. It’s just still a lot of work to be done.
Rob [04:12]: Yeah, there always is, isn’t there? But you made it through and you’ve added a couple of new customers, which I think is probably the important takeaway from all of that.
Mike [04:19]: Yeah. So that’s a good feeling to see that I can talk to somebody about the product and walk them through it. And, actually, one of them was sight unseen. They just said, “Yeah, this sounds like it solves my problem. I’m in.”
So, yeah, it’s going well so far, I think.
Rob [04:31]: Cool. One other thing I wanted to mention is I was interviewed on Mixergy again. I was trying to think, this might be my – I think including the time I was on – you know, he did like his 1,000th episode and there was like Seth Godin and Tim Ferriss and a handful of people. And he invited me on for that. I think including that this is my sixth time of going on Mixergy.
So it was fun to talk to Andrew. I had just seen him a week or two ago. I’d converted to then see him again and be able to do it. So, it’s about the Drip acquisition, in essence. About growing and selling Drip. So, if you want to check it out, it’s on the front page of Mixergy as of now. So it’s still freely available.
And, if you do head there, I’d appreciate – there’s like a ‘Like’ button in the upper left. I’d appreciate if you’d click that because it kind of increases my cred in the whole Mixergy ecosystem.
So what are we talking about today?
Mike [05:13]: Well, today we’re going to be talking a little bit about some management lessons for founders. And we’ve had some previous discussions about this dating back all the way to episode 68 where we talked about how to hire and manage virtual assistants. But then we’ve also talked in episode 116 about how to move a team from good to great. And then seven tips for being a better manager in episode 129. And then in episode 193, we talked about distributed team collaboration for startups.
But one thing we’ve never really discussed directly was how to generally manage teams of people. And I think there are two different extremes that you could end up falling between when you’re managing people. One of them is the highly involved micromanager who wants to be involved in all the intimate details of everything. And then there’s the other extreme where the manager doesn’t want to do any sort of management tasks, or the founder doesn’t want to do any of those management tasks and they expect everyone to work completely independently of one another. And, obviously, when you trend towards either of those two extremes, you start running into friction where either people are not doing the right things or their work is overlapping so you end up with all those inefficiencies that kind of come out among those conflicts.
And I think that one of the goals of management is really to move the business in the right direction. And, per Joel Spolsky’s advice a long time ago, he said that the job of management is to essentially get the furniture out of the way so that people can do their jobs. And I think that that’s great in theory if all you do is manage people. But I really think that that starts to fall apart when you need to switch between a work mode and manager mode because, in the early days of your business, you’re still working on a lot of things. And then there are times when you need to manage people and you need to manage either the project or the future road map or working with customers or the support team. So you need to kind of alternate between these different management tasks.
And then at the end of all that, you still need to go back and be productive on the things that you’re doing. Whether that’s coding or marketing or what-have-you. What are the other things that you are regularly working on?
So, when you get into that situation where you have to alternate, I think that it becomes very difficult to follow that mantra of just moving the furniture out of the way for people. And I think that there’s some guidance that we can kind of shed some light on for people to help make them better managers.
Rob [07:15]: Switching between maker-mode and manager-mode, which is what you were just talking about there – very, very difficult. And it’s actually not something I recommend. I’ve found that trying to be productive as a maker, as a creator, whether that’s writing code or putting out blog content, writing, talks, that kind of stuff that really takes the deep glucose – first is interacting with people, being willing and able to be interrupted so that you can keep other people going. Trying to merge those two is extremely difficult. And I’ve found that times in my life when I’ve done it – and I did it the City of Pasadena; I did it as a tech lead for a credit card company in LA; and then I did it kind of coming up into Drip. In fact, a big decision I made moving into Drip as we started and that I’ve never regretted was moving out of the maker-mode and out of the maker role, I should say. Because I didn’t write any code on Drip.
It was a tough decision for me because my identity for a long time has been caught up as a software developer, you know. That’s how I introduce myself to people. And to not write code for the past few years was an identity issue. As well as you kind of lose your technical chops. But with that said, it has been a lot easier for me just to feel calm on a day to day basis because I don’t feel like I need to produce as well as managed people.
Now something interesting is that I should probably reference back – because if you’re listening to this, you might be thinking, “Well, I never want to manage people,” right. “So this episode isn’t applicable to me.” But there was a blog post I wrote in September of 2010 and the title was ’10 things I will never have to do again.’ And I’m talking about being a Micropreneur and how I just didn’t like politics of big companies. And so now that I’m on my own and I’m never going to hire employees, I have 10 things and I said I will never again number one, read a book about leadership. Number two, worry about building a company culture. Number three, get someone’s buy in. Number four, participate in a performance review on either side of the table. And I go one to talk about other things. But it’s all implying that the beauty of being out on your own and doing stuff.
And at the time I thought that’s what I was going to do forever. And, as it turns out, that’s actually A: kind of lonely. B: kind of boring and C – you can do some big interesting things but you couldn’t do the big interesting things that I wanted to do without having people onboard.
So, that’s where I would say like at one point I thought I would never ever higher, manage, and build culture and do all that stuff. I think there’s value there. And even if you’re not going to hire employees, if you’re running a team of contractors – which, in essence, I wound up doing just a couple years after that. I think I had eight contractors working for me. All remote so I didn’t have to go into an office. And they were all hourly so I didn’t have the payroll and the W-2. But still there was – I did have to be a decent manager. And I had to learn how to do that. So that’s where this isn’t just for someone working at a big company going to manage this team of 10 fulltime employees. I think there’s a lot of lessons we can take away from this episode that apply to anyone who start a business even if you don’t plan to hire employees.
Mike [09:57]: So, I think before we even dive into the different lessons, I think the first thing to point out here is that, as you had mentioned, not everyone really wants to be a manager but people aren’t necessarily always good at it either. It’s very rare to find somebody who is just a good manager from day one. It’s essentially a learned skill. And I think that that is very important to keep in mind as you’re listening to this episode or you get into managing different people. So, you will get better at it over time but it does take practice and it can be uncomfortable when you’re first getting started.
So, let’s dive into the lessons. And the first lesson is that information is power, but having too much information can kill productivity. Really what I’m talking about here is over-communication. And I’ll be perfectly honest about this, I am brutally awful when it comes to this. My emails tend to be longwinded and I tend to try and consider or talk about different edge cases that I’ve kind of considered when I’m replying to emails. I’ve actually made this point to the people that I’ve talked to. Like, “Hey, look, if my emails are too long, just feel free to let me know that they’re getting too long and you don’t need as much information.”
And it’s important to know what your limitations are, what your shortcomings are when you’re dealing with people. You have to let them know how they can interact with you and how they can provide feedback to you; and what is okay; and what isn’t. And one of those things that I let people know is, “Hey, if my emails start to get too long or it’s inappropriate to continue that conversation in email because of that, just let me know and we’ll take it in some other mode of communication.”
But the real point of this is that you need to provide enough context about the tasks or the jobs that need to be done. But not so much detail that you’re getting in the way and your communication is getting in the way of what people are trying to accomplish.
Rob [11:35]: Yeah. I think as I’ve gotten better at this skill of managing, I’ve learned to be a lot more succinct and to try to filter in only give people the amount of information that they need because anything else is just noise. And they don’t need the whole back story of how we got here. They often don’t need nearly as much detail as you have in your head. And so I’ve found that this works both ways. In retrospect, when I was a developer reporting to managers, I remember telling them all the technical details of a decision and they really didn’t need to know that. A lot of times I should have just boiled it down to something that was just simpler to understand.
So, yeah, I think this is a really good learned skill in all walks of your life, like all aspects. Whether you’re talking to your kids, talking to your spouse, talking to a manager, talking to someone whom you’re managing. Just being able to sit and filter and to put something in terms that others understand and think about it from their perspective I think is something that all of us should focus on. I think, to be honest, the world would probably be a better place if we could all do this a little better.
Mike [12:31]: I think like that point about it does work both ways. So, when you’re talking to somebody who is higher up than you or you’re being managed by them, that filter should also be in place. That you’re distilling it down to just the important things that they need to know. And you’re right, I think that it comes down to making sure that you’re contextually aware of what sorts of things they are interested in or are important to them.
The second lesson here is when you’re managing a team, at least provide people with a high level idea of what the business objectives are, what plans you’re trying to execute. And that can really just be a simple one-page document that’s updated on a semi-regular basis that just indicates kind of what your key priorities for the business are. You need to let them know what’s important to you today and why it’s important and what the different objectives that you’re trying to reach are and kind of leave it at that. Let them interpret that information and apply it at the micro level to what it is that they’re doing. You don’t really want to be in that position of the micromanager where you are getting into their workday and saying, “Okay, when you do this task make sure you remember this. Remember that over there.”
If there are certain things that you’ve run into in the past that you know that they’re probably going to run into, then it’s appropriate to bring those things up. But you also don’t want to be overbearing or over-communicated all of the different pieces that will go into it because one: they’re going to figure it out and two: that’s what you’re paying them for.
So, you want to make sure that you are spending your time wisely and you’re not deluging them with all this irrelevant stuff that, quite frankly, may not even be relevant to the problem.
Rob [13:57]: What’s nice about giving folks a high level overview is that then if there are small decisions day-to-day, you don’t have to be the single point of contact. You don’t have to be the single bottleneck to make every little decision. The more context people have around it and the more context you build over time in their heads folks working for you can just make better decisions. You don’t want to dump it all once like we said in the first part. But over time giving folks a broader business objective rather than having people just be focused on exactly what they do day-to-day so that they understand what role it plays in the business is a good thing to do. And in the past, if you’re in person – we used to do it with a weekly lunch at the Drip office where we’d all get together and just sit around the table and share what we were up to and where we were headed. And people would share what they were working on and then I would talk about kind of where I thought we were going next. I would often lay out, “Here’s what I think the next 30 days are. Here’s what I think the next 90 days are.” And that’s about as far out as we would go.
But I think if you’re remote, this could probably be accomplished – I don’t know if it could be accomplished with IDoneThis.com, which is kind of an email thing that lets everybody know what everybody’s working on. Or if you might need a 30-minute weekly video all hands where everybody’s on there and you just chat through some stuff. You don’t want to do an hour video all hands. Like it’s just too painful and people are going to think it’s a waste of time. But being in person I think is ideal to do this. But I also think that it’s possible to still keep people apprised of what’s going on.
And you have to think, high level plans and business objectives they change frequently, especially in the early days of a startup. I mean they might change every week or two until things start to iron themselves out and you start to get a more repeatable development and marketing approach.
Mike [15:29]: One of the things that you just pointed out was kind of a key difference between an in-person team where everybody is in the same office versus a distributed team where people may very well be in different time zones when they’re trying to communicate. So typically in those two situations, you have the synchronous communication for the in-office people. And then you have asynchronous for people that are around the world. And that’s generally how the business itself operates. I would think that a video call or something that is probably going to be very constraining for those distributed or remote teams. And what you’ll probably want to tend towards is like a summary email or just a document that you can keep updated.
I think the document tends to fall apart just because it’s not in front of people. If it’s sitting in somebody’s email box they’re probably going to read it. But if it’s like Google Doc that gets updated on occasion, even if you send them a link to it, they may not necessarily read it. You really kind of need to imbed that text in someplace where it’s going to be right in front of them so they are, I’ll say, encouraged to read it as opposed to, “Oh, I got this link. I could go click on that but I’ve got all these 30 other emails in here that I’m going to go deal with at this point.”
So I think that you do have to keep in mind whether or not your team is in person or not when you’re deciding how to communicate effectively across the entire team.
The next lesson has to do more with how do you communicate with individuals on the team. And I think when you’re working with individuals you have to set those short term goals and objectives for them. Obviously, you let everybody know what the long term objectives for the business and for the company are but, with individuals, each person tends to be working on different things. And maybe you group a couple of people together when you’re putting together these short term goals. But you need to know what it is that they’re supposed to be doing and they need to know what it is that you expect them to be doing during a short term timeframe. And that could be a week, it could be two weeks, it could be four weeks. But you don’t want to go for extended periods of time without some sort of communication feedback.
So, really the matter at hand here is how you communicate with them to get information to them that they need and you know that they’re working on these certain priorities and how they return information to you to give you status updates to let them know what’s going on. I’ve had managers in the past who’ve had me send out weekly emails to them with three different sets of information. The first one is what did you accomplish this week. What is on deck for next week? And then the third set was what are any outstanding issues or upcoming issues that you can foresee happening that you may need help with or that I may need to be aware of.
And I think that that works generally pretty well. Other systems – I think you’d mentioned IDoneThis. I’ve also used Status Hero in the past for individual updates which you can use either for daily or weekly updates. It depends on how many people you have on your team and the frequency of communication that you need. If you have a lot of people who are working for you, you’d mentioned that you had eight contractors working for you. I would imagine that eight daily updates emails telling me what people are working on would just be too much. It’s just too much communication overhead so, I’d probably lean towards weekly at that point.
But you really have to dial it up or tone it down depending on what your team looks like; how many there are; people fulltime versus only working once or twice a week. All those things factor into it but really it’s a matter of establishing the communication back and forth between you and the individuals.
Rob [18:39]: Yeah and this is where I’m going to go off on my rant about remote teams versus all being at the same location. I believe that a hybrid approach is the best, to be honest. I’ve tried working with completely remote teams; I’ve tried working five days in an office. And neither one is ideal if you’re working especially with developers. I think if you’re doing marketing and sales and you need a lot of communication, customer success, that kind of stuff. I do think being in the office three, four, five days a week is perhaps kind of more conducive to moving forward. But I think as developers, designers and more of the makers who need their quiet time and the maker time, I think that a half and half approach is the best that I’ve ever experienced. And, again, I’ve done the entire gamut of completely remote, completely in the office and then these mixes. And what we’ve found with Drip when I was left to my own devices to figure out what to make work, we essentially arrived at I was in the office about two and a half days a week. The developers were in two days a week. And some the other folks with customer success were doing calls, some of them were in five days a week, four days a week. It was up to them. Really nice to all be in the office Tuesday and Thursday and we would do a lunch on one day and that was the perfect time to get this kind of stuff done to talk about short term goals and objectives and to get everybody else on the same page.
And then if we needed to talk day-to-day, there were often these little short hallway conversations that could even be five minutes of, “What are you up to today? Do you need any guidance? Do you need any help?” Boom, it’s done. So, again, this can all be accomplished with IDoneThis or with daily stand-ups via phone. I know people do all that stuff but to me it all plays second fiddle to sitting and being in a room with a person.
With that said, in terms of providing people with short term goals and objectives, I think it depends on who you’re managing here. If you’re managing developers, then it’s typically going to be features or bug fixes or here’s the next thing we’re doing. If you’re working with sales, customer success marketing, then it’s like here’s kind of a growth sprint or the next growth thing we want to talk about doing. And they’ll go off and do it. And if it’s customer success, it’s probably like we’re finding processes, how to touch base with people more often or do a better job of that.
There’s just things that you need to be thinking about as a high level. And this is where being a manager, if you are really managing all these facets of it, it can make your brain spin. It’s sitting there every day and not being able to focus on anything works for some people and it doesn’t for others.
Mike [20:46]: The third lesson is to set expectations for how people should work with you and what their expectations of you as a manager are. And you want to do this as early as you possibly can and the reason for doing it early is so that you can identify what the deficiencies in that method of working for you is so that you can get those things corrected. If you don’t correct those things early, what can happen is that you end up in a situation where you have these expectations of somebody but you haven’t really communicated them very effectively. So then you start to get resentful or angry that they’re not doing what you expect of them but you haven’t really told them what it is that you expect. So you have to establish those lines of communication very early and what those expectations are. Whether it is, “Hey, I expect that if you’re working on a daily basis you have to” – this is for developers – “you have to have at least one commit at the end of every single day.”
And if you start letting those things go, then that will not only eat away at the relationship that you have with that developer, but it will also start to undercut the credibility and the overall relationship because you can’ read their mind and they can’t read yours. So if you don’t tell them, how are they possibly going to know?
And if you don’t correct those early it will tend to create a cycle that is very detrimental later on. You can get around these things by having some weekly updates where you start discussing those things. Maybe set aside some specific time when you meet up with people during one-on-ones whether that’s a weekly basis or monthly basis or even a quarterly basis. But if issues start to arise you need to address them early.
Rob [22:19]: This is where hiring people who you think you can work with and who you think can work with you is a big deal. You can’t just hire anyone and expect their work style to match yours or their work style to match your management style or your interaction style. We were extremely slow at hiring at Drip because we were just waiting for the right people. We didn’t want to get people on who would disturb the culture even though we were small. We were two people and then we were four and then we were six and eight. But we really hired people we felt could get along. And part of that was me thinking, “Do I want to interact with this person? When they’re frustrated, how are they going to be? When I’m frustrated, how are they going to react?” And kind of weighing that in your mind.
Something that I talk with folks during the interview process is, “Look, we’re a small team and as such, we’re pretty hands off. We try to hire really smart people and we try to give them really challenging tasks because that’s what we like to do and what keeps us interested. And then we’ll kind of touch base with you now and again, but if you think that you need daily check-ins or weekly check-ins in order to keep things going and you want monthly feedback and you want this kind of stuff, that’s not really how we work. That’s just not how we set up the culture. And I’m not saying that any of those are bad things, but it’s a different culture than what we built.” And I think there’s logic to that, right. There’s a reason that we did that. It’s because Derek and I are both software developers and we know that as a maker you want to get in, you want to do your stuff, you don’t want to be reporting to someone every day about everything you’re doing. You don’t necessarily want to break your maker time and have to have conversations and meetings are often the death of your maker time. And that is what we setup.
So as a result, we set expectations, not even after someone started with us, but we set it during the interview process. And tried to suss out do we think this person can work given our working style and our management style and basically the company culture that we wanted to build. And so, you have to think about that yourself as well. Like how is it that you want to work? And this isn’t an excuse to basically delegate stuff to people and then just walk away and expect it to get done right every time because that’s not how we work either. For the first few weeks, give advice to people and help them work through it and then offer feedback. And then they’d show it to us and we didn’t expect it to be right the first time so we’d iterate on it. But then over time, people just become more and more autonomous. Good people. They learn and they become more and more autonomous in their role. And so you just don’t have to touch base with them nearly as often. I think it’s figuring out what your style is and learning over time how to find other people who can work with that style.
Mike [24:38]: One of the things that I’ve found helpful, which is kind of the next lesson, is to establish the terminology around the feedback loops that you use with people. One thing that I recently did with the developer that’s working with me is that we kind of established some key words or phrases that are helpful for me to determine whether or not the updates that I’m getting from him are things that he needs me to pay attention to or if it’s just something like, “Hey, I just wanted to let you know.” Because there, in the past, had been some tendency for an update to come through and he’s like, “Oh, you know, this is a problem and here are all the different issues with it.” And I’d look at that and, without any real context because it’s just coming through slack, is that I look at that and say, “Oh, well, he’s got a problem and I know generally how to solve that or I know what some of the work arounds are given my history with the code base.” And I can go find some of the information for him.
But there was a lot of miscommunication there just because I didn’t realize the context of that because there wasn’t really anything there. It didn’t say, “I just wanted to let you know.” It was just, “Hey, there’s a problem with this and I think that this is probably how we need to do.” So what we did was to setup a couple of different key phrases where one of them is just more of, “This is an FYI.” So, obviously, you can just put little snippets of text in there. One of them is an FYI. Another one is, “When you get a chance” which means, “Hey, take a look at this, but I don’t need you to look at it right away.” And then there’s other ones that you can use like, “Hey, I need help with this,” which is kind of a, “I need help right now and it’s blocking my progress from me doing anything else.”
And I think that just little key phrases like that can really help, especially when you have a distributed team or when you’re not in an office. If things are coming through email or chat or text, any of those situations where you don’t get that voice intonation that goes along with it, those types of things can be helpful.
In addition, you can communicate time estimates with people very, very easily but you really just need to set up what those expectations are. And, honestly, all it takes is like a five-minute conversation. “Hey, if you tell me this, include this little information so that I know how important it is or if it can wait or if I need to drop everything that I’m doing and respond to it immediately.” Those things will help you and it will help them so that that way you’re both on the same page in terms of the communication.
Rob [26:40]: Yeah, and what I’ve found over the years is certain people prefer certain communication channels. And for a lot of more introverted folks, we’ve had support people who really prefer email and even with big announcements. We’ve had Andy who’s done support for us for – I’ve working with him five or six years now. When I told him about Drip being acquired by Leadpages, I emailed him which is crazy because that’s a big deal. And I wrote him a really long email but it’s because in the past we have done a couple of video calls over the years and he just said, “Yeah, this just isn’t my thing. I’d prefer just to do text.” And he’s really good over email. He had done all the email support for Drip since day one, he’d done all the email support for HitTail, he does it for the academy. He really works well and I know his style and when he said that he’d prefer to do email even with kind of big tricky things I will put them in email. Whereas other folks really prefer to see your face, they’d prefer to hear your voice, they’d prefer to be in person. You just kind of need to learn over time what they’re going to prefer.
When I was developing and when I was consulting, I always prefer text meaning email at the time when there wasn’t much else.
Mike [27:41]: You’re dating yourself here, man.
Rob [27:42]: I am. I am. But, yeah, I didn’t mean sending me an SMS. I meant sending me an email because it wouldn’t interrupt my flow, it was a synchronous and it was something that I could sit there and think about and mull over and then respond to. Rather than you’re put on the spot with this phone call and somebody springs something on you and you don’t know how to react and then it feels awkward and stuff. I have less of that these days now that I, I don’t know, I have more experience with it. But think about each individual on your team likes to be communicated with.
Mike [28:09]: And the last lesson on our list of ‘Management Lessons for Founders’ is to dedicate time to management. As you said early on in this episode, alternating back and forth between that maker-mode and management-mode is extremely difficult. It’s hard to do just outright but in addition it kills your productivity for anything that you’re trying to build or make. And all those interruptions, even if they’re just little things, even if it’s just a question of, “Hey, how do you think I should approach this?” If those things can be pushed to certain days of the week or certain blocks of time, then it will help you out tremendously in terms of your productivity. And the time that you dedicate to managing people does not need to be every day. You can intentionally revisit those management tasks maybe once every couple days or once a week depending on how big your team is and how much communication needs to be had between you and individuals. You can schedule that. And as long as people know that there is that dedicated time for you to communicate with them, they will put those things aside or they at least have the capability to. And you can redirect them if those communications start to come up in the middle of the day. And you have those scheduled calls or communications where you can level set those expectations. You can tell them, “Hey, this could have waited until such-and-such time. Or if this comes up in the future just do this instead.” What that does is it puts you in a position of being able to perform those management tasks without interfering with what they’re doing.
Rob [29:30]: Well, I think once a week is a good rhythm to at least be thinking about it and then you’re going to have to do stuff every day is the bottom line. It depends on your situation. If you’re doing this on the side and everybody’s remote, then maybe it doesn’t need to be once a day. But if you do have folks in an office you can be actively thinking on your drive in, “Who’s doing what? Does anybody need any help? Do I need to check in with people?” That was always kind of a mental thing for me on the drive in and then on the drive home to make a note, “All right, I’ve got to check with so-and-so tomorrow.” But then really, like I said, get maybe that weekly lunch in or the weekly – even if it’s a three-minute, five-minute check-in with people saying, “How are things going? Do you need anything? Everything going well?”
I, again, don’t like the 30-minute formalized or the one hour formalized conversations where you’re trying to figure out what’s going on them and feel like you just have to sit in a meeting. But to take a few minutes and even just ask a question, “How are things going?”, and it might take two or three minutes and you’ll hear some short things and you don’t feel like you have to sit in a conference room together. I always liked that approach.
And, again, I don’t know if that would scale to a huge team. You know, if you had 100 people at a company does that approach work? I don’t know. But I never really had the goal of doing that. And I think folks listening to this podcast, you’re probably thinking more about having a small, remote team perhaps one in an office. And I do think that this is a really good way to go about it.
And that brings up the point of like we often have only seen teams managed at large scale because a lot of us have worked for larger companies. Don’t think you have to do it that way when you only have four people because you don’t. You can have a different approach that’s perhaps more authentic to yourself and more authentic to the people around you because you can do things that don’t scale at this small stage. And you can just handle things as they come up rather than having a lot of formal processes. Then once you get bigger, you probably do need to switch that up and perhaps follow some of the more standard marketing wisdom that you might read in the books or read in the MBA programs because those are often talking about much larger organizations.
That’s our episode for today. If you have a question for us, call our voicemail 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. We’ll see you next time.
Episode 313 | The Viability of SaaS, Cutting-edge Technologies, and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions including if SaaS is still viable for microprenuers, latest technology they are excited about, and some book recommendations.
Items mentioned in this episode:
Transcript
Rob [00:00:00]: In this episode of “Startups for the Rest of Us,” Mike and I discuss whether SaaS is still viable for micropreneurs, what books we’re reading now, and what solopreneurship looks like in 2016. Plus, we answer more listener questions. This is “Startups for the Rest of Us,” episode 313.
[Theme music]
Rob [00:00:17]: 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’ve built your first product or you’re just thinking about it. I’m Rob –
Mike [00:00:33]: And I’m Mike.
Rob [00:00:34]: – 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 [00:00:38]: Well, this past week I spent quite a bit of time probably alternating between two, different things. First one was having a lot of MicroConf sponsorship-related calls with people, because people have been reaching out and asking how to get in touch, and how to go about sponsoring MicroConf. I’ve been having a bunch of those calls. I won’t say it chews up a ton of time, but because they tend to be sporadically scheduled I have to be careful about how I allocate the rest of my time. The other thing I’ve done is scheduled a few, different calls with some of the people I’ve been working with on Blue Tick to hammer out how to integrate it into their sales funnels for Asana and Streak and a couple of other apps that they’re using. It’s been some interesting calls there. I’ve got some overlapping feature requests that we’ve got to go through and implement. They were on the roadmap anyway. All I’ve basically done is move them up a little bit, but so far things seem to be going pretty well. How ‘bout you?
Rob [00:01:25]: Yeah, speaking of MicroConf, if you’re out there and you feel like getting your company, or product, or whatever, in front of several hundred bootstrapped startups founders would be interesting, drop Mike a line. You can email him at questions@startupsfortherestofus.com, and we’ll get to you, or Mike@micropreneur.com. In terms of MicroConf, yeah, tickets are now on sale for Founder Café members – which is our online membership community – as to previous attendees. I think by the time this episode goes live, we will be emailing the early bird list either that day or the next day. So, if you are interested in heading to Vegas in early April, we’re having, as we said, the growth edition, the starter edition, depending on your stage. Head over there. It looks like we’re going to sell out pretty quick again this year. Is that your take on it as well?
Mike [00:02:10]: Yeah. It’s interesting the number of tickets that we’ve sold just so far. It exceeds what we’ve done in the past, which is to be expected just since we have more tickets available. It’s nice to see that things haven’t really been impacted by splitting things out into two, different conferences. Things still seem to be moving along at a pretty good clip, and it’s a matter, I think, for most people of determining where they should attend – just because there is the starter edition and growth edition. I’ve heard some people have not really concerns, but they say it’s a little bit of disappointment. They’re like, “Oh! I’m not going to see everybody that I saw last year.” because some of them are going to one edition or the other, and they’re going to be at the opposite one.
Rob [00:02:44]: Sure, but this allows us to have – what – probably around 400 people across the two conferences without having any conference be more than about 200, 220 people. I think it’s a good compromise.
Mike [00:02:56]: Yeah, definitely.
Rob [00:02:57]: And if you miss out on tickets this year, and you’re interested in getting an early jump on tickets when it’s much calmer, foundercafe.com, as I mentioned earlier, is Mike and my online community for bootstrapped startup founders. It is a paid community, and folks who are members of Founder Café get basically first crack at MicroConf tickets, both in Europe and in Las Vegas. So, if you’re interested, we do screen and approve incoming requests for new members. We don’t just let anyone in. You have to have some type of business launch, and have some type of traction in order to get in, but we’d love to see you inside Founder Café, if that’s of interest. Last thing for me, I’m preparing for my retreat, and my goal is to take two retreats a year – do one in January, one right around June or July – but with the chaos of the Leadpages acquisition, and the move, I never did my midyear one. So I’ve been encouraged by everyone around me. You know how someone hands you deodorant and toothpaste you take that as a hint, like, “Yeah, you smell?” Well, three different people in different walks of my life basically told me, “You really need to go on a retreat!” [Laughs] So, that was the indicator of like, “Oh. Am I being that much of a jerk?” “Do I look that stressed out?” So, I took that as an omen and booked something. I’m going up to the waters of Lake Superior for the first time ever.
Mike [00:04:12]: Very cool. I used to live right next to Lake Ontario, and very close to Lake Erie. I’ve never been that far up into the Great Lakes region, though. I have been to Minneapolis and seen the Great Lakes from there, but it’s a little different than actually going out there.
Rob [00:04:24]: For sure, yeah. I have not been north of Minneapolis at all, so it’ll be a fun, little drive for me. This week we have a bunch of questions. I really liked these questions. We have one from John Ndege, and then we had an email filled with questions from Corey Moss at gelform.com, and both are long-time listeners of the show. We’ve met both of them in person at different MicroConfs, and so we just wanted to take 20, 30 minutes to run through these. Some of these range from things about us and what we’ve been up to. Other things are more of our take on what solopreneurship looks like in 2016, 2017, that kind of stuff. The first question is from John Ndege, and his question is, “Is SaaS still viable for micropreneurs?” – meaning folks who want a lifestyle business, who want to probably stay solo, and keep a small business that can fund their life. You have thoughts on that?
Mike [00:05:13]: I think the interesting thing about this question is that people are starting to look around and see that the landscape of SaaS businesses is starting to become more crowded. If you look at the landscape today compared to five years ago – or even, honestly, two years ago – things are a lot more crowded now, and the low-hanging fruit is more or less gone. There’re certainly opportunities out there for people to come in with a new SaaS product and aim it at a particular niche and be able to be successful with it, but I think that the problem people are probably starting to run into now is that they look around and most of the ideas that have for a new SaaS product have already been done. There’s a little bit of angst, or concern, about coming out with a new product that does something that another product does, and I think that this is a very common hang-up among developers, where they basically want to invent something new. They don’t want to reinvent the wheel. They don’t want to do something that’s already been done, and that to them is a hurdle that they need to address in some way, shape, or form, either with themselves or with their customers. Because one, you don’t want to build something that there’s already a lot of very competitive products out there that already do that exact, same thing. For example, it’d be very difficult to come out with a new Basecamp, for example, or a new version of Teamwork, or a new project management application. It’s because those markets are very crowded. The analogy there that most people, I think, would take is they transfer that onto all other SaaS products and say, “Oh, there’s already something that does this.”, when the reality is the question you should be asking is, “Can I get in front of those people, and can I deliver something?” I think the other side of this is also that people’s expectations of what a successful SaaS product needs to achieve on day one are substantially higher than they were five or ten years ago. If you look at the new apps that’re coming out, they look very, very polished when they hit the market, and when you first discover them. It’s not often that you get to see the makings of a new SaaS as it’s being built, or as it’s in the very, very early stages, because you just are not in that target market most of the time. I think that those are the two things that factor into this. I do think that there’s still a lot of opportunities here, and I still think that people can come out with a new SaaS and make it work – especially in the micropreneur space – but I also think that you have to be very calculated about the things that you do and the choices that you make in terms of the competition and the market that you’re going after, and the marketing channels that you use. There’re still a lot of marketing channels out there that developers tend to shy away from, that they don’t necessarily need to shy away from, because there’s a lot of opportunities there. Some of those opportunities are a direct result of the fact that other developers and entrepreneurs are not in those because they’re uncomfortable with it.
Rob [00:07:51]: I think that’s a really good take on it. I agree with you, it’s more competitive than it was five years ago. The best time to get started was ten years ago, the second-best time was nine years ago, and the third-best time is today. I’ve been saying this for years about SaaS and micropreneurship and software and all this stuff. Info products have done the same thing. There is so much money to be made, and as audiences have grown bigger and bigger, everyone wants to do it – thinks they can – so there’s a big rush of competition. I absolutely think SaaS is still viable for micropreneurs, and I’m seeing people still execute on it, and launching three months ago and getting decent traction; launching six months ago, getting decent traction. I see the landscape shifting, but I don’t see that ending anytime soon. Even looking several years out, it’s still, in my opinion, going to be a viable business. You may have to niche down more. You may have more competition. There’s a bunch of stuff – it’s different, but I still see people executing and just making it happen. So I have no qualms about saying that it’s still legit. Our next question comes from Corey Moss at gelform.com, and he says, “What specifically have you guys gotten out of the podcast? What are some stories of connections made? And would you recommend it as a marketing channel?”
Mike [00:09:01]: Three different questions buried in there. I’ll try and answer them individually. What have I specifically gotten out of the podcast? I would say that it gives me something to talk about when I meet entrepreneurs. Sometimes they’ve heard of the podcast. Sometimes they’re listeners. It makes getting a conversation started with people a lot easier, especially when they’ve heard of the podcast, or if they’re a regular listener. You can jumpstart into various aspects of things, because there’s already that relationship there, even though that relationship, I think, is mostly one-way when it comes to podcasting, because you’re talking, but you’re not necessarily getting that interactivity with the people on the other side. There is that feeling of familiarity with them to you to be able to talk about different things and discuss things about their business. I really like that aspect of it. It’s really nice to just go someplace and say, “I have a podcast.” or find out that somebody else has a podcast, and you just start talking about podcasting, and about what your format is, and how you do things, and how you prepare, and those kinds of things. I think that those are the basics of what I’ve gotten out of it. Stories of connections? There’s any number of things that have come out of this podcast, MicroConf being one of them, the Micropreneur Academy being another one – although I guess the Micropreneur Academy came a little bit first. Still, there’s all those connections that you can make. I’ve talked to hundreds and hundreds of people that I probably would never have met otherwise, because they just don’t live near me. You don’t get the sense of familiarity, or the ease of being able to just walk up to somebody and talk to them without having that connection of some kind. I think a podcast does help to establish that. Both of the guys in my Mastermind group have come to MicroConf. They both listened to Startups for the Rest of Us in the past. So those are the types of things I’ve gotten out of it; Mastermind group members, MicroConf, relationships. Then, I think the last question here was, “Would you recommend it is a marketing channel?” I think this is very subtly nuanced, because I think it’s very easy to say, “Yes, it’s a good marketing channel.” but I also think that there is a lot of nuance there as to the type of person who can make it work, and whether or not you have a format that is appealing to people, whether you have topics available, and quite frankly, whether the podcast is just interesting to people or not. There’s a lot of things that factor into it. You might just not enjoy talking into a microphone every week. You might not enjoy it very much. You can do what we did. I forget how many episodes we recorded. It was eight or ten before we even released one of them, but that’s one way to test it. Do you even enjoy it? Now, in terms of whether it works as a marketing channel, I can’t answer that for every business. For us, with the Micropreneur Academy, it has worked really well; and, obviously, that translated into MicroConf, which is doing extremely well. I don’t know how well it would work for other types of businesses. I think that it does give you the social awareness, in your circles, for the people who are listening to it, but whether it is an effective marketing channel for everything? My suspicion would be, “No, it’s not for everyone, or for all types of businesses.”, but I think that there’re certain ones where it can work, and it can work really well.
Rob [00:11:54]: Yeah, and from my perspective, what I’ve gotten out of the podcast – it’s similar to you. Before the podcast, I had the blog, I had written my book, and I definitely had a small personal brand in the bootstrapped software space. The thing was there was a realization at one point where I surveyed my email list, and I sent them – I don’t even remember what the questions were, but it was kind of trying to find out what they wanted me to write about, and it was how much did they enjoy the blog and this kind of stuff – and a bunch of them said – and I put this both through the RSS feed on the blog – the email – and a bunch of folks replied with comments like, “Yeah, I think I like your blog, but it’s hard to remember what you write and what everyone else writes, because I just see it all” – “I click through to 20 articles from Hacker News, or I see it all in my RSS reader, and I forget who wrote and who said what.” It occurred to me that as much content as we’re all producing and writing, trying to make these impacts on people, that it really was getting lost in the noise.” Even though you want to have a unique voice – or even if you do have a unique voice – your stuff just gets blended in with all the other information that someone consumes in a day. So the realization hit me that two ways to stand out were, number one, to be audio, right? To have a podcast where someone listens to you. It’s a serial. It’s a show that comes out every week, people follow the trials and the tribulations, and if you go all the way back to the first episodes you’ll hear you and I talking about random stuff. Then you’ll hear us talking about selling apps, and buying apps, and launching Drip, and you just follow this story. It can happen with a blog, it’s just a lot more rare, I think. The other thing I realized is that – in terms of content and people engaging – writing a book is the other thing. That’s the other thing where someone will sit there, they’ll read that book, and they’ll spend several hours digging into it, and then they’ll be impacted, and they’ll remember that you wrote it. That was kind of a big wakeup for me. So, I think specifically, what I’ve gotten out of the podcast is it has made my thoughts and my voice, and the stuff that I want to get out there into the bootstrap community – I think it’s given me a mechanism to do that in a way that people remember, “Oh, Rob.” or, “Rob and Mike said this.”, right? As opposed to us saying stuff, but then it just gets lost because nobody remembers you said it, in essence. Beyond that, Micropreneur Academy – which, as you said, I think, was before the podcast – but MicroConf I don’t think would have – it may have happened, but it wouldn’t’ve been nearly as successful as quickly as it was without the podcast. And it’s a fun thing to do. The reason I like it is we show up here for 45 minutes, and then we walk away, and the show shows up every week. I used to spend six to eight hours per post on the really good blogposts. Sometimes I’d crank one out – including all the edits and everything before I hit “publish” – might be four hours. That’s a tremendous leveraging of my time. That’s why I like podcasting. In terms of stories of connections we’ve made, I could go on and on. So much of growing MicroConf, growing Drip, finding speakers for MicroConf, buying apps, selling apps – almost anything I’ve done – has been easier because of the podcast, and because of the connections that we make. Even if they’re one-sided connections, right? You get 10,000, 15,000 people listening to a podcast. I may not know them, but if I reach out to invite them to speak at MicroConf, I don’t have to explain what MicroConf is. They often will say, “Oh, yeah. I’ve heard your show,” or, “I listen to your show.” It makes it so much easier that they know that you’re legitimate, so, in essence, it’s not a cold outreach.
[00:15:21] “Would you recommend it as a marketing channel?” Similar to you, it really depends on what you’re marketing. As a SaaS marketing channel, probably not. I know it can work; we had talked about doing a Drip podcast at one point – but it’s just such a slow burn, and the time it takes to build an audience is really, really long. I think if you’re trying to market software that doesn’t surround a personal brand, I would say this is like high-hanging fruit. There’re tons of things that are more low-hanging than starting a podcast, with all the overhead of doing it. There’s a lot of things to think about. I’ve started two podcasts now, and Sheri has done a separate one as well on parenting. So there’s three podcasts that I’ve been heavily involved with getting set up technically, and every time it just takes a bunch of time.I think that if you’re going for a personal brand, selling information products, if your unique voice needs to be there in order for something to be sold, then yes, I think over the course of years it’s worth doing a podcast. But be in it for the long haul. You’re not going to release ten episodes and have any type of audience. We were around for a year before we had – I don’t know, I don’t remember the exact numbers – but it just wasn’t that many people. It’s really this long snowball that you’re basically pushing up a hill. Our next question is for you, Mike. It says, “How did Mike’s book do in the end? What did you get out of the process, and would you write another?”
Mike [00:16:30]: I’ll be honest. I have not paid very much attention to it since probably a couple of months after the launch. So during the initial launch – I think if you’re on my email sequence there are emails that go out that actually tell you all the different stats, and show you all the numbers and everything – but that’s all from the launch. I think with the launch itself I did probably around 250 to 300 sales, or something like that, and it was around probably $20,000 or so. The odd thing about that is because the book itself – there was a physical book that went with it – that $20,000 was profit. It was not total income for it. The book itself cost me around $5 for each one just to print it, and then anywhere from about $4 to $18 to ship it. I factored those into the profit margin as well. That’s how it did out of the gate, and then it still sells copies every month. I just haven’t really kept track and gone back to look to see what it does. In terms of what I got out of the process, I understand, I think, a lot more about what would go into writing book. That probably doesn’t necessarily directly help me, in terms of most of the things that I’ve worked on. I have thought about writing a book that would go along with Blue Tick, for example, and it’s given me ideas on how to structure that, and what needs to go into it. I’ve looked at amazon.com, for example, as a marketing channel for that book. Those are the types of things where I would say it’s helped me. Would I write another? The answer to that is “Maybe, but I’m not absolutely sure on that.” As I said, I’ve had the idea to write one for Blue Tick just about sending out emails and being consistent about the outreach, and what sorts of things you should look for, what you shouldn’t, what you should say, and what you should avoid saying. Those are the types of things, I think, that would go into that, but I’ve also been reading a lot of science fiction and fantasy books lately, and I remember as a kid one of the things I wanted to do was be a writer. It’s kind of made me think about the possibility of branching off at some point in the future and doing that as a side project, or a side hobby, or something like that – just writing either science fiction or fantasy books, or something along those lines. It’s been burning in the back of my mind, but I haven’t moved on it yet, just because I’ve got so many other things going on, and it’s just not that important to me right now.
Rob [00:18:35]: Very cool. The next question is for me. It says, “Rob, would you, could you write another book?” Then [chuckles] he put in parenthesis, “That may sound more cynical, but I mean it, too.” It’s kind of funny: “Could I write another book?” Yeah, the answer is, “Absolutely.” I kind of talk about this every year, don’t I? I like to say, “Oh, I’m” –
Mike [00:18:49]: You do. I think that’s a yearly, annual goal for you. Or, at least, you revisit it every year, and you make a conscious decision to not go back and write –
Rob [00:18:58]: Exactly. Yeah, so the answer is, yes, I have hopes to one day do this again. I don’t particularly enjoy the process of writing. It’s pretty painful. I think for most people it is. It’s hard to do, but I think that I absolutely could write another book. I think that I definitely plan to write another book. I would love to go back – I don’t know if I’m going to go back and revise “Start Small, Stay Small.” That’s been the big decision process: “Do I revise this?” “Do I have more to say on that topic?” “Do I want to write another one with a different focus?” I think the bottom line is, yeah. As soon as I have time -things are in place where I can do that – I would guess that that’ll be something that I will add to one of my annual goals. Next question is, “What solopreneur bootstrapper books are worth reading now?” This is, actually, a tough one for me. I know of a few books, but I’m not in the –- in the early days when you’re really thirsty and you’re just trying to drink all the information you can on this topic, you read all the books, and you have a pretty good survey of what’s out there. I actually don’t these days, because I’m not actively seeking them, because I don’t necessarily need to learn these aspects of it. I continuously find myself recommending Ryan Battles’ “SaaS Marketing Essentials.” When I started reading through that book it was similar to an outline of a book that I was hoping to write someday. It’s just kind of step-by-step, “Here’s how to think about SaaS.” “Here’s how to get it launched.” I really like that book. Solid. I recommend it pretty frequently. I also like Justin Jackson’s “Marketing for Developers.” I think it’s just a solid way – especially, I think, even if you’re not a developer, this still applies. It’s really teaching you how to get software out there and into people’s hands. It reminds me a lot of stuff that, if you look back at my writings between maybe 2006-2007 and 2010 or ’11, a lot of it was – it’s similar type of stuff. It’s like trying to break – it’s saying the same thing over and over – trying to break developers out of the thing: “Don’t go in the basement and build it first. Start marketing. Talk to customers first…” It’s the same stuff, but it needs to just be constantly said, to be honest, because new crops of developers come up, and nothing lasts forever. So those are the two books that most come to mind.
Mike [00:21:02]: Yeah. I think when you start to – depending on how you phrase this particular question – the answers could be different, because both of the books that you just mentioned, they are from solopreneurs, or bootstrappers, but I wouldn’t necessarily consider them to be about being a solopreneur or bootstrapper. If I were to look at the landscape out there, there’s not very many that fit in that mold. Your book “Start Small, Stay Small” is one of them. My book, “The Single Founder Handbook,” is another. But when you start looking around beyond that – that specifically talks about solopreneurship or bootstrapping a company -there’s really – I don’t see a whole lot out there. Now, the two books that you mentioned, when I look at those I look at them specifically as a form of “How do I do X?” or “How do I solve a particular problem?” which would be – if you’re looking at Justin Jackson’s book – if you’re a developer, how do you go about marketing; or, if you have a SaaS application, how do you go about building that. I don’t put them in the same vein as the way this question is phrased. I think that there’s a difference between those two things. Is it by a solopreneur or a bootstrapper, about that particular topic, or is it by them about a very particular nice thing? Another one that comes to mind that also fits in that is “Email Marketing Demystified” from Matthew Paulson, who has come to MicroConf for several years, knows quite a bit about email marketing. He’s been on this podcast before talking about how they send, some crazy number – like 10 million emails a month or something like that – which is probably higher than that at this point. Those are the types of topics that I think that are probably relevant, and I think once you get past the basics you’re probably looking for very point solution-specific books that solve a particular problem for you.
Rob [00:22:36]: Yeah, I think that’s a good point. I think implicit in my answer is that, if you’re going to be a solopreneur bootstrapper, I think you should learn how to market, which is why I recommend Justin’s book. I think you’re probably eventually get to SaaS. Maybe that’s not your first thing, but I think you’re going to want to take some stuff away from that – you know, Ryan Battle’s book to do it. But you’re right. They’re not specifically about solopreneurship and bootstrapping. Corey’s next question is, “What new tech has you excited, both personally and as an entrepreneur?” For me, I think these are very different questions – which is kind of cool, there’s the personal side and the entrepreneurship side. As a founder and especially as a solo bootstrapper, I don’t think you want to be excited about new tech. That’s the danger. That’s the Silicon Valley thing. If you want to go build software for drones, or you want to build wearables, you should go raise funding, because if you don’t, you’re very likely going to get creamed. If you’re bootstrapping from your garage you want to look at things that’re a lot more boring. Those are the ways to cut your teeth. It’s not to jump in the middle of the pile where everybody has $10 million, $100 million valuations, when it’s two people in a garage and it’s just going to be red water, and 100 companies are going to launch, and two are going to succeed. If you want something that has a decent chance of success the tech that would excite me is things like: building a web app in Ruby on Rails – a SaaS app that helps B-to-B folks, that’s priced at $20, $30, $40 a month and up – or building something in Python over Djenga. These are boring, old things, but that’s how you do it. It’s going simple. Once you get to the point where you have experience, and maybe you have the income coming in – 20 grand a month from your SaaS app. Then you can go do what you want, right? Because you’re basically going to be able to fund your R amp;D. You have some credibility, and you have chops, and maybe you do want to go raise money at that point. But I feel like taking care of that first is something that I’d recommend. So, entrepreneur side for me? That’s the tech that I think people listening to this should be focused on. Now, with that said, for me, personally, I’m really into crypto currency. I like Bitcoin. I like the promise of it. I think there’s a lot of potential in that. I think it’s way overhyped for a number of dumb reasons. That would probably be a whole episode we could talk about, but I am teaching myself about Bitcoin. It’s something that’s new, and it’s changed something. It reminds me – when I was eight years old, I got an Apple 2E sitting on my desk, and I thought to myself, “I’ve never seen anything like this. I wonder how long these things ‘ll be around.” Then the Internet came up. I got into college in ’93, and I get this email address they handed me, and I’m like, “What is this thing? It’s my initials ‘@ucdavis.’ “What in the world is this? I wonder how long this thing ‘ll be around.” And here we are. The Internet and everything keeps piling up on itself, and it’s like these things that we have all been alive as they launched – few of us saw the potential in them. When I look at Bitcoin I think that it’s going to be around for a really long time, and I think we’re at the advent of something that is going to – I don’t want to say, “It’s going to be big!”, but it really does feel like we’re in the early days of things like that. I also think wearables are interesting. I don’t own any of them myself, but I’m excited, long term, about the potential of those. I like [quad?]-copters and drones. I have a little plastic one we play around with the kids, but I’m not excited about those like I am in terms of learning about them and getting in and doing all the stuff like I am with Bitcoin. I guess the other thing I’ll throw out is 3D printing. I have a little consumer-grade 3D printer that I got on Kickstarter. I’m pretty stoked about that, but I’m more stoked about it for my kids. We do it together, and I want them to understand how to design, and how to print the things out, and how to build them. I think for them, long-term, that could be their programming. When I was eight I learned how to code, and it has changed my life. I think for them, one of these things that we do is going to latch onto one of them, and one of them is going to say, “I love 3D printing. This is the thing I’m going to do.” I think your long-term career prospects, if you do that now and get into it, are really big. Anyways, I just threw out a bunch of stuff. You have opinions as well, Mike?
Mike [00:26:21]: I don’t think my opinions are too far off from yours. I think that there’s definitely a difference between being excited about a piece of technology for personal reasons versus entrepreneurship. There’s nothing really out there that I can see that I would want to latch onto as an entrepreneur. The one – I don’t even really want to call this an exception, because I still think that it would be very difficult – but building small devices, or products, out of microcontrollers and things like that. You could use Raspberry Pie, for example, as a prototype tool, and then go out and build other small devices, or have them shrunk down, or get the manufacturing process so that you can get them cheaper than having to buy an off-the-shelf Raspberry Pie to run whatever it is that you’re building. That said, on a personal front, I’d say that a lot of the things that go around home automation, I think, are interesting. I don’t know how really excited I am about them, so I guess things like being able to measure or monitor all the different things that are going on in your house, whether it’s temperatures, or air currents, or, “Are the lights on? Are you using a lot of power when it seems like there’s nobody in the room?” Those types of things they’re not really terribly interesting, though, I don’t think – at least not from a personal standpoint. It’d be nice to have that information, but it doesn’t really help you. It doesn’t significantly change your life. I think it’s interesting, and I like the idea of working with those little pieces of electronics. I would find a hard time, I think, building a business around it. You could certainly do Kickstarter campaigns and things like that, but I think it’d be tough just because of the cost of manufacturing, which was why I went into software rather than hardware. Beyond that, I have a drone as well. I think that those are pretty interesting, but that’s more because I like playing with them with the kids than anything else, except when I run it into the TV [chuckles]. There’s not a lot out there that, I think, interests me, or really excites me. There’s certainly a lot of possibilities around VR, but VR has been talked about for the past 20 years. I went to college with somebody who made a VR headset for the original Mechwarrior game, and that was back in the mid-‘90s, and VR still really hasn’t taken off. It’s not to say that it won’t, but I don’t see TRON-like features two years in our future. I think there’s obviously potential for those things, but it’s not stuff that I’m looking around saying, “I really want to get into that,” or, “I’m really excited to see that.” because, as you said, it’s so hard to see what the future looks like for some of those things.
Rob [00:28:38]: Corey sent us some additional questions that are really good, and we’re going to cover them in a future episode. But for today I think we’re wrapped up.
Mike [00:28:45]: If you have a question for us you can call it into our voicemail number at 1-888.801.9690, or, you can email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. Subscribe to us on 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.
