Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Justin Jackson about launching 100 projects in a year. Justin talks about the goals and idea behind his MegaMaker project. He talks about some of the products he has come up with and how he went about marketing those products.
Items mentioned in this episode:
Transcript
Mike [00:00] In this episode of ‘Startups For the Rest of Us’ I’m going to be talking to Justin Jackson about launching a hundred projects in a year. This is ‘Startups For the Rest of Us,’ episode 296.
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.
Justin [00:25]: And I’m Justin.
Mike [00:27]: And we’re here to share our experiences to help you avoid making the same mistakes we’ve made. How you doing this week Justin?
Justin [00:32]: Well, like I was saying the kids just got out of school, which just feels hectic. It’s amazing how much we rely on the kids being occupied all day. And so now it’s like they’re out. Now what am I going to do?
Mike [00:43]: That’s actually a really good way to put it, and I’ve never quite phrased it verbally before, but it’s nice that the kids have school to preoccupy them for six or seven hours on most days of the week.
Justin [00:54]: Now there is a theory. I don’t know if this is real; but there’s a theory that schooling, public schooling, really came about because of the Industrial Revolution. Because you couldn’t have parents working all day and then have kids just running around. So I don’t know if this is true or not, but that’s what I’ve heard is that a lot of public education came out of just needing to occupy the kids while mom and dad are in the factory for 12 hours a day.
Mike [01:17]: I would actually guess that it’s probably a direct result, not necessarily of the Industrial Revolution, but of child labor laws that prohibit the kids from working.
Justin [01:25]: See now we’re getting down.
Mike [01:28]: So that’s probably it. But anyway, great to have you on the show. For anyone who is not familiar with Justin, Justin lives in Vernon, BC, which is in British Colombia. Which, to me, I call it Canadia on occasion just because I live so close to the border. I used to live in Buffalo, NY, and I mean literally you could hit a golf ball and hit Canada.
Justin [01:44]: Well there you go. Do you have some Tim Hortons there?
Mike [01:46]: Yes we did have Tim Hortons. So went there on occasion.
Justin [01:49]: So you’re basically like 30 percent Canadian.
Mike [01:52]: I guess. I don’t know if I’d admit to that publicly on a podcast with thousands of listeners. But I did want to have you on the show because – just talk a little bit briefly about your history. And you’ve been the former Product Manager at Sprintly, and in 2015 you kind of struck out on your own to make your own stuff. You’ve been kind of around the block, I’ll say. You’ve got three different podcasts that you’ve run, Product People, Build and Launch, and now you’ve got Mega Maker that you’re working on. And then you’ve also got a bunch of ebooks that you’ve written, there’s Amplification, The Hacker News Handbook, The Product Hunt Handbook, Marketing for Developers; I’m sure that there are several other ebooks, and other podcasts that I’m probably missing in that list. So why don’t you, I guess fill people a little bit more in on some of the highlights for anything that I might have missed.
Justin [2:34]: I got started in the software business in 2008, working for a email service provider in Edmonton. And I kind of started my ground level just answering customer emails and doing customer support, but kept poking my nose in everything. I was interested in design and development and marketing. And eventually I worked my way up to being Product Manager in that company. And it’s actually a good definition of a Product Manager. They’re people that kind of sit in the middle of all those other categories. And then after that I went to work for a startup called Sprintly in Portland. And did that for about 14 months or something like that. And then Sprintly got sold and I had this decision to make. I could go out and find another big consulting client, go out and get a job, or I could stop working and make my own stuff. And I’d been kind of building little side projects on the side up until last November, and decided okay, I’m going to do this. And so I went to my wife and I said, “Hey honey, what do you think about this idea of me not going and working anymore, but just working on a bunch of little things and maybe trying to make a 100 projects in a year, and then documenting it on this podcast called Mega Maker?” And she said, ‘No.” And I was –
Mike [3:58]: So executive preapproval was denied.
Justin [4:00]: Yeah. No approval there. And I was like, “Please.” I was just begging her. And so the deal we struck was I said if I can make a living, if I can keep paying our bills, keep food on the table, et cetera, let me do some exploration here. And the whole idea wasn’t to like maybe go out and start a big startup. The whole idea was I had been working ever since I was 22 up until 35, working full-time for other people. And I just want instead of kind of jumping feet first into starting a company or trying to build something really big, I just wanted to explore a bunch of different things. So my wife has called this kind of like my early mid-life crisis, and it’s actually probably a pretty good description. I just wanted to try out a bunch of stuff and in some ways, to learn new product skills, learn new marketing skills. And also, just to kind of maybe figure myself out a little bit. After working full-time for all those years, let’s try something else out. Let’s learn a little bit about myself.
Mike [5:02]: That’s awesome. So how did you go from the answer of “no” to “maybe let’s see how things go for a little while”? Because it seems like there’s a gap there that you might have glossed over some stuff. Did you trade one of your kidneys or something like that?
Justin [5:14]: Well, obviously it was a conversation and I just said, “Honey, I think I can make this work.” And one of the reasons I felt confident is I’d just released Marketing for Developers and it had done quite well. I think by that point—just doing some math off the top of my head—I mean it’d probably done about $30,000 in sales or something like that. And so I felt like I’ve got this one product that seems to be selling pretty well, and I think that will give us some leeway to go and try some other things out. And my goal, revenue-wise was if I can bring in $10,000 a month just from doing whatever, I think we’ll be okay. And each month it was like an experiment in how am I going to make money this month? And there was a few months where it was scary. Like in May. May was the month where I decided I wanted to work on some software products. And so my buddy Marty and I, we had built a bulk SMS application called Network Effects. And then we said for the show, we wanted to launch two products at once and kind of examine the response to each of them. It’s kind of like split-testing product launch. And so we launched this other software product called Remote Workers, which was an online community and what I call a reverse job board for remote workers. So we were working on both of these, but because I was heads-down working on those I hadn’t been trying to make any money. So I kind of lifted my head and was like, “Whoa. I haven’t made any money this month, what am I going to do?” And I think I just toughed that one out because I knew that I was going to do a big sale in June. I did a deal with the app Sumo. And so I was like, “I think we’ll be okay.” So we just kind of toughed it out through May and then made it to June. To answer your question, every day my wife says, “So when are you going to go get a job?” And I’m like, “I’m not getting a job. This is way too much fun. I’m going to keep going as long as I can.”
Mike [7:08]: I guess what I wanted to drill into a little bit was whenever somebody is starting to kind of go down that entrepreneurial path, as soon as the question or decisions start to come up around, how are you going to make money and are you going to get a quote-unquote “real job,” then most people see that as a stable form of income and the merits of that statement are debatable at best. But most people look at that and say, “We have to have a serious conversation about it.” That’s what I want to drill into this, like what was that conversation like? Because I think that a lot of people listening to this are on that path and you have to have your spouse on board in order to be an entrepreneur. There’s really just no other way to do it. Or you’re divorced. It seems like those are the two paths that people would end up on.
Justin [7:51]: I mean I think one thing that made it easier is that we had kids quite young. We were married when we were 21 and we had our daughter Sadie when we turned 22. And before that, before 22 I had all through college, all through high school, I had run my own little business. I had a video production and Web design business in high school and college. And when we had our daughter we made a decision that I would not do my own business and that I would work full-time until all the kids were in school. And so this year our youngest, we have four kids and our youngest was in grade one, full-time. And so because that transition had happened I said, “Hey, you remember that conversation we had? Well, now all the kids are in school and now I have this opportunity. Sprintly’s just been sold. And I could go do something else. Why don’t I try to do that thing we talked about 15 years ago, and let me try to do my own business again?” And so that was part of the conversation. And the other conversation is I said, “If this doesn’t work out I’ll just go and look for a job or look for another client.” But I said, “I think I could probably go out and find something else if I really needed to.”
Mike [9:03]: And I think that that’s something that can be comforting to the spouse is if you are in a position where you are in demand; they want you to come work for them. And if you ever needed to you could fall back on that and you could go out and get a job in relatively short order. And I think that that’s applicable to probably a lot of the people who are listening to this podcast. And especially if you’re in the tech world, just because there is so much demand for tech talent that if you are talented, if you are publicly visible to a lot of people, then it makes it easier for you to find full-time employment to fall back on if you really needed it.
Justin [9:35]: I mean I think everything’s a risk. I think employment kind of lulls you into sleep in some ways. And not recognizing how risky it is. Employment is just as risky as anything else; that you could get laid off at any time. And at least when you’re running a business you’d know your own financials. You’d kind of know what’s coming down the pipe. But employment, you could just show up one day and be like, “Sorry, you’re gone.” And client work is even kind of worse in some ways. In some ways you kind of what’s coming down the pipe. But other ways, just like, “Man, this could disappear at any moment.” So I think there’s pros and cons to all of them.
Mike [10:10]: Well, sorry for that little side track there, but I thought it was important to drill into that initial conversation because I think a lot of people are going to have to have that conversation early on when they’re starting to build a product. But I wanted to have you on the call today so that we could talk about your Mega Maker project. And I guess, could you summarize very quickly exactly what the Mega Maker project is so that the listeners have an idea?
Justin [10:31]: I had this idea that why don’t I try to build 100 things. And some of these would be small little products, some of these will just be creative things for me to explore on my own. And I’ll document it on this podcast called Mega Maker. So it’s kind of like a lab. It’s like my marketing and products lab. I’m working on all sorts of little things. So as an example, we’ve got this little SMS app, what would it be like to run this as a full-time business and to really feel that? That’s a big part of this whole experiment is to experience things without committing too much. I’m going to try this out, try it on for size, see how it feels. That’s interesting. And then kind of looking at everything. So, for example, one thing I’ve learned over the past just six months is that most of my revenue still comes from things like Marketing for Developers. People really go to me for product marketing advice, product marketing teaching. And the lion’s share of the money I’ve made so far has been there.
Mike [11:37]: So it’s kind of like this gives you the ability to launch a mini product and get a feel for how much traction it gets without committing three month, six months, nine months to a single thing, which may or may not pan out or you may have to do a lot more validation on. I mean if you keep these small enough you can throw something out there, see how it goes, and it’s not just that you can see how it goes but you can see how well it does in relation to the other things that you’re building, which gives you a much clearer picture of how well it could do.
Justin [12:07]: Yes. But the other thing that I’ve been really thinking about, and it’s almost more important to me right now, is we talk a lot about product market fit. I’ve been thinking a lot about market/founder fit and product/founder fit. For example, serving some markets, you don’t really know what it’s going to be like until you actually start doing it. There’s some things I’ve launched where I’m like, okay. As an example, one idea I had was about 70-80 percent of my audience is software developers. What if I tried to bring some other types of creative people into the audience? What if I reached out to artists and musician and artisans? Let’s just see what that’s like. What I discovered is I really liked those people but it’s not really a market I want to serve. So there’s not a fit there. There’s no founder/market fit there. Likewise, there’s product/founder fit. And I think this is a question a lot of people don’t ask themselves, especially before they launch like a SaaS a business; is do you really want to run that kind of product? It’s a lot different running SaaS than it is downloadable software, than it is info products. They’re all very different. They all feel very different. And this has been an opportunity for me to try some of that stuff on. Like what would it be like to run this product every single day? What would it be like to serve this market every single day? And actually the third one that I’ve been thinking about a lot lately, this idea of company/founder fit. And what I mean by that is kind of like company structure. Rob Walling just had this quote I read about how to get above seven figures in SaaS revenue. You really need to have a team. And I’ve been thinking a lot about that, too. Up until now I’ve been just working by myself or partnering up with people. What would it be like to have to hire a team, to pay salaries, to be a leader, to be a confidant for employees, to bear the weight of providing for all these different families?
Mike [14:06]: Because you have to be—like if you hire somebody full-time, you’re essentially responsible not just for their job and their benefits and stuff like that, but in some cases if they’re married and they have kids, you’re responsible for their welfare as well. So it makes it, in my mind it’s much more challenging to run those types of scenarios. And I’ve done it before and I’ve had to let people go where I knew that they had a wife and kids and they didn’t have another job lined up. And it sucks. It’s very difficult to be in that position. And I think it’s something that you have to slowly work your way into. It’s not something that you can just jump into and be able to just day one know exactly what you’re doing and feel confident about it. I mean, working your way up towards it is probably a better solution. I know that there’s obviously the VC funded startups and stuff don’t have that luxury, they just kind of jump in head first. But as a bootstrap company I would hate to be in that position where you have to hire ten people and then half of them don’t work out, or a quarter of them don’t work out.
Justin [15:00]: And these are the things. I think a lot of product people are so desperate to build something that gets product/market fit, and that’s hard. Finding something that—a product that fits with a good market, a market that’s able to pay you, a market that had demand for that thing that you’ve built. I mean, that alone is really hard. But there’s these other vectors, which is like, does this even fit me as a person? A lot of us are kind of running away from something. We’re like we don’t want to work for the man anymore. We don’t want to work for clients anymore. And so we run towards product. But often we run towards product and we end up serving a customer base that we don’t really like, or building a product that we’re not really passionate about, or creating a company that we now have to run. We then become that boss that we really didn’t like.
Mike [15:49]: I have wrote about that a little bit in my book because I met somebody who had a seven figure business and he hated it. He didn’t want any part of it but he was so involved in it that there was no way for him to really get out of it. It was a services business, but at the same time he was so involved on the relationship side of things that it would have been almost impossible for him to sell it. So he kind of had no option. It was kind of like being locked into a job that you just didn’t like.
Justin [16:14]: Exactly. And so this is all the exploration I wanted to do with Mega Maker. So at the beginning, season one, it feels very much like watching a guy have a mid-life crisis. Instead of going out and buying a Lamborghini, I’m making things. And the story that everyone talks about from that season is, I said what would it be like to go to a restaurant and design a menu item for that restaurant and then actually make it and then market it? Go through the whole product development process, not for software, but with something like food. Because I had never done something like that before. And so I convinced this restaurant to let me do a Friday lunch special. It’s a barbeque restaurant. They didn’t have a burrito on the menu and I love burritos. So I said let’s try to make a Mega Maker burrito. There was kind of two goals with it: one was to just experience what is involved in making a food item at a restaurant, and two, how can I apply some of the things I’ve learned doing marketing and sales for software products to marketing this lunch special? And that story, I can’t even remember the other episodes, but that story is still the one that people come up to me at a conference or whatever and say that whole thing was insane. That was just me exploring stuff. Just figuring stuff out. You know when you’re running a tech event, like a conference or something, you need to get people in the seats. That’s the most important thing. And so I was like I’m going to make a list of everyone who is going to come on Friday and order one of these burritos. So I had a spreadsheet where I was calling people, emailing people saying, “are you coming, how many burritos are you going to order?” So I had this running total because I wanted to make sure that we were above 60.
Mike [18:00]: So you were essentially brute forcing your sales. Like a lot of bootstrap software entrepreneurs, they’ll brute force their way to like 20-30-50 customers in the early days. And you almost have to. That’s because you don’t know what traffic channels are going to work for you. So you contact everybody you possibly know in order to get the [crosstalk]
Justin [18:16]: Totally. And the whole time I was also telling the story as it was happening. I was doing clips on Snapchat. I was doing little YouTube videos. Just sharing the whole experience. And then the Friday came and it was like insane. We ended up selling 80 during the lunch hour. The restaurant was just packed out the door, you can’t get a seat. I was in the back actually making burritos. And so I got to experience everything. And it made me realize, one, I never want to do that again. But two, in terms of like product marketing there’s this great clip from that episode where this guy calls me over. I’m recording it and he says, “Do you realize why people came here today?” And I’m like, “I don’t know. They like burritos.” He’s like, “No, man. People are here because of the story. They wanted to come and be a part of the story.” And that kind of marketing is completely applicable to the product world. I think a lot of times people get interested or engaged because of the story and they’re kind of following along and they’re like that’s how they become a customer; is they were just following along with the story. So there were some parallels that were interesting.
Mike [19:28]: Now you’ve mentioned marketing. Obviously that was a one-time event. You got a bunch of people there and, yes, they’re involved in the story. But how do you go about marketing for some of these other projects that you’re launching, because, obviously, if you’re doing 100 of them in a year, that averages out to roughly two per week. So one every two and a half to three days, it doesn’t really give you a heck of a lot of time to do marketing for these. Do you do any follow-on marketing? Do you do advance marketing for some of these different projects that you’re launching? I know that not everyone is aimed at creating revenue or generating revenue for you, but at the same time there’s got to be some base of people that you want to launch it out to, or that you want to get it in front of, because there’s really not much point of creating something if nobody’s going to every look at it or use it.
Justin [20:11]: I was having a conversation with Lars Lofgren. We were just talking about marketing. He and I have known each other for a long time. And so we were just talking about marketing. And he said one of the best things a marketer can do is realize that they’re not going to be good at everything. You’ve really got to play to your strengths. And just hearing him say that, someone I really respect, it almost gave me permission to say, “that’s great, I can really focus on these things that I’m really good at.” And still sharpen the ax as much as I can with things that I’m not super great at. But really double down on the things I’m good at.
Mike [20:45]: And I think that’s important to know what your own limitations are. Not just on the product side of things, because obviously if you don’t know how to use a particular piece of technology you can probably figure it out. But sometimes it’s worth just paying somebody else to do it. But that also translates over onto the marketing side because sometimes it’s better to just pay someone else to do something that you really just don’t like. Which could be successful but you don’t want to do it because you’re just not good at it and you’re not as comfortable with it.
Justin [21:09]: And that’s why in the book, Marketing for Developers, I give so many different channels and so many different techniques because I just want people to be able to choose. When I was doing the customer research for that, a lot of folks would say, “Well, Justin, I’m just not good at writing blog posts.” And so for people to be able to choose and kind of explore different things and then find the one that they’re really good at. That’s where you should invest all your time and money; is in the thing that you’re really good at. And then either hire out those other elements or just don’t focus on them.
Mike [21:41]: So I guess going back to the heart of the question though, how much marketing are you actually doing for each of these individual projects?
Justin [21:47]: It really depends. I mean some of these are just things I need to get out of my system. So Network Effects, we launched on BetaList. We wanted to get a ten person paid beta in both. So ten person paid beta in Network Effects, and ten person paid beta in remote workers. We launched on BetaList for that, got enough people in and now we’re just like basically getting their feedback. What are you using it for? What do you really like about it? Are you willing to keep paying? It’s $9 for Network Effects and then the plans are similar to MailChimp or whatever.
Mike [22:20]: Is that like an onboarding fee for that?
Justin [22:21]: Yeah, it’s basically because with SMS you have to pay for the number. Unless you get a custom number it’s not very useful. And so we wanted to get people in, getting a custom number. And so mostly it’s just to help pay for some of our costs. But it also is just a great way to figure out who’s really serious about this. And, like I said, over ten people paid for that beta. And then the people that stuck around, I think there’s like, of that group, there’s about three that have stuck around. We’re like really working with them to figure out what do you guys need? What are you using this for? Some of them are using it like every day or every week. And we’re like we’ve got to focus on these folks. Who are you, what are you doing this, how are you using this?
Mike [23:03]: So like customer development –
Justin [23:03]: Customer development.
Mike [23:04]: One-on-one [crosstalk]
Justin [23:05]: Exactly. Exactly. And when we’re ready to really kind of turn things on, in my mind, it’s like you do a BetaList launch and then you get enough people to come and try it out. Really figure out who you’re focusing on, and then launch to the waiting list. Again, kind of figure out, why are people signing up? That’s the big question. Why are people signing up? And once you can figure that out, then after that I do a Product Hunt launch, and then it’s looking into other strategies like ads, SCO, et cetera.
Mike [23:35]: So you keep saying ‘we’ a lot. And maybe that just applies to this particular scenario. But are you working on a lot of these by yourself, or do you have partners for some of them, teammates, people that are working with you, either part-time or full-time on a regular basis, or is it just more one-off projects?
Justin [23:49]: It’s me for almost all of them except the bigger projects I’ve partnered up. And so my buddy Marty Dill, who’s an awesome developer here in Vernon. So when the idea for Mega Maker came around I said, “Hey Marty, you want to team up and build a few things?” I’ll find it for you, but I have this agreement that I sign with people I want to team up with. And basically it says we’re going to work on this project for six months, and if we decide to turn it into a business we both get like 50 percent ownership, and then we move forward from there. If this doesn’t turn into a business within six months, then we just let everything fold and we move on. I mean, it’s been audited by a lawyer and everything else. It’s just a way of saying, okay, this is the purpose of right now, we’re just testing out an idea. We’re building the initial thing together, and then when it comes to turning this into a company, we’ll both get equal shares.
Mike [24:43]: It kind of forces the conversation up front, I guess, too.
Justin [24:46]: Yeah. I started signing these because I was doing even small little partnerships, like I built a WordPress plugin with Carl Alexander, and we’re good friends but I had seen enough partnerships go real bad that I thought, “let’s start signing something upfront from day one.” And it gives it such a great framework because it’s like, if this doesn’t work out in six months, we just move on. If this does work out and we want to turn this into a business, then we create the corporation, we both get 50 percent of the shares, and then we treat it seriously. We treat it like a company. And there’s a few other kind of conditions in there as well. But I found it a really great way to get started on projects knowing that we’re both kind of protected and we can both kind of trust each other for that period. And then it kind of gives us a way of moving forward if we decide to take it from there.
Mike [25:35]: So one of the other things that comes to mind is while you’re going through and launching a lot of these different projects, one thing that—I’ve experienced this myself, but I’ve seen it happen to other people, is that when you start on something, that’s kind of the high point. When you’re embarking on a new endeavor and everything’s new and everything’s exciting, but then three months, six months down the road you start to get tired, you lose focus, you lose your motivation, I’ll say, to continue. I would imagine that for a lot of these projects that doesn’t happen on an individual project basis because the timeline for them is so short. But throughout the process of this, you’re doing a 100 of them in a year. Has that come into play for the project as a whole, or you really have low points for individual projects?
Justin [26:18]: Totally. Here’s the stage I’m at right now. So if we look at the timeline, it starts off and I’m just exploring everything. Every idea that pops into my head I put it on this list. You can see the list at Megamaker.co/list. It’s just a Google Doc. And anything that pops into my head I’m like, “I’m going to do that.” And I put it on the list. And it’s exciting that I’m exploring all of these things, I’m trying all of these things, I’m starting; and starting’s way easier than continuing, right?
Mike [26:44]: Or finishing.
Justin [26:44]: Or finishing. And so that was the beginning. And some of these are bigger things that I really wanted to explore. Like for example, going after a new market was interesting to me. That’s something I really wanted to explore. So even especially like physical makers. For a long time the term maker just applied to people that made handmade furniture and art and sculpture. Lately, digital makers, people that make apps and software have taken that term as well. But for a long time it was just physical makers. And I thought I wonder if they could be my audience, too? And what I’ve realized is, do I really want to go out and interview people that are making their own coffee tables or running their own Etsy shops? At the beginning I thought that would be exciting to me. But now I’m realizing that, no, that’s not going to be exciting to me. And so the point I’m at right now is I’m like, okay, at the beginning Mega Maker was about everything, and my life was about just exploring everything. Now, we’re six months in, it’s time to start focusing. It’s time to start closing down some projects, stopping some things and simplifying. And so I’m still planning on making 100 things through this year, but the show, Mega Maker, is going to be a lot more about products and marketing, software, digital products, similar things to what I’ve done before. Because I’m realizing I went out and I explored a bunch of stuff, but I’m coming now, back to one, the things that I feel like I’m good at, two, the things that are making money. And I guess those are the big things. Am I good at it and is it making money? Do I really like the people I’m serving? Truthfully, I was trying to bring these other customers into my world, but truthfully most of the people that listen to Mega Maker are my same audience. Mostly software developers, designers, product people, entrepreneurs. And so I’m going to start doubling down on those, stopping some of these projects that didn’t feel like a good fit.
Mike [28:40]: So did you find it difficult to complete some of those projects, or was it more of an after the fact that you decided this isn’t something that I really should go after because of the results of it? Was it more because of how you felt early on in going after it? Because I think with the list that you’ve got going, you can look through that and kind of pick and choose what it is that you work on. So chances are good you’ll probably be excited about it at the time. But it sounds to me, like throughout the process of this, you’re also kind of dialing things back and you’re trying to figure out what it is that you want to work on moving forward as well.
Justin [29:14]: Yeah, I mean, it was a bunch of things. One thing I realized is at the beginning I was just like a kid in a candy shop. And I had freedom for the first time in my life. I wasn’t working full-time. I’d always had side projects but now I could give all my time to these things. And I just started way too many things at once. So I’ve gone back to just like working on one thing at a time. Right now I’m working on a new book called Jolt. And it’s 20 surprising marketing tactics, things that most people don’t talk about. It’s going to be really good. It’s going to be exactly for that group of people that I’ve already connected with. So right now I’m trying to not focus on other things and just work on Jolt. Like every day, try to get some writing in. Every day try to finish another chapter. And I’m hoping to launch it July 15. And when that’s done I’ll focus on the next thing. So one thing at a time. And there were some things I just didn’t want to finish. And I think that’s okay. Especially if you start a software project and you’re like, “Man, this is not a good fit for me.” Carl and I just had this conversation because we’ve been maintaining this plug-in and it’s still selling pretty good, but I noticed like he was always the one to answer customer support emails first and I just was never getting to them. And part of it was I just wasn’t excited about it anymore. It just wasn’t a good fit for me. And I just said, “You know what, Carl, you just take this 100 percent. I’m okay with removing this from my plate.”
Mike [30:42]: There’s a certain amount of—I guess it goes into the feelings of procrastination for something, around the fact that you just simply don’t want to do it and you’re not interested in it. Because you haven’t prioritized it. So it doesn’t mean as much to you or you are dreading doing it. I think you said it much earlier in the episode, something about how a lot of times entrepreneurs are running away from something and that brought you to the idea that make sure that what you’re running towards is also something that you want. It’s not something else that you’re going to what to run away from.
Justin [31:11]: Exactly. And because of that we have to be willing to quit some projects. We have to be willing to either let them die or give them away, or sell them, or something. And I think that’s the piece that most of us struggle with.
Mike [31:27]: Yeah. Walking away from that stuff is hard though.
Justin [31:30]: Walking away from it. For example, this next phase of Mega Maker, I have an online community for Mega Maker and I know that this next phase is going to tick some people off. Some people are going to be like, “What? This isn’t about the thing you said it was going to be about in the beginning.” And I’m like, “Well, I have to change this. I have to keep narrowing this down to something that’s going to work.” And so having to upset people is really hard. Like say, I’m sorry, but I’m going to be changing the product, or I could be changing the focus or we’re going to move this way.
Mike [32:02]: Well, I think that’s also one of the traps that people fall into when they are launching a product. Because if you never actually launch it then you never have to worry about disappointing people.
Justin [32:11]: Exactly. The other thing I’ve learned is you get really good at launching and getting over those fears the more you launch. And so part of my message from the beginning, both with Build and Launch, and now this is kind of like version 2.0 of what I was doing with Build and Launch, the message from the beginning is, start small and start now. If you’ve never launched anything, don’t go out and try to launch the next HubSpot. Launch something super, super tiny, and then get that done. Get it done in a week and then launch a two week project, and then launch a three week project. And the more you do that the better you get at getting over that sense of dread, that sense of fear. And you just learn so much each time. And so the dread that I used to have from launching things, I still get nervous, like before this Jolt launches I’m going to be feeling the exact same thing everyone else is; like is anyone going to buy this, did I do the right things, am I targeting this the right way? But I don’t feel the same kind of anxiety as I used to. It’s a lot easier the more that you do it.
Mike [33:13]: That’s very much, I guess, it aligns very well with what Rob Walling came up with, which was the stair step approach. Which you can kind of apply to this, where his was more about the types of products that you’re building. But this is also about becoming more comfortable over time with doing the same thing, launching things over and over.
Justin [33:30]: I think the one thing that I really want to impress on people is that there’s no one path to success. And I think a lot of folks are trying to follow other people’s paths to success. And one of the things that I wanted to explore was this idea of you know what, I’m going to go and just try a bunch of different things and figure out what’s the right fit for me? And I think anybody can do that. You don’t have to make 100 things. But be willing to kind of try things out, look at your strengths and evaluate whether it’s really a good fit for where you want to be. Especially make sure that you’re not running into the same thing that you’re running away from.
Mike [34:14]: And I think that that’s probably a really fantastic note to leave off on. So Justin, tell the listeners where they can find you and if they want to follow on the Mega Maker story or if they just want to sign up for your email list or follow you on Twitter, et cetera, where can they find you?
Justin [34:27]: I’m right at Justinjackson.ca. On Twitter and Snapchat, I’m the letter M, the letter I, Justin. That’s M-I Justin. And Mega Maker is megamaker.co.
Mike [34:41]: And we’ll link all of those up in the show notes for everybody. Well, Justin, I just wanted to say thank you very much for coming on. I hope that this was educational for the listeners. And I really do appreciate you driving home that point at the end there about finding what is right for you versus what everybody else is doing. I think that’s a very, very powerful piece.
Justin [34:56]: Beauty, Mike. Yeah, it’s been a pleasure, man.
Mike [34:58]: 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, and we’ll see you next time.
Episode 295 | How to Get Your First 10 SaaS Customers
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to get your first 10 SaaS customers. They reference a ParseHub blog post about the beginning stages of their startup. Rob and Mike walk you through the steps of this article and how you might be able to replicate their success.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of ‘Startups for the Rest of Us,’ Mike and I talk about how to get your first 10 SaaS customers. This is ‘Startups for the Rest of Us’, episode 295.
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 are just thinking about it. I’m Rob.
Mike [00:29]: And I’m Mike.
Rob [00:30]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So, what’s the word this week, Sir?
Mike [00:34]: Do you want to hear a joke about tacos?
Rob [00:36]: Always.
Mike [00:37]: Are you sure?
Rob [00:37]: Uh-huh.
Mike [00:37]: It’s kind of corny.
Rob [00:39]: Well, you know. It comes with territory, right?
Mike [00:41]: Get it, corny? Tacos?
Rob [00:45]: I was waiting for something funny.
Mike [00:47]: I know. I don’t know what you were expecting from me.
Rob [00:49]: Ah, man. Yeah that was pretty bad. I wouldn’t even tell that one at MicroConf. That’s how bad that joke is. Yeah, we were talking offline before this podcast and it’s like we don’t have so much going – we have a lot going on, but none of it this week is that interesting to do in this update upfront. It’s like there’s behind the scene stuff. You said you’d talked to a potential customer about early access stuff. I’ve been plugging away having meetings, charging ahead. But I really couldn’t think of anything in the last week that was that interesting to tell the listeners about. Some weeks it’s like that.
Mike [01:21]: Yeah. It’s not that there’s not stuff going on. It’s just that it’s not really interesting to hear about at this point.
Rob [01:26]: Yeah, well so maybe today we just dive right in to the topic of the day. We’re talking about how to get your first 10 SaaS customers. And, specifically, we’re going to be referencing this blog post on the ParseHub blog called ‘How We Got Our First 10 Paying SaaS customers.’ And ParseHub is a SaaS app. They’re a visual web scraping tool. So, they have tag lines like ‘Extract Data from Any Site,’ or ‘Turn Any Dynamic Website into an API.’ And so, obviously, you sign up for them. You can go and it does screen scraping, in essence. And then you can pull data out. I’m assuming you hit some ParseHub endpoint and then you can pull data through there.
But they published a post – this is over a year old at this point. They had launched in September of 2014 and they published a post in 2015 about how they went through and – basically from a standing stop. As far as I know, they didn’t reference having a list, or they didn’t reference having an audience, or any of that stuff. And so that’s where I found it interesting – is that these folks have done it recently, relatively. They walk through – what is it, 5 or 6 steps that they took to do this. And we won’t cover in detail everything that they talk about. We’ll obviously link it up in the show notes. But we did want to kind of walk through some steps of how you might be able to kind of replicate what they’ve done to also get your first 10 SaaS customers.
And so the first thing they talk about is don’t rush. And the post mentions there’s a lot of pressure to launch early and grow from day one. But premature growth can be detrimental to a small team that’s not equipped to handle a large number of sign-ups. And, back to my voice here, not only can it be detrimental if you can’t handle the support and can’t handle the onboarding, but it can be detrimental if you have a product that nobody wants yet, and you launch and people try it, and then they don’t give you a second chance later on. Whether your product is just plain bad, if it’s not built well. Or if you haven’t built something people want yet it’s going to be really hard to get the benefit of the doubt and get another try out of folks six to twelve months down the line once you actually have built your killer tool.
And so ParseHub – in the posts – talk about how they didn’t launch publicly right away, that they focused on finding a pay-in point. They solved one problem for one type of customer very well. And this is where having this early access – I called it the “slow launch”. I mean, DRIP launched over the course of six months, in essence. We got customer number zero and then customer number one and we figured out “How do we built it until they get value?” And then customer number two. And we built up one at a time. And ParseHub, in essence, did a similar thing where they really took they’re time to focus on finding a real pay-in point and solving it for one target customer type.
Mike [03:53]: And I think in most cases that’s probably the way to go if you don’t have traction yet, and you’re not really sure if what you’re launching is really what people need. I mean, so there’s a difference between what your vision for the product is and what you’re able to deliver on day one. And there’s a lot of people who are going to be willing to put up with the early access bugs and the lack of features and functionality that you just aren’t going to be able to have on day one. And then there’s going be this large category of other people who are not willing to wait, and they don’t want to because they’ve got a problem right this second that they need solved and they need to have either you solve it or somebody else. And if you can’t solve it right then and there for them, they’re not going to be willing to wait.
So, I think that this point kind of drives home the idea that there’s this certain classification of customers, or prospects, that you have to have early on that are going to be willing to work through whatever those issues are over whatever that timeframe happens to be for you to get to a point where you can deliver not just everything that they need, but go above and beyond it, to the point that you’re able to attract and retain these other types of customers.
Rob [04:52]: Another reason that they’ve said don’t rush is that they’ve spent a ton of time up front solving this problem well. They said there are dozens of competitors that can extract data from simple, well-structured sites. But nobody could tackle the edge cases. ParseHub essentially spent a year – they said they grabbed a random sample of 30 scraping jobs from oDesk and they told themselves they wouldn’t launch publicly until they could handle at least 20 of them, and it took almost a year of development before they hit it. By that time, they’d built something really unique, really special. But what is they’re value proposition then? We can scrape sites that no other tool can. Like we are, quite literally, the best. We know that no one else can do that. So, they had a value prop that they’d developed through working with real customers over a longer period of time then most start-ups would be comfortable with. And – I haven’t done research into ParseHub – but I’m guessing by the fact that they took that much time that they were bootstrapping. Because if they had a big chunk of funding they probably would have been pushed to hire faster and get bigger faster. But instead they were really trying to build – in this case a better product – and seeking that product market fit in essence of building something people wanted. And it took them a long time. And it will very likely take that long when you’re doing it as well.
So, the second tip they offer is to perform extensive user testing with potential customers. They said they did more than 50 hours of user tests. And they said almost every change to their product was hinted at by what users did during an interview. They had friends, co-workers and friends of friends use the product while they watched. They found potential customers on marketplaces like Elance and oDesk and PeoplePerHour. They interviewed early adopters. They tested usability. They did all that stuff and they asked questions. Here’s a few sample questions they asked: “What web scraping techniques and tools did you try? What did you like or dislike about them? What kind of websites do you want to get data from? What do you need the data for? Is that data essential for your business?” And so, they said they focused on solving the customer’s problems. And they spent a ton of time doing it. So again, this is part of the don’t rush. It’s like, do it well. Don’t try to short-circuit this part of the process. We’re all in a hurry, and we’re all impatient and we want to get there, but realize that investing the time now will yield dividends if you really nail it in this early stage.
Mike [06:55]: And I think the point of what they’re trying to get at here is, specifically, that if you know what the customer wants before you try and build it then you can design towards the customer expectations, not what you think that they want, and then try to match it up later. At which point you’re going to have to go back and adjust for whatever that gap is between what you thought they wanted and what they actually were looking for. And that’s going to hold true regardless of whether or not you’re using the tool. And I think that if you are using like whatever the type of tool is that you’re building, if you’re in that target market, then you’re probably more prone to maybe make some assumptions about what the customer really wants. And that can be very difficult to adjust for the gap between where you ended up versus what they were really looking for, what they really needed.
Rob [07:39]: And the third tip they lend is to build something people will pay for. So, very much like building something people want. And I think the way they phrase it is they say, “Provide value that customers are willing to pay for.” In their post they say, “Finding a problem is great, but is it a problem that your customers are willing to part with their hard earned cash to solve?” They said before they had a product they would go on oDesk every day and apply for web scraping jobs. They asked people to commit to $150 a month for a tool they could use themselves. And once they got a few commitments, then they were sure there was a need to actually build software. And they point out that customers will pay you if you help them make money. We’ve said this many times on the podcast. Help them make money, help them save money, help them save time. And they found a product that, in essence, does all three.
Mike [08:24]: I think it’s very easy to kind of skip this particular piece of it and think that you’ve got this problem that needs to be solved, and it needs to be solved so people are going to be willing to pay for it. And it’s really a matter of whether or not they’re going to be willing to pay you for it. And the other side of it is whether you’re going to be able to find additional people who are also willing to pay for that. Back in late fall, when I started the process on Blue Tick, there was actually another idea that I was looking at and I really thought that that was the one that I was going to be able find traction with and get customers for, and it turned out that it wasn’t. It was an interesting problem. I think that there was a lot of money to be made there, but I don’t know if I would have been able to actually make that work, because I couldn’t find enough people that were – essentially a critical mass – that would have been able to develop into a customer channel. So I think that you have to have those conversations with people and find enough of them early on. And if you can’t go through the process and find even just 10 or 20 people who are willing to pay you for it, then what’s going to make you think that you’re going to get 100 or 500 or 1,000? So, if you try to think to yourself, “Oh, well, that’s a lot a work. I don’t want to do that.” Well, you’re not going to really be able to build a business if you don’t do that to begin with. So, you have to take a little bit of a step back and at least just take a baby step in that direction. Try and find the core group of users that you’re going to target. And if you can’t find them, you’re probably not going to be able to scale that into a viable business.
Rob [09:44]: They’re fourth tip is to leverage marketplaces and communities. And, with ParseHub, these guys focused on Elance and oDesk, but they specifically have a couple questions you should ask yourself. Number one: Where does my customer spend his or her time online? Two: Where does he or she look to find a solution for the problem I am trying to solve? And they give a couple of good examples. They say, “If you’re running a business that can help jewelry designers sell more product, reach out to them on Etsy?” If you want to solve a pain point in the real estate market, you can try kijijirealtor.com and other industry-specific communities. If you’re developing a solution for teachers, you can find them on Udemy or Skillshare.com. The idea here is that if you can find a community or a marketplace you’re not looking to scale it up to a bazillion users at this point. What you’re trying to do is get early feedback. And it gives you a little bit of exposure to people who are experiencing a pain point pretty dramatically, and if you’re solving that you are going to get some interest from folks. And that’s the point, you’re looking five, 10, 15 people at this point. Which the reason the title of this episode is ‘How to get your first 10 SaaS customers,’ so you’re doing stuff that doesn’t scale very well at all. But that’s the point. You’re just trying to hone in on their needs at this point so that you can solve them, and then you look to scale it later, and you look to replicate that out and expand it.
Mike [10:57]: One of the things that I really like, that they kind of eluded to in this particular articl,e which was they went out places like Elance and oDesk and looked specifically for job postings to solve this particular problem. They used those to help build their software, because it was evident from those job postings that people wanted that particular problem solved and they were willing to pay the money right this second for it. So, I think it’s worth going out there and taking a look at those different types of sites to find out if there are active job postings to solve the problem that it is that you’re trying to solve. That might also be a good place to just leverage to find ideas as well. I mean, if there’s enough people that are paying for a particular job over and over and over again, or particular problem they need solved, then you could, in theory, build software that is going to solve that problem for them. And – maybe you’re not going to be able to sell it to them because they need the solution right this second – but down the road if they need that problem solved again, or if there are other people who also come across that particular problem you can get them into a sales funnel and solve it later for them.
Rob [11:58]: Yeah, I agree. It’s a hack I don’t know that I’ve heard about it before, but it totally makes sense. These aren’t going to be easy things to solve. Imagine going onto oDesk and getting the list of all the people who want something extracted and then looking at those sites. I bet a bunch of them are really nasty, because I bet they had already tried all the solutions available on the market. And so you’re going to have to do some hard work here. You’re going to have to solve a hard problem. But that’s the nice part, is that you’re going to be able to charge for that if you are in fact able to solve it. I get the feeling so many of us as engineers, or of the engineering mind-set, or even just the entrepreneurial mind-set, once you have a problem you really want to tear into it. But it’s just finding that problem that people are willing to pay for. Even if it’s hard and you’re willing to spend six months of nights and weekends, or as these guys spent a year of customer development time. Finding the problem and vetting it is perhaps as challenging or more so than solving it itself.
The fifth tip from ParseHub is to engage on Q and A sites like Kora and Stack Overflow. And they talk about how they answer questions on Kora and Stack Overflow about web scraping and that this had a measureable impact on their revenues, especially in the early days. They also talk about launching on Hacker News Reddit and [Product Time?], which I think these days most people would probably try to do and they talk a little bit about. But I like the Kora approach which they reference – there’s a Kora how-to guide by Kissmetrics. And they talk about how there’s 40 underrated niche sites where you can post about your start-up and you can engage about that. This is – I’ll say it’s a somewhat common approach – it’s not completely novel or new. But if you can get on Kora or Stack Overflow and you do provide value and you can answer questions, because by this time you’re such an expert in your topic that probably off the top of your head you have more knowledge than 99+% of the people on the site. And so you actually can, off the top of your head, answer stuff with really in-depth numbers or thoughts or metrics because it’s just something you’re living and breathing. I have seen this with my products. Whether it’s DRIP today, or HitTail previously. I have seen getting customers from these types of things, because what’s interesting is that these aren’t just forums off in the corners of the internet. These are big sites with a lot of traffic, and the people who search for these questions are desperately seeking an answer. And so if you can provide a good answer to it – it doesn’t even need to be that the answer is “Oh, use my product.” The answer can often just be here’s some insight, here’s some metrics, by the way I learned this as the founder of this product. And it lends you that credibility. I like this approach.
Mike [14:20]: The other thing that nice about that is, as you said, these sites have lots and lots of traffic. And it’s not just the immediate traffic from the people who are asking the questions. It’s more the long-term traffic over the course of a year, or two years, or five years, because those answers that you left several months or years ago will continue to be searched and indexed, and people are going to look for those. Because the same questions on forums tend to come up over again. So, even on Kora you’ll find that the same types of questions keep getting asked and they keep getting answered. And even on Stack Overflow, to some extent, there’s a lot of times where there will be one canonical answer. And that’s really what the community there strives to try and do. But a lot of times there’s variations of a particular answer, and you can go in and you can answer them. And as Rob said, you just drop some notes, “Hey, I learned this as the founder of X.” And people will go through those and they’ll take a look at it and if they still need the problem solved, or if they still have questions, they’ll click through and they will end up at your site, and hopefully that will lend itself towards another marketing channel. But I do know people who’ve been using Kora to some degree of success to try and help push their sales funnel further.
Rob [15:26]: Yeah, and you might that that Kora doesn’t scale – and it’s not going to scale infinitely – but you see entire brands built just on answering Kora questions. Like with Jason Lemkin and [SaaStr?]. He says that’s how he built, pretty much, the core of the SaaStr brand. And he’s answered thousand’s, I’m assuming – I’m sure you’re going to look and see how many he’s answered – but thousands of Kora questions. And he’s become kind of the defacto guy to be talking about B2B SaaS, and how to grow that because of that. So, while you may not have the time to do that, if you’re able to answer questions up front and then later on you can use the approach that Steli does at close.io where he says they’ll often put out a blog post. And then he basically records a video and then they turn it into both a video, audio and a blog post. And then the kind of editor – the guy who’s helping him do the content production – reads the post and gets the ideas out of it and goes onto Kora and figures out are there questions that pieces of this post answer? And then will answer it, whether it’s posting it all on Kora, or linking back. I’m not exactly sure how they do it. But There can be value that is a somewhat scalable thing, because it’s not using Steli’s time anymore, and you’re not using someone else to continue offering a lot of value to the audience and answering questions that they want answers to. And, in effect, getting some of that value back by the handful of people who are going to click back and potentially check out your product.
The sixth and final tip from ParseHub about how to get your first 10 SaaS customers is to use Twitter. And, specifically, they say that Twitter works magic, and so do your first few loyal fans. They talk about how they had a few users give them positive shout-outs on Twitter. And that after their initial launch, someone noticed them and reached out to write about them. And, to quote, the author says he wrote an honest comparison between ParseHub and Komodo Labs and he included the pros and cons of the first version of ParseHub. I agree. I have this love-hate – mostly hate – relationship with Twitter and Facebook for that matter. You need to use your head when you’re doing this. You can’t be on Twitter all the time, in my opinion. You need to be running your business. But, he’s right that monitoring Twitter and engaging with folks, especially in the early days, will earn you fans. It can earn you press. I’d say it’s more important in this early stage, as you’re starting, to get momentum. And he indicates that the opinion of your first few users matters more than gold. Reach out to them. Ask for their feedback. Engage them in your story, because then they become advocates of yours. And if they like you and they like what you’re doing, they’re the ones who are going to help spread the word. And so, engaging with them on Twitter is one way of doing that. Email is another. The nice part about Twitter, of course, is that it’s public and if folks are asking you questions or high-fiving you essentially, virtually through Twitter that’s a nice way to engage and kind of I guess broaden your reach so to speak.
Mike [18:05]: That’s also a double-edged sword because if they’re experience was a negative one then, of course, it’s out there publicly for the entire world to see throughout all of human history at this point.
Rob [18:13]: But most people, like if you really are working with them and they have a negative experience, they tend to do it via email.
Mike [18:18]: Right.
Rob [18:19]: Especially in the early days when you’re really hands on. I would hope that you could handle that one on one and –
Mike [18:23]: Sure.
Rob [18:23]: – help them move along. But you’re right. It is a danger.
Mike [18:25]: Right. I mean, I won’t say I take issue with this so much as it really like – I don’t think that Twitter is a silver bullet for every single business. I think it’s great that it worked for them and it’s great that they were able to land an honest review between them and somebody else. But that’s certainly not going to happen to everybody. In some ways it was a lucky coincidence, but in other ways if you are really working hand-in-hand with a lot of customers over the course of a year to build your product, then that’s going to happen naturally on its own, regardless of whether it’s Twitter or some other place.
Rob [18:55]: Yeah. I would agree with that. That’s a good point to raise. There is absolutely some serendipity in this. I think there are ways to tip that serendipity in your favor by providing amazing support and hand-holding experience up front. I think, if possible, working with influencers – whether you’re handpicking them or whether you’re just lucking into them – that’s always a big one. Because then you want to know that email list or a big Twitter following, they tend to want to create content to send to that list and, if you really knock their socks off, it often gives people an excuse to talk about you. It’s not a sure fire thing, for sure. And you’re going to spend a lot of time that’s never going to yield anything. But at least ParseHub, in their early days, said that they used it to great effect, or at least to get them to that 10 customer mark. And I think if you did all of their other things and didn’t use Twitter, I think you’d be just fine. I think Twitter is more or an icing on the cake if you’re already there and you know your audience is there as well and that that is going to be a viable channel, then I think it’s something to think about. But I wouldn’t prioritize it as high as any of the other points we’ve spoken about.
Mike [19:53]: Right. But I think that’s more because it’s so dependent upon those other things. I think that your comment about icing on the cake – I think that that’s very true just because of the fact that if you do all of the other things then Twitter will work well, or Facebook, or showing off your stuff publicly is going to work well because you’ve already worked with customers a lot. You’ve seen exactly what they’re looking for and what they’re willing to pay for, and you’ve done all of those other things. And it eventually leads you down the road of being more public about your stuff, and being more public about your interactions and the success that your customers are having, which then leads to these other things and these other success marks like the unbiased reviews and things like that that you can then highlight. So it becomes something of a snowball effect at that point, whereas if you were to start out with Twitter, for example, it just wouldn’t work because there’s nothing to base it on. You don’t even know if you have a viable product yet, or you’re solving a real problem that people have. So I feel like this is not just the last on the list because it just happened to fall there, but because it naturally falls there. It has to, because all of the other things have to be in place in order for that to really work well for you.
Rob [20:57]: So, again, we’ll link up the full blog post in the show notes. And, hopefully you’ve enjoyed this look today into how to get your first 10 paying SaaS customers.
Mike [21:05]: 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 Comments. Subscribe to us in iTunes by search for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 294 | Back of the Envelope Business Model Test
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about back of the envelope business model test. This episode is loosely based on chapter 2 of the book, Scaling Lean: Mastering the Key Metrics for Startup Growth. Some of the points discussed include defining your minimum success criteria and converting revenue goals to customer acquisition.
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 back of the envelope business model tests for revenue. This is ‘Startups for the Rest of Us,’ episode 294.
Welcome to ‘Startups for the Rest of Us,’ the podcast 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. How you doing this week, Rob?
Rob [00:30]: I’m doing pretty good. I’m coming off a series of split tests that we’ve been running on the homepage of Drip. And actually Zack on my team took that over recently. And after I had run a couple split tests with – basically the normal result of a split test is that you’re not going to have an improvement. If you run ten split tests you’re going to get improvement on one or two that’s significant. And so, my split tests were just chugging along and just taking forever to run. And then the first one Zack runs, he made some more dramatic changes, he saw a 41 percent improvement in the click-throughs. And so now we’re taking it another step and we’re actually installing – something we should have done from the start – but we’re installing the pixels. So we actually know if it’s not just click-throughs but it’s actually leading to trial sign ups and that kind of stuff. But it was pretty cool to see that kind of jump because that’s definitely a notable percentage.
Mike [01:19]: Nice. Now that you’re doing that and when you go back, are you going to track everything through because obviously you have to have some sort of a benchmark, right?
Rob [01:25]: Yeah. We’re going to track it through. We didn’t talk today about whether we’re going to rerun the same test now that we have the revenue pixel in place, or if we’ll just use this as the new benchmark and start from there. But either way this stuffs always fun. I geek out on it because it’s like the engineer – this is engineering marketing. Nowadays it’s called growth hacking but this is what we’ve been doing for ten, 12 years, where it’s like applying the engineering mindset to marketing. Which isn’t something that was commonly done, or maybe it just wasn’t talked about very much, except for by direct response guys before a few years ago when kind of this growth hacking thing became popular.
Mike [02:03]: Cool. Well, I just recently kicked off my Twitter ads for Bluetick again. And I’m hoping that they aren’t completely messed up like they were the last time. I think that I talked about that a little bit on the podcast, where just before MicroConf I had put a bunch of new ads out there on Twitter and people were tweeting back to me and commenting to me like, “You’re doing it wrong”. And I was just like, “What ae you talking about?” And I didn’t really think to go back and look to see what it was. I just thought it was people trolling a little bit. I got enough of them that I went back and took a look at it and, of course, the Twitter lead cards were all screwed up and it was like people had to click on them and then click on them again. It was just messed up so I had to redo not the entire campaign, but at least different parts of it. Hopefully things will go well this time.
Rob [02:42]: Good luck with that. It’s always touch and go when you first start any type of ad campaign, especially if it’s not proven because you just have to monitor it really closely. Once you get to that point where you have something that’s working and you have history behind it and numbers behind it, it’s so much more – I don’t know, comforting. Or it’s just less nerve-wracking I guess when you start it up. Because you generally know the range that it’s going to fall into. But at the start, man, you can turn it on and be paying crazy click amounts or you can just get no impressions and not know why and stuffs always frustrating when you’re trying to figure it out.
Mike [03:11]: What happened before was I was getting lots and lots of impressions but very few click-through rates. So I wasn’t actually paying for very much, which on one hand that was nice, but on the other hand I just wasn’t seeing any sort of results that I was looking for and I just hadn’t had time to go look at it at the time. At least now I have a benchmark of what I should not be getting.
Rob [03:30]: For sure. Cool. So what are we talking about today?
Mike [03:32]: Today what we’re going to do is we’re going to go through back of the envelope business model tests. And this is loosely based on chapter two of a new book that just came out called Scaling Lean: Mastering the Key Metrics for Startup Growth. And this is by Ash Maurya. And he’s written a couple of other lean startup books or at least books that are in that particular realm or genre so to speak.
But what I wanted to do was go through chapter two specifically and take a look at what some of the different thoughts are from him about how to look at a business model and determine what the forward looking plateaus are going to look like. And you can use this either for an existing business or for a brand new business that you’re getting off the ground. Some of the calculations that he has in the book are especially relevant just because they greatly simplify what he calls ‘customer throughput,’ which is your customer acquisition. And it kind of measures that against your customer churn rate as well, on a yearly basis. So taking those two things into account, you can sort of look at where your business plateaus are going to be and figure out whether or not you’re going to be able to have enough of a customer acquisition channel or channels in place in order to be able to just maintain the business – whatever your revenue goals are for the business.
Rob [04:43]: And keep in mind that unless you’ve run a business before and you kind of have some loose rule of thumb numbers that you use, some of the stuff we talk about today is going to be less applicable if you have no business at this point. Because you’re just pulling numbers out of the sky and you’re going to find that you’re pretty far off. But if you’ve already started and you have at least a few thousand a month in revenue, you have some numbers and you know your kind of trial to paid, and you know how something should go, you can be much, much more accurate with these calculations because you just have a concept of where you are and where you need to get to. Realizing that the numbers will change but in much smaller increments than if you’re just kind of throwing darts at a dart board as you would if you really do have a business with no customers to date.
The other thing I wanted to mention is keep in mind with books like this that they are written for a broader startup audience. And so not everything – if you do go buy the book, which I’m guessing is pretty good – if you do go buy it you got to take some things with a grain of salt. And we’ll try to point some things out specifically with chapter two, here, that I think may apply more to bootstrappers or ways that these could be shifted to people who are self-funded rather than the examples of the ten million dollar ARR after three years. It’s like that’s just so irrelevant to our audience in particular. We’ll try to call that out as we go through.
Mike [05:55]: Let’s dive right in. And the first step of chapter two is to take a look at the business itself and define what you would consider to be the minimum success criteria. And as I said before, the business model that’s shown in here can be applicable to either an existing business or to a new business that you’re trying to get off the ground and you’re trying to figure out whether or not it’s going to be a viable business. Take a look about three years out and try to think about what the business looks like specifically in terms of revenue. Now those two different things are extremely important. The first one is that you’re looking no more than three years out. And the second one is that you’re looking specifically at a revenue dollar amount so that you can make some sort of calculations.
If you try and go out further than three years, you’re probably not going to be nearly as accurate. And in addition, if it’s a business you’re trying to get off the ground, three years, trying to look beyond that and plan beyond three years is not going to be helpful to you because the business may just not be there or you may have a really hard time getting the customers. So looking at those in a much shorter time period, essentially time boxing your problem so to speak, is going to be really helpful.
The other side of it is being able to take a look at a firm dollar amount. You can adjust that later on, but the idea here is that you want to have a dollar amount in terms of the yearly recurrent revenue that you want to shoot for, that you can base most of your other calculations on. And we’ll talk a little bit more about how you can play with the numbers to kind of reach that revenue target based on lifetime value, customer acquisition rate, how long those customers stick around, etcetera. But those are just the two basic things that you need to think about when you’re talking about the minimum success criteria.
Rob [07:24]: And I’ll admit, to even think about thinking three years out feels crazy to me. It feels very MBA to even be talking about 36 months out because so much is going to change after you launch. When I’m first starting a business I tend to look six months out and think what can we get there. And if we hit product market fit where can we be at 12 months. With that said, this exercise, by the time we get to the end of it, it gives you a cool formula that I’m impressed with. It’s a high level way of trying to find plateaus and figure out where the business is going to plateau based on lifetime value and based on how many customers you think you can pull in.
So there’s a give and a take here. I don’t love the idea of looking three years out because I just think that you’re going to be way off. Even with the business as consistent as Drip, if I looked three years out I’m going to be way off and I know the numbers like the back of my hand. Take that with a grain of salt and realize that if you are projecting out and you’re thinking I need 120k per year, and maybe you want that after the first 12 months and you want that to be you quitting your job. But then you want the business – you’re thinking you want it to go to maybe double in the next year, and then go to 360 of 500k, kind of in that range is ambitious but I’ll say it’s not impossible for a bootstrapper to get there. Those are the kind of numbers that you should probably be thinking about in terms of this exercise. Assuming that you’re not going to have funding at the start and then you’re not going to try and grow a seven, eight figure business super-fast in the style of Silicon Valley; that you’re going to build it like a real business and hire based on profit and that kind of stuff.
Mike [08:56]: The second step is to take that revenue goal that you came up with and convert it into what he calls customer throughput. And this is your customer acquisition rate over time. And there’s a number of different steps to doing this. And the first step of that is if you’re building a new product you have to come up with some sort pricing on it. And if you don’t know what your pricing is, the recommendation is to use some sort of value based pricing to estimate the base price. This is essentially pricing your solution on the value of what it provides, not on what it costs to build and deliver. So that’s a difference between the solution value to your customers versus the cost structure on the back end to you.
Something else that you might look at is using cost based pricing, which is essentially taking your costs to deliver the solution, and then adding a margin on top of that. There’s a lot of business models that fit this particular mold of a service based model of any kind; productized services. Those tend to fit that. But those tend to fit that particular type of model. But if you can get away with it, if you can provide some sort of a value based pricing, you’re much better off. And going back to what we said before, if you have an existing business in place, you already have your pricing. You can essentially just use that number.
Rob [10:02]: For SaaS, I’d say it goes without saying that you’re going to want to shoot for value based pricing. That’s just kind of the way it’s done. You look at the value you’re providing, figure out if there is any competitors that are doing similar things and you either price above them if you want to be premium, or you price similar to them if you just want to be a better product. And I think another example – you mentioned consulting and such of using cost based – another example of that is kind of metered pricing, like how Amazon EC2 does it. I’m sure that they just look at their costs and then add some kind of margin on it. So, I think for the purposes of bootstrappers and folks listening in this, value based is 99.9 percent going to be the direction you want to go.
Mike [10:39]: The second step is to calculate the total number of customers at the end of the time period that you want in order to identify what your active customer base needs to be in order to make your ends meet for the revenue target. So let’s say that your revenue target is $180,000 a year, if you’re charging $30 a month then you need 500 customers in order to be able to reach that revenue goal of $180,000. That’s the kind of calculation that you need to be able to do. And this is why it’s so important to come up with not just the time periods but also what you are selling your product for and what your average price point is going to be for your customers. Obviously, if you have different pricing tiers then you kind of have to guess a little bit. So if your pricing tiers are $50, $100, and then $200 a month, your average price might be something like $75 a month or $90 a month. It really depends on where in the pricing spectrum the largest number of your customers fall. And obviously it can go in the other direction, too. You might have an average price point of $175 even though you have a bunch of people on the $50 a month plan. So take those things into account, but you’re trying to get down to an average price point per customer, and a lifetime value.
Rob [11:48]: Lifetime value is very hard to calculate if you don’t have a product. I think we’ll come back to that point. If you really are spit balling this, you’re going to have to use some rules of thumb and you’ll be off by a factor of two or three. If you already have a product this is much each because then you should know this like the back of your hand.
Mike [12:03]: I think if you don’t have a product at all, then using benchmarks from other similar companies to get to an estimate or just using what their pricing models look like – again, going back to what Rob said about determining whether or not you want to be a premium priced product or commodity based product or something along those lines. Just use a conservative estimate if all else fails. If you’re really not sure, come up with some sort of a conservative estimate for most of these numbers.
Now that said, once you have the numbers for your lifetime value and for the yearly target that you’re trying to reach, the calculation that he offers up is to get your customer throughput. And to do that you would take your yearly revenue, divide it by the customer lifetime value. And this comes out to the number of customers per year that you need to add into your business in order to be able to maintain the business at that level, at that point in time. Now that’s not on day one. It’s not on the 12 months in. It’s at that multi-year mark that you came up with in the beginning. So the recommendation was three years, if you’re using three years. And for sake of an example let’s go through that. If you’re trying to get to $500,000 a year at year three and you have a $50 a month product with a two-year lifetime value, your lifetime value is very easy to calculate, it’s $1200 lifetime value. But your customer throughput is that $500,000 divided by your lifetime value. And that comes out to 417 new customers per year that you need to add.
Now again, this assumes that your business is at year three. And if you just look at the raw numbers of the customers who are paying you on a monthly basis, your business would need 833 active customers to get to 500k in yearly revenue. But if you also take a step back and you look at that lifetime value, you’re churning out 417 of these customers every year. Which means that at 500k a year you need to add 400 every single year in order to just maintain the business at that level. And this is really where those calculations start to come into play and you can start figuring out where your plateaus are if you’re going to hit them at that particular level.
Rob [14:00]: And when I first saw this calculation, which again is called customer throughput, and it’s your yearly revenue target. So, like Mike said, that 500k divided by your lifetime value. And when I saw that my first question was why are we dividing by lifetime value? Shouldn’t we be dividing by the annual revenue per customer? And as Mike and I batted this back and forth offline, and in fact this formula works, the one that he’s given works. And he’s doing some clever math and canceling some things out, but suffice to say we tweaked around with different lifetime values, different lifetimes and different monthly price points and in all of them the math works. So, what I like about this is it’s a high level thing. Don’t get me wrong, this is not something that you’re going to sit down on day one and it’s going to dictate everything about your business. But what I like about this is it’s pretty fast to calculate.
And based on when I’ve launched products, you have a general idea of what your price is going to be. You know it’s going to be maybe around 30 bucks, or around 50, or around 75. You know that your average revenue per year should kind of be that based on what you’re launching into. And then you can always take a guess at your lifetime. When in doubt go with 12 months. That’s kind of been my rule of thumb for people who are starting a new business. You’re going to start off way lower than that when you kick off because you’re not going to have product market fit, your customer lifetime’s going to be like four or five months. But as you improve it you’re eventually going to hit that one-year mark and move beyond it. So a one-year lifetime is reasonable, and a two year means you’re doing pretty well.
In certain spaces like, let’s say Web hosting, where people just don’t churn out nearly as much, you might have a four year LTV or even a five year LTV. And big enterprise software is also like that. Maybe a HubSpot or a Salesforce, those guys have these really long customer lifetime values. And with lower price point software, typically let’s say average revenue fees are 20 to 99 bucks a month. You’re just going to have higher churn, you always will. So you’re going to have between, let’s say a one and three-year customer lifetime. So it’s pretty easy to kind of run a couple different scenarios on this. If it’s 50 bucks a month and you’re doing one year, then it’s $600 lifetime. And if you’re doing three years then it’s $1800. And then you can pretty quickly get an idea of how many customers you’re going to need to bring in each year in order to replace the people that are leaving and to maintain that revenue level.
This is not a projection of where you’re going. That’s a whole separate conversation. To project where you’re going you want to sit down with an Excel spreadsheet and it’s a whole different set of numbers. But what this is telling you is where the business is going to plateau based on your customer acquisition. So if you see this number of 400 new customers per year, if you’re already in your business and you’re trying to grow this thing, it’s going to be pretty obvious to you whether or not you can bring in 417 new customers per year. Because you know your numbers. And you know your traffic sources. And you know your trial to paid. And you know how many trials you get based on unique visitors and you can pretty quickly see you’re either going to be above that or below it and where you’re going to plateau. That’s the fun part.
From here I would actually take this estimate – it is a higher level, more ballpark estimate – and I would dive into real numbers so to speak, of like your exact churn rate. Because I have a big Excel spreadsheet that I use to do this but anyone can put this together if you have your true trial to paid and your true visitor to trial and your true first 60-day churn and post 60-day churn. It’s just much more complicated though, and it’s going to take you a few hours to put together. And you’re going to see an exact projection. But the cool part is that this one that you can throw together in like five minutes is going to be within the ballpark. Close enough that it’s a nice first cut to give you an idea of where your business is going to plateau if you’re accurate enough with your churn and your lifetime value numbers. So this could be more useful when you’re first starting out if you do use those benchmarks of other existing businesses you might be competing against. If you can get any idea about their pricing and their churn and that kind of stuff this can give you an idea of how many customers you need to acquire right up front. And just give a sanity check on, “Boy, can I really bring in 4,000 customers a year if that’s what it takes to maintain that revenue level?” It just stands as a decent five-minute sanity check, I think.
Mike [17:47]: The other thing that I think that this is really helpful in showing you is that because you have that high level number of – whether it’s 400 or 4,000 new customers that you need to add per year – you can backtrack a little bit and say let me divide that by 12 and figure out how many new customers I need to add per month. And let’s say that if comes out to 100. If you’re only adding two customers a month or three customers a month right now, then you know that looking forward to that particular point in time that it’s probably going to be really challenging to find enough customer acquisition channels to get from two to a 100. So it does give you that ballpark sanity check that you may need in order to be able to determine whether or not this is a business that is going to take you to where you want to go. Or whether it is something that you should probably offload and go look for a different business or just try a completely different business to start with depending on whether or not it’s an existing business that you have or an idea that you’re trying out.
Let’s move on to the next step. Once you have this customer throughput number, then you can go back and take a look at revising some of your previous estimates. And the first one that you can obviously adjust is that high level revenue target. That’s probably the last one that you want to adjust but it’s the first one that shows up on the list because that’s the high level, big, hairy, audacious goal that you’re trying to reach. You can adjust that; you could up or down. Chances are probably good that based on your estimates it will most likely end up going down. But that is one option.
The other option is to take a look at the lifetime value and try and figure out whether or not there are ways to either increase the lifetime of the customer, which is going to raise your lifetime value. Or raise prices in such a way that it also raises the lifetime value. And those are essentially the two ways that you can adjust this number. It’s either adjust that revenue target or increase the lifetime value. And those are really your only two options available to you.
Rob [19:30]: And again, if you’re doing this on paper before you started a business it’s harder because you’re just guessing at the LTV. But if you are a year or even six months into a business, you’re going to have a reasonable idea of your LTV and probably some ideas about how to increase that, whether it’s by reducing churn or increasing prices.
Mike [19:47]: The one thing I do like about this particular piece of it though is that – even if you are at a pre-revenue stage and you’re trying to validate things – if you have to look at your lifetime value and ten X it or 20 X it, or raise prices by ten or 20X then chances are good it probably points to the fact that this may not be a viable business model at all for you. Obviously, there’s probably other costs and stuff that you’re going to take into account. But again, you want to be using conservative estimates to begin with. So if these numbers do not pan out on paper then they’re probably going to be significantly more difficult to make work in real life.
That kind of leads us to our takeaway. And that’s the first takeaway. If you can’t make this business model work on paper then you’re never going to be able to make it work in real life, barring some form of miracle in terms of doubling your LTV or quadrupling it. Because those things are going to be very difficult unless your initial estimates were way off. Which is possible, but you also have to take into account that when it comes to math like this, if you have a bunch of estimates – there’s various theorems out there that say if you have all these different estimates or a number of different data points – chances are really good that your final number, because it’s an average, it’s going to come out in an average range. It’s not going to be at one of the extremes.
Rob [20:59]: And to give you ballpark ideas about lifetime values, it ranges very broadly because if your churn is high and your price point’s low, you can pretty easily have lifetime values in the $100 range. Like if you’re charging, let’s say $9, $19, $29 a month, if those are your tiers, you’re probably going to have a lifetime value that’s between – assuming you don’t have just crazy churn – you’re going to be looking at around somewhere between 80 bucks and a 150 bucks because that’s just where lower prices apps tend to churn out more than higher priced apps. And getting something into that range, let’s say that the 150 to 250 range is harder to do than you might think.
Now with that said, if you’re able to build an app that businesses depend on and that they really are using as kind of a core piece of their business, you can pretty quickly jump that above $1000 to $2,000 is completely reasonable for a business or for a SaaS app that has a monthly fee. Maybe the tiers are 50, 100, 150 and even on up for enterprise. If you’re building something people are relying on and they’re sticking around for a couple years – two to three years – that quickly gives you a lifetime value in that $1000 to $3,000 range, let’s say.
And moving on up, of course, you get a Salesforce or a HubSpot of whatever, which have lifetime values of tens of thousands of dollars per customer. And some even into six figures. And that is because the price points are so high and because they lock them into annual contracts, and because their entire business if focused on it. And so that’s your real range.
But if you’re listening to this podcast and you’re just starting out, you’re probably going to want to think my LTV’s going to be between 50 and 100 bucks. 150 bucks once you know what you’re doing. But it’s going to start out really low. Unless I’d say if you’re a repeat entrepreneur and you kind of know more of what you’re doing, you’re going to be able to push it into the several hundred dollars and then potentially into the low thousands. These are kind of ballpark guesstimates based on all the apps that I’ve seen.
Mike [22:44]: Another key takeaway is that the calculation for the customer throughput is really heavily dependent upon the inputs and the outputs to the model. And those inputs and outputs help you to define what is and is not actionable. So when you’re taking a look at the lifetime value, for example, that’s one of the inputs into this. And you can take action on that. You can raise the lifetime value of the customer by either increasing prices or increasing the lifetime of the customer.
In terms of the outputs, the number of customers that you need to reach on a yearly basis, you do have influence over that, and it is dependent upon the types of marketing channels that you use, advertising, whether you’re doing some sort of affiliates or leveraging other people’s networks. A lot of those things you have some level of control over. But obviously the math itself has to work. If you can’t make those final numbers work for you based on the inputs and the output, then the business model itself is not going to work for you at that point in time.
Rob [23:36]: I think some other things to keep in mind are this type of calculation, it estimates the viability of a business. It doesn’t give you an exact answer but it does give you a ballpark sanity check on whether or not this thing’s going to fly. In addition, Ash points out that time-boxed goals are more concrete and thus better than kind of simple revenue goals of I want to get to 500,000. It’s like without it being time-boxed what does that mean? And that’s something that I’ve always liked. I look ahead, like I said, six to 12 months and have a spreadsheet that’s looking at that. Because without the timeframe, it has so much less meaning because you have no concept of how many customers you’re going to need and how low your churn’s going to need to be. And therefore, how many trials you’re going to need. And therefore, how much traffic you’re going to need. If you know one step to the next what the conversion rates are, you can just back calculate from a 12-month revenue goal, you can back calculate to exactly how many unique visitors you need per month in order to make that happen. And if you’re complex enough you can include things like churn and upsells and downsells, and upgrade revenue and downgrade revenue.
It gets complicated but the idea is that this calculation that we talked about is that first swipe at it to give you the sanity check, and then you can dig into it as you get numbers that are better and that are real once you’re into the business. And then you can start plugging those in and figuring out how to improve them and how close your original estimates really were.
Mike [24:56]: Now I don’t know if this is something that Ash covers in a different section in the book, but one thing I think that we should probably talk about is a little bit about the difference between something like this versus your growth targets and your growth goals and how to look at those. Because what this gives you is that back of the envelope test to say at such and such point in time what does the business have to look like, how many customers do I need to acquire and how many will be leaving at this particular time. But that can be heavily overshadowed by your growth or your current growth. So if you’re growing at a very fast clip right now, it can be very easy to be distracted and look kind of micro focused at the business itself right now; how it’s doing, how you’re acquiring customers, doing split testing on all these different things and onboarding customers, doing support. And not really think about this down the road because you’re so hyper focused on that three to six-month timeframe.
But if you don’t take a step back and look at something like this then you can easily run into a situation where your business essentially flip flops and you almost drive it into the ground because you’re not paying attention. You’re hiring ahead of the curve or ahead of the need because the business is growing so quickly and you don’t realize that 18 months, 36 months down the road you’re probably going to run into serious customer acquisition problems or business problems because your customer acquisition needs are going to become so high based on your lifetime values.
Rob [26:12]: That’s the key here. These are not growth targets we’re talking about. These are plateaus. This is a heads up about a potential plateau. And this is something you need to be looking ahead at constantly as a subscription business. We had Ruben Gamez from Bidsketch on 50 episodes ago, I guess, to talk about how to identify and overcome plateaus. And this is the biggest hurdle that I see new SaaS founders hitting is not looking ahead and projecting. Given my churn, given my average revenue per user where are we going to plateau and how do we get past that? And the answer can be add more trials into the funnel. Sometimes that’s what it is. Sometimes the answer is we know that our funnel has no optimization so it may be running a bunch of split tests because you should be, at that point when you’re projecting, that you should be at scale. And I don’t even mean big scale like venture capital scale, but even if you just have 10,000 uniques a month or something, you can start running some split tests or even just making improvements on conversions on the site.
So there are a bunch of different ways to do it, but the idea is that when you’re running this business you have to be thinking ahead and projecting when am I going to hit the next plateau? And that’s what this calculation is about rather than growth projections. That’s probably another episode entirely.
Mike [27:24]: Sure. And then once you’ve identified what those plateaus look like and where they are likely to occur, then you can backtrack to where you currently are, plug in your numbers into a growth model and say, “when do I think that I’m going to end up actually hitting that plateau?” Because the business model might say it’s two years out or three years out, but looking at where your business is right now, if you’re growth rate is much higher then you could very well hit it in 12 months. And you really want to be in a position where you are looking at how to adjust the lifetime value of your customers well in advance of that. As Rob said, if you’ve done all those optimizations and then there’s not really other ways to address that, then you can start looking at your lifetime values and say, “how can I keep customers on longer? Are there ways for me to raise my prices or offer additional services?” And what that will do is that will increase your lifetime value, which will essentially push out that plateau even further.
Rob [28:15]: That wraps us up for today. 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. 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 and we’ll see you next time.
Episode 293 | The 6 Biggest Email Marketing Myths
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about the six biggest email marketing myths. The episode is put together around an unbounce.com blog post. Rob and Mike discuss whether they agree or disagree with the myths mentioned in this article.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of Startups for The Rest of Us, Mike and I discuss the six biggest email marketing myths. This is Startups for The Rest of Us Episode 293.
Welcome to Startups for The Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing cell phone products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:28]: And I’m Mike.
Rob [00:28]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike [00:33]: I talked a little bit about it last week, but we’re finally putting the finishing touches and final testing on the huge code overhaul that we’ve been doing over the past several weeks. It’s been a long trying process at best, I’ll say, but it’s finally almost done. We’ll be able to go live with it in a couple of days. It’s prevented us from pushing new code live just because of the way that we did things. And we too had a couple of missteps along the way, but we didn’t push anything live to the production servers because we went through the testing process and it’s like, “Oh, this just doesn’t work,” or, “It’s broken in this way,” so we held off on some of that. But hopefully another 24-48 hours and that’ll be over with and then we can start moving ahead.
Rob [01:07]: Those are always super trying processes, man, trying to get all the code up to speed. Now why did you have such an overhaul this early? Typically, I’d imagine you get technical debt and then you’d wait a year and you really run into it, and then you come back and revamp. But why only you’re kind of still in early access at this point and a few months into development?
Mike [01:26]: So it had more to do with how things were interacting with the database, and the fact that it was just not easy to write unit tests. So we basically skipped a bunch of things early on in the development. And the things that we skipped made it really, really difficult to put automated tests in place. And we made the conscious decision to not do some of those tests, but we took a step back and there were bugs that were getting into production and things that were being broken. So, I took a look at it and we went through and tried to figure out, “Okay, well how can we write unit tests and make sure that this doesn’t happen again?” and it was actually not possible to write those unit tests because of the way that some of the code was structured. So, in an effort to get us to the point where we’re not incurring more technical debt every single time we had a feature, we did a code overhaul of some of the way that stuff accesses the databases and external resources and things like that, because we interact with the mailboxes and we’re heavily dependent upon the current time. So, because of those things you have to have an abstraction layer in the place that essentially mocks those things up and says, “Oh well, if you were to access this thing, this is what that would return.” But because we didn’t have any of those abstractions in place, you literally can’t test them.
So, there was just a lot of…it wasn’t really spaghetti code, it was just a lot of internal dependencies on things that we don’t really have control over and they were embedded in the code. So, just made it very difficult, like I said, bordering on impossible to test some of those things in an automated fashion. We bit the bullet now to go through that to get us to the point where we can do that. And it’s not to say that we’ll do it in every single case moving forward, but any time we come across a bug, I want to be able to be sure that we can write a test that will make it easier to filter those things out. So, when we run into things in production, we can get rid of them and test it locally and make sure that we’re not going to run into that again.
Rob [03:14]: Very cool. It’s always a bummer to have to do that upfront. It kills time but I think it’s probably the right choice if it’s allowing you to write unit test. Because I think I’ve said several times over the past couple of years that I will never build an app or work on an app again that doesn’t have extensive unit tests, because it has saved our bacon so many times with Drip. Obviously, it takes longer to build the feature. It’s incrementally longer especially in the early days, but over the long run, it will save you time. So, I think you’re making a good call there.
Mike [03:43]: Like I said, it wasn’t so much about writing the unit tests, it was having the ability to. So, when we do run into something, we need the ability to write those so that we can test it and say, “Okay, this is what’s happening in production.” And then we need to be able to replicate it locally and we couldn’t do that. So, there was one bug we run into, and I talked about it last week, where I literally could not replicate it locally because I couldn’t get everything set up and mocked up in a way that it was in production. So, I was just guessing at different things to say, “Okay, will this work? Will that work?” And I had to push several different variations of the code in order to ‘fix it’, so that was really the issue. It was just when we run into something; we need to be able to test it locally to make sure that we’re fixing it.
So how about you? What’s up this week?
Rob [04:28]: Things have been pretty good. They’re kind of busy and chaotic right now. With school ending, I’m sure you ran into having a lot of end-of-the-year presentations and awards ceremonies and plays and parties. And just so happens both of our kids have birthdays around this time. So, I’ve just felt like we’ve gone to a lot of performances and a lot of events recently. Which is fun to go to, but it does kind of fill up the time and mean we have less of our evenings and weekends free right now.
Mike [004:52]: My kids had a half-day of school yesterday, which you’d think with two weeks left that they would still have full days of school. But for whatever reason, they had a half-day of school yesterday. So, you have to deal with it.
Rob [05:01]: Right. And then we’ve had a transition. We had a friend of ours, a nanny in essence, watching one of our sons, and she transitioned into doing yoga instruction full-time. So, we’ve had to transition him on that as well as he’s now done with school as of last week. So, we’re really just rushing around, getting stuff done, in addition to some other chaos going on.
So, today we’re talking about the six biggest email marketing myths. And I put together the outline for this episode around an unbounced blog post. And it was published in mid-May, so it was a couple of weeks ago, and it’s called The Six Biggest Email Marketing Myths Debunked. I wanted to talk through it, because some of them I do think are pretty good points that we should discuss that people should or should not do. And then some of them I just don’t think are actually myths. They may be some light rules of thumb, but I don’t think they’re things that everyone proclaims are rules and the truth and going against them is a terrible thing. But that’s the fun part, is that we’re going to be able to look through this.
So, the article kicks off and it talks about how there’s over 205 billion emails sent and received through the Internet. And it talks about that one McKenzie study suggests that email marketing is 40 times more effective at acquiring new customers than Twitter and Facebook combined. And we’ve talked about that on this show here, right? I typically say it’s a 20:1; I didn’t think about 40:1. But this goes back to when I had an RSS feed on my blog with 20,000 people and I had an email list of about 1,000 and when I launched both of them, the email sold as much as the RSS feed did. Which was surprising to me, because I thought that a lot of people were reading the blog. But it turns out they were reading it amidst a bunch of other blogs, and so they didn’t really know whose blog was who, because in an RSS reader it kind of all blends together.
And then, of course, the whole thing of having 20,000 Twitter followers versus even 1,000 or 2,000 email addresses I would say still holds true. So, it’s neat to see that someone has actually studied that. That’s why so many people – like we had a question last week of a founder who is saying, “It seems like all the advice I see -” which I think is a bit of an exaggeration, but he said, “I think all the advice I see it starts with the presupposition that you have an email address. And I think the reason is because email addresses they just work so well. And so it’s basically everyone encouraging you to go start building your list.”
And so let’s dive into the first myth here. And again, it’s the myth according to this article. I think, Mike, you and I want to discuss whether or not we think these are myths, in fact. But the first one is that Tuesday is the best day to send marketing emails. The article says, you’ve almost certainly heard this one and from my rule of thumb, Mondays and Fridays are typically not very good days to send email because on Monday people are just getting back from the weekend and their inboxes are often filled with three days of email. And on Fridays, a lot of people wind up – they either take Fridays off, so then stuff would fall to Monday. Or people are just starting to check out for the weekend. And so Tuesday, Wednesday, Thursday, for me, have always been my rule of thumb. And I wouldn’t say these are hard and fast, but in general, that’s kind of what I lean towards.
Mike [07:55]: I think that for this you really need to figure out what your audience is like. Because I would suspect that there’s a huge difference between B2C versus B2B communication here. I think on the weekends, your B2Bcommunication is probably going to drop off a cliff. But depending on your audience in that B2B space, it might be appropriate to send them. So, if you’re sending emails to entrepreneurs or small businesses, your chances are probably decent of being heard above the crowd. Especially among entrepreneurs because they’re probably checking their email on the weekend or at least to some extent. Versus if you’re sending the emails to people who work at Oracle or Microsoft or any of the larger businesses, they’re probably not going to be checking their email on the weekends. I think that you have to take some of these data points with a little bit of a grain of salt and just understand that it is highly dependent upon who your target audience is. It’s not just that Tuesday is the best or worst day. It’s really relative to who it is that you’re communicating with.
Rob [08:51]: That’s a good point, and in fact I had a B2C eBook at one point. This is probably seven, eight years ago, and the emails on the weekends converted better. And I just guess because that’s what people were thinking about at the time. I never figured out why, I just knew that they did get higher click through rates on the weekends.
The other interesting thing or an interesting exception is when I still had our apprenticelinemanjobs.com, which was a job board, I would see big traffic spikes on Sunday. And so I started sending more emails on Sunday, and it definitely made a big difference. Because, you know, on Friday or even during the week, folks aren’t necessarily thinking about trying to find a new job, but when Sunday comes, they’re starting to dread the next day’s work, and they’re thinking about how they can get into another line of work. It was crazy to see the traffic spikes. The biggest day of the week every week was Sunday and it was like Sunday afternoon, Sunday evening. So, that’s good thing to keep in mind.
What the blog post here talks about is there’s a HubSpot science of email report and they looked at the impact of the day of the week had on email open rates – so it’s only open rates – and what they found is that it’s crazy how smaller lists versus larger lists, there was a different impact. So, for smaller lists, Tuesday was actually the worst day of the week to send. And it wasn’t until you get to the larger list which is more than 10,000, so it’s not that big. But then Tuesday was a reasonable day. But to be honest, it seems like the article concludes here that if you send on Tuesday, you’re probably getting lost in the noise of the other email marketers who are also using this best practice of sending on Tuesday.
So, that’s the problem with a lot of advice, is that once everyone starts taking it, it doesn’t work as well anymore. The same is true with any of the marketing approaches that you hear about or any of like a blueprint or a roadmap to starting a startup or doing the marketing tactic. It’s like once everybody is doing it, then it doesn’t stand out anymore. It’s not remarkable and so it just kind of blends in to the background and you have to find that next thing. And so, I could see this one – we see big spikes Monday and Tuesday at Drip with our sending, in terms of our customers wanting to send email. I could see maybe thinking about shifting to Wednesday morning, Thursday morning sends.
But number two is that you can only send a particular email once. And this blog post talks about how you wouldn’t want to send the same email to the same people. But they talk about the tactic that Noah Kagan of AppSumo and SumoMe, and it says it was actually taught to him by Neal Taparia from EasyBib. It’s a tactic that Noah popularized where you take the same email that you have already sent to a list, and you change the subject line and you resend it only to your non-opens, right? So it’s people who didn’t open the first one and you change the subject line. And we’ve actually found this to be so powerful that we implemented it in Drip as a feature. When you’re sending a broadcast, there’s a single checkbox you check. And if you checked to resend to unopened, and then you can just say how many days you want to wait and what’s the new subject line. And it’s just all built in and it happens automatically, and it’s linked back to the original. And we have consistently seen increases of more than – well, between let’s say 25 to 35%, so in the 30% range. And that is what Noah had mentioned too, is that they were getting greater than 30% increase in opens from this tactic.
Mike [11:58]: I was going to mention exactly that when you guys added that into Drip and made it easy to do. You look through if you send out a bunch of campaigns; you can look back through them and look at the stats for those people who have been resent a particular email. And it’s astonishing how many of those people who didn’t open it the first time will open it the second time and it’s the exact same email. The only thing that’s different is the subject. So it’s pretty amazing that this little hack works and gets such significant results out of it.
Rob [12:25]: And you might think that you’re going to get complaints, and we have never gotten complaints in our use of it, and as far as I know other customers haven’t as well. The only time that I got complaints, I think I sent to my Software by Rob list and I accidentally – this was before we had this. This made us put some code in place to prevent this, but I had scheduled a broadcast with a resend to unopen and then I unscheduled it to make a change, and then I sent it through again with resend unopen. So I resent it twice. And I’m pretty sure the second two I didn’t differ the subject line between the two, and so then people said, “Why did you resend this email to me?”
But aside from that, which again is now not possible with Drip, right. We eliminated that because I did it to my own list accidentally. But even that one, I only got – it was literally three or four people who said, “Hey, how come you sent this?” and didn’t seem that big of a deal. So this tactic, I’m a big fan of it and we’ve only seen positive results from it.
The third myth we’ll talk about is keep your marketing emails short. And this is one that I’m not so sure that I’ve heard this as like a hard and fast rule. I guess I’ve heard enough people talk about the exact opposite. Like Patrick McKenzie often talks about how he sends out these very long emails and that his audience likes it. And same thing, Joanna Wiebe is actually – I’ve heard her say this, but she’s quoted in this article about how it’s not about picking one length or one style out of a hat, because it’s going to depend so much on your visitors and your prospects. And I’ve often heard in the Internet marketing spaces – especially 10 years ago – the sales pitch thing was: the longer the better. The longer you make your sales page, the more you’re going to convert. And I have found the opposite to be true.
We have a long forms page on the home page of Drip right now as an example, and we’ve done split tests with shorter versions of it. And the shorter versions appear to be having more traction. And so we’re looking at making changes there, and this happened remember the Microprenuer website, the home page used to be a lot longer. That’s over at Micropreneur.com. And I ran several split tests and I had a long, a short, and a medium, and the medium one just cleaned house both times and the content was generally the same. Like the headlines weren’t different. It really was just the length and it was cutting some stuff out. So, I think the same applies to email here. I certainly don’t disagree with it. I just wonder if it is really a hardcore rule. I haven’t heard that many people talk about it, so I question if it’s really a myth.
Mike [14:34]: And I guess it goes back to what I had said before about knowing who your audience is and what it is that you’re offering them, and at what point in the sales process. There are certain times where a much longer email is going to be warranted, and then there are sometimes where you just want to send a quick one.
And I think I remember one time – and it’s kind of a little bit of an aside, but we made a mistake when we were talking about MicroConf in one of our emails that we’d sent out to the list, and we accidentally put in an unsubscribe link right up at the top and the subject was MicroConf and people saw it. And as soon as they saw the email, they just clicked on the first link that they saw because it said MicroConf. And had we obviously put that that the bottom or made it a longer email with stuff at the bottom, then they would have had to scroll a little bit. But I think that knowing what it is that you’re sending them and why it is that you’re sending them that email makes a huge difference in whether or not your emails should be short or should it be long. Are you trying to explain something to them? Are you trying to educate them about a particular topic? Are you trying to get them to buy something? If you’re trying to redirect them to another location, then chances are good you probably want a shorter email. But if it’s just an education email, then there’s no reason that I know of, to go with a short one. You couldn’t certainly embed all that information there.
The other thing that you have to think about, I think, is the reusability of that information. So, if you have a series of blog articles and you embed them directly into an email sequence, then that’s perfectly appropriated to do. But just keep in mind that it’s probably going to be a little bit unwise to be sending people who are in your email list links back to that blog post if the reason they ended up on your email list was because they read that blog post. So, just be a little bit aware of contextually where those people are in the sales funnel, and how they ended up on your list, and what the content is that you’re sending.
Rob [16:20]: You make a good point about really the purpose of the emails. Because well, what I’ve seen with our up front email mini-course – which is Why Marketing Automation is the Future of Email Marketing – we’ve seen really good read rates and comment rates and reply rates on that course. And I think one of the reasons is that the posts are very palatable, and you can read them – I say the posts. It was originally a blog post and we turned it into an email mini-course. The emails are short enough, but they’re super palatable. I do think like in this case, having shorter emails that aren’t impossible to read on mobile or just take forever to read – if Patrick McKenzie gets away with giving people 15 to 20 minutes to read because his stuff is – he’s got a warm audience who really likes him and they know he’s going to give really valuable stuff, when you’re first engaging with someone, they may not give you that much time. In fact, most of them are not. And so being able to pack some really powerful actionable stuff into a short email, I think, is a good way to get acquainted with someone. And then once you get deeper into your courses, I think having longer emails can work. But keep in mind that just trying to throw 5,000 words in that first email – a lot of people they aren’t going to be up for reading all that.
The fourth myth is to keep your subject line short. And in this blog post, they reference a return path blog post that talks about how a typical desktop inbox displays about 60 characters of a subject line, while mobile devices show just 25 to 30 characters. And so there’s been some general advice in the past few years of keeping your subject lines under 30 characters. But what the return path found is that the highest open rate – well, they call it read rate. But I mean I’m not exactly sure they would know that. It’s really more open rate – is between 61 and 70 characters. It’s 17% at that point.
Now, it’s a bit of an anomaly because they go in 10 character blocks, and like the one below it is 14 and then the three above it are 14. And so the 61 to 70 really is this funky anomaly that bumps up 3 percentage points and not exactly sure why that is, but what that’s indicating is potentially there’s some magic. You know, they did look at 2 million email subscribers from over 3,000 retail centers for the month of February. And so there’s a non-trivial sample size. We’re doing this with 10,000 people or something. I would say that this could be more of an anomaly, but it seems like they’ve actually done some reasonable research here to point out that you don’t necessarily have to be super short. I don’t think 61 to 70 is a magical number, but I do think this points out that maybe short email subject lines are not the end all be all that some folks recommend.
Mike [18:43]: I don’t know very much about this one way or the other. I think that you have to have a minimum number of characters just to convey what the email is about. That’s the purpose of a subject line. But you also don’t want to run a War in Peace book in the middle of the subject line either, because there are going to be things that are cut off. And if it’s cut off, then it’s interesting looking at the data and the graph here that they have. It says they grab the average read rate and then the messages with this subject line length. And there’s not really a drop-off in terms of the read rate after a certain point. But if the email client cuts it off at 60 characters, then it almost doesn’t matter whether you have 60 characters or 60 million in the subject line, because they’re not being read anyway. So, people are judging it based on those first 60 characters. It seems to me like the data itself is a little misleading because you really have to take those types of things into account.
Rob [19:36]: Our fifth myth is that unsubscribes are bad. And in essence, the writer of this post talks about how people who brag about not having many unsubscribes are incorrect. And that unsubscribes are good because they remove people from your list who are unlikely to buy from you. And I would say in general, I agree with that. If you are emailing on a reasonable schedule and giving good content and someone unsubscribes, then okay, they probably weren’t going to buy from you.
However, I have seen some people who literally email every day, seven days a week, and have let’s say an autoresponder sequence of 60 or 70 emails long. And maybe when people unsubscribe from that list, it’s not that they don’t want to buy from you, it’s that they don’t want to hear from you 70 days in a row.
I’m not saying that that’s a bad tactic by the way. I think for the approach that this person was using, it was actually a reasonable thing for the goal they were trying to achieve. But what I’m saying is that I think unsubscribes are fine. I think that if you’re getting half percent of your list or 1% of your list to unsubscribe within any given send, that’s not a red flag, in my opinion, because are just going to come in and out of your list. The two things to keep in mind are one, if you do get an unsubscribe rate higher than that, why is that? What have you been doing or what did you do in this email that is encouraging people to leave your list? And two, make sure that you’re building your list fast enough. That having a reasonable unsubscribe rate, an expected unsubscribe rate, is something that you can overcome because you’re gaining more people than you’re churning out, basically.
Mike [21:02]: I think there’s a big difference in viewpoint here in terms of looking at the fact that you have people unsubscribing versus having an unsubscribe rate that is sort of out of control. And you talked a little bit about it where the number of people that you’re adding to your list is not overcoming the number of people that are unsubscribing, then you probably have an issue there. You are sending out an email every single day and your email unsubscribe rates are pretty high but you’re still adding a number of people in that are going to overcome that, that’s not necessarily a good thing either.
I do agree with you that I think that having unsubscribes is not necessarily a bad thing. There’s going to be people who opt out, and you do want those people to opt out if they’re not a good fit. I’ve seen marketers out there who will tell you flat out, “Hey, if you’re not interested, click here,” and they will actively make efforts to prune their lists to some extent to get people off of their email lists. And there’s a number of advantages to that. One is that it helps them to not be inundated with data from people that are just not interested and are never going to buy. The last thing you want is an email list of 20,000 people where 15,000 of them just don’t want to buy from you and are never going to. And then you’ve only got this group of 5,000 people. Well, three-quarters of your list is crap at that point. So what happens then is you end up with a lot of misleading data about what you think people want versus what they actually want. And three-quarters of those people you should not be listening to. The problem is which three-quarters of them is it, and you don’t know.
So, taking steps at that point to get rid of those people at that point is a good idea, but it comes down a lot more to segmentation than anything else. So, unsubscribes are not necessarily bad, but you also have to take into account the context of where people are unsubscribing and why.
Rob [22:42]: And I take it a step further with pretty much all of my marketing lists, and we use the feature in Drip called List Pruning. And this actually will remove people who are not opening or clicking or engaging with your emails, because even if they haven’t unsubscribed, if it’s just going into their empty inbox, that’s not good. It’s not good for some of these could be honeypots, Yahoo, Hotmail, Gmail. A lot of these mail providers will look at – and this is all black box stuff. So it’s rumored that they look at if you’re sending domains or your IPs are sending a bunch of emails and none of them are getting opened or it’s a very low open rate, then they consider your list lower quality. And so, it can hurt your deliverability long term.
And so, we do list pruning pretty regularly, and this is why it’s so funny. Like our lists are smaller than they would be if we weren’t pruning, but our open rates are way, way higher as a result. Because we keep our deliverability up and we only keep engaged people on the list. We do some joint ventures and we’ll partner up on an integration or something and people will tell us they have a list of x-thousand and the first question is asking is, “What’s your average open rate on a broadcast?” Because that’s way, way more important, because we’ve literally had people say, “I have a 40,000-person list, and their open rate is like 10 or 11% on a broadcast. Whereas bottom end you want to be above 20, in my opinion, and you’re solid and have a really healthy list if you’re between 25 and 35 for the broader lists.
And it depends about the age and the size and a bunch of stuff. But when you first start out and someone first stops in, that very first email, you want to see especially if they’re opting in to get some information. I want to see like a 70% open rate on that first email and then 60% at the low end. I have seen some that are up around the 80% range. And then over time as someone receives 20, 30 emails from me, that’ll slowly tick down, right. And so if you get 10 or 20 emails into an auto responder campaign, you’ll see it drop down into the 50s and the 40s. And then when it gets in the 30s, it should typically level out in that range, assuming you have a decent quality list. But if you continue to drop and you drop into the 20s and the teens, you have an issue. And so, not even just unsubscribes here, but I think just getting rid of people from your list who aren’t engaging, it serves a lot of positive purposes.
And our sixth and final myth is that marketing emails should be branded and polished. And frankly, this is something that I’ve been reeling against for years, is the big glossy fix with email newsletters thing with the drag and drop builder that you build this big Microsoft FrontPage looking thing and then you send that out to people. I’ve just found, in my experience, that having really nice plain text looking emails that are responsive. And they’re not actually plain text because you need to have the image in there to see if people will open, and you want to be able to rewrite your lengths and stuff. So it’s an HTML email, but it looks like plain text. I’ve been doing that for 10 years and I think that is the way to go with few exceptions. I think ecommerce is one exception where the visual element really helps. I think if you’re a recipe website where the visuals of the food, that’s where you can have something formatted. But to do this multi-column newsletter-type thing if you’re just communicating with your audience and you want to build a relationship with them, or even if it’s your customers and you want to have a relationship with them, I really have not been a fan of that approach.
Mike [25:49]: Did you really just reference a product that was discontinued in 2003 to send emails?
Rob [25:54]: What did I say?
Mike [25:55]: FrontPage.
Rob [25:57]: I did, because you know why I was using it as an example, we all know that using Microsoft FrontPage, you just build crappy web pages. And that’s what I see coming out of these drag and drop email builders is unless you know what you’re doing, you’re going to build a crappy looking email. So yes, I did. I hope it put the image in your head of exactly what I was saying.
Mike [26:17]: Yes. No, it did, but it also points back to – I remember using FrontPage as well and I was like, “Wait a second. FrontPage, is that even around?” I didn’t think that it was, and I looked back and it was discontinued in 2003, so that’s kind of scary that we both remember that and both have used it in the past.
Rob [26:32]: Totally. Totally.
Mike [26:33]: I do generally agree with this. I’ve seen lots of emails that come in. Some of them are branded and some of them are not. And to me it means more that the content itself is decent and that the source that it’s coming from is somebody that I trust versus how good it looks or how polished it is. That stuff to me doesn’t matter nearly as much as it does that the source of the email itself is somebody that I actually want to hear from, because if I don’t want to hear from them, then I don’t care how polished the email is. I just don’t want to.
If you look at a lot of the marketing emails that come from the Fortune 500 companies, they’re very well branded. And it’s not to say that the branding doesn’t help them, because it certainly does – it makes them recognizable, but they’re in a position where that matters to them. Versus if you’re sending your own emails, the chances are good that having a lot of that additional branding probably has very little effect on your business and it’s more about are you optimizing for the right things in your emails.
One of the contention points that I have about this particular item here is that some of the data they give is about plain text emails versus having HTML emails that have gif embedded into them. And they claim that there’s a 37% decrease in opens if you’re adding images into them. And I question whether or not that is a valid data point, because how would you even measure the open rate if you’re not including some sort of a tracking pixel of some kind in there?
Rob [27:54]: Right. And you can’t include that in a plain text email. And that’s what I was saying earlier, that when I say plain text, I mean an HTML email that looks like plain text, so that it allows you to rewrite the links so you can track clicks, and it allows you to embed the image so you can track opens.
Mike [28:07]: I think what’s probably more important is trying to figure out whether or not having a lot of brand and polish in there makes a difference. But even something like that, you’re not going to know until you get a fairly massive email list and have the ability to do some split testing on it. And at that point, it’s not so much about the open rates as it is about what the conversion rates are and the action that you’re trying to get them to take inside of the email. So if you just want to get your emails open, that’s one thing, but if you want them to go into the email, read it, and then take some sort of an action after they get the email, that’s a completely different story.
Rob [28:41]: Wow, this HubSpot study is pretty intense. They say with statistical significance specifically that they tested it with such broad, or I guess a higher number of emails that it is true. They come to a lot of conclusions like it says people say they prefer HTML, so if you give them a choice they’ll choose that. But over and over in every AB test they ran, they preferred plain text emails. They said that the HMTL emails reduced open rates versus the plain text looking ones I’m assuming. They said HTML emails have reduced click through rates. And they don’t just mean HTML. I think they actually mean – they have these big design emails with a lot of – there’s a lot of flair in there basically. And images and formatting, and the fix with type stuff I was referencing earlier with my FrontPage comment.
This is why, to be honest, the one template built into Drip is an HTML template that looks like plain text, and you can of course embed an image in it or something, but we have not encouraged people to do the big fancy templates. Although some people do bring them in, and I’m sure if they’ve run tests, they might find out with your specific audience that they do like some particular branding. We do have people who have elegant – they’re nice well designed, elegant templates, and those, I think, can help keep your brand in people’s minds. And I think they’re tasteful, they work with your audience. But I think just going with big fancy HTML by default is a really bad choice.
Mike [30:00]: And looking through at the emails that they have in here, some of the ones that they have side-by-side, they’re not terribly long, and if your email has five or eight lines of content in it and two or three massive images in it, to me it seems like that’s a very different story than if you have a longer post or you are using those images to help convey some sort of a story. Because I think if you a thousand-word email or something like that with a bunch of images in there for illustrative purposes, I think that’s very different than if you have three or four lines of text that have these massive images in it. And the main content or main focus of that email is to show you an image. To me those emails don’t really resonate. I would rather see some content along with it. But again, it depends on what the purpose of those emails is.
Rob [30:45]: I agree. And as I said before, I think if you’re Pinterest or you’re recipe or food site or a real estate site, there are reasons where visuals really can light it up and they should be the focus of something. But I think in general, if people are consuming your content and they want to read your content, you should stick more towards plaint text looking and then have images as needed in the email to break up the text.
Mike [31:06]: So, I think the bottom line with most of this stuff is to whenever you see some sort of a best practice or a guide about, “This is the best day to do this,” or, “This is the best way to do that,” take it with a grain of salt and think about what it means for you and what it means for your audience. Because by the time something becomes a best practice, it is not going to stand out anymore. And that’s something that you have to keep in mind, and figure out whether or not it’s still relative for our audience.
Well, I think that about wraps us up for the day. If you have a question or comment 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 full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 292 | Moving from One-time to Subscription Revenue, When Your Core Product Has Variable Costs, 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 on topics including moving from one-time to subscription revenue, when your core product has variable costs, and how to disrupt the current payment method for a market. Mike also gives some updates and recent challenges with BlueTick.
Items mentioned in this episode:
Transcript
Mike [00:00:00]: In this episode of “Startups for the Rest of Us,” Rob and I are going to be talking about moving from one-time to subscription revenue when your core product has variable costs, and [more, some?] listener questions. This is “Startups for the Rest of Us,” episode 292.
[Theme Music]
Mike [00:00:20]: Welcome to “Startups for the Rest of Us,” the podcast that helps developers, designers and entrepreneurs be awesome at building, launch and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob [00:00:28]: And I’m Rob.
Mike [00:00:29]: 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 [00:00:33]: Well, MicroConf Europe is less than two months away, so if you’re interested in joining Mike and I in Barcelona with 100, 120 of your favorite bootstrapped friends, go to microconfeurope.com. We have a “buy a ticket” link in the upper right. We’d love to see you there. We have speakers that include Mike and myself and Steli Efti and Peter Coppinger from teamwork.com, and we’re currently working to recruit more speakers to the conference. We’re pretty stoked about it.
Mike [00:01:00]: Yeah, I’m definitely looking forward to it, although the time is going by really, really fast. I looked up the other day, and somebody had sent me an email: “Hey, by the way, see you in a couple of months,” and I’m just like, [groans] “Oh.” [Laugh]
Rob [00:01:09]: Yeah, it came up on us quick, so we have to get our other speakers in line pretty fast.
Mike [00:01:15]: Yeah. I think one of the downsides is just the timeline for us to sell tickets for MicroConf was pushed back a bit because of all the tax implications around accepting that for the conference –
Rob [00:01:25]: Yeah.
Mike [00:01:25]: – which, unfortunately, has to be also pushed onto the people who attend. We didn’t change the ticket pricing at all, but the tickets are priced higher now because we have to charge [VAT?] on everything.
Rob [00:01:35]: But then they can get refunds of [VAT?] –
Mike [00:01:38]: That is true.
Rob [00:01:38]: – so, ultimately, it won’t be more expensive. Almost everyone across the board will be able to get refunds, although I’m not an accountant. Don’t consider my advice concrete here, but that’s my understanding based on the consultants. It’s so complicated. We have to work with [VAT?] consultants. It’s crazy. You know you’ve grown up when you are hiring consultants just to deal with taxes.
What have you been doing the last couple weeks?
Mike [00:01:59]: Well, I’ve been working on on-boarding people into Bluetick, and I’m at the point where I’ve on-boarded over half of the prepaid customers so far. That’s good to see, but the downside is I ran into a bit of a minor setback. We ended up hitting a bug that caused a pretty major performance issue on my server. It was about three days or so – three, full days – and it was really hard to replicate in a local test environment, so we basically just bypassed the issue for a little while and said, “This functionality isn’t going to be available for you guys for a couple of days, or a week, or whatever until we get this straightened out.” We’ve had to refactor just a ton of code in order to get to the point where we can replicate those types of things locally. It just sucks to have to go through that, but I’d rather do it with under 20 customers than 200-plus.
Rob [00:02:49]: Yeah, now’s the time to do it. It is so painful early on, because you just want to move fast, because you’re just trying to prove things out and get that early revenue. But if you don’t make some good decisions here and eliminate that technical debt, not make the fast decisions where you have something hanging out there that later on can sting you, it’ll be brutal when you get into the hundreds; because having a major outage at that point sucks.
Mike [00:03:12]: Right. And it wasn’t even just that there would’ve been an outage. There’re things that, because of this bug, it just didn’t work. Or, at least there were parts of it that didn’t work. The rest of the application was still working, but it was causing certain jobs to be reprocessed over and over again, and it just pegs the CPU because of that. So, unfortunately, they just were never going to finish, which sucks. Having to take that step back and essentially put all forward progress on hold for close to two weeks – it really sucks, to be honest.
Rob [00:03:43]: Yeah, I know the feeling. It seems like with any app of any complexity these days, you’re going to run into this a lot in the early days because the code is just trying to ramp up. As you scale and you get more customers, we’ve found that about every – I’m trying to think. It’s probably every four to six months with Drip that we hit the point where we need to stop all feature development for a couple of weeks and just focus on fixing performance of individual – whether it’s queries, or whether it’s pages, adding caching, even upgrading the entire database to a bigger box with more RAM and all that stuff. We’ve cycled back on that to maybe three times a year, because you outgrow stuff. We’re not building these basic crud apps [laugh] like we used to be able to and compete. The stuff’s too competitive now. I think of a project management tool, or even time tracking, or invoicing software or something, you obviously want a lot of UX. There’s a lot that goes into building the product; but on the back-end the performance implications of it are really small compared to something that is sending a lot of email, or doing a lot of analytics, tracking opens, tracking clicks. Both of our apps do that, and any type of – I can’t even imagine what apps, like Mixpanel and Kissmetrics have to do on the back-end because they are the next level. Now I understand why those types of businesses had to raise funding. You just couldn’t get enough boxes and enough people to scale that up without having a big outlay in advance, even with a tool like Amazon EC2 or Rackspace Cloud.
Mike [00:05:12]: Yeah, I remember talking to Heaton at one point a while back about Kissmetrics, and one of the first versions of that that came out. I may have these numbers mixed up, but I think that he said that for 20 customers they had 12 servers, and it was just because of all the processing that they did.
Rob [00:05:29]: Yeah, I remember that. Obviously, they got better at scaling as it went out, but I do remember in some interview someone had said just the basic infrastructure, the fixed cost of their infrastructure – and I don’t remember if it was Kissmetrics or Mixpanel – was more than a quarter million a year. It might even have been half million. It was somewhere in that range just to keep everything running, and that wasn’t even to scale up as they got really big. That’s the kind of thing you have to think about. It’s getting easier and easier these days to build really cool tools, but the performance implications of those and the complexity of them as you scale up – it’s a real thing. I know that some startups have entire teams just devoted to keeping that stuff moving fast, and it’s a team of both Dev ops folks, DBAs and developers who are in modifying code just to keep things performing. You can imagine something real-time, like Uber, and how hard that would be since it’s worldwide and there’re so many incoming datapoints at any given time. The order of magnitude of complexity – that’s got to be incredible.
Mike [00:06:26]: The other side of that is that you have to have tools or systems in place such that you can test it and put it under artificial stress, and that’s something that we just haven’t really paid a whole lot of attention to because we were trying to move fast and trying to get the app out the door as quick as possible. We were able to do that, but the cost of doing so was that we didn’t have good mechanisms in place for us to be able to run absolutely everything locally and to integrate a lot of testing into the system. So, a lot of it’s been done manually, or there’re certain places that are much better-tested than others. It’s the places where we don’t have a lot of tests that really bit us, so right now we’re working on refactoring a lot of that code. Like I said, it’s been a full week. It’ll probably be another week before we get things settled down to the point that we can actually go back and start working on more features.
Rob [00:07:15]: Well, congratulations on getting half your folks on-boarded. I feel like this bump in the road that you’re hitting – that’s just the other shoe dropping. It had to happen eventually. You can’t get through this stuff without having something like that.
Mike [00:07:26]: Right, and these bugs are things that probably would have come up anyway. I would expect that the two we specifically ran into are ones that we would’ve come up with across other customers as well – eventually. Maybe not tomorrow, or the week after, but it would’ve been soon, and I’d rather find out now than later.
Rob [00:07:41]: So, what are we talking about today?
Mike [00:07:43]: Today, what we’re going to do is go through a bunch of listener questions that have come in. If you’re interested in having us answer any of your questions, you can email them to us at questions@startupsfortherestofus.com. Our first question comes in from Dan Gravel, and he says, “Hi, guys. I’ve been listening to the podcast since its launch, so thanks so much for all the tactical, actionable and practical advice you give. I’ve been running my business for almost seven years, and I’ve been full-time on it for six. The first product, called ‘Bliss,’ which you can find at www.blisshq.com, is still a bestseller, but it plateaued a few years ago. It’s a B-to-C, downloadable software product which automates the management of large music libraries. Arguably, the reason for stagnation is a drop in interest in self-stored music collections with the mainstream move to streaming. I’m considering moving all or most of the app into the Cloud and adopting a subscription payment model. I can’t move it 100 percent because a small software agent will always be required to perform the work on the music files. I think moving to the Cloud should lower friction in on-boarding, allow easier life cycle emailing and a higher LTV due to subscription payments that may enable a paid acquisition. How would you go about deciding whether to go ahead with this? Dan.”
What are your thoughts on this, Rob?
Rob [00:08:45]: Well, I think there’s two markets for moving to the Cloud. One is your existing customer base, and they’re easy because you can just ask them – right? You could do a survey, some one-on-one phone calls, and you could say, “Would this be of interest to you if we had a subscription version of this?” You can talk about the price point. You can talk about the benefits and find out if any of those folks are interested. Then the second market is everyone else – right? It’s all the audiophiles. You said you have an existing market. It’s some audio files, and there’s integration’s, and there’s certain customers who aren’t your customer yet, but who could potentially be. Those guys are a little harder to reach, but you could certainly survey your email marketing list. I’m assuming you have some type of list that is folks who’ve signed up to hear about updates, or maybe they follow some content you produce or something; and that would tend to be a much larger swath than folks who are actually paying you. That’s a good place to start.
[00:09:38] The other option is something I heard about from Patrick and Price Intelligently. He mentioned this in his MicroConf talk this year, and it’s a website called aytm.com. It’s AskYourTargetMarket.com, and you basically define all these demographics. I would imagine by this point you have a pretty good idea of where these folks live and if there’s any type of gender bias, if more of them are men versus women; what they do for a living; how they think about stuff. You can basically just define this at aytm.com, and then you pay per survey responded, and you could basically present the product as it is today and ask if they’d be interested in a Cloud version and try to do some market research that way. So, that’s the most data-driven way that I can think of and probably where I’d start to at least start getting some insight into whether or not this is a good move for you.
Mike [00:10:24]: Yeah, I’d have to agree with you that going back to your existing customers and asking them whether or not that’s something that they’d be interested in is probably a better bet, especially if you’ve been full-time and this has been the major source of income for the business for the past six years. The downside, I think, to doing that is that you have probably attracted a certain number of customers, or a certain type of customer because of the fact that it’s one-time, downloadable purchase and they can just buy it once, install it. Then they don’t have to worry about it ever again. There’s a certain profile of person you’ve probably attracted because of that, so I think that the data is probably going to give you at least some mixed messages there, because a lot of the people who fit that particular profile are not going to want to pay for a subscription service – not unless you can come up with solid justifications for what your service is going to allow them to do. Obviously, those are things that you’re going to have to work with those people to figure out what is it that they actually want and what would the Cloud service really do for them.
[00:11:18] One thing that I can think of off the top of my head is to be able to stream their music to any of their devices from anywhere; but then, of course, you’re going to rely on being able to take their own music and then replay it back to them through the Cloud, or through a streaming service of some kind that you would have to offer on the backend. I would imagine that all that’s possible. It’s just a question of whether or not the people actually want that and whether or not the existing services through Pandora, or Amazon, or any of the other ones already overlap enough with what you’re doing to be able to replace it and serve as a solid competitor; because they’re going to be heavily funded and already have access to a large market of people, but those types of people are probably not the same ones that are in your market.
Rob [00:12:00]: The nice part is that there are so many B-to-C services that are paving the way for you. As we know, B-to-C tends to be a tougher market, because you’re going to have lower price points, higher support, just a lot of things that aren’t as ideal with B-to-B market; but Apple, with iCloud and with iTunes Match and the Spotify subscription stuff; people are used to Netflix and Hulu. There’re just so many more subscription services than there were even two or three years ago, and consumers are getting more used to paying for these. I do think there’s at least some precedent for you to ride on the coattails as folks are getting used to more of these subscription pricing structures.
Mike [00:12:40]: So, Dan, hopefully that helps answer your question.
Our next question comes from Zachary Kesson. He says, “Hi, guys. I’m starting up a SaaS product and having a problem. I don’t have any traffic. My best day, I had 31 visitors to my blog, but they stayed an average of seven seconds each. It seems that all the sales advice I hear for SaaS founders assumes that the founder has a mailing list, and I don’t have one; and without some traffic to my webpage, I don’t see myself creating on in a realistic timeframe. At this rate, I should have a 5,000-person mailing list by September 2031, or something like that. I’ve put links in Reddit, tweeted them, put them in LinkedIn, but nothing seems to generate more than two to four clicks. Paid advertising is outside of my budget right now. What would you suggest? Zach.”
Rob [00:13:16]: This is saying, “How do I market a SaaS app with no audience?” The answer is you don’t want to. You want to have had a landing page up since you had the initial idea and to have at least been talking about it for a longer period of time so that you get some interest. Even an email list of 50 people is incredibly powerful at this stage. You don’t need 5,000, because having 50 people will allow you to get feedback and to do some type of customer research and figure out who wants to use it and for what, and talk to them about value propositions. That is much more valuable. I think that the fact, Zach, that you haven’t done that yet really puts you in a tougher position; because now you have to start from a dead-cold stop, and you’re saying paid advertising is outside your budget right now.
[00:14:11] AdWords is obviously very expensive, so you’re not going to do that, but you can get super-cheap clicks on something like You Tube; or, in Facebook you can get 10- and 20-cent clicks if you’re doing targeting. So, I would instantly put the Facebook retargeting pixel on your site even with 500 visitors per month. You said your biggest day was 31 visitors in a day, so if you do the math and it’s 900; and I’m assuming, since that was your biggest day, you don’t get that many every day. Even with 500 uniques a month, you can start some retargeting. I would also put an email capture widget on your blog. You’re not trying to build a massive list to market to, but you’re just trying to get some human beings that you can talk one-on-one with. You could test that versus, like, a Koalaroo survey box, or one of those other types of things. You’re trying to get information why are people leaving after seven seconds, because you have a problem if they’re leaving after seven seconds. Either your current traffic sources are garbage, or you’re not a fit for what people expect when they come to the site.
[00:15:08] You’re not going to get [out of this?] with split testing. This has to be a one-on-one effort, because you’re so early in the game. The fact that you don’t have a mailing list – and, again, even a mailing list of 50 or 100 – it puts you behind the eight ball. You have a product now, and it’s not going to market itself. You’re going to have to hustle. These days, you’re going to have to do everything under the sun that doesn’t scale just to get people using this app. So, putting a link on Reddit or tweeting it when you have 100 or 200 followers – that isn’t going to cut it. There’s too many people doing this these days to really be able to just do it with this kind of cold, random traffic. So, I would try to do a lot of one-one-one stuff to figure out who’s coming, why, what they expect, why they’re leaving quickly. That average number of seven seconds per visit is worthless. You don’t care about that, because a bunch of people are leaving after one second, and then some people are leaving after hundreds of seconds, and you want to focus on the people who are staying for those minutes. So, figure out how to differentiate those, whether you use Mixpanel, or whether you use Kissmetrics, or whatever it is you use – free trial of Crazy Egg, or Inspectlet. These are things that can show you what people are doing on your site, but don’t rely on the tools to do it. You’re going to have to dig in and do a lot of one-one-one stuff.
[00:16:17] The last thing I would say is if you have an idea of who should be buying your software, figure out where are they; because being on Reddit and Twitter is too generic. Using your tool relates to other CRMs, it looks like, so I’m assuming you integrate with something like maybe Salesforce, or Closeout iO, or [Bay?] CRM, or whatever. So, how do you get into those integration repositories? How do you get those guys to co-promote? You promote on your end when you finish integrating, and they co-promote to their audience via a blogpost. That’s integration marketing. Ruben Gomez was the first person I ever saw do it, and then I coined this term “integration marketing” and talked about it at a MicroConf talk a few years ago. It’s to get marketing done via these integrations, and in order to do that you have to hustle. It’s not going do it on its own. You need to communicate with them and convince them. You have to have some type of blog at that point if they’re going to blog about it, because you have to have something to offer them. They’re not going to email their list if you don’t email yours. Since you don’t have that, you don’t have that asset. An asset doesn’t build itself overnight. This is stuff that you need to be thinking about well in advance of when you need it. If you haven’t to date, then today is the day to start building that. It’s going to take you longer than if you’d gone about it in the correct order, or in a more optimal order; but you can’t really look back at this point. I think you’ve just got to get started building these assets as of today.
Mike [00:17:39]: I went over and took a look at his site. It’s yourcrm.link. It looks to me like the product itself is aimed at SaaS businesses who want to connect with CRMs, and that was just my initial idea of what the product does based on what I read there. If that’s the case, what I would probably do is move much more towards an [out?]-[?] model where you’re directly contacting those people that you think are going to be a good fit. So, sit down and make a list of the 25 companies that you think would be a good fit for using your product and then contact them. You just go through the list and talk to every, single one of them just to get a yes or no as to whether or not they’ll talk to you and see if it actually is a good fit. It sounds to me like if you’re not getting targeted traffic to your website, then you’re not posting things in the right places. If you don’t know what that target is going to look like, then it’s going to be very difficult to figure out where you should even post it. Is Twitter a good place to be posting those? I don’t know. It really depends on what the people who are interested in your product have to say and where they actually hang out. I can’t answer that, but I think that you should be able to after you have some of those conversations, and I think that’s the bottom line at this point. Because you haven’t had those conversations, it’s very difficult to figure out where you should be marketing your product to and who is an ideal customer for it.
Rob [00:18:55]: Yeah, that’s actually a really good answer. I think I may have liked your answer better than mine, because yours really is doing the one-on-one work and the outreach. It’s just a matter of getting in these one-on-one conversations and figuring out who can use it and why would they. His price point starts – I hadn’t even noticed that part, because I didn’t scroll down to the bottom. His price point starts at $149 a month and goes up from there. It’s like $149, $499 and up, so there’s definitely enough room to do some medium-touch sales and some high-touch stuff. I think that’s a really good start. The other stuff I talked about is probably as you want to drive more traffic down the line. I think these one-one-conversations are more critical up front.
Mike [00:19:34]: Yeah, and I think your point about not worrying about trying to do any sort of split testing or anything like that is also valid because of the fact that you just aren’t going to have enough traffic to be able to do that. It’s those one-on-one conversations that are going to be the single most valuable thing to you at this point. What I would probably recommend is visualizing what your sales funnel is going to look like just from a conceptual standpoint. You don’t have to be exact, but you could just set it up as a simple three-, or four-, or five-stage sales funnel where you say, “These are the 25 people that I would like to see as customers,” and they’re at stage 1. You haven’t even actually reached out to them. Then stage 2, you’ve reached out them. Stage 3, you’ve had a conversation or scheduled a meeting. Step 4, you’ve had the meeting; and then Step 5 is whether they are actually going to trial the service or sign up for it. At that point, if they pay for it, or they’ve decided that they’re going to evaluate paying for it, then they drop off that particular sales funnel right there; and then they maybe enter into another one.
[00:20:31] Those are the basic steps that you should probably go through. If you’re just doing things quick and dirty because you don’t have any of this traffic or any stats, just set up a Google doc or something like that, or a series of them. Every, single conversation that you have, you put that conversation into the Google doc. If you have a second conversation with somebody, maybe because they’re further down on your sales pipeline, you add that conversation into that Google doc. That way, you end up with a series of four or five different Google docs that are in line with what your sales funnel looks like, and you can always go back and you can refer to all the conversations that you had at stage 1 of your sales funnel, then at stage 2 and stage 3. It lets you look back at those down the road to see if there are any conversations that had a lot of overlap, or a lot of questions that specifically came up at a certain stage of your sales funnel. Then you can take that stuff and translate it back onto your website to help gather trust and answer questions for people that you are not directly talking to. So, that’s essentially the customer development process that I would go through for this.
Rob [00:21:30]: And if you need software to help you do that cold outreach, I would look at Bluetick.iO.
Mike [00:21:36]: [Laugh] Ah, yes, thank you for the plug there. So, Zach, hopefully that helps you out.
Our next question comes in from Corey Moss, and Corey’s been a long-time listener of the show. Corey left a message on our voicemail number, so we’ll play that for you now.
Corey [00:21:47]: Hey, guys. This is Corey Moss. Over the last year, I’ve stepped back from SaaS apps to concentrate on my Kanban board plugin for WordPress. You can check it out and the paid add-ons at kanban nwp.com. In the SaaS world, the holy grail is monthly recurring revenue, but in the WordPress ecosystem, most licenses are annual, and most don’t even auto-renew, if you can believe it. I want to apply SaaS best practices, but I’m nervous about doing things too differently from how people expect it. Mike, have you run into this in dealing with enterprise? Have either of you had experience with this disrupting the status quo when it comes to monetizing patterns? Thanks.
Mike [00:22:25]: Corey, if I understand you correctly, you’re essentially asking how to disrupt the current payment that a market is used to in standard practice today. So, your question to me specifically was did I run into that sort of thing in the enterprise market. Yes, I did. It was very difficult to get them to change their ways and, looking back on it, it was probably foolish of me to even try, and I would not recommend that somebody else try to do that. So, if you’re going after the WordPress space and you’re trying to convince them to pay for a subscription to something that they’re used to paying for once as a downloadable product, and potentially a yearly maintenance fee or something like that after that, I would be very hesitant to say that you should try and modify that model in such a way that they are not comfortable with or they’re not used to.
[00:23:10] I’ve talked to other people who are in the WordPress space, and they said that selling subscriptions in WordPress is a very difficult way to go, because people are just not used to it, so they don’t do it. I think Rob had one of his yearly predictions that this is going to change in the future, but I think that there’s also going to be a huge subsection of the market that is not willing to change, and it’s going to be years before they are convinced that that’s the only way to go because they are forced to do that. Even if you look at today, it’s 2016, and there is still a ton of downloadable software that’s sold out there. What we tend to see is mostly the recurring revenue, but there are huge number of downloadable products that are still available for sale; and people still buy them every, single day because they only have to pay for them once. I think that you’re probably going to run up against that roadblock in the WordPress space for several years to come. If I had to put a number on it, I’d probably say between five and ten. So, I would not bank on trying to do that overnight, and I almost certainly wouldn’t even recommend going in that direction if you can help it. I would probably double down on trying to figure out what people are willing to pay more for and try to increase your lifetime value that way as opposed to trying to change the way that they fundamentally buy their software.
Rob [00:24:19]: I know that there are some knowledgeable WordPress folks who are trying to attack this problem, and they haven’t really been able to break through yet. I don’t know of any WordPress plugins that don’t rely on an external service that are able to pull off a monthly pricing tier, because if you do have an external service – let’s say it’s backup to a Cloud server, and you’re maintaining the Cloud server, or it’s some other thing like – I think Jetpack doesn’t have external stuff that WordPress runs. They’d be able to charge a monthly fee. But in terms of just doing it for the sake of doing it and not having a strong justification? I agree with Mike. I think it’s going to be an uphill battle.
[00:24:53] I think the other thing to think about is, while monthly subscription is the holy grail of SaaS, that’s also its biggest drawback. It takes you years to get through the “long, slow SaaS ramp of death” – right? It’s just years of toiling away to build up any type of monthly, recurring revenue. The nice part about WordPress plugins is you can charge more up front. You do get a one-time fee. Let’s say you’re charging 49 bucks for the annual license, which a lot of people are doing. I think auto-renewing with advance notice – let’s say a five-day, or a three-day, or even a week notice before you auto-renew should be perfectly acceptable. I do know that some folks are moving in that direction. I think the more savvy WordPress business folks are doing that, and I would as well. The nice part is that, since most of the traffic that you generate will come from these recurring sources like a Google, or a WordPress.org plugin repo, you can ramp up your revenue to a couple grand a month really quickly; whereas SaaS is just going to take forever to get there. While SaaS will grow over time, I’m not so sure that’s what you want at this point. I personally would be going for that early revenue. Let’s try to get to between 2 and 5 grand a month as quickly as possible, and then you can start thinking about either adding add-on services that could potentially become subscription; or, using that money to stair-step your way up with either a second plugin, buying out all your time and then thinking about something long-term that is more of a monthly subscription model. Whether that’s in the WordPress space, or you just go straight for SaaS, that’s something to think about.
[00:26:21] But I am not bullish on the fact that, as a relative newcomer to the space, that you’re going to be able to come in and just charge monthly without a major justification; because so many WordPress users, the reason they’re using it is because it’s cheap and because there aren’t subscription fees. A lot of consultants use it because they know that their clients don’t want to pay subscription fees for things. They don’t want to pay for Shopify or Squarespace. So, if you come in and want to charge this 9 bucks a month or whatever it is that you could get for it, it’s going to be a deal breaker for a lot of folks.
So, that’s my advice as of now, the middle of 2016 here. I do believe that over time this will change. I think most things are going to move toward subscription. We see it happening in B-to-C entertainment, which was unfathomable a few years ago to think that millions of people would be paying for Spotify, for essentially music subscriptions; and even 15 years ago, to think that tens of millions of people would be paying for Netflix, for movies by subscription; but it’s happening. Do you think that WordPress will eventually go? I think it’s years out, and I think you’re ahead of the curve.
[00:27:22] So, my prediction Mike called out. As we’re talking through it, I’m realizing there’s just no chance that’s going to happen in this year. I think what my prediction was was that one person would figure it out pretty well; and that, of course, remains to be seen. I guess we’ve got another six months.
Mike [00:27:35]: I’ve seen one company that has done this, which I think they’ve done pretty effectively, Optin Monster. They have a little widget that you can install on your website, and they do charge a subscription fee for it, but they also have – as you pointed out, unless you have some sort of external service that integrates with, like for WordPress backups, or security checking, or things like that, where it needs that external service in order to function, and that external service needs to be up and running at all times, maintained and everything else. Optin Monster can do that because, one, the types of things that they integrate with are types of services that you’re going to pay for. So, it really sits on the front of that funnel and is aimed at those people who are used to paying for those things.
[00:28:16] The other thing is that I think they charge $50 or $100 per year, and it is that subscription fee; but they also keep the widgets up-to-date. So, if there are changes made in MailChimp, or Drip, or Aweber, or whoever, they will update the plugin so that when it comes down to your site, it is all up-to-date and you don’t have to worry about keeping your own plugins up-to-date. So, there are some advantages there, but they also made that switchover after they hit, like, 200, 300,000 customers or something like that. They’re not going from ground zero and trying to build a SaaS pricing model out of it. They already had a pretty substantial user base before they made that change.
So, Corey, hopefully that helps answer your question.
[00:28:54] Our last question for the day comes from Brian Kenry, and he says, “Hi, guys. Love the show, and it’s been a big help in getting my startup off the ground. I’m building a platform that will be monetized by generating leads and selling them to a private agency. I’ve assumed that I will partner with one agency and turn over leads at a cost per lead, but I’m wondering if I should consider a different dynamic. I realize this is a vague question, but is there any benefit to pursuing a subscription model or a marketplace for leads? It seems like a cost per lead is the most logical way to approach this, but I want to make sure I’ve considered all avenues. As always, thanks for your input.”
Rob [00:29:21]: I think I would stick with cost per lead, because that’s the most granular, and it’s the easiest to understand both from your and your customer’s perspective. Your costs are going to be variable, but you’ll be able to lock them down below a certain amount and then know what your margin is.
One thing I would consider is having customers – they could pay on a subscription basis so that they pay in advance. Here’s what I’m thinking. Instead of delivering a bunch of leads to them and having them pay at the end of the month or something, you really want to get that payment at the start of the month, knowing that you’re going to deliver those leads over time during the month. So, you could think about having tiers of, like, “Do you want 100 leads? Then it’s 1,000 bucks,” or whatever. If you want 200 leads, then it’s either $2,000, or you can give them some type of discount. Do $1,800 or something a month. The nice part about that is you don’t have to chase after them for money. They can either sign up for the PayPal subscription, or through Stripe, or whatever; and you’re automatically billing them, and you’re getting paid in advance. If their payment doesn’t go through, then you don’t deliver the leads. You’re not out the money. I think that is beneficial for you from a business perspective, and it’s going to save you time. That still works out to a cost per lead, but they’re basically committing up front to buying a certain amount of leads, and you’re getting that payment up front.
[00:30:34] Those are my thoughts off the top of my head. I can’t think of any way to get more complex without just making things hard to understand, and I know in the lead industry things are typically sold per lead. Do you have any other thoughts on it, Mike?
Mike [00:30:46]: I have a few that go into different places on this. As you said, the one that’s easiest to understand is just selling them directly cost per lead. The problem there is that you don’t know how much time and effort it’s going to take you to do the work to get a lead. As you said, if you do it enough, you’re going to able to figure that out and you’re going to be able to do some averages there and then tell people, “Yeah, I can get you X number of leads for Y dollars.” Then eventually, they’ll be able to make that mathematical calculation in their head or just look at it and say, “Yeah, that totally makes sense for us to do that.”
The other thing that I can think of that might be an option is to have them pay you for a specific service based on a flat fee. Whether it gives them results or not is a risk that you’re pushing on them. I don’t like this idea nearly as much because of that very thing, but you could say, “For $500 a month, we’re going to do X, Y and Z for you. We’ll reach out to X number of people with your emails, or with your script,” from whatever the call is, whether you’re doing cold calling or cold emailing. You can do something like that and put together different packages.
[00:31:51] I do agree that you should probably charge people up front so that you have the capital on hand to go do that, so that you’re not paying for or funding it up front only to have somebody cancel later on, and then essentially eat the costs associated with that. I’d definitely collect the money up front. Those are the things that come to mind for me. The real big there, I think, is who is assuming the risk for doing this. I think that you probably want to assume as little of the risk as possible, but I also think that you probably don’t want to go down the road of saying, “We’re going to do X amount of work for you,” but then basically push all of the risk onto them if it doesn’t deliver; because it could reflect very poorly on you if you go through a month, or two months, or something like that and, for whatever reason, you’re just not getting the results that you used to. I think that you’re better off evening those out for the customer and letting them look at the raw numbers and say, “Yeah, we expect to pay $10 a lead, and that’s what we’ll get.”
Well, Brian, I hope that answers your question.
Rob [00:32:45]: And that wraps up our episode 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 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 291 | Freemium, Asking for CC Up-front, and a Big Mistake First-time Founders Make (with Guest David Cancel)
Show Notes
In this episode of Startups For The Rest Of Us, Rob interviews David Cancel, of Drift, about whether or not to use freemium, innovating versus inventing, and the topic of asking for credit cards upfront. David also shares some upcoming topics that will be covered on future episodes of his podcast.
Items mentioned in this episode:
Episode 290 | Public Speaking as a Sales Channel with Rachel Andrew
Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Rachel Andrew about public speaking as a sales channel. They discuss the advantages and disadvantages and challenges you will face as a public speaker. Rachel also shares some of her processes and success stories of overcoming public speaking anxiety.
Items mentioned in this episode:
- Double Your Freelancing Conference Europe
- Double Your Freelancing Conference–Discount Code
- Perch
- Rachel’s Website
Transcript
Mike [0:00:00.1]: In this episode of “Startups For the Rest of Us,” I’m going to be talking to Rachel Andrew about public speaking as a sales channel. This is “Startups For the Rest of Us,” episode 290.
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.
Rachel [0:00:26.0]: And I’m Rachel.
Mike [0:00:26.9]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Rachel?
Rachel [0:00:30.9]: I’m good. I’m back in the UK at the moment. I flew in from Boston last night, so I have no idea what time it is.
Mike [0:00:38.7]: Oh, that’s okay. I know that I caught you at a bad time, right between conferences. You just got back from one, and you’re headed out to another one tomorrow, right?
Rachel [0:00:45.3]: Yeah, I’m always in between conferences. That’s a permanent state, as you’ll discover.
Mike [0:00:49.9]: Got you. Well, speaking of conferences, I do have an announcement. Brennan Dunn is running the Double Your Freelancing conference over in Stockholm this year. And that’s next month. If you’re interested in that it’s a four-day event that is for freelancers and consultants. And it is aimed at helping them to grow their business, and essentially land more customers, make it more profitable, etc. We do have a ten percent off discount code that you can enter. Discount code is “Startups.” But we’ll link it up in the show notes with a direct link over to that. Again, this is primarily aimed at freelancers, so if you do have that type of business, or you’re a consultant, that might be a good option for you to help grow your business. But with that out of the way, Rachel, I wanted to give you a little bit of a brief intro and talk a little bit about your background; what you’re doing. You’ve been a main stage speaker at MicroConf Europe for the past couple of years. You are running a product called Perch, which you can find at grabaperch.com. It’s a CMS that is built for Web developers. You launched it back in 2009, and you work on it full-time right now. So with that background at play, I guess, expand on that a little bit, and tell the listeners who you are and what you’ve been up to.
Rachel [0:01:52.0]: So I’ve been a Web developer for a very long time; since sort of ’97. And I’ve been running my own company since 2001. And so we have Perch. My background was working really—we do consultancy and we built things for people. I eventually launched Perch, which was a sort of self-funded product; counter management system. And that’s sort of the main job really. That’s what I do, is I work on Perch; write documentation; do support for Perch. And as well as that, I do an awful lot of speaking. And much of that really came from the things as I do as, kind of, a weird sort of hobby. I’m involved with [Ready Open?] Web standards and CSS, and I’ve always been involved with that really, for as long as I’ve been a developer. So a lot of the stuff I do outside of Perch is regarding [Ready Open?] Web standards and things like that, and talking to people about that, and writing.
Mike [0:02:41.5]: I guess for a little bit more background on that, you said you do a lot of public speaking. How many speaking engagements do you do a year?
Rachel [0:02:49.4]: I think last year I did about 27 presentations, and sort of three or four full-day workshops.
Mike [0:02:56.6]: Okay. Now how big are these different presentations that you do? Are they 10, 20, 30 people? Are they more like 100, 200, 500?
Rachel [0:03:03.7]: Usually in the 100s. I also speak at meetups and things, and often what I’ll do when I’m traveling, if I’m asked sort of a bigger event that’s flown me in, I’ll then go and speak at some smaller things that are around as well. They wouldn’t be able to afford to fly in at international speaker, for instance. So typically the things that I’m speaking at are quite large events. But I’ll also do meetups, especially locally or whatever.
Mike [0:03:26.4]: Now when you’re giving these talks what is the general subject matter? I guess, how are you presenting things to the audience? What topics are they? I know you said that you are involved in Web standards. Is that the kind of stuff? Is it more technical? Is it more marketing?
Rachel [0:03:38.8]: A lot of the time. At the moment I’m speaking a lot about some very new CSS specifications that I’ve been involved with. So I’ll talk about those. So a lot of those kind of talks are really just training, essentially. It will be an instruction to a new spec, and how all that works. I often talk about business, as you know. When I came to MicroConf Europe I was talking about our experience launching Perch. So I do a fair bit of speaking about that. So it’s never directly sales related, in terms of our product, but I tend to be speaking to audiences who’d be interested in the product.
Mike [0:04:11.3]: So it’s mostly, I would say, technical presentations, if I’m understanding you correctly.
Rachel [0:04:14.9]: Yes, generally.
Mike [0:04:16.0]: Now, you said that the audience themselves, because you’re talking about this technical stuff and it kind of relates back to your business because you do have a product that is aimed at Web developers, what sort of impact have you seen from the speaking side of things on the product sales?
Rachel [0:04:31.9]: All right. It’s really, really difficult to know. The speaking kind of works on different levels. We’ve been doing Perch for about seven years, so we’ve got lots of customers. We’ve got customers worldwide. So one of the things that the speaking enables is for me to actually meet those customers. And it’s pretty normal that I’ll speak at an event and then afterwards I’ll get a bunch of people talking to me about what I spoke about. But also a bunch of people who are Perch customers. They’ll come up to me and they’ll be saying, “Oh, we use Perch, and we’ve got this feature request,” or, “Here’s a project that we’ve just used it for.” So that’s a real positive thing, and something I can see an impact from, because it means I can actually speak to our customers face-to-face, and I wouldn’t otherwise. But in terms of sales, I mean, we do get a sort of fairly steady stream of people who’ve, for instance, they’ve signed up for our online demo, and they quote, “Oh, I saw Rachel at XYZ conference.” So, it’s very difficult to actually measure the impact of this stuff.
Mike [0:05:25.7]: People that I’ve spoken with, that whole concept of attribution is somewhat difficult to directly assign, especially when you’re talking about conferences and just general awareness and visibility. But at the same time, if they hadn’t seen you would they have even sought out the product, or would they have even known about it?
Rachel [0:05:42.8]: I think there’s that, and there’s also the fact that in an industry where people need to have confidence that someone who’s creating a product like Perch, that people use Perch to do all of the projects that their business does for clients. So it’s quite a big thing to start using; to use a different CMS. And quite a lot of people have moved off, for instance, WordPress. So you’re jumping from one platform to another, and you want to know that the people behind it know what they’re talking about. So the fact that I’m there on the stage of a large industry event and seem to know what I’m talking about, I hope that then reflects positively on the product.
Mike [0:06:17.9]: Yeah. It lends credibility and trust, not just to you, but by virtue of you being the developer behind the product, it lends trust and credibility to the product. It just kind of transfers to that.
Rachel [0:06:28.0]: Yes, absolutely. And this is what developer relations people, for all sorts of products, do. A lot of the conferences I go to there’ll be quite a few people on the bill who’ve been sent there by their company. They’ll be speaking not really in a sales way, but they might be speaking about something interesting they’ve learned while developing the product. But that’s exactly why they’re there, is that reflects well on the product itself.
Mike [0:06:49.0]: So I guess you said that you did 27 speaking engagements last year. Let’s take a step back and go back in time a little bit. When was it that you first started speaking, and how did you go about finding the first speaking engagement that you ended up with?
Rachel [0:07:01.6]: It’s only in the last few years I’ve done this much speaking. For a long time I’ve — been a writer since way back when; I don’t know 2000, 2001, I think, I first sort of actually had something published in a book. And I started to be asked at that point, “Will you speak?” And there were far fewer conferences then for web developers. And I was actually really terrified of public speaking, and just wouldn’t do it. There was absolutely no way I was going to do any public speaking. And I’m not quite sure where the change happened. I think I did a panel. I was on a panel at a conference about ten years ago, and that was okay, because I’ve never minded being asked questions. So I was doing this panel, and then sort of slowly I started doing smaller things. And there is video somewhere of me absolutely shaking in my boots trying to do like a ten minute talk with absolutely no confidence, sort of, hanging on to the lectern in case I fell over. And so it was not something that I immediately thought, “This is what I wanted to be doing.” And really the change came, because in the industry being able to speak became far more important if you wanted to get something across that you had to say. And when I first started writing was, kind of, everything. I needed to follow that change really.
Mike [0:08:15.1]: When was it when you started to realize that doing some of these public speaking engagements was a viable, or a good, sales channel for you? What was it that drew you to it? It sounds to me like you started out really, really gently into it, and then over time, obviously, it’s ramped up quite a bit. But was there a turning point, or an inflection point, or something that sticks out in your mind that kind of jumped out at you and said, “This is something that I really should be doing a lot more of.”
Rachel [0:08:39.7]: I think with Perch it was we were sort of couple of years into Perch by the time I started doing a lot more speaking. And partly that was because my daughter got older and I wasn’t needed to ferry her backwards and forwards to things. It was easier for me to be away for a while. But then I’d start to see those comments. You know, people signing up for the demo and saying, “I saw Rachel on stage.” and I just started to realize that this is a valuable thing to do. It’s something that I’m quite good at. By that point I was a lot more confident. It’s something that I enjoyed. I’m quite introverted, but I find that when I’ve gone out there and spoken on stage that gives people a reason to come and talk to me. I don’t have to start those conversations. And so it makes it a lot easier for me to chat to people and find out what they’re interested in, and what they’ve been doing with Perch if they’re customers. It’s a combination of things that really made me realize this is important. And also just the fact that being at these events I get to see what’s important in the industry, and what people care about, and that’s vital for the development of Perch.
Mike [0:09:38.3]: It’s interesting that you say that you’re an introvert, because most people when they think of public speakers they say, “I could never do that because I am an introvert, and I just do not want to be up on stage and I don’t want to be the center of attention.” And I kind of, am the same way – to be perfectly honest – but at the same time I feel the same way as you do, and I’ve talked to other people who also have encountered this. They’re introverts and they don’t mind being up on stage, because they are comfortable talking about the things that they know about. But then it gives other people excuses to come up to talk to them, so that they don’t have to go out and seek them while they’re at the conference.
Rachel [0:10:11.3]: Absolutely. If I attend a conference I’ll not speak to anyone. I’ll hide in the corner with my laptop. So, actually as a speaker then, I speak, and then afterwards I know people will come and talk to me, and that’s great. And I enjoy that. It’s, kind of, like I’ve started the conversation on stage, and then for the rest of the conference I’m able to continue that conversation individually with people.
Mike [0:10:32.4]: That makes a lot of sense. So over the years has it gotten easier for you to find speaking engagements? I would imagine that in the early days it might be very difficult, because you’re trying to get your first break, or you’re trying to get noticed by people who either run meetups or conferences or just many events. Have you found it easier to get more speaking engagements over time?
Rachel [0:10:52.7]: Yes. It definitely gets easier, because I think people see a talk that you’ve done somewhere and think, “Oh, I’d like to have that person come and speak at my event.” And so it naturally sort of builds on one on the other. I’ve found that, certainly in the early days, pretty much every speaking engagement I was directly asked to do was because of something I’d written. So I’d write a blog post somewhere that someone would be interested in, and they’d say, “This would make a great talk. Have you thought about making this into a talk?” So that tended to be where people would approach me from. But particularly in the early days I just applied for these call for papers. There were sites you can go and you can find which conferences have got open call for papers. And the good ones will tell you exactly what they offer; if they’ll cover you’re travel or if there’s a fee, all the information about it. And you can just put together a proposal for a talk you’d like to give and post it there, and see if it’s interesting. Initially that’s what I was doing a lot of. I do far less of that now because, to be honest, this year I’ve turned down more requests for me to go and speak than I’ve actually accepted, because there’s so many conferences and they’re all at the same time and there’s only one of me. As you do more of it you’ll get more people actually saying, “We want you to come and talk about this subject.” At the beginning you kind of have to put yourself out there and find things.
Mike [0:12:07.8]: You mentioned calls for papers. There’s a couple of links that you gave to me before we got on the podcast. So we’ll link those up in the show notes. But there’s the Weekly CFP, there’s Tinyletter.com, and then there’s Lanyard. There’s also other places that you’re aware of for resources. Can you talk a little bit about what the process is for those call to papers? How in depth are some of the proposals that you need to give? Is it something that you can put together in 15 to 20 minutes, or do you have to essentially build like your entire talk before you even get to the point where you’re making a proposal?
Rachel [0:12:37.2]: Most call for papers just want a sort of abstract. So, kind of, a couple of paragraphs explaining: what the talk is going to be about, what the attendees will learn from it, the level it is. Because obviously – particularly if it’s technical stuff – it could be for beginners, or it could be something really advanced. So it’s useful to outline that. You certainly don’t need to worry if you’ve got a beginner’s talk, because a lot of conferences want talks for beginners. People think, “I’ve got to be an amazing expert in my topic to be able to speak at the conference.” And that isn’t true at all. There’s lots and lots of conference that wants things that are for newcomers to the subject, because they’re the people who are being sent along to the conference. So usually it’s a couple of paragraphs. And absolutely you can write the abstract before you’ve written the talk, and most people do that. You think, “This would be a great fit for this conference.”, and if it gets accepted then you go and write the full talk.
Mike [0:13:28.5]: So when you go through the process, and you have gotten to the point where you are going to be speaking at a conference, what are the general logistics of speaking at some of these conferences? Are they paid engagements? Are they unpaid? Do you get compensated for travel only? How does some of that work, or does it vary greatly between one type of conference or event and another?
Rachel [0:13:48.5]: It does vary. It varies between industries and so on. I, as a person who’s self-employed, I’m not funded by a big employer, so I won’t go and speak anywhere unless my traveling expenses are covered. Unless it’s literally down the road and I can just walk down there, they need to cover my expenses. Typically, I’m paid these days. I think you have to balance that with how valuable something is for your business; how much you want to be at the conference. Because, obviously, if you’re getting your expenses paid and it’s a conference you really want to be at anyway, and you’re getting a ticket for it too, then you might be happy to speak for free in order to get that. That’s fine. But as you go along you tend to find that if you’re doing quite well as a speaker you’ll get more requests than you could ever do. And it kind of becomes part of your income. Which for me it now is. I mean, actually speaking at conferences and doing workshops is a reasonable chunk of my income. Just that’s how it’s turned out. It was never something I aimed to do. But obviously anytime I’m spending speaking I’m not actually working in the business so I have to balance the two.
Mike [0:14:50.1]: I was just about to ask that, because you do do a lot of speaking. So how is it that you’re able to balance that? Even if you’re getting paid to speak at a conference, you’re generally getting paid for going there and delivering your talk and some of the prep time for your talk beforehand. But at the same time, depending on where that conference is—like for me, if I were to fly out to Las Vegas it’s an entire day for me. I mean, it’s a six hour flight and then on the way back it’s going to be nine, because of the three hour time zone difference, plus an hour or two at the airport each time. It adds up. And for me, something like that’s an entire day. How is it that you’re able to balance this? Are you getting a fair amount of work done while you’re on the road, or in the air?
Rachel [0:15:29.9]: Yes. I work everywhere. I’m very able to do that, and I don’ think everybody is. My husband Drew, he really can’t work on planes, whereas as soon as that seatbelt light goes off I’ve got my laptop out and I will work for an eight hour flight. I will work from the minute that light goes off to the minute they’re telling you to put your laptop away in your bag. And I’ll get a ton of stuff done. I’m very organized. For flights, in most of the flights from the UK to the states, there’s no Wi-Fi. So you’re going to be offline. And so I just make sure that I’ve got absolutely everything I need for whatever bit of work it is that I’m intending to do, sort of, all ready. So I’m not being frustrated and thinking, “I can’t do this because I’m not online.” I get into hotel rooms. I set myself up. I’ve got a little stand for my laptop, and a separate keyboard, and trap pad, and I sort of get myself set up so I can actually sit down and do full day’s work in hotel rooms. And I do that all the time. You, kind of, need to have the work you can do like that. Obviously I can code or write documentation or do support very easily from a hotel room. And you need to be the sort of person who can work on the road, and I don’t think everybody is. That’s just a sort of personality type. But you do get better at it as you go along.
Mike [0:16:35.4]: Yeah. It gives new meaning to the word “road warrior.”
Rachel [0:16:37.6]: Yes.[laughter] You just have to be really organized if you want to be able to get a lot of stuff done. Which I am, just as a person. So that makes it, I think, a lot easier.
Mike [0:16:47.2]: What’s changed from when you first started speaking, to now, in terms of the preparation you have to do in advance of a talk? Are you reusing a lot of your previous talks, or is that very heavily dependent upon the speaking engagements that you accept?
Rachel [0:17:01.4]: Yes, it does depend. At the moment I’m speaking a lot about CSS specification now, being involved with CSS grid layout. So I’ve got hundreds and hundreds of slides and information, examples, and bits of code and things, around this subject now. So if someone says, “Can you come and talk about grid layout and performance, or something,” I can pull together the right set of slides. If they say, “We need a real instruction for absolute beginners, they’ve never heard of this before,” I can pull together a bunch of slides. So there is somethings that I can very quickly put what looks like a new talk together, but it’s essentially just repurposing things. And then there are events where I’m going to have to write something brand new, and that is going to reflect in whether I say yes or no. Because if I think “Yes, I could write this talk, and then I could use it for another event.” then that’s more useful than something completely unique.
Mike [0:17:53.0]: Now, one of the challenges that I’ve run into, in terms of putting together a talk, is the fact that you don’t realize it up front, but making your presentation look good actually matters to some extent. And you don’t realize how much effort and work that takes upfront. Are you reusing the basic template that you have every time? I mean, obviously the slides themselves and all the information on them will change, but do you have a template that you use from one talk to the next? Or one conference to the next?
Rachel [0:18:20.2]: I have a couple of things; I’ve got a keynote template that a designer friend of mine did for me when she redesigned my web site. A lady called Laura Kalbag. She made me a keynote template that matched my site, which I use for some things. And it’s got some really good slides in there for showing code. The other thing I use is an application called Deckset app, which is an application that creates slides from a markdown document. And it has a bunch of very nice themes that you can’t really modify. You just use one of their themes. For the sort of talk where I’m not showing code, and it’s just like a bunch of points and quotes and images and things, Deckset works really, really nicely. So you can just sit there and write your talk in markdown, and then it kind of makes it look cool, and it’s very easy to use. You don’t have a lot of customization, but, to be honest, I’m not a designer, so that’s quite good.
Mike [0:19:11.7]: Yeah. I’ve found there’s definitely resources out there where you can just go out and you can buy a template for PowerPoint or Keynote, or whatever. Then use that template. And sometimes they’re really difficult to modify after the fact, but if you find one that has enough page layouts, then you can usually make your talk fit into those. And even most of them will come with a black page so that that way you don’t have to worry as much about it.
Rachel [0:19:34.5]: I think it’s making them clear so people can sort of understand what you’re getting across without being distracted by awful clipart, or things like that. I speak at design conferences and I’m not a designer, so I always sit there and look at everybody else’s slides and think, “Oh, they’ve got these beautiful slides and mine are all code.” But I think a lot of it is just making them clear, and not objectionable to look at.
Mike [0:19:58.9]: Taking another step back, when we talk about going out and doing public speaking, and using that as something as a sales channel for your product, is this an approach that you think can work for anyone? Or are there significant challenges that people are going to need to overcome?
Rachel [0:20:12.8]: It depends on the industry that you’re in. I mean the web design and development scene has a big, big conference scene. There are masses and masses of conferences every week. And so that’s an opportunity. If you’ve got a product which is for those type of people, and you’re able to speak, you’re able to come up with interesting things that people in that audience are going to want to hear about, then that can be a great channel. But that’s not going to map to every industry that every product is aimed at. If they don’t have a big scene of conferences and so on, it’s going to be much harder to find places to speak about things that are related that then link back to your product. So I’m quite fortunate. But I can imagine that quite a lot of people listening to this podcast have things that are of interest to designers and developers and people who freelance in those kind of industries.
Mike [0:21:02.1]: That brings up a really good point, which is that if you’re looking at this as a potential sales channel for your product then make sure that there is a critical mass, so to speak, of these types of conferences, or events, that you can go to and speak at. Whether it’s either locally or regionally, or even across the country or around the world. Because if you can’t get enough speaking engagements then you’re probably going to spend a lore more time doing the preparation than it’s worth. Because I think in your position you’re doing so many of these speaking engagements, and you’ve amassed such a wealth of previous slides that you can reuse, that you’re probably in a position where to do another speaking engagement isn’t so much about building the presentation and doing the set up and the preparation for it, so much as it is getting there and still being productive while you’re getting there.
Rachel [0:21:51.2]: Mm-hmm. Yeah.
Mike [0:21:52.2]: So if you were to go back and do this over again, what advice would you have given yourself when you were first starting out and doing public speaking?
Rachel [0:21:59.4]: Just to get on and do it. I spent an awful lot of time being this person who was scared of doing this. And so every time I did any public speaking I would, kind of, lose three days before because I was so nervous. And then I would be stressed about it afterwards, like, “Did this go okay?”, or I was shaking, and, kind of, really overthinking the whole thing. And I do think to some extent you have to do it in order to get over that. But I think I’ve never really seen anyone, even the most nervous of people, go down that badly; nothing like as badly as you ever think you are. And so it’s really not to stress so much, because if you’ve got something useful for the audience then they’re really with you. They want you to succeed. They want you to get your information across. And generally, it’s an enjoyable experience presenting, once you can get past getting on stage for the first time. So I think I’d tell past Rachel not to worry so much about it and just get on with it. And the more you relax into it the more your personality starts to shine through, and you’re able to really hone your presentation skills as opposed to just trying not to fall over.
Mike [0:23:05.9]: Sure. even from the audience perspective, nobody wants a given speaker to go down in flames, because really what they’re there for is to learn and be educated about a particular topic. Nobody’s going to go to a session if they’re like, “I hope this person fails miserably, or falls off the stage and breaks something.” But at the same time there’s probably some major drawbacks or challenges that somebody might need to overcome. What types of things would somebody run into when they’re starting down this path of public speaking?
Rachel [0:23:31.0]: I think just the general logistics of it. Coping with the amount of travel, because there is a lot of travel. I’ve spent a lot of time traveling about, and making sure that that doesn’t then negatively affect the rest of your business. That’s quite difficult. And I think, as I mentioned, I’m very organized. And you do need to be to do that. I think a lot of people end up doing an awful lot of this and essentially just burn out. Because if you’re a good speaker you will get masses and masses of requests in certain industries. As I say, I’ve turned down more than I’ve taken on, and I’m doing a huge amount of speaking this year. So it’s very easy to end up essentially just burning out. And I see that quite a lot. You see people start speaking, they’re really great, they get loads of invites, and then suddenly they drop off the scene because they’ve just become exhausted. So I think a lot of it is learning how to manage this stuff, and to not get so excited that, “Oh yeah, people want me to speak.” that you make decisions that aren’t sensible, either financially or just for your own health.
Mike [0:24:27.0]: Or you just overcommit yourself. I can see a situation coming up where somebody doesn’t want to disappoint a particular conference organizer, and they say yes to a speaking engagement when they have something that was just the day before, or ending, and the schedules conflict a little bit, and then they show up late or they miss a flight or something like that. And it can really impact the conference coordinator’s schedules.
Rachel [0:24:49.6]: I’m really sort of obsessive about planning these things. And I’ll sometimes pay for an extra night in a hotel just to make sure that I don’t have connection problems with flights and so on. Because I’m really, really concerned about doing things that are last minute. But that’s very much my nature. I’m not a last minute sort of person. I think you have to take care of yourself like with everything. And it can be a really great way to promote your business. It can be a very nice life if you enjoy traveling, which I do. But you do have to also be sensible around it, and work out how to protect yourself when you’re doing this. Because these events come with a whole load of stuff. You know, speak at dinners, and people who want to go out for drinks every night, and all this stuff, and just all the time shifting with travel. So you have to take care of your own health as well.
Mike [0:25:36.9]: One of the things that I can imagine might be a little difficult is dealing with feedback, especially in the early days when you’re not really used to, or comfortable with, public speaking. Do you get a lot of feedback from people, either positive or negative when you’re speaking? And does that contrast differently between when you first started out?
Rachel [0:25:53.7]: Yes, you do get feedback. You get feedback in all sorts of ways. Often the events have an official route for feedback, so you might get PDFs of scanned handwritten forms that they’ve handed out, or they might just send you the votes and things. I really don’t like the sort of feedback where it’s like, “Did you like this presentation, yes or no?” Because you never quite know why they didn’t like it, if they didn’t like it. And if you’re presenting on a controversial topic you probably expect 50 percent of the audience to disagree with you. And then, well do they vote, “I didn’t like this presentation because I disagreed.” or because they thought you were a terrible presenter. You never know. If they’re going to do official feedback, I like it if it’s a bit more broken down into the different aspects of the talk, because then it becomes useful. You get people who come and want to tell you all sorts of strange things after you’ve spoken. It’s a well-known fact among female speakers particularly that there’s always a man racing up to you afterwards to tell you off about something which was totally not really to do with your presentation, but they feel they’ve got to have something to tell you. That happens after almost every talk. You get used to smiling and nodding at that. Feedback is often really useful. You hear from people who say, “That slide, it wasn’t very clear.” or, “I couldn’t quite see your code examples on this projector.” and you’re like, “Yeah. I need to shift the contrast of those.” So it’s always useful stuff.
Mike [0:27:14.7]: One of the issues that we’ve run into with MicroConf is creating a balance in our surveys to people after the conference. You addressed this a little, or talked about it, but when you’re asking about a speaker, one of the things we have in mind when we’re requesting the people rate the speakers, is their rating based on how applicable the talk was to their business, or was it their impression of the person on stage. And those are two extremely different issues, and having just one score for somebody can really screw that up.
Rachel [0:27:46.1]: Exactly. I think for other conference organizers, I think that’s the thing is breaking this stuff down. Because someone could be a fantastic speaker, but they’re speaking about a controversial issue. And then it looks like they’ve got a very low score because people disagreed with them, but it was important to voice that, for instance. So, as you say, the content might not be relevant to a good chunk of the audience, if it’s a single track conference. But that’s okay, because sometimes you’re going to have to sit through things that aren’t relevant to you. The next talk might be. So it’s useful to have them a bit more broken down, because I’ve got a fairly thick skin at this point, but if you just get what looks like a bad mark and you’ve got no way of ascertaining what that was about, well it’s not helpful. You might as well have not been given that.
Mike [0:28:26.4]: Right. I think that if you look at scores in aggregate across the spectrum – like let’s say you only asked for one number from the audience for a particular speaker – when you’re looking at the numbers – let’s say that there’s a 100 of them, a 100 ratings – you, kind of, have to not just look at what the average of those ratings is, but also the distribution of it. Because if you’re given a controversial talk, you’re going to end up with some that are much higher and then much lower, versus if they’re all clustered in a particular region. So if they’re all between four and six, for example, then it’s very different than if you got a bunch of twos and threes, and then you got a bunch of nines and tens.
Rachel [0:29:02.3]: Exactly. And I think as well, there are some speakers who are so good at just presenting, that they really could come and present the phone book and people would give them a high rating because they’re just talented presenters. I don’t think I’m that person. I’m a good trainer. I’m good at teaching stuff and making things clear to people, but I’m not the inspirational speaker type. And it’s those types people leave going, “Wow, that was a fantastic talk!” I hope that people leave going, “I learned something there.” And that’s really where I am with speaking. I’m trying to pass on information; stuff I’ve learned.
Mike [0:29:36.5]: Right. And that’s actually something else to talk a little bit about, which is making sure that you know what your goals are going into these. Because it’s one thing to accept a speaking engagement. It’s another to figure out what it is that you’re actually going to be getting out of it. Whether it’s just stage time, or getting in front of your customers, or even just being able to put yourself out there so that you can leverage that in the future.
Rachel [0:30:00.4]: Yeah. I think it’s worth thinking about why you’re doing it. Particularly if it’s taking time away from your business and your family. Why are you actually doing this particular event? And certainly as I get busier and I get more requests, I have to think, “Well it’d be really nice to go there.” because I do love travel and I think, “Oh, if I got an invite to somewhere I’ve not been before.” there’s always a little bit of me thinking, “That’d be nice, I can go there.” But I have to think, “Is this sensible for the business?” Because even though I’m good at working on the road, it’s obviously taking me out of the office. And it’s going to have some impact, going and doing that event.
Mike [0:30:30.7]: So, we’ve talked a little bit about some of the downsides, and what the different challenges are that you need to overcome. Why don’t we end this on what are the advantages to becoming a public speaker?
Rachel [0:30:40.5]: I think I’ve learned a lot more confidence, generally, by doing this. As I say, I was really nervous of speaking, and now I’m able to talk really to anyone about our product. I can present things a lot more clearly from doing this. Whereas before I was always very much into writing things, and not so much into actually being able to voice them, which I’m a lot better at now. I mean, there’s just personal things. As I say, I never got a chance to travel when I was younger. I had my daughter very young, so I didn’t have the time in my 20s or whatever where I went traveling and did that sort of stuff. On a personal level I enjoy seeing parts of the world. I enjoy meeting people from different cultures and finding out about how they work and how their lives are. So that’s a personal good thing. And, as I say, it helps me to learn what people in my industry are interested in at the moment. Because that is vital to the future development for Perch. We could build as many features as we like, but if they’re not what people are currently needing, who are building Web sites, then we’re not doing our job. As well as people finding out about what I do, I get to find out what they do. And that really is probably the biggest benefit.
Mike [0:31:50.4]: I can definitely say that if you’re sitting in your basement or in your living room coding all day and you don’t get out of the house, then long-term effects are probably not very beneficial. But it does get you, not just the opportunity, but an excuse to get out there and talk to other people who are either doing similar things, or are in your target customer audience. Or maybe you’re part of their audience as well. So it’s nice to be able to just have those conversations and learn about people and their different perspectives.
Rachel [0:32:17.4]: Absolutely. And it does give you a platform for things you care about. And there’s a whole bunch of stuff outside of Perch. As I mentioned, things like the web standards stuff that I’ve done. These are things that I really, really care about, and have done for a long time. And so the speaking has given me a platform to talk about some of the things to do with the Web that I think are very important, and that need people speaking about them. So that’s a real sort of benefit that I get a chance to push; a bit of an agenda that I have in terms of things on the Web that I care about. So that’s cool.
Mike [0:32:48.4]: Excellent. Well, I just wanted to say thank you very much for coming on the show. If people want to learn more about you, or maybe see where you’re speaking, where can people find you?
Rachel [0:32:56.1]: I’m Twitter @Rachelandrew where I’m normally complaining about airplanes or something else. My web site is Rachelandrew.co.uk. And Perch is at grabaperch.com. And you can also find me on Lanyard, which is where all my speaking stuff is. And on Rachelandrew.co.uk/presentations is a repository of all my past presentations and slide decks and things. So you can see the sort of stuff I’ve spoken on in the past.
Mike [0:33:21.0]: Very cool. We’ll link all those up in the show notes. You also have a book, I believe. Is that correct?
Rachel [0:33:25.2]: Yes, I’ve got a number of books. The one most relevant to this audience is The Profitable Side Project Handbook, which I wrote really about how we got Perch to market with no money and without any real idea about how to launch a product when we started.
Mike [0:33:38.8]: Well you’ll have to send me over the link for that and we’ll link that up in the show notes as well. But I just wanted to say thanks for your time and really appreciate you coming on the show.
Rachel [0:33:44.5]: Thanks. It’s been fun.
Mike [0:33:45.7]: Well, I think that about wraps us up. If you have a question for us you can call it into our voicemail number at 1-888-801-9690. Or 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 289 | A Short Guide to Online Presales for SaaS & Software
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike give you a short guide to online presales for SaaS and software. Some of the topics they dive into include inbound leads, sales funnels, lead qualification, and general sales process for buyers.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of “Startups for the Rest of Us,” Rob and I are going to be talking about how to do online pre-sales for SaaS and software. This is “Startups for the Rest of Us,” Episode 289.
Mike [00:17]: Welcome to “Startups for the Rest of Us,” the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products whether you’ve built your first product, or you’re just thinking about it. I’m Mike –
Rob [00:26]: And I’m Rob.
Mike [00:27]: – and we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
Rob [00:31]: Well, I want to apologize to our listeners that the episode that came out last Tuesday, published five hours late due to just a minor scheduling mix up. But we received quite a few tweets and several emails asking where the episode was. I think that’s a good sign – right –
Mike [00:49]: Yes.
Rob [00:49]: – a good problem to have that people notice when you’re a few hours late delivering?
Mike [00:52]: I think so. I would like to attribute it to the entire New England area going dark from Internet yesterday but I can’t say that that’s really the case.
Rob [00:59]: Right. It had nothing to do with it, but the timing is really good – right? We have something to blame it on.
Mike [01:03]: Right, yeah.
Rob [01:03]: Yeah, it was really a bummer. You said – was it a couple of states had a major shutdown?
Mike [01:07]: Yeah, apparently Level 3 Communications – somebody cut a fiber cable, and it took down the Internet throughout parts of – let’s see here. It was New York City, other parts of New York; and then there was Connecticut, Massachusetts and Rhode Island. It affected Time Warner Communications, Cox and Verizon. Somebody cut the wrong cable, I guess, so, “We just cut a cable.”
Rob [01:28]: So, were you tethering to your phone all day, then?
Mike [01:30]: Yeah, pretty much, which kind of sucks; because I was a little worried due to the fact that I had a demo to do yesterday morning. I was sitting there, tethered to my phone and running everything through that. I had Skype running. I had my sales demo running; and everything, amazingly, worked well enough that it didn’t really make a difference. But I did burn through, like, 500 MG worth of data in maybe an hour.
Rob [01:52]: Yeah, that’s a bummer, because it’s two-way, real-time video; so it can’t be compressed, probably, as much as other things. It’s audio, and that’s a lot of data. Are you going to up your data plan for the month?
Mike [02:01]: No. I don’t think I have to, actually. I’m on the minimal 5 GB plan for each month, and I actually have that shared between my wife and I; but I work from home, so I don’t really use it very much and just dropped my data plan because I didn’t really need all the extra bandwidth. Then, of course, the kids come home, and they’re like, “We want to watch Netflix.” I’m like, “No.”
Rob [02:20]: “Not a chance,” yeah. That’s funny.
Mike [02:22]: Nope.
Rob [02:22]: Hey, I have a book and a movie recommendation this week. I’ve been listening to a lot of nonfiction books that aren’t business-related, and there’s a book called “The Big Short,” by Michael Lewis, that I listened to a couple years ago when it first came out. I like pretty much everything Michael Lewis does, and I was blown away by this book when I had listened to it years ago. Then I heard they’re making a movie out of it, but I was thinking, “There’s no way they can pull off this movie,” because the book is so complex, and there’s so much to it. Although the book is better, they did an amazing job, and I think the movie’s probably going to be up for awards, if it hasn’t won them already. I don’t even know when the awards shows are. Apologies about that, but amazing writing and acting and all that stuff. So, if you have time, I’d say listen to the audio book or read the book, because it will blow you away. If you only have a couple hours, then watch the movie, but it’s about the financial crisis – essentially, the housing crisis in 2008 – and how the bankers caused it and a bunch of players. There were three-different players who predicted it and bet against it. It’s called “betting short” – right – “going short” on it. Just the characters in it are amazing. It’s probably my favorite film I’ve seen in the past maybe year and one of my favorite books during the past year as well.
Mike [03:27]: Interesting side note here: I actually know Michael Lewis personally.
Rob [03:30]: Is that right? Where do you know him from?
Mike [03:31]: I have to put a little caveat on here. It’s a different Michael Lewis, who is also a writer, and there’s a little confusion there.
Rob [03:36]: Oh, got it. Nice. You know a Michael Lewis.
Mike [03:39]: I know a Michael Lewis. It is not that particular Michael Lewis, but he does often get confused with that. Of course, he’s got the name and driver’s license to back it up, so he could pull it off if he really wanted to, but I don’t know how long it would last. [Laugh]
Rob [03:51]: “The Big Short” – read the book?
Mike [03:52]: I have not. I did see advertisements and stuff for the movie, but I haven’t checked it out yet. It does look good, though.
Rob [03:57]: Yeah. It’ll rock your world. How about you? What’s going on this week?
Mike [04:00]: Well, I hired somebody to do some manual testing on Blue Tick a couple weeks ago, and they’ve gone through and started sending over bug reports. Most of it’s little stuff, like, “This field right here doesn’t prevent you from putting in as much text as you want,” which is kind of nice, because that’s the advantage of having testers who their job is to go in and break things. At the same time, it’s creating a lot of work for you that I would say is lower in the priority list for most of it, and it doesn’t necessarily do anything specific for the app other than make it more stable in the long run. So, when somebody goes in and tries to do something funky like that, the app doesn’t break under what the person is doing.
Rob [04:41]: What’s your thought behind hiring this person rather than either doing it yourself, or having developers continue to do it? The reason I ask I know developers are not the best testers, and you need a certain personality type because a lot of developers will just crank it out and then push the code. At Drip, we are ten people. There’s a couple of part-timers in there, but we still don’t have a dedicated manual tester. We’ve been able to get by pretty well without it. I’m interested in hearing your thoughts on why you’re making that move early.
Mike [05:09]: Sure. I’ll call it more of a safety net than anything else, because there’s a bunch of different ways you can go about testing. The reason I hired somebody to do it was because going through that manual profess was just time-consuming, and there’re certain parts of the application that I haven’t been able to get to the point where we can automatically test them either using unit tests or integration tests or anything like that. It makes it very difficult to go through that, because it’s just so time-consuming. For example – just something little – I’ll give you a prime example. When I was first starting to onboard some people, we went through and I said, “I need you to go over to this page and register.” Well, we changed the back end route for the URL where you go to register; but it wasn’t something that we ever went in and tested again after making that change, because how often do you go in and actually register? We actually have code in there that just automatically sets up the account so that you don’t have to.
When I first went in to onboard somebody, I found out that that was broken, and because we didn’t have the unit test in place, or a manual tester who would go through and just perform some of the basic functionality, I ran into that. Fortunately, I was able to fix it on the fly; but, again, I want to make sure that as we’re pushing things into production, those types of things don’t come up, that are fundamental issues that would prevent it from working. You can do a lot of manual testing, but as I said, it’s time-consuming. So, what our basic process is now is we’re going through. We’re implementing unit tests and making sure that the back end of the application is functional. Then we push it into a staging area, and then in the staging area the person goes through, runs some basic spot checks to make sure that the app itself is still completely functional on the front end – or at least mostly functional – and letting them know, “We changed this,” or, “We fixed this thing over here. Can you double-check it?” Then they check it in the staging area. Assuming he signs off on it, then we take that from the staging area and move it into production.
That’s it more than anything else. I think it’s partially a result of the fact that we’re using Angular on the front end, so it’s a little bit more difficult to do unit tests on front end Angular code mainly because we just haven’t set it up to do that yet.
Rob [07:11]: Yeah, that’s tough. When you have that much code on the front end, you’re right. It’s a lot harder to unit test it. I also think that you’re essentially using contract labor, and so your developers may not be as committed to making sure all the I’s are dotted and the T’s are crossed as when it was Derek and I working – and he’s known us since a co-founder – hacking stuff out and has a very high standard for making sure stuff works before it ships. I think there’s perhaps a different motivation there, so you need maybe an extra check in place to avoid having things breaking on you.
Mike [07:39]: Right. Like I said, it’s partly a time commitment thing. I found that I was spending a heck of a lot of time. I’d send something over to somebody: “Hey, could you implement this,” or, “fix this?” They’d fix it, and it’d come back to me, and then I would have to spend additional time going through everything that I just did in order to make sure that not only did that thing work, but it didn’t break other things as well. And there were times where that happened very early on in the process. It doesn’t happen nearly as much at this point, but with that staging area in place, it makes things a lot easier. It cuts several hours a week of my time out of that process. The cost benefit is certainly there.
Rob [08:13]: What are we talking about today?
Mike [08:14]: Well, we got a listener question in from Guy Lewis, and he says, “Hi, Mike and Rob. I’m wondering if between you, you have a best practice for engaging with B-to-B clients who make sales inquiries via an online business. I have experience in pre-sales face-to-face, but translating this into an email dialogue doesn’t translate well for me. So, specifically, I want to understand typically how much should your pre-sales people who answer online inquiries be pushing early for trials, or just being more relaxed and answering client questions, leaving the clients to reply and come back when they’re ready to engage more. Thanks, Guy.”
Rob [08:42]: To clarify right off the bat, this is from the time someone first engages with you – maybe they sign up for an email list – all the way up until the point where probably they do a demo. So, this is all pre-sales and pre-demo that we’ll be talking about. Mostly, we’re going to focus on SaaS and software sales. It might apply to other industries, but obviously these are the things that you and I are most familiar with and qualified to talk about.
Mike [09:05]: Something else to point out is that I think that in most cases, this pre-sales process is probably not going to be as applicable to something like an info product or any sort of education or training material. I will put a little bit of a caveat on there that says that if you’re selling something that is high-price, that may not necessarily be the case. This could be applicable to those situations, because you are probably going to be much more involved in vetting those applicants or those people who are contacting you in order to identify whether or not your product is a good fit for them; because you clearly don’t want to sell a product to somebody who they simply can’t use it, or it’s not going to benefit them. At the same time, you are probably going to have to go through some sort of pre-qualification process to make sure that, if you’re selling, let’s say, a $5,000 training product, it is going to be a good fit for them and you’re not wasting your time trying to track them down to get them to come to the table and pull out their credit card.
Rob [09:58]: Right, and I’d say this also applies to even lower-priced SaaS apps and software products where at least you’re willing to answer questions and engage via email manually, one-on-one; or, you’re willing to do maybe a pre-qualification phone call or something like that. If you’re selling really no-touch signup and you don’t even want to answer individual questions if someone has some specifics about their setup or how you’re going to work, then this won’t apply; but I think almost every SaaS app that you’d be launching today probably should fall into this. Even if your price is 10 or 20 a month, you or a support person should be willing to do some manual pre-sales email back and forth. Even if you’re not ultimately looking for a demo as the end result maybe you’re just looking to encourage to go to trial. Having some back-and-forth via email and answering questions and encouraging down the steps of the funnel should still fit into the paradigm we’re talking about, all the way up to folks who – let’s say you’re selling for 100 a month. Then, for sure, you’re willing to go back and forth via email; probably jump on a qualifying call 10 to 15 minutes, and then ultimately move towards either a demo or a trial.
Mike [10:58]: The first step in this process is to look at your inbound leads as essentially a sales funnel and try to set it up as a decision-based workflow. Essentially, what that means is that when somebody comes into that sales funnel, you analyze where they’re coming in and decide what to do when they enter that point. If they come in through this web form, do this. If they come in because they replied to an email, then do this other thing over here. Or, if they went over and they viewed your trial page and then they viewed your pricing page and then sent you a support email, do something else. The idea here is that you really want to take a step back and look at your entire sales funnel leading up to the point where they sign in and go to a trial as a decision-based workflow of some kind, and you map out all those different decision points.
Rob [11:46]: Yeah, and to get really specific with this, in essence, once someone signs up for your email list – let’s presume that they’re either opting in to get an email mini course, or a PDF tools list just to keep things simple. When you first start out and you’re just building this funnel out, that’s all you’re going to have, and you’re going to want to educate and give them topics and content that they can use without signing up for your tool; but the whole time, you’re mentioning that your tool makes it a lot easier or faster for them to do it. It will save them time and potentially save them money, or make them money. Then you’re doing a soft sell during this time. Might have a P.S. that says, “Check out our trial.” Or, if you really do want to do demos, if that’s your main focus, then you could have a P.S. that says, “Hey, interested in learning more? Click this ca-[?] link at the bottom of this email and set up a qualifying call,” if you’re doing qualifying calls before your demos. The way to decide to do that, it depends. If you have a lot of people coming in and you really want to qualify them, you should do the qualifying call first. If you don’t yet have a ton of people in your funnel, you can go straight to demo and just qualify them in the first five minutes of the demo and then end the demo if they don’t qualify. There are some very specific questions you can ask people to help that.
Beyond that, as you expand this, you’re probably at some point going to do a webinar. You’re probably at some point going to be creating some free content, or even valuable content. At Drip, we have two eBooks now, one of which we sell; and we actually sell real copies of it through Gumroad, and then we have a video course that we sell. These are all things that can educate and are valuable and that do give your brand some legitimacy, I guess. So, throughout the funnel – as you expand it; you don’t have to do this from day one – we then start pitching, and we say, “We’re going to give you these free eBooks.” “We’re going to give you this free video training,” which is a recorded webinar we’ve done at some point. Each of these touchpoints is an excuse to then say at the end, “If you’re interested, click this button and do” either whatever you’re looking for. You’re looking for a qualifying call, or you’re looking for them to sign directly up for a trial, or you’re looking to encourage them for a demo, or you’re going to qualify them. That’s a couple more specific ideas and thoughts about how to structure this front end piece of the funnel.
Mike [13:45]: And much of the decisions that you make there are going to be based on volume. As Rob said, if you only have a couple of people that are coming into your sales funnel each week, then it’s a lot easier to push somebody towards a demo, regardless of the price point because you want to be able to get information from them, and you really need to be able to gather some of that feedback in order to use that information for future efforts and to redirect your attention towards doing different things for those people. But if you have a ton of people coming in, let’s say you have a hundred a day, then your strategies for dealing with 100 people are going to be very, very different than if you were only getting one per day.
Along with that, what you need to do is you need to take a look at your sales funnel and map out, either using paper or some sort of flowchart software, and get at least an idea or approximation of how many leads you’re getting in from different places and what the decision points are for the customers at those points. One of the things that – I’ve done this myself in the past where I’ve set up some sort of a sales funnel, and if I don’t map out the entire decision tree, it’s very easy to lose some of the decision making along the way for the customer. If a customer gets to a certain point at the end of a particular email sequence, or in the middle of an email sequence, if you don’t have those calls to action mapped out, or at least documented some place, it’s very easy to forget that you either didn’t have one, or that it leads to a certain place. Then the customer just kind of gets lost, because you’ve lost track of them at that point and you didn’t take the time or the opportunity to redirect them in a certain place. Even if you did, what happens if they don’t? What happens if they do not take that step that you wanted? Do you just drop them at that point? That’s something to be very careful, of because you don’t want to have a sales funnel where these people are just dropping out of it because you didn’t give them a call to action, or you didn’t take into account the fact that they may not have gone in the direction that you wanted them to or expected them to.
Rob [15:35]: Yeah, and in terms of mapping out your sales funnel – in the old days, I used to literally map it out on paper and then scan it in. This is five, six years ago. I also used Vizio for a while. I think these days, I’d probably – a lot of people are using Gliffy, but these days people have moved towards building it in the app you’re using. If you’re using the right tool – let’s say you’re using Drip. You can use the workflows or using Infusionsoft. You can use their Campaign Builder. You can really build out a sales funnel visually in the tool that you’re using, so you save yourself having to keep documentation, essentially; because your documentation is this actual funnel, and you can move people in and out and have it all in a nice, visual flow.
Mike [16:09]: Yeah, that’s extremely helpful. What I tend to start with is just graph paper, and I’ll work on things from there until I get to the point where I want to finalize it and then move it into the app. But you’re absolutely right. Having that visual workflow inside of an app is very helpful in terms of being able to redirect people through your sales funnel. Even if you’re not actually using the tool for those people – if you have a workflow that you’re trying to move people through, even if they’re not actually doing it inside of the tool, if you just want to tag them or something like that, that can still be very helpful for helping to determine where people are going. There’re similar things in other tools, such as Pipedrive, for example, where you can just people through a sales funnel. They’re not quite the same, but it is helpful to see it visually.
Rob [16:51]: We also have several workflows that are in draft that we use more as documentation than as actual production use. Someday they will be in production, but we use it as reference.
Mike [16:59]: The third step is to take a look at your price point and the complexity of your products in order to determine how to proceed for the business. If you have a high-price-point product, or it’s a complicated product, or if it integrates into a core part of the customer’s business, then taking people and trying to push them into a personalized sales demo is probably going to work out a lot better than sending them directly to a trial; because the communication medium for a phone call or a demo is much different than it is if you’re just trying to engage with somebody through email. If you send them an email, it’s very easy for those things to get lost, or for people to glance at it and not really take in some of the subtle nuances that you’re looking for them to understand. In any sort of business or product where it integrates highly into the business, it makes much more sense to try and get those people into a call of some kind so that you can have those conversations.
At this point, you really have to ask yourself what’s the best or most cost-effective way in order to move somebody towards making a purchase. Just keep in mind that I didn’t say “into making a purchase”; I said “towards it.” There’s a very key distinction there in that you want to move them along the path but you don’t necessarily want to force them. There’s a couple of different reasons for that. One is people don’t like feeling as if they’re being forced into buying a product, or feel like they’re being pushed; but at the same time, you also need to make sure that you’re giving people the information they need in order to make a good decision. And that good decision might be something that they can make immediately, but it might not be something that they’re comfortable with for a week, or three weeks, or even three months. It really depends on where they are in their buy-in process.
Rob [18:32]: At Drip, we used to encourage everyone to sign up for a trial, and then while they were in their trial we would try to contact them and help them get onboarded. We would do calls at that point, if needed. Then about – really, it was over a year ago now. We switched to where we have two different calls to action, and people can choose to either start a trial – because some people like self-serve. I actually prefer self-serve and to dig in and figure stuff out on my own, but a lot of people like to see demos. If you go to the Drip homepage, you’ll see at the bottom it says “Start a trial” or “Schedule a demo.” Then we have a whole funnel to submit yourself to schedule that demo. What we found is that, initially, like the first month, it was a hit to our trial count; because there were enough people that were hitting that demo button that weren’t clicking the trial button. But over time, the people who clicked the demo and actually showed up are way more qualified when they sign up; and once they get inside the app, they’re more educated, and they’re more likely to actually convert. So, it can be good to give folks a choice if you’re on the edge.
We’re email-marketing software, and some people are experts, and they just want to get in. They don’t want to be forced to go through a demo. There’re other funnels where you really need to go through a demo before you get in the app, because you’re just going to be lost, and your trials – they just aren’t going to convert by themselves. That’s what you were saying, Mike, when you were talking about if it’s an extremely complex product, or fits a high price point. There are certain things to it that you’re just going to need to educate. Even if your product’s not complex, but if it’s complex for the audience – like, if you have realtors who aren’t super good at, let’s say, project management or something; and you have a management tool for them, or a process management tool, you’re probably going to want to do demos with most of them; because a lot of them are not going to be technically oriented enough to just be able to get up and self-start. you’re going to have to make a judgment here as to whether you give people a choice, or you force them down one path or another.
This is part of optimizing your funnel. We talk a lot about getting to product-market fit, and product-market fit is when you get that product that everybody wants to buy, and people really will convert and stick around. The next step after that, or the thing you’re doing at the same time is you’re trying to figure out – it’s almost like sales process or sales funnel market fit where you’re trying to optimize that to reduce friction and to figure out what works the best for the people who are coming to you and for the leads who are coming to you. What is what most of them want? And then try to help guide them down that path, and that’s really what we’re discussing here – is the discovery of that and then the architecture of the funnel as they come through and start to become pre-qualified.
Mike [20:55]: Let’s talk a little bit about the general sales process for people who are making purchases. The key thing that you want to try and do here is to be able to identify where that prospect is in their buying process. This ties a little bit back into what Rob was just talking about where he was giving people the option to either take a look at a demo, or to start a trial immediately. There are a couple of different stages here. The first one is awareness. In the awareness stage, are they even aware that there is a particular problem they’re experiencing, or that there are other solutions that are available? The next step in this process is nurturing. Do they even know enough about the nuances of the problem and the solution that you offer? The third step is qualification. Are they a good prospect for you to start going after, or to even use your product at all? The fourth one is evaluation. Are they looking at the different options that are available and deciding where they are going to spend their time, either doing a demo or a trial – taking a look at those things and really deciding whether or not they’re going to not just move forward with a purchase, but taking a look at the different competitors and figuring out which one is the best for them? Then the last one is actually making a buying decision, which is purchasing.
Try and identify where the prospect is in their buying process. You can use what your inbound funnel looks like to some extent to help figure that out. If they come to you and they’ve started a trial, for example; or, they’ve come to a demo, you know that they’ve come to that demo and they are probably past the awareness stage. They’re probably past the nurturing stage. You don’t need to send them additional educational material. That said, depending on what their questions are, you may need to send them some more stuff. You may need to send them some more educational information, but those different touchpoints that you have with them are going to be key pieces to trying to figure out where they are in that buying process and then adjusting where they end up starting into your pre-sales funnel.
Rob [22:44]: Right. It’s easy to assume that when someone first signs up for your list that they’re in the awareness phase. That’s not always the case. You may have someone who already knows about your product. They already are comparing it to two or three other options. They have a short list. They’re a savvy buyer; and really they’re in the third phase, the qualification phase, already. This is where having not just some email marketing tool, but actually some type of nice marketing automation tool where someone can click a link and jump ahead, or they can opt to get quicker to qualification, or quicker to a demo, or quicker to trial is actually really, really helpful. In the traditional roles, marketing is the first three that you mentioned. Marketing is essentially awareness, it’s nurturing, and it starts qualification. Then sales tends to pick up at qualification and then helps with evaluation and purchase. So, again, depending on your price point and your complexity, when marketing hands off to sales, that first piece that sales needs to do is qualify them. They’ll be partially qualified through how they’ve interacted and how they’ve maybe filled out a form, or what you know about them; but at a certain point, you’re really going to have to dig in and start asking some actual questions in terms of who they are, what their usage is like, who they’re evaluating you against, etcetera.
Mike [23:53]: That said, let’s talk a little bit about the lead qualification process, because that’s really where the core of this particular episode is headed. You really need to be able to qualify those people in order to determine how it is best to treat them inside of your sales funnel.
There’s a couple of different things to lead qualification. I think the differentiation between two different types of qualification is that qualification can either be explicit or it can be implicit. It depends a lot on whether you need to speak with those people directly. How do they come into your sales funnel? Is it through an email list? Is it through a webinar? Did they fill out a simple form that just asks for their name and gave a text box for their phone number? Or, did you have this two- or three-page application process that they needed to go through in order to submit that to you so that you could take a look at it and review it? Depending on which of those mechanisms you’re looking at, you can decide whether or not that’s more of an implicit or an explicit lead qualification. If they filled out a giant, lengthy form, then that’s pretty explicit. You’re going to be able to get a lot more detailed information. If they just signed up for an email list, it’s much more implicit, and you can’t really judge just yet whether or not they’re going to be a qualified lead.
Rob [25:04]: The most important part of lead qualification is you’re trying to figure out is it worth your time and is it worth their time in continuing the conversation. You’re trying to be mindful of both of your resources and schedules in this, because if they’re not going to get value out of the product and it’s going to be a bad experience for them, then you’re wasting both of your time in this. The key thing that we found is to figure out a short list of qualifying questions, and that’s something you’re going to have to develop over time. You’re going to start intuitively, and then over time you’re going to see patterns. Get those into a doc as soon as you can so that you can ask the same questions the same way every time and then slowly split-test those questions with others and figure out what it is that essentially – there’s certain things that you shouldn’t be doing with your tool at all, so you’re going to learn over time.
I’ll give you an example. With Drip, we get multiple people per week jumping on demos, and the first thing they talk about is how they have a purchased list, or how they have a list of people that they’ve scraped from the Internet, and that’s called “email outreach.” While that’s perfectly acceptable in some tools, it’s not in tools like Drip, MailChimp, AWeber and Fusionsoft. We’re for warm leads, and we’re for nurturing once people have opted in to hear from you. That’s an easy pre-qualifier for us – a disqualifier, I would say. To just be able to say, “Tell me about your list.” “Where’d you get it from?” “When was the last time you emailed them?” You talk that through. We have very specific things.
You’re going to learn what that question is for your tool. How are people accidentally – because it’s not malicious. They just don’t know. They see “email tool,” and they feel like they can just put whoever in that they want. So, figure out what those questions are to disqualify folks early on, as well as the ones that will really qualify them well. You might know that you serve SaaS businesses and people who are bootstrappers, people who have raised funding, or info marketers, or bloggers. There’s going to be a group that you serve really well. Figure out if they’re in that or in the periphery and can fit your use case. If they’re not, it’s really nice for you to have knowledge of your space and be able to actually recommend them out to a tool that is going to work for them; because, again, it’s a matter of using your time well and using their time well.
I heard [Sully Efty?] say this. You don’t owe a demo to anyone. You don’t, and you don’t want to use your 30 to 40 minutes of demo time on someone who you know is not going to get value out of this. So, if they’re qualified, then do it. If not, then you’ll figure out some key phrases to basically politely encourage them that you’re not the right fit and, hopefully, recommend another tool that might be a better fit.
Mike [27:27]: A nice side effect of going through this process and really taking a hard look at this information and what those qualifying or disqualifying questions are is that those can also be used on your website and your sales collateral and your marketing collateral to help guide the people who are going to be a good fit into your sales funnel, and further down, versus trying to push those people away. There’s a couple of different ways that you can push those people away. Maybe, as Rob said, you recommend somebody else’s product for them. In that particular case, if they came in and they have a purchased email list, for example, then they’re not a good fit for Drip. Is there another product out there that could be recommended, or another mechanism that could be used for them to use that list? Those are different ways to down-sell to some extent, or to just provide them with value such that if they come into a situation in the future where they could use your product, then it would be a better fit and they can come back. At the same time, if there are lower-tiered opportunities for offering different products, or lower-price products; or, if they’re a do-it-yourself type customer, can they buy a lower-tiered version of it and do everything themselves? Or, if you have a higher-priced consulting product, maybe they’re a good fit for that. Depending on where they are, what you’re doing and how they fit into that, you’re going to be able to start pushing them – probably “push” is too strong a word, but help guide them in one direction or another based on what it is that you offer, what it is that they’re looking for; and be able to answer those questions pretty concretely.
Rob [28:54]: Another question you want to think about is: would this lead perhaps be better served with a lower-tiered or lower-priced product? Are they a DIY type? Are they not a good fit for you at all due to one of these disqualifiers? Would they be better served either by a competitor or even another class of tool, or even just staying with paper and pencil? Sometimes, we’ve had people to purchase who are doing – he was just getting an email started, had zero people and was going to do something with bars or restaurants and get the owners to sign up. Then he was going to send emails manually. It was just a really manual thing, and we realized, “You know? Maybe just have, like, a Google Doc or an Excel spreadsheet, or even just a paper signup form and then send the emails yourself manually until you prove this out. Then if things work, you can look at a tool like Drip, or even a free account with MailChimp for a little while, if you’re really just sending small broadcasts.” Often, especially people who are just getting started, they may have more of a need for a lot of support. You have to use your judgment. The people who are going to pay you a lot of money tend to be the ones that are more tech-savvy, and they’re further along, so they’re going to tend to be less supportive and definitely worth any support time you have to spend with them.
This is an evaluation piece you have to do early on. In your road and your journey of your product, you’re going to want everyone, and you’re going to learn who are good fits and who are not. Then you refine this over time. As it goes further on, dealing in volume and just getting a lot of people using your platform may not be the right play for you, especially if you’re a bootstrapper; because supporting someone at a $29-a-month plan, they’re going to be more likely to churn, more likely to be unhappy; and they’re often going to need a lot more support than someone at the higher end. So, a qualification is not just can they get value out of the tool, but it’s is it a good mutual fit in both directions.
Mike [30:39]: One of the things that you had mentioned in there was how far along are they. I think that there’s two, different aspects to that. One is how far along are they in the life cycle of their business. Then the other side of it is are they already performing the tasks that your tool is offering to them today, and they’re doing it manually versus are they looking at potentially using it to start doing that. So, if they’re already entrenched in doing that; they’re doing it today, but it’s painful, then your tool can certainly help them out, versus a situation where they look at that and say, “Well, I’d really like to try that out, but we haven’t done it before.” Those are two, very different types of customers. I think that the people who are already doing it today, they’re much easier to sell on it. They’re much easier to work with because they know exactly what they want and what they’re looking for, versus the other ones where you are probably going to do a lot more education with them to help them figure out how to solve that particular problem, because they’ve never run into any of the challenges before because they’ve just never done it.
Rob [31:33]: I think the bottom line is that the majority of pre-sales is really to identify where someone is in the buying process and give them the right information that they need that’s relevant to that step. I think in most cases, a quick phone call tends to be the best if you have the bandwidth to do that. Then in other cases, if you don’t have the bandwidth, you can try to do it via email. Probably not as successful, but some people will prefer email. So, giving them either option, I think, is the ideal way to do it. Your results may vary depending on how much time you have to do it and how good you are at talking to people on the phone and how interested you and/or your team are in doing that.
I think that’s going to wrap us up for today. We designed this whole episode around a listener question. If you have a question for us, you can call our voicemail number at 8-8-8-8-0-1-9-6-9-0; 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 288 | How to Choose and Test a Paid Marketing Channel
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to choose and test a paid marketing channel. They give you some criteria and discuss the mindset you need for choosing the channel that’s best for your business.
Items mentioned in this episode:
Transcript
Rob [0:00]: In this episode of “Startups For the Rest of Us” Mike and I discuss how to choose and test a paid marketing channel. This is “Startups For the Rest of Us” episode 288… 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 have built your first product, or you’re just thinking about it, I’m Rob.
Mike [0:29]: And I’m Mike.
Rob [0:30]: 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 [0:33]: You changed up the intro a little bit.
Rob [0:34]: I know, I added in some more stuff. Because we always talk about launching in the intro, but really, now often times we’ll talk about the building, and the growing, and the scaling and all that. Maybe I’ll update that actually in the doc. That was, kind of, off the top of my head.
Mike [0:48]: Well, of course, you know, there was the little flub there, which will thankfully be edited out.
Rob [0:53]: Indeed. So what’s going on?
Mike [0:54]: Last week, I had talked a little bit about how I had started onboarding people into Bluetick, and I recently just uploaded a spreadsheet into Bluetick so that I can have it automatically send out the emails to people to get them scheduled, so I don’t have to individually email each person. And of course the nice thing is that it will gradually email them out over time instead of all at once. So that’ll be helpful in terms of putting a little bit of spacing in between some of those. Obviously, they can choose anytime on my calendar, but it will be nice to not just use it in kind of production environment, but to also let people who are coming on to it see the app in action and what it will look like on their side of things.
Rob [1:31]: Yeah. That’s pretty cool. So, you’re at the point where you’re able to dogfood it, and use it for your own use.
Mike [1:36]: Yes.
Rob [1:37]: Yeah. You know, I remember when we first hit that moment where we could do it with Drip, and we started really using it for a lot of our email marketing. At that point it was like something flips, and you’ll suddenly — you already look at your product a certain way, because you have been building it. But something, kind of, shifts once you start using it, because you’re going to notice everything that’s clunky about it, everything that you need to fix. Even more so than you did before you started using it. So I think it’s really a plus to be able to use your own product, and to catch bugs before the people – or even to catch usability issues before the rest of your customers do.
Mike [2:11]: Yeah. I mean, I started trying to do this a couple of weeks ago, and as you said, it was clunky, and there were things where I ran into where I could do those functions and perform those actions, but it was a little painful. There was a few too many clicks, and there’s still a few places where we could optimize what we’re doing in the user workflow, and how they get to different places in the app. But we basically redesigned the entire navigation, and merged a couple of pages so that people don’t have to click around as many places. It’s a lot better today than it was even just a week or two ago. We just pushed out a new version of it this morning. It’s nice to be able to do that now, and as I said, it was working a few weeks ago, but it was a little painful. I think we are starting to turn that corner where the app – it’s not just inherently useful but – it’s nice to be able to dogfood it in a way that is not as painful.
Rob [2:59]: Yeah, for sure. I think there’s that quote that’s kind of over-quoted at this point about how, “If you’re not embarrassed by the first version of your app then you waited too long to launch.” I think that there’s two sides to that embarrassment. One, it can either be that you just don’t quite have the usability right yet. I think that’s one reason to be embarrassed. I think another one is, maybe it is really useable, but you just don’t have enough features to do what you want to do, and you feel like it’s sorely lacking. I think those two axes can either be off on one or both of them. But identifying which one, and kind of moving up market, or even just improving upon those axes, I think, is a big thing in the early days.
Mike [3:33]: What about you, what’s going on this week?
Rob [3:34]: Well, we had a pretty good response to a recent blog post on the Drip blog. It’s probably the post that’s gotten the most uptake in that last several months, and it was called, “Email Marketing Tips: 33 Industry Experts Share their best Strategies and Tactics.” It was an expert roundup, basically where really Zach on my team headed it up and did most of the legwork, although I contacted some of the people who I had contact with. But we got some really solid tactics from people like Devesh Khanal from Grow and Convert. We got Josh Pigford at Baremetrics, Joanna Wiebe at Copy Hackers, Dan [Norestelli?], Alex Turnbull, Brendan Dunne, Patrick Mackenzie, Noah Kagan – just this big expert roundup, and there’s some really interesting tips in here that people are using to improve open rates, and click through rates, and just overall just improve stuff. So it went to the top of GrowthHackers for a while. I think it went up to one or two on inbound.org, and at this point it’s got 300 social shares. If you haven’t checked it out, it’s a really good post, and I’m not just saying that because we put it out. There’s a lot of cool tips and tricks in here. We’ll obviously include that link in the show notes, but if you go to the Drip blog, or if you just search “33 Industry Experts Best Strategies and Tactics” you’ll find that.
Mike [4:44]: Awesome. So what are we talking about this week?
Rob [4:46]: Well, we periodically get questions from listeners about getting started with paid acquisition, and today we are going to be talking about how to choose and test a paid marketing channel. Most recently we received this question from Ryan Frank, and he said, “I’m sure this had been requested multiple times but I’d love to get some insights on the show regarding setting up and running marketing campaigns. What platforms do you choose to advertise on, and why? How much is a reasonably initial investment? How do you brand the campaign? How do you target? How many do you run at a time, etcetera?” He goes on to ask some more questions that we’re going to cover today. The interesting thing is we don’t tend to cover this topic specifically because—well, there’s a few reasons. One, this stuff changes so frequently. Even the ad networks that are going to work for bootstrappers will completely roll over in, let’s say, 12 to 24 months, and anything we say here about specific ad networks will be different then. In fact, with Facebook – for a while there – it was like every 90 days things were changing in the ad interface itself, and different ad types started performing better than other ones. You just had to be right at the cusp of it, and either in touch with someone who really knows what they’re doing and are constantly testing, or you have to listen to some really detailed, recent information. That’s why we don’t often dive into specifics. However, today we are going to talk more about like the mindset, and the approach, of testing and choosing a paid marketing channel. Another reason we haven’t talked about this a lot is it can get often to the weeds, and it can get a little too detailed and boring. We’re going to try to avoid that today. Then, finally there’s really this, kind of, factor of competition. And this has become more of an issue of late, with competitors kind of, I’ll say, borrowing heavily from some approaches, which has been a bummer, and it comes with a little but higher stakes now that I have ten people working for me, and we’re paying mortgages and doing that kind of stuff. So, kind of, giving away exact detailed information of exactly the wins that we’re having, and why, isn’t necessarily as feasible as it used to be when I was selling eBooks and beach towels. With all that said though, there is a really specific path that I take when I’m thinking about testing and choosing paid marketing channels, and picking out new networks, and how to test. And we really are going to dig in. There’s a lot of meat in today’s episode.
Mike [6:53]: Awesome. So, let’s dive right in.
Rob [6:54]: Yeah, so we’re going to, kind of, break it up into two sections. The first is the criteria for choosing, and the second one is really how to run a test on a paid marketing channel. The interesting thing is, it’s only getting more complex these days choosing a platform to test on. There are more choices, and within those choices there are more choices. There weren’t YouTube ads at all, and then there were YouTube ads. And now there’s YouTube Instream, and there’s YouTub- in-display, and there’s another type that I forget the name of it. And with AdWords, it used to just be the little text ads, and then there’s the display network, and then there’s the text display network, and the visual display network, and Gmail ads, and on and on and on. It’s just getting more and more ubiquitous. The nice part is that does give you more choices and more opportunities, but the negative is it makes it hard to choose. I think the kind of first thing I’ll throw out is that, these ad platforms, there the cheapest when they first launch. That’s also when they’re hardest to use, because the management tools are not very good, and there’s not a lot of insider info on how to, kind, of use them for optimum results. So you really are pioneering, and you’re going to just do trial and error. But as these ad platforms get more advanced, and they get more matur – like AdWords is an example – they become so expensive that there’s just no chance that you’re going to make them work. Whereas a platform like Facebook is probably in the middle right now, it used to be cheap. It’s not totally out of the range of being affordable, but it’s in the middle. Then somethings that’s really new – maybe Pinterest for example, or Instagram’s pretty new in terms of ad networks – those will be the cheapest clicks, but there are also maybe the hardest to use, hardest to target, and you don’t have a ton of information on how to do that.
Mike [8:29]: I talked to somebody – probably a year and a half, two years ago – about some strategies that they were using on Instagram for paid acquisition, and they showed me a graph and I looked at it. It was insane. They basically doubled their revenue almost overnight by doing Instagram marketing and just paid acquisition through that channel, and there was no mechanism for doing it. They basically built an entire system themselves. They had all these spreadsheets and data, and they were calculating all these different metrics on their own. And for themselves, they pioneered it. They didn’t really talk about it publically, but I looked at what they were doing and it was absolutely incredibly and insane. The results that they were getting, it was really, really hard to argue with the results, just because there was a point and time where they weren’t doing any of this type of advertising, and then they started, and immediately you could see the graph. It just doubled the revenue almost overnight. You are right, I think, about getting in when those platforms are new. I think the downside of that is that when these new platforms come out you can spend a lot of time and effort trying to get something working and running, and it may just not work. Because that’s one of the risks that you’re taking with those, because you are pioneering something completely new, there’s no benchmarks to go off of, there’s no guidelines, there’s really not very many people you can talk to, or ask about, in terms of being able to work on those channels. But if you can find something and make it work, it can be really, really cost effective.
Rob [9:51]: Yeah, that’s pretty cool. I remember that guy’s story, assuming it’s the same person that I’m thinking of. He basically went in before there were even official ads. There was no ad platform, and he was paying the more popular Instagram users X dollars to post the thing. It was in essence, ads, but he was so early that he got in when it was really cheap. I heard Noah Kagan talk about this – before advertising in email marketing newsletters was getting really big – he would just approach big email marketing newsletters and make them an offer. That’s a kind of way to get around the ad networks, because the ad networks are marketplaces, right? And eventually they kind of even out, especially once your competition is there, then your cost per click is just going to go up and up because there is competition for those clicks, and your cost required is going to be similar across competitors. So it is going to even out eventually at some type of norm, but if you get in way early then that competition doesn’t exist yet, and you can get the cheapest clicks early. There’s obviously a lot more danger there. That’s really the balance.
Mike [10:46]: Right. I guess one of the takeaways from that, that I just thought of off the top of my head, was that if you are getting in that early, and there isn’t a marketplace for ads on a particular channel then you could probably negotiate for some sort of exclusivity when you’re working with those people. And if you can get it, then you can, sort of, lock your competitors out of that as a channel. That’s something that also worked extremely well in that particular case. That’s something you might be able to take away from that.
Rob [11:14]: I think another question you want to ask yourself is, are you going to do this yourself? Like, are you going to test the channel yourself, or are you going to hire someone? This depends a lot on whether you want to learn it or not, whether you have time to learn it or not, and whether you have budget to hire someone. The nice part is, three or four years ago, hiring someone to do it was very, very expensive. These days there are knowledgeable folks who are managing AdWords, or Facebook ads, or Twitter ads, or I’m sure Pinterest ads – I haven’t used anybody for that – but that are not these big agencies that charge enormous sums of money – or a percentage of ads spanned – but that may charge per lead, or that just charge a lower monthly fee. There was someone that was going to manage Facebook ads and I didn’t wind up using them, but it was a few hundred dollars a month rather than several thousand like a lot of the old agencies. I think, keep in mind that running a test is not terribly hard, but it is time consuming to actually get this to work and then scale it up. So be realistic about how much time you actually are going to have to run these ads. To take a step back, I’m realizing we didn’t really cover when you should try to do this. Like, when should you think about running paid ads. I think that the two points are: really early on when you are maybe testing a value proposition on landing page, and you want to send someone, and you want to test that value proposition and get email signups. I think it’s very valuable then. I think in the interim – kind of between that launch and product market fit – when you are just trying to get more people to use it so you can do customer development, I think that’s a good time to run it. You don’t want to scale that one up. You just want to get enough people in there to get enough feedback to improve your product. That’s the second time. The third point, I think, is once you’ve built a product and you have a value proposition and things are really starting to scale up, that’s when you want to hit this really hard, and I would recommend actually getting the budget together and hiring someone. I think in the first two instances you only need such a trickle of traffic when you’re testing stuff, that I would guess unless you do have money at your disposal – like you’ve raised funding – that it’s not going to be worth going out and hiring someone for the small amount of clicks that you’re actually going to be buying.
Mike [13:10]: This is one of those situations where, as a bootstrapper, you’re kind of caught between a rock and a hard place, because in order to spend the time and effort to get the results that you want, it’s going to be time consuming, and you either have time or you have money; you typically you don’t have both when you’re doing this. It makes it painful to go in and start running some of these experiments. You have to pick and choose your battles a little bit in terms of where you’re going to try and optimize things inside of your ad campaigns, because it’s going to either cost time or money, and you typically don’t have both available to you. So often times you are trying to implement things, or run some tests, and they’re going to be less than optimal. I think that that’s an important thing to keep in mind, is that you’re not necessarily looking to optimize each and every single test. You’re looking to learn from the early ones so that you can scale things up and make them better in the long run. You don’t want to spend a lot of time and effort trying to figure out, “Okay. What is the single best ad that I can come up with?” Take three to five of them, throw them against the wall, see what happens and then measure the results and iterate from there. It’s not about getting things right on the first time. It’s about iterating over time and then enhancing your results.
Rob [14:20]: Another criteria to think about when you’re choosing an ad platform is, is it B to B, or B to C, or is it a mix? I’ve found that there’s a lot more B to C inventory than there is B to B. The B to C inventory tends to be really low quality, and so it can work, the clicks are really cheap, but if you’re not targeting something like weight loss, or online dating, or these really broad consumer interests, it can be hard to make money with those more B to C networks. And those are things like Chitika and Clicksor, and I think Infolinks is like that. I tested 10 to 15 ad networks back in the day when I was really trying to scale HitTail, and I found that most of the ones that I hadn’t heard of were just kind of junk traffic. They were super cheap clicks – five cent, ten cent clicks – but average time on site was two seconds or three seconds or something. So it was pretty noticeable that either the clicks genuinely were just bots or not real people, or they were accidental things, or they really were just looking for more stumble-upon content to hang around and be enticed with info market stuff, rather than actually trying to sell a product. You definitely want to think more. We’ill talk through a few networks here. My next bullet spells out several networks, and there still are a lot of B to B and mix networks that do have quality traffic, but you’ll want to think about this in terms of the product you are selling, and the type of scale that you’re trying to get to.
[15:43] The next criteria to think about is, does the ad network have enough volume to scale traffic? Early on, like I said, when I was running ads for HitTail, I actually ran ads on Bing and Yahoo and other search engines, and those were examples of things that converted for me, but I couldn’t get enough clicks that it was even worth managing the ad platforms. So, while you can look at all these kind of peripheral ad platforms, it often will be a waste of time even if you can get it to work. The majors are things that you’ve heard about. There’s Facebook, there’s Twitter, there’s Google AdWords. Then there’s the AdWords display network, which is basically what AdSense runs on. Then there’s YouTube with multiple different types. There’s a LinkedIn ads. Pinterest now has an app and network. AdWords has a Gmail ad section that can advertise on Reddit, and I got those to work for a short time. BuySellAds.com is a nice display network, and then we start moving in to the consumer stuff. I think there may be one or two more that are at scale and you can do B to B, but the ones that I have already listed are pretty much what I know about. Then there’s like Outbrand, and Chitika, and Clicksor, and Infolinks. There’s a good article summarizing these. It’s on monitizepros.com and we’ll include that in the show notes. The idea here is, if you can find an outlier ad network and you can make it work, the clicks are going to be super cheap and it’s going to be very, very lucrative for you. The trick is, I’ve never been able to do that, and I spent quite a bit of time and money trying to do that at one point, and I found that the ad networks today that people are talking about, there’s a reason they are talking about them. It’s because that’s where the real people who actually spend money are. So when you think of the Facebook, Twitter, the Google, the LinkedIn, and the BuySellAds, and maybe Pinterest and Instagram if that’s kind of your thing, those are going to be the mains that you’re going to have to evaluate and think – based on what I am selling – is someone going to buy email marketing software on Pinterest or Instagram? The odds are probably not. That’s not going to be at the top of your list if you are going to advertise. You’re going to want to stick more to an ad network where you feel like you at least have a chance of someone being interested in your product.
Mike [17:47]: You know, the fact that you had an ad budget for Yahoo means you probably could have spent enough money to just buy Yahoo outright of what they were worth.
Rob [17:55]: I know. Interesting. For real. This is back in the day. They were still worth something a few years ago.
Mike [17:59]: Are they negative now?
Rob [18:00]: Oh, it’s so sad to see a giant like that just go down the tank.
Mike [18:08]: Oh, well. So, what’s next?
Rob [18:09]: So, the next thing to think about is to take into account what the cost per click is going to be, verses your budget, and the lifetime value of your users. You’re just going to have to ask around, or do Google searches or whatever, but these days we know that Google AdWords is very expensive because it’s such a mature platform and Google’s really smart. Whereas Pinterest and Instagram – since there are early – the ad clicks are going to be a lot cheaper. You can get some cheap clicks on BuySellAds, and I have heard there’s cheap clicks on YouTube these days. Whereas Facebook, like I said, is kind of in the middle. Twitter, I think, is in the middle as well. They are both starting to mature, and they are getting a little more expensive. So this is one where I think that the most value can be had probably in the early to the middle section there, and I think a lot of the older – or the larger – enterprises are doing the more advanced, or the more mature, platforms because they are easy and more qualified clicks, but they are definitely a lot more expensive.
Mike [19:00]: I think one of the things we might want to touch on here is talking about the cost per click, or the cost per lead, that you are getting verses your budget, and that kind of ties back into what the lifetime value for your customer is as well. So obviously, if you have a one-time sale for a product, then your lifetime value is going to be whatever the sale price of that product is. So, if it’s 50 dollars to buy a WordPress plugin, it’s going to be 50 dollars. But if you have a SAS product, or anything where there’s recurring revenue – and it’s let’s say 100 dollars a month, and people are going to stick around for 10 months – you’ve got a lifetime value of about a thousand dollars. I think that the general rule of thumb that I’ve heard from most people is that you don’t typically want to spend, on a long term basis, more than about a third of what you’re lifetime value is to acquire a given customer. Now, that’s not to say that you can’t spend upwards of break even for the first set of them, but you’re going to drive your business into the ground very, very quickly if you do that for too long. The primary reason for that is because you’re going to be spending a lot of your ad budget now, and let’s say that you spend a thousand dollars to get a customer now. But the problem is that you’re not going to make up that revenue for any given customer until they are there for the entire time period. So you’re not going to get all of that money back until 10 months into it, so that makes it very difficult to do that. When you’re trying to go through and budget for this, make sure that you are very aware of how much money it is that you are spending, and keep in mind that the tests that you are running early on, you may very well run way above and beyond that, and it’s primarily just to go through and do the testing on those different channels and iterate and try and make your ads better. You’re not going to get them right the first time. You’re going to spend a heck of a lot more money the first time through, but as you iterate, if you can get that under about one third of your lifetime value then you’ve got, essentially, a sustainable channel that you can start pumping money into. Now, that’s not to say that you can do it on an unlimited fashion, because even if you are doing that, then you’re still not getting that money for at least three months. So you can’t just pump every dollar that you have into it. You do have to be careful. You do have to budget for those types of things. I certainly wouldn’t run the bank account down to almost zero with the anticipation that you’re going to be able to make it up within 30 days.
Rob [21:12]: That’s a really good point. I think the one third LTV is a good reminder, and then – typically if you are bootstrapped – I see most people not going more than about three month payback. I see some people edging up to like a four month payback window on your trial or sale cost. So that’s not a click cost, but that’s someone coming in and actually becoming a customer, and you want to get paid back within four months. In your example, if you were doing a hundred bucks a month then you could pay up to 400 hundred dollars to acquire a customer. But, then like you said, you need the cash to be able to do that. Funded startups, the rule I’ve heard is, no more than a third of lifetime value, and no more than a one year payback. They tend to raise enough money that they can cover out, but when you’re bootstrapped — I remember first starting out it was like I had like two month payback with HitTail. Then as I got more cash it was three month, then it was four month. Then once I really optimized it, and I widened the reach, and I knew that not only were the folks signing up and becoming customers, but I was watching them remain customers, I actually kicked it up a little higher than that. That’s kind of the range that I would think about. I think the last criteria for choosing a network is, are you going to need banners or fancy images? And do you have a way to do that? I know Bannerarchitect.com is a pretty good way to do that, and there are certainly people on Upwork these days that can create banners. But keep in mind, there are some text networks that work really well, and you don’t have to spend the time and money to develop banners, and banners burn out as well, so you are not going to have them made once and have then last forever.
Mike [22:31]: That’s actually a really good point about the fact that those banner ads will burn out, and the same images that you use today will not necessarily work the same even a week from now. I mean, sometimes they burn out very, very quickly. Other times they will last for a while. Again, every image I’ve ever used – or ever seen – in any of my ad campaigns, they inevitably burn out after a while. And what will happen is you will notice that the effectiveness of that campaign will start to decrease even after you’ve optimized it. So you will have to refresh those images, and use different ones, and play around with it. And the thing that sucks about that is that it screws with your stats, because even week to week you can’t necessarily guarantee, or look ahead and say that, “Oh, this advertisement is going to have this effectiveness.” because it will change over time as people see it, and they basically become blind to it.
Rob [23:22]: So moving into how to actually test a network. As a rule, the higher your budget the faster you can test. But you can test cheaper channels with a budget of, say, $10 a day. You’re not going to be able to test AdWords at that budget, but you could start running let’s, say, a Facebook test, or even maybe there’s some cheap clicks – like I said – on YouTube, or Instgram, or Pintrest. I’m sure you could do those for 10 bucks a day. I personally like to start with about 20 bucks a day so we can move a little faster. And I commit maybe around a couple thousand bucks to a full test, unless it’s either doing really well at the start, or it’s really tanking at the start, we’ll go in one to two thousand bucks; that’s just the scale we’re at right now. But you could probably make a call after a few hundred dollars. I recall doing that. I mean, some of these are just going to be so obvious that they’re not working that you don’t need to invest a huge amount of money in order to figure it out.
Mike [24:10]: I think one of the things you have to be careful about when you are doing these tests is that you have to be aware that the way that the advertising channel shows you those advertisements is not going to be identical to what is displayed to the user. So sometimes their interface is just blatantly wrong. I can think back to a scenario where I was starting to do some paid advertising for Bluetick through Twitter, and I was using their lead cards. And everything showed up in the Twitter advertisement interface just fine, and I put it out there, and I forget how long it was, but people started sending tweets back to me with screenshots that showed me that they were displaying just a link to the Twitter card, as opposed to the Twitter card itself. And people had to click through it. And at the time I was looking at my stats saying, “Well, these are abysmal, but they’re not costing me very much, so I’ll just let them run.” Because I was still getting email addresses, gnd going back and looking at the screenshots that people were sending me, my ads were just fundamentally broken. So I ended up stopping them at the time just because I was clearly spending a heck of a lot more money, and I didn’t want those images to burn out, and quite frankly it was kind of a distraction at the time. So just that said, you need to be aware that just because your advertisements are tanking doesn’t necessarily indicate that, “Oh, this entire channel is junk.” It could also mean that you’re doing something wrong. So you want to be careful to at least do some spot checks to identify whether or not, “Is it my advertisement that is wrong? Or is it just this channel?” And it’s sometimes difficult to tell the difference.
Rob [25:37]: Yeah, that’s tough. I haven’t seen that happen with AdWords or with Facebook; where the ad showed up different than the preview. But I have to imagine that happens. Especially with Twitter where all the clients are— not all the clients – but the third party clients tend to display stuff differently than the native Twitter things that they own. So I could imagine that there would be differences in display. It’s something you need to watch out for. The next step in how to test is that if you’re going to do this yourself is to educate yourself online. I would just start doing Google searches of “how to run Twitter ads”. And I would try to find like Growth Hackers links from growthhackers.com, or people who are actually doing it, kind of, in your space, because you’re going to find a lot of stuff of people running ads on this network, and they’re doing it for, again, like diet pills, or “make money online”, or just stuff that doesn’t apply to you, and it isn’t necessarily going to be that helpful. But I personally try to buy a course if I can. I try to find a podcast on the topic, and then I try to buy that person’s course – assuming that the podcast is reasonable. And obviously you’ll pay something for that course, but it can save you dozens of hours of trial and error. And maybe it’ll even convince you it’s not a good channel and it’ll save you the time all together.
Mike [26:44]: In terms of courses, there’s a lot of great resources out there that are free. And as Rob indicated you can also go out and look specifically for paid courses from people who are actively working in that particular industry. But there’s a couple of different resources you might want to check out. You can take a look over at Udemy, or Udacity, or at Coursera. And all three of them have courses that are available, either for free or for reasonably low cost, that you can just pop in, learn what it is that you need to learn and get out. And I think the one thing to keep in mind when you’re looking at these courses is that you don’t need to consume every single piece of information that’s there. Skip through, find the things that are relevant to exactly what it is that you’re doing, and then get out and start practicing with that stuff. Because if you spend too much time getting into the weeds, then you can spend forever there and not actually get your ads done. And I think that setting up your ads, and getting the images, and the text, and all that stuff all set up can be very time consuming. And if you’re spending more time learning – and we actually talked about this in a previous episode a little bit; how to balance your time in learning mode versus execution. So if you haven’t listened to that, go back and take a listen to it. I think it was episode 286 where we talked about that. It was “Five guidelines for balancing learning and doing”. So if you think that that’s an issue that you might need to contend with, go take a listen to that episode. But again, you just want to make sure that you’re getting in, getting the information that you need, and getting out as quickly as possible, so that you can start learning how that particular channel applies directly to the product that you’re selling.
Rob [28:09]: Yeah. That’s a good point. There’s a lot more resources on these topics – on ad networks and how to run them – than there were a few years ago. And those course web sites that you mentioned, I’ve actually had good luck finding decent courses on them, and have bought several for my own edification. So the approach I take when I’m testing is that I tend to try to go immediately from an ad to a sale, or a trial, or a demo, to see how that pans out. And then judge is my ad click through rate too low? Or is it the landing page that I’m sending them to that’s too low? Which should I optimize? And typically it’s going to be the ad at first, because your ads aren’t going to be very good. Then I split test images, headlines, and the audience, until I get to the point where I’m paying a reasonably small amount and getting a decent amount of traffic. By that time you’re going to find out that your landing page sucks. And then I’m going to use Optimizely to improve that. If I then spend several weeks trying to improve the landing page, and trying to get them to buy or to try, and that’s still not working, then my guess is that either the traffic is not qualified enough, or I’m just asking for the sale too quickly. So then I shift into this “Plan B mode”, where instead of asking for a sale or trial I ask for email opt-ins – either to a webinar or to an email course. Then nurture those leads, see how many convert, and this is where a tool like Kissmetrics or a Drip – because that’s what we use it for – where you have tags, and you can actually report on everyone who’s coming through those ads – because their tagged as their source is that ad. Then you can see, “Boy! Did they sign up for a trial? How many of them did? Did they sign up as customers? How many of them did? How much have they paid us?” It’s very, very big, because it’s hard to do that without a tool where you can actually see individuals and not just aggregate data. That’s a quick run through; the philosophy of actually running a test is to first try to ask for the sale trial, figure out what’s not working, fix the ad, then fix the landing page, and then – if you get that working – then it’s awesome and you can scale it up. And if that doesn’t work, then you switch into this plan B mode of getting the email opt-in and nurturing. So it sets you sale cycle out longer, it means there’s more steps between them initially clicking the ads. And, not only steps, but more time in them signing up and buying from you. But that’s what this is about. It’s about finding and reducing friction during this process.
Mike [30:23]: And I think something that that process kind of highlights is the fact that you’re going to have to go through this several times in order to find out whether or not a given channel even works at all. Because one of the first things we talked about was making sure that you had enough budget to go through and run these tests. And when you’re testing them, make sure that you’re taking a look at the statistics, and identifying your conversion rates, and how much you’re paying for the incoming leads, and whether or not those people convert to trial. And it’s time consuming to gather that information, and analyze it, and figure out where the leaks are in that particular sales funnel. Again, it’s just a matter of going through, gathering as much of that data as you possibly can, and then iterating through it multiple times in order to find where those leak points are. Because you’re not always going to find them the first time. Sometimes it’s misleading it best. I mean, you’re going to look at those things and say, “Well, this particular channel isn’t working.” And I think that that’s where a lot of the fear, uncertainty, and doubt comes about from some of these different ad channels. Because somebody will try them out and say, “Oh, well, I tried that and it didn’t work.” And your response to that should be, “Well, what did you exactly do? And why did it not work out?” And if somebody can’t explain why something didn’t work then they may not understand all the subtle nuances about it, or they just didn’t dedicate the time to it. A lot of these ad channels will work if you spend the time and effort to optimize them. Now that said, there are some that are not going to based on the type of product that you have. But if other people are advertising on those ad platforms, chances are good that it’s working for some of them, because if it didn’t work for anyone then nobody would do it. So nobody’s going to spend money to make nothing. That’s obviously a losing strategy.
Rob [31:57]: I think a final thought is that if this sounds complicated and scary, it’s not. But it does take work and it does take time. And just the dream of plunking an ad on to AdWords and paying five or ten cents a click, and then just having this amazing cost per acquisition is not—I’ve never seen that happen. It does take work, and it does take refreshing of the ads. So if you have the time to do it, invest, but consider it another marketing channel. It’s not anything that’s going to be easier than other marketing channels, or particularly less time. The nice part about it is if you get it to work then it tends to scale really well, and you can drive a lot of trial pretty quickly. I think the last thing I’ll throw in is if you’re not already doing retargeting, that is actually where I would start before I got into all this stuff that we’ve said here. I would consider using a tool like Perfect Audience, or going directly to Google AdWords, or to Facebook, and they have retargeting images build into them where you can get a pixel, and then essentially cookie people, and then retarget them with ads as they travel around the Internet or on Facebook. Those are going to be your cheapest clicks and your highest converting clicks. And so that’s actually pretty easy, and there’s not too much magic to it; maybe some testing of the ads and such. But you don’t have to get into all the targeting, which is nice, because you just have this audience. And that would be, I think, the low hanging fruit in terms of paid acquisition. But if you’re trying to get new visitors, that’s really more of what this episode was focused on. Because to do retargeting you need to have a nice bulk of existing visitors already. You can’t just start from zero, because there’s no one to retarget.
Mike [33:25]: I think that about wraps this up. If you have a question for us you can call it in to our voicemail number at 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, and we’ll see you next time.
Episode 287 | 5 High Leverage Areas Bootstrappers Should Focus On
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about five different areas bootstrappers should focus their time on. You’re not going to have time to do everything and some things should be a lower priority.
Items mentioned in this episode:
Transcript
Mike [0:00]: In this episode of “Startups for the Rest of Us,” Rob and I are gonna be talking about five high-leverage areas bootstrappers should focus on. This is “Startups for the Rest of Us,” episode 287.
Welcome to “Startups for the Rest of Us.” The podcasts help developers, designers, and entrepreneurs be awesome at launching software products. Whether you’ve built your first product, or you’re just thinking about it. I’m Mike.
Rob [0:24]: I’m Rob.
Mike [0:25]: 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 [0:29]: Well, week’s going pretty well. I had about two and a half hours yesterday that I totally killed because of the way that Gmail forwarding works, and the way that it’s really smart and it knows if, like, another Gmail account can send as a certain email address, and if you try to send from a Gmail account to itself as a different address that it won’t send the email. And I had like two or three Gmail accounts and I was trying to troubleshoot all of it, and I won’t to the vast complexity of it, but it was this funny string of, “Man! These things are not forwarding. Google Apps doesn’t work the way I thought it did.” There was a certain forwarding setting that I had set and it just wasn’t working. And two and a half hours later I finally realized, “Oh, it’s because Gmail knows that the other Gmail account could send as that thing, and so therefore it wouldn’t forward the email along. And by the time I had someone else in my office send the email and then it all worked it was like two and a half hours later. So, it was kind of a bummer.
Mike [1:26]: That sucks. You could have asked me. I would have told you that.
Rob [1:28]: Yeah. Well, I knew how it worked with one account, but it was that there were these three accounts that were linked in this chain. To be honest, moving from DreamHost to Google Apps to manage our email has been a fairly seamless transition aside from the upfront work, but just not knowing the interworkings of how it’s gonna do some things, and there was an email that got lost, it instantly made me suspicious. I just hate being on new systems where like you don’t quite know how everything operates and interacts. They aren’t necessarily bugs, but they are like, features or odd behaviors that [crosstalk]
Mike [1:59]: Yeah. They’re little quirks.
Rob [2:00]: They are. That’s what it is, you know, just legacy of how they were built type of thing.
Mike [2:04]: Yeah, I’ve seen that myself. I think the way that I got around it was that what I did was I would send the email and, inside a Gmail, I would have it send through an external SMTP server that would then, basically forward that email back.
Rob [2:17]: That didn’t work. I did that.
Mike [2:19]: Really?
Rob [2:20]: Yeah. It’s exactly that. That’s why it took me two and a half hours, because I was like, “There’s no way it knows.” but it did. It’s crazy. There’s a bunch of technical detail that doesn’t make sense. The bottom line is I killed two and a half hours and I should have just assumed that Gmail was smart. Because that’s really what it is. I mean, when I actually look at it, they built it pretty intelligently. I just didn’t expect it to be that knowledgeable of a separate Gmail account and that it would know who was sending as.
Mike [2:45]: Yeah, I just don’t understand why they prevent you from doing that to begin with. That doesn’t make a lot of sense to me. I don’t know why. Maybe there’s some weird technical thing on the back end, and it might have been something that was early on and then at this point, they’re just like, “Well, it’s not broken so let’s not bother changing it.”
Rob [3:00]: And I also wonder if they’re trying to keep infinite loops from happening, where you like forward from one account to another and then if you were to forward back it would infinite loop back and forth or something? This behavior would avoid that, and so that’s part of why I think they might have done it.
Mike [3:13]: I guess, but at the same time those would be rules, not necessarily like an active send. If I literally send an email, or if I send it, it should send it. It shouldn’t matter what other rules and stuff are in place, and they should have stuff in there. Like if they’re smart enough to do that, they should be smart enough to detect whether or not there’s gonna be infinite loop of forwarding back and forth. It’s six to one, half a dozen the other. It’s like you can solve it in one or two different ways.
Rob [3:35]: Perhaps, but I know that the forwarding can get really complicated and have like custom rules and all that stuff. So they would have to evaluate those on both sides. That would actually be a lot more complicated I think, then just having –
Mike [3:46]: Google.
Rob [3:46]: – the flat. But do they want to waste their time on that, or do they want to be like be shooting rockets in other space?
Mike [3:52]: Or making us all live to the end of time.
Rob [3:54]: Exactly. That kind of stuff. How about you, what’s going on this week?
Mike [3:57]: I on-boarded another customer this week and I am unfortunately not gonna make my deadline of having everybody onto Bluetick by the end of the month, but I am at least making steady progress to it. And the app is getting more and more solid each week that goes by. So my self-imposed deadline of having the app completed was back at the beginning of this month –
Rob [4:16]: Right, and you hit that.
Mike [4:16]: Yeah. The thing is it was completed, and it was largely functional, and we’ve spent the past several weeks cleaning up a lot of the rough edges and double-checking to verify certain things; that everything’s working. And then anything that’s not working, we’re going in and fixing it more or less as I onboard people. Initially it was just, get at least one or two people onto the system, find out where they’re stumbling, and basically I’m just kind of watching over people’s shoulders as they’re going through. I watch them sign up for the app. I watch them configure everything, I watch them as they struggle through the interface and take notes about pretty much everything that they’re doing so that that way I can go back and log new cases and say, “We need to fix this.” or, “We need to move this over here.” or “Make this more clear.” or “Change this text so that if there’s any questions about how something works.” Some of it’s just very simple stuff that you wouldn’t necessarily think of, and it’s just adding some explanatory text is what will fix it, or changing a text on a button. All of that stuff is pretty simple to do. It’s just a matter of knowing that you have to do it. So watching over their shoulder really helps with that.
Rob [5:18]: Yeah, that’s really cool. I mean that’s the benefit to being so hands on in these early days. So, you said you’ve on-boarded another customer What’s your total customer count up to?
Mike [5:25]: I’m up to three and I’ve got another one scheduled for this Friday, so I’ll be up to four. I actually don’t know what my preorders is up to at this point. It’s somewhere between 16 and 20.
Rob [5:36]: Nice.
Mike [5:37]: I don’t know exactly. So that’s kinda where things are at, and I’m hoping over the next couple of weeks I’ll get everybody else on-boarded and start working through the issues. I mean, we’ve already redesigned a bunch of the navigation to make it easier to use, and easier to kind of pop through the screens and do what you need to do. And then a lot of the other stuff is just adding in little bits and features that people need. And one of the things that I really wanted to have operational on day one was Zapier integration, and the person I put on-board yesterday they were able to do that. We wired everything up, connected to a form on their website, sent everything directly through, automatically added them to an email sequence and made it so that they could start sending those emails, basically automatically. It was really kind of awesome to watch.
Rob [6:17]: Yeah, that’s fun. It’s fun to get some real people using it. Have the people you on-boarded actually started sending emails? Are they using it for production use?
Mike [6:25]: Not yet. That will probably be next week. So right now they’re just kind of going and putting it through its paces internally and testing it with just test email accounts, and then I think next week I know of at least one person who’s gonna start using it in a production capacity assuming that everything goes well this week.
Rob [6:40]: Cool. And are they on a trial basis where you’re gonna touch base and find out when they’ve got value, and then you’re gonna charge them for they subsequent month or is it a predetermined timeline, in terms of the trial length?
Mike [6:52]: Yeah, it’s not a predetermined timeline. It’s essentially when I brought them onboard I had them give me a preorder. I took their money and then said, “Look, I’ll work with you through the onboarding process, and if the very first day you can say it’s providing value, great. I’ll apply a credit for however much you gave me and then in X number of months, I will charge you again for that “first month of service” which is, in reality, like three or four months out. But if you can’t say that for six weeks, or for eight weeks, or 12 weeks, then we’ll just keep working with each other until you get to the point where you can say it’s providing value and then we’ll do that. So, they’ve kind of paid already, but I’m not actively charging them more if that makes sense?
Rob [7:32]: Yeah, no that makes sense.
Mike [7:33]: But I don’t have a specific timeline. I mean, I would be disappointed if it took like eight weeks for people to look at it and say, “Yes, I’m getting value out of this.” because then it would mean that there were a lot of things that I got wrong, and I don’t think that that’s the case.
Rob [7:45]: Yeah. That makes sense. That’s how we did it with Drip as well, when we on-boarded those first ten or eleven early access users. I was just so high-touch, and just so aware of what everybody was doing at that point, that at a certain point I was like, “Man, they sent a broadcast to 5,000 people, and got this open rate, I have a feeling they’re getting some value out of this.” So it was purely based on me just circling back every week and reviewing everybody’s activity rather than having a predetermined trial length. And then I went and used that data to then inform, “How long should our trial be? Does it need to be 30? Can we do 14?” And obviously we settled on 21-day trial, but at this point learning and just getting people using the app is more important than the money as long as the people are willing to pay you in the long-term, because you want the right people using it who have money, who aren’t going to be perpetual free users. I think you’re on the right track with that.
Mike [8:34]: Yeah, and that was the purpose of taking that money upfront. It’s more just to maintain an affirmation of commitment than anything else.
Rob [8:40]: It’s a token, yeah. So if listeners are interested in seeing what you’re up to they can head to bluetick.io, and I guess they would sign up for the email list there and you’ll be in touch once stuff’s ready.
Mike [8:51]: Yep. That’s right.
Rob [8:52]: So, how about today, what are we chatting about?
Mike [8:54]: So, today what we’re gonna talk about is different high-leverage areas that bootstrappers should focus on. And I kind of came up with this idea because I’ve been personally buried with just tons of different things that need to be done, and what I’ve realized was that I was kind of going down the rabbit hole in certain places. So, I kind of took a step back and thought about what I should be doing versus where I am spending my time, because I track my time using RescueTime so I’m able to go back and see exactly what it is that I’m doing, and how much, and things like that. It seemed like kind of an appropriate topic to talk about and to share with people. I did a little bit of research when I was taking that step back, and so this is loosely based on an article from Fortune magazine which we’ll link up in the show notes. It talked about five different ways that CEOs should spend their time.
Rob [9:40]: And before we hit record, we talked a little bit about how really these five areas are aimed at more full-time bootstrappers who are trying to grow a business. So right now if you’re nights and weekends, or you have something that’s on autopilot, this probably isn’t gonna be as relevant. It’s more for people who are gonna be hiring some contractors, potentially employees, at some point and who are really thinking of building something that they want to grow and are investing in it. And you know, it’s funny, I’m not sure that it needs to be full-time, but it’s like if you’re hitting it hard and you’re investing time and money into it, and are heading for growth, I think this is gonna be in line with what you should be focusing on.
Mike [10:15]: Yeah. I think the other thing that factors into it is making sure that you’re spending time in the right places and you’re not overworking yourself. I think that that’s an easy trap to fall into if you’re doing something where it’s just taking and consuming a ton of your time and you don’t really have a lot of free time to do other things to kind of wind yourself down. And what I found was I was spending just vast amounts of time working on some of this stuff, and quite frankly some of it I just didn’t need to be doing. It was better left to other people. But at the same time there’s this core group of things that just needed to get done that I’m kind of the only person who could or should be doing those things, and it’s just a matter of balancing those things and making sure that not only do they get done, but I don’t burn myself out in the process.
So before we dive into these, one of the things that I wanted to point out is that I think that it’s a mistake to think that as a small company you can do everything right that the big companies get wrong. I remember years ago when I started my own company I looked around and said, “Well how are they still in business? How is it that they can sustain themselves when they do this laundry list of things wrong?” At the time I remember promising myself that I would never act like that and just drop things on the floor. And with time comes a little bit of wisdom, I suppose, and I’ve realized since then that it’s very difficult to not just drop some things. You can’t always move everything forward. You’re not always gonna be able to pay attention to the smallest details, and there’s gonna be things that get dropped. And that kind of goes along with this particular podcast episode, because there’s gonna be places where you should be spending your time, and then there’s gonna be places where they’re gonna be lower priority. You’re gonna have to neglect them a little bit. So with that said we’re gonna kind of dive into these five different areas. The first one is strategic planning. Under the umbrella of strategic planning this includes things like: your business roadmaps, your product roadmaps, the vision of where the company is going and how it’s going to get there. And along with those things you have to have at least an idea of what it is you’re trying to accomplish, and what the timelines associated with those are, because if you don’t plan those things out and figure out how you’re gonna get there then it’s gonna be difficult to achieve those goals.
Rob [12:21]: There’s a concept from the E-Myth where the author says that, “A technician thinks about today. The manager, who’s one step up, thinks about this week. And the entrepreneur thinks about this month, or this quarter.” That’s where this strategic planning comes in. You have to be thinking out three to six months, and thinking about what features are going to need to be built? What marketing approaches you’re going to need to take? Do you have the cash? Do you have the personnel – whether it’s contractors or full-timers. And really where is the whole space headed if you’re in a competitive area? How you’re going to react to things that other people do? I mean, there’s a lot to be thinking about in this kind of umbrella of strategic planning and vision, and no one else is going to do it. This is really a founder level responsibility, because everyone else is focused on getting stuff done day to day. And this is actually hard to do in the very early days when it’s just you, or you and one or two other people, because you are so focused. You are a technician, and manager, and the entrepreneur. And those are the hardest days in my opinion, because you’re just trying to get the support tickets responded to, and get the next feature built, and get the next page of documentation written. But as you’re able to fire yourself from some of those roles, meaning that you hire good people to take them over – so suddenly you’re not responding to the support emails, you’re not writing the KB articles. This is all stuff I was doing two and a half years ago as we launched Drip, and I’m not doing any of that anymore. Once you do that you find that you free up more mental space to start thinking strategically, and this is where you spend time taking in outside content basically. This is why I do listen to a lot of audio books and podcasts, and I keep up on what’s going on in the email marketing space and marketing automation and marketing technology in general. And I have time to do that because I’m able to essentially delegate all the tasks I used to do, kind of the technician and more hands on stuff. So, you have to make a decision here. If you want to stay small as a one or two person, and you want to keep writing code, that is totally cool. But you do need to fit some time in your week to do some strategic planning even at that level. Then if you do plan on getting bigger, and becoming, let’s say, five, ten employees, you will want to start to move back from some of the more hands on roles.
Mike [14:35]: And I think that’s a difficult line to draw in the sand, and you eluded to it early on when you said that in the early days you are acting as both the implementer and as the manager. And it’s very easy to get sucked into all the short-term stuff and ignore the longer term stuff, thinking “Oh, it’ll just sort itself out.” and you won’t need to think about it, especially if you do really well on all the short-term stuff. And that’s not the case. I mean, because there are definitely times where you need to take a step back and look up to look to figure out whether or not those short-term things that you’re working on are even relevant. Do they even need to be done? And sometimes they just don’t. Sometimes the things that you’re doing short-term make absolutely not difference whatsoever, and it is better to leave them alone and walk away and essentially let them fall on the floor and do something else, because it makes more strategic sense to go do something else. The second high leverage area is to focus on communicating. And there’s three different place where communicating is applicable. The first one is talking to your prospects. When you’re talking to people who are looking at purchasing your product, or using your product, they are going to give you an indication of where the market is headed and where things are trending. The second place where you should be communicating is with existing customers, because they’re going to give you an indication of where they’re at with their business and how you can better serve them in the future. Presumably, those customers are growing, and if you are able to grow your app and meet their needs in the future, then that means that your customer base and the relevance of your app to that customer base – whether they are small or as they are growing – is also going to increase. So, it essentially increases the breadth of people that your app is applicable to and gives you essentially a wider market that you can tap into. And then the third place where communicating is really important is communicating with your team. And that is to essentially make sure that they understand the vision of the product, the business, and where the company’s headed, how you intend to get there, and all the timeline things associated with it; the roadmaps, the goals, the milestones, etc. They need to understand what the priorities are for the business, and if you can’t communicate those things to them effectively, in a way that they are going to understand and be able to relate to, then it’s going to be very difficult to get them to all go in the same general direct. What you’re going to end up with is a lot of people who are either going off into the weeds, or are working on things that are simply not relevant, and you’re going to get frustrated. It’s very easy to assume that because you’ve been involved on all these conversations with customers and prospects and all the different people that you have working for you, that other people know those things. And that’s definitely not the case, especially if they’re sitting there, heads down, writing code, and they’re not talking to the customers. They’re essentially relying on you to relay that information, and if you’re not communicating it with them how could they possibly know that information? So, this is where communication with your team is just as important, if not more important, than communicating with your prospects and your customers.
Rob [17:25]: Yeah. That third part is about communicating your vision. It’s the vision of the company and where it’s going. And, like you said, what the timeline looks like. And I find that thinking out 90 days, in a pretty concrete manner, and kind of having a pretty set up roadmap of where we’re going, is a good place to start. Things change so quickly that past 90 days, for me, it’s always murky. And I know as you get larger, if you’re a 20 person company, you probably need a roadmap longer than that. So, at this point, with Drip, we have ten people working for us. A couple of them are part-time. But, still, a 90 timeline has been plenty. And looking out beyond that it gets a little murkier, but I do have bulleted lists of where I want to see the product going. And what’s interesting is Derek and I will talk about it and come up with what’s happening, and then we have a weekly team meeting where we’re able to communicate that to everybody and give them an idea. And I feel like since everyone is doing their day-to-day job, and they’re busy just cranking out content or doing demos or cranking out new features, they aren’t necessarily thinking about the higher level of like, “What are we building?” And that’s where, as a founder, you need to bring that up to the higher level and summarize it to people. Like, “Did you guys notice that all we’re doing right now is a bunch of UX stuff?” or, “All we’re doing is performance?” or, “We’re building this big feature that’s going to take three to four months.” And communicating it back to them in the way that you see it so that it can lend clarity to them and they don’t just feel like they’re doing all these little tasks, but there’s a higher level strategy to it. And I think there’s a lot to be said for that. And it doesn’t need to be some big leadership ra-ra thing at all. It can just be getting feedback from everybody about what they’re seeing, what they’re hearing from customers – because assuming you’re not the only person talking to customers – and then communicating back to them the current vision for the company. So I think as you get bigger – like say you were a 30 or a 40 person company – you’d split these roles, and the person who’s maybe hearing from prospects and customers would be like the CPO. I think the CEO needs to keep communicating to the team because it’s just so important to keep that ball rolling.
Mike [19:23]: The third area bootstrappers should focus on is researching and testing marketing channels, or at the very least finding ones that are working really well and then doubling down on them. And again, this goes back to what we had talked about very early on in the episode about how not every business needs to go through fast growth. Or some of them just simply aren’t capable of it. But if you are in that situation where you are trying to grow the business, what you’re doing today may not get you to where you need to be, or where you want to be. And some of these new sales channels are going to be very critical to growing your company. Another thing that you have to keep in mind is that not all of these channels that you’re currently using are infinitely scalable. And, in fact, some of them are just going to dry up or go away, because they were – not necessarily fads – but they were not sustainable channels. And that could be because the channel itself collapsed, or it could just be that you have grown enough to the point where the things that used to work in that particular channel simply aren’t moving the needle for your business anymore. So as you get larger a given channel may no longer work as well for you as it did in the past.
Rob [20:25]: Yup. Especially, I’d say early on until you have several employees, this is going to be your key driving factor, because finding good marketing people and someone who knows growth is very, very hard, and they’re very, very expensive. And they’re just a handful who are going to be able to drive this like you will be able to. It’s one of the most difficult roles to fill, I would say. And so, definitely researching and testing marketing channels. At least getting them to the point where they’re working, then you could hand them off to someone else. But this is going to be a critical growth lever in the early days.
Mike [20:57]: The fourth area is what I’m going to call “moving the furniture.” And this is based loosely on an article that Joel Spolsky wrote a long time ago about the fact that what he saw was that the job of management was essentially to remove obstacles from the path of developers so that they could get their work done. And I think that this applies to a bootstrapped company as well. As a manager, or as the founder, your job is to really do the same thing for not just the developers working for you, but also the other people who are working in your company. So whether they are on the marketing team, or you have hired somebody to do copywriting, your job is to essentially remove obstacles for them so that they can become more productive. And whether you perform those tasks yourself in order to remove the obstacles, or you empower them to remove the obstacles themselves, either way that has to be done. You don’t want to have people who are going to run into an obstacle and then either be really hampered in their ability to get work done, and not have any mechanism for taking care of it, or not have somebody that they can turn to to get those problems taken care of for them. I think “moving the furniture,” also applies to allowing your customers to use your product more effectively. And this goes back a little bit into communicating with your customers. But you want to identify ways to get them better results, and those better results are going to allow them to do their job more effectively, they’re going to make those people who are users look better to their existing employers, and essentially want to use your product more. And they will talk about it. So those are all things that fall under this umbrella of “moving the furniture.” It’s more about making sure that everybody on your team is operating it at as high a level as they possibly can, and at the same time still not burning themselves out while doing it.
Rob [22:37]: It’s a really interesting duality where you have to both be removing obstacles and making decisions, but also being able and willing to ask for help and delegate to your team. So you’re both taking things from them and giving them out. And that’s a struggle, I think, that might befall you in the early days; you think that removing obstacles involves you doing everything and taking everything onto your list, or you might over-delegate the other way and not be removing enough. And I think that the idea here of removing obstacles tends to be making decisions, setting game plans. It doesn’t tend to be, “Well, give me that. I’ll just write the copy.” or, “I’ll just write the code.” It’s not taking the task over, but it’s taking over the decision process. Or if there’s like a key intro that needs to be made that you have, or there’s some roadblock that really you’re going to be the best at fixing without actually doing all the technical work, that’s really what we’re talking about here. Other interesting thing is my dad was an electrician, and then he became a foreman, and over the years became a general foreman, and then he was a project manager. So he was just rising up. Then at some point he was an executive project manager managing multiple project managers. And what he told me – because I asked him “What’s the difference?” – and, a, he said being a foreman was the most fun because you had this small team and you could think just out a week, and you were really building stuff and it was so cool. He said the higher up that you go all you hear about are fires. You hear about all the things that are going wrong. Because when things are going right, everyone’s doing their job and they’re able to move forward, you’re only going to hear about the roadblocks. You’re only going to hear about the problems and the trouble. And so that take some getting used to, coming from being able to build stuff with your own two hands, to then making that mindset shift of your day is just basically filled with your good people not being able to overcome things. So there are always going to be challenging problems that are brought to you if you have built a good team. You’ve got to start to enter into that mindset as you move forward, because as you said “moving the furniture,” removing roadblocks, it’s not necessarily always an easy job, because you have to make decisions without complete information. And that’s perhaps the best description that I can think of of someone who’s running a team. You almost never have all the information you need to make the decision, and you just have to learn to make it so that people can move forward.
Mike [24:50]: And sometimes “moving the furniture” is as simple as just making sure that people don’t have to stop to come ask you for a decision. Sometimes you can just say, “Hey, if a decision needs to be made here, just go ahead and make it.” And I’ve actually found that with contractors they have a very hard time with this concept, because I don’t think that most of them are used to being trusted in such a way. Most of them want to stop what they’re doing if they get to a point where they don’t know how to proceed, and they will basically stop all work and come to you and say, “Hey, what do I do here?” And it’s like, “Well, just make a decision.” And you have to set that culture, that expectation, with them. And then another instance where I’ve run into this is where if somebody needs something, whether it’s a piece of software, or they want to purchase a service that will help make their lives easier and more productive, then just giving them access to the company credit card is a mechanism to prevent them from having to come ask you for permission to use it. And you just give them a blanket statement: “If it costs less than X dollars, just go ahead and do it, and then I will reimburse you for it.” So, if you don’t want to give them access to the credit card, you can just say, “Hey, I will reimburse you for anything up to $50 if you just decide to go do it.” So that’s another mechanism for handling that.
And the last area where bootstrappers should focus on is finding good talent. And I think finding good talent is probably one of the more difficult pieces out of all of these, because it’s not just you doing it. When it comes to doing a strategic planning or communicating, you’re the one who is essentially doing that work. You’re pushing out emails, you’re sending instant messages to people, or you’re having those meetings. When it comes to finding talent, essentially you are searching for other people and trying to identify whether or not they’re going to be a good fit for, not just you and the way that you manage people, but also for your team. And are they going to be a good fit to integrate with the team based on their own working style? And that can be very difficult to figure out. And there’s a couple of different aspects to it. One is how they have essentially gone through their career? What their career arc has looked like? Are they early on in their career? Are they much more entrenched in the things that they’ve done? Are they able to pick up new things or not? And another thing that I think most people don’t really think a lot about is whether or not the person you’re bringing on is for a short-term need or for a long-term need? And I think, depending on which of those two things you’re hiring for – whether you’re hiring a contractor because you have a very specific set of things that you need accomplished and you know that it’s probably going to be a short-term need that they’ll be there for two, three months and that’s it – or you want to try and identify somebody that you can keep around for the next two, three, or five years. Those are two entirely different situations, and depending on which one you’re trying to do, is going to influence a lot of the different ways that you handle that particular situation and you go through the hiring process. And the other flipside of that is being able to balance the talent that you’re hiring with the cash flow of the business, because you’re not always going to be in a position where you have the money on hand to be able to hire somebody. And there are going to be times, probably, where you have to hire somebody and you don’t quite have the money yet. So you might be operating at a little bit of a loss for the business. Which, I think for most bootstrap businesses is kind of unusual. When we put this list together one of the things that we thought about including was the idea of cash flow as an element of itself. But for a funded company that tends to be more of a focus of the CEO, because they’re operating at such a huge deficit every month or every year. With a bootstrap company you typically don’t do that because you don’t have a lot to work with to begin with. But, still, when you’re going out and you’re hiring somebody, you still have to make sure that you have the cash on hand, because the last thing you want to do is lure somebody away from their current job, hire them, and then have to let them go in three weeks because you made a bunch of mistakes in your own business. And it’s really not fair to make them pay the price for your mistakes. But, inevitably, that’s what’s going to happen if you don’t pay attention to your cash flow.
Rob [28:43]: Yeah. Hiring’s a big topic. Obviously we could dedicate a lot of time to it. But the bottom line is there’s a lot that plays into hiring. It’s hard to find good people. When you find them, keep them around. The best folks that I’ve worked with I plan to work with for many, many years. And I think it’s interesting you brought up the cash flow aspect of it, because as a bootstrapper you do need to be careful. It’s pretty easy to hire ahead of cash flow and to suddenly have some bill that comes up. Like tax day comes and you get a bill for 20 grand or something that you didn’t count on, and suddenly you could find yourself in a pretty tough position. If you’ve hired right up to the point where- think about your revenue – if you’re making 20, 30 grand a month in revenue and you hire right up to that point, it can be tough if you do get any type of unexpected occurrence and you don’t have a backstop. Because you really don’t want to be laying people off, especially in the early days, because it’s stressful. So this is definitely one of the things that you’re going to need to spend a lot of time on, and it’s something that I have never seen delegated well. As the founder, as the bootstrapper, trying to delegate this to someone else I think would be a real mistake.
So to recap, our five high leverage areas bootstrappers should focus on are, number one, strategic planning; number two, communicating; number three, researching and testing marketing channels; number four, “moving the furniture”; number five, finding good talent. 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 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.
