Show Notes
- Thomas’ company, FE International
- Thomas’ guest post on Rob’s blog on how to build a SaaS business you can sell
- The post Thomas referenced on how to value an online business
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us Mike and I discuss how to sell a web application with guest Thomas Smale. This is Start-ups for the Rest of Us, episode 197.
[00:09] Music
[00:17] Rob: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products, whether you build your first product or you’re just thinking about it. I’m Rob.
[00:26] Mike: And I’m Mike
[00:27] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
[00:31] Mike: Just before we got on this podcast I was interviewing somebody on oDesk to hire them to do some development on AuditShark. Get to the end of the interview and I was like, “Okay. So explain this all to you. Do you have any questions for me?” “No, no questions.” “Is this something that you’re interested in?” and he’s like, “Well, not really.”
[00:49] Rob: Wow, so he just turned it down?
[00:51] Mike: I hadn’t even gotten to the point where I was actually selecting a candidate, but yeah. He just said, “Yeah, it just sounds like I’m not really interested in doing the work that you want.” I’m like, “Alright.”
[00:58] Rob: Saves you time.
[00:59] Mike: Normally there’s people who’d be upset over that, but I was just like, “Man, thank you so much for saying you’re not interested, because you just saved me so much time and effort that I probably would have had to sink into this ongoing relationship.” I’m thankful he was upfront and just said, “Yeah, I’m not interested.” Move on.
[01:13] Rob: Rather than leading you on and then dropping off the map and not responding to your emails, you know, which is typically what happens.
[01:19] Mike: So I’ve learned to start asking that question though, because it really helps weed people out. Because if they’re not interested, that’s fine.
[01:26] Rob: Right. So Drip 2.0 is what I’m calling it. That’s all launched now, and that’s basically Drip with all the light-weight marketing automation built in. So Drip is now becoming a tool that is, I’m considering it it’s like an above MailChimp and Aweber in terms of power, and it’s below the Infusionsoft and the OfficeAutopilots. It’s gotten a lot of really good publicity. I published a couple blog posts in the past week.
[01:50] One on the Drip blog that’s about how marketing automation is the future of email marketing, and the other one that I was surprised as much uptake it got is called the Biggest Gamble of Your Career. It’s over on softwarebyrob.com. It’s the first real blog post that I’ve done on my journey, because I tend to now document what I’m doing on this podcast. I really stopped blogging like I used to maybe 18 months ago, two years, I really slowed it down.
[02:13] This is kind of the first revealing of what’s been going on behind the scenes that I’ve done in a long time, and it sure seemed to strike a nerve with folks. It got a lot of shares and sent quite a lot of interested folks to try out Drip, so it feels really good. I mean this is something we’ve been working on since January, and finally to get it live last month and then really be able to start promoting it. Feels like we’ve hit another milestone with Drip.
[02:36] Mike: Very cool. What else you got going on?
[02:38] Rob: We got a tweet from My Egg Noodles, and he says, “A question I’d love to see you address on your podcast. Should your first hire focus on sales or marketing, or on product? The founder is comfortable with both. It would be good to get your thoughts on all product types.” What do you think about that?
[02:54] Mike: Well, I guess it depends on whether you’re- by comfortable, what does that really mean? Are you much better at one or the other? I think I’d look for the things that you procrastinate on doing and find somebody to do those.
[03:06] Rob: That’s a good way to look at it. The other thing- the other it depends is how far along is your app? Because some apps, or products as he said, because it may not necessarily be software, some products they become done. They become mature after a while. They may only be a single feature, and they just do it really well, and you don’t need to build much else. So if you hit that point then there’s really not a lot of ongoing development on it, whereas other products become more complicated and you branch into new audiences and they need a lot of development.
[03:37] I think if you’re in a market where you have competitors, and you’re trying to stay ahead of them in terms of product development, or you just know you have a lot feature requests from serious customers and you need to build a lot of stuff, I would have to say that I would lean towards hiring someone to do product while the founder does the sales and marketing. Of course it’s not the case in every case. I think like with HitTail, as an example, after I fixed a bunch of bugs couple years ago after I first acquired it, it didn’t need a ton of new features. So if I would have hired anyone, it would have been sales and marketing, because it just didn’t have that dire need of product development. I think product development for product development’s sake is a big mistake that some founders make. They just want to build more features because, well, that’s what we do, right? We’re creators, and a lot of times if you’re satisfying a market and you have that fit, you don’t necessarily need that new feature. It’s not actually going to move the needle for you at all.
[04:28] Mike: Yeah, I mean sometimes those new features can just cause more problems for you than anything else, because then it creates confusion over what the product does. I would almost say that in some ways MailChimp falls into this category for marketing automation. They’re great as an email service provider, but they came out with Mandrill, I think it was, for sending out transactional emails, and I never even looked at it, because I knew that I was just like, “Oh, well it’s MailChimp. That’s what they do is they do mass emails.” So it wasn’t to me their core focus. They may very well do it perfectly fine and maybe even better than other people at it, but I never even gave them a second look because that’s not what I knew them for.
[05:08] Music
[05:11] Rob: Today we interviewed Thomas Smale. He’s a website broker who runs FE International. Very pleased today to have Thomas Smale with us on the line. Thomas, thanks so much for staying up late there in the UK to join us on the podcast.
[05:26] Thomas: Yeah, hey. Thanks so much.
[05:27] Rob: So Thomas is a website broker. He runs FE International. They broker the purchases and sales of SaaS apps, downloadable software, WordPress plugins. Thomas, I’m assuming you also do niche sites, e-commerce, the whole gamut of web properties. Is that right?
[05:46] Thomas: Yeah we do all sorts if it’s online, we’ll do it. But we’ve done quite a lot of SaaS related apps recently.
[05:52] Rob: I really like the way Thomas operates. He’s very knowledgeable in terms of the buying and selling process. I like that he’s, unlike some other brokers that I’ve dealt with, he is very upfront with his thoughts and just seem to be very knowledgeable when I’ve dealt with him. I have looked at a few things that he’s had for sale. I haven’t acquired anything recently. I’ve also referred a few friends of the show will email and say, “Hey, I’m in a… and I need to sell an app. What should I do?” and I typically refer them over to Thomas, just because I do trust that he’s going to handle everybody with kid gloves. So that’s why I wanted to have him on was to lend deeper insight, because though I’ve bought and sold a lot of apps and sites over the past several years, Thomas does this every day, and he has a company with six employees. Thomas you said you have six employees in London alone. Tell us where you have offices now.
[06:38] Thomas: Yes, we’ve got an office in London. We’ve got a couple of guys who work out of Europe. They work from home. We’ve got a small office in San Diego, and we’re also in the process of setting up an office in Boston. So there’s eight, nine of us at the moment, and we’re kind of actively hiring probably to fifteen within the next six months or so.
[06:57] Rob: Right, so you’re still quite a bit- I mean, you’re a start-up.
[06:59] Thomas: I guess with an advisory business you don’t necessarily need tons of staff. It’s more of a high-end service, I guess, rather than man-hours.
[07:09] Rob: Right. I kind of want to limit the conversation since our audience tends to focus on software. Like talk about SaaS, downloadable software, WordPress plugins, add-ons, that type of thing and not talk so much about e-commerce, niche sites and info products. I’d like to take it from a couple perspectives. I think we’ll start off with someone who is thinking about selling an app, because I get so many more of those requests than I do of people who are thinking about buying apps. But I think I’d like to maybe start off with, I guess, your credentials in terms of like, how many apps do you broker in a year buying and selling? Or how many total have you brokered? What numbers do you have to give us an idea of your experience level?
[07:48] Thomas: Yeah, sure. We’ve been around around four years now. I think the company’s been focused on brokerage for the last two, at least, maybe three. I’ve always brokered prior to that, and currently we also run a few of our own sites. I’ve run software products apps myself, so kind of got a wide range of experience. In terms of deal experience, last year I believe we did 78 transactions, but I’m generally speaking the size of those should be anywhere from 20, 30 thousand all the way up to the low 7 figure range. This year-to-date I believe we’ve done around 40 sales, total volume around 4 million. So we’re probably tracking by the end of the year 7, 8 million in sales, maybe 10, depending on how we get on. Then I would say of that 25 to 35% would be SaaS or apps, or whatever, and then the rest is quite evenly distributed across niche sites and e-commerce. So I’d probably say 20 apps a year.
[08:50] Rob: Couple apps a month, which is quite a bit a volume, because, you know, when I first got into this buying and selling I felt like, “Oh, this is such a liquid market, and there’s all this stuff moving all the time.” But there really aren’t that many sales when you get up above the $20,000 range.
[09:03] Thomas: Yeah, certainly when it comes to apps. I know across, well we were speaking just before the show about the other brokers out there, there aren’t all that many established brokers in the space we operate would be 50,000 to a million is 95% of our business and the same for other business brokers in the space. I know that we, of all the businesses we do, we are quite specialist in apps, so the market really isn’t that liquid, especially when it comes to brokerage sales, whether there’s a bigger market privately, I don’t know. But I would certainly say you’re correct in saying that there’s not hundreds of thousands of apps selling every year, especially through brokers.
[09:42] Rob: Which side is weaker, the demand or the supply side? Meaning are there a lot of apps out there and not enough buyers, or there a lot of buyers and not enough apps?
[09:50] Thomas: Yeah, I would definitely say, especially in the last twelve months or so, we’ve seen a lot of demand for- with buyers that is- for apps, especially SaaS in particular, and there’s a recurring element popular with buyers, I guess that the cash flow is slightly easier to predict. Macro tend to kind of if you go up to being, it’s like public companies and SaaS companies are trading at high multiples, so I guess it’s attracting people down the scale. I guess on the supply side there is certainly a lack of quality supply. There’s certainly supply there, but whether or not there any good or not is kind of a different matter. I think my reasoning on there not being that many is there’s a little bit of a grey area between- our average business will have anywhere from 100,000 to, say, 2 million a year in revenue, which is a kind of area that attracts a broker is too small for a merger and acquisition, small advisory firm.
[10:43] Anything smaller than that, it’s just not really big enough for a broker by the time you’ve gone through the process. As soon as you’ve got anything off the ground, once you start scaling through the process you can get to the stage where you might be looking to raise funding. So maybe as soon as you hit, say, a million dollars in revenue you might want to start raising funding. I think a lot of people as well, if you get to the stage where you’re making, let’s say, a couple of hundred thousand a year net, the exit isn’t always necessarily that attractive, because you tend to find with SaaS or software products in particular there’s a lot of burden on development up front. You can put two years into development before it’s even ready to go. So actually letting go of it- if you compare it to a niche site, where you might put 50 pages of content, build some links, and then it could be quite profitable, certainly wouldn’t really require any upfront work. It’s quite hard to let a business go for three times multiple, or whatever they’re selling for.
[11:37] So overall there’s definitely some solid and strong consistent buyer demand, and it think increasing as well. But then on the sales side there’s definitely a lack of quality supply. There’s certainly out there people looking to sell apps, but they might not be profitable, and that’s not really what I deal with. There may well be a more liquid market lower end, kind of a starter pathway. Where you’ve built the software, but it’s not profitable yet.
[12:02] Mike: It seems like there would be this large number of people who build an app, but they don’t really have an audience or they’re not able to get the sales, so they’ve got almost nothing to show for it. There’s no revenue there, so as you said, it’s not attractive to a broker. But if they can get things rolling, if it is a SaaS app and they’re able to get to a certain point it seems like if they’re able to 100, 200 thousand dollars a year in revenue then the inclination for people would be to grow that as high as they possibly can, which may very well take it kind of out of that brokerage space. I wonder if that’s some of the issue that you’re running into there.
[12:34] Thomas: Yeah, exactly. That some of what I was trying to explain. I think you get to a little bit of a grey area where it’s sort of a smaller, not profitable, so a least for a broker it’s not particularly attractive. And then beyond that, if you’re growing year on year and the business is going well why sell? Probably the most common reason we’ve seen people sell perfectly profitable businesses lately, I’d say the first reason would be the general time of commitment. They might have a full-time job, they might have another business, or they got other personal issue, whatever you want to call it. Then the other one, which is quite common, especially with people with a technical background, is they get it to a certain level, we tend to see maybe 100 to 500 thousand in revenue, so not insignificant, but not multimillion dollar exit stage. But because they have a software, financial background they don’t have that sales ability, so pushing it beyond the initial 100 to 200 customers is beyond their expertise, and you’re in that little bit of a grey area outside the “sell it” or “figure out a way to sell”. For a lot of people, especially technical founders, they tend to find that selling it and then starting something new is what they prefer to do.
[13:42] Rob: Yeah. That’s interesting. There’s a couple points that you raised that I’d like to touch on. One is you mention valuations. You mentioned like a 3 X valuation. Talk us through what types of valuations you see things selling at, and that includes- I’m actually interested to hear the difference between the SaaS and software stuff versus the e-commerce and niche side and info product stuff.
[14:02] Thomas: Yeah, so valuation is, especially from the broker side, is one of those consistently debated topics. We do enough sales now that I’ve got a pretty good grasp on valuation of where business come in. Generally speaking, this is where a lot of confusion, because a lot of brokers or individuals do it in a different way, but generally a business is sold on a multiple of- this is a small business, whereas you get larger you tend to have a multiple of EBITDAR, which is a slightly different calculation. But for small businesses, so if you’re going for a business broker sub 2 or 3 million, it’s generally a multiple of SD or SDC, which is Seller Discretionary Earnings or Discretionary Cash-flow.
[14:41] That is effectively a calculation of the net profit of the business. So taking into account all your revenue and then take off your operating expenses and everything like that. Then you add back, which is kind of a financial way of representing how much the earner’s benefiting from the business, you add back in what the earner’s getting paid. So let’s say you have 500,000 a year in revenue, and then you’ve got 200,000 a year in costs. That might be payment processer, hosting, affiliates, refunds. Then you pay yourself 200,000 a year as an owner. That then get added back so the actual profit is higher than whatever. So obviously with a small business, generally speaking, again I’m not a tax accountant or a lawyer, but generally speaking the administer made the business look the least amount profitable as possible when it comes to taxes.
[15:29] So owners tend to pay themselves more than they need to, or they will takes some benefits in the business. So you might if you’re 500,000 take off 300,000 in genuine costs so you get to a net of 200,000, but also 300,000 in costs 100,000 is your own pay, your insurance, your car, so it increases to 300,000 in that case. That’s your baseline number, and that’s generally where, at least a good broker, should help you wouldn’t expect to do that calculation yourself. Generally you’d expect to send your broker your profit and loss account, whether that’s QuickBooks or whatever accounting you use, especially you’ve got bigger sidings at least 100,000 in revenue you would hope you’re doing your account properly in that respect. Then from there, you have the financials, which is obviously number one variable is your underlying SD number or the SDC, or whatever. Then that is multiplied by a number, and that number is determined by- the main factors would the sustainability of the business, so is it growing? Is it in decline? As a rule of thumb if the business is in decline you’d expect to get a lower multiple than a business that’s growing.
[16:39] Is the business really hands-on and personalized? So if I owned thomassmale.com and thomassmale.com was a software product that let people sell their businesses in an easier way, than that’s going to be a lot harder to sell than if I had sellmybusiness.com, which is a software product not attached to me about selling a business. So if there’s a personalized element to it, it can be a little bit more difficult, or if it’s got any particular alliance. So especially with technical founders you tend to find they are the ones doing all the programming, so if they developed it all themselves and there’s no backup program or thing like that, then that can restrict the multiple.
[17:15] Although I’ve certainly seen recently that’s becoming less of an issues, and the kind of buyers we’re seeing at least, tend to be quite happy with the technical burden, and they tend to know what they’re doing on that front. We would come to that as a broker, I would come to the multiple number. You certainly wouldn’t expect to do that yourself, and if you are hiring a broker it’s certainly worth asking around and making sure that whatever valuation you’re given is actually based on some form of precedent. The number we use is based on sales we’ve done, so we have an internal database for the deals we have done, and we track all the different variable in that deal to figure out what the multiple’s going to be. It’s a somewhat scientific approach, yet with a little bit of gut feeling. It might be I think it’s worth 3 times the SD number, but expect to be offered 2.5 times, for whatever reason, or maybe expect the cash-down number to be a 2 times level. We do it based off the transactions we’ve done recently. There are other methodologies. I just tend to find that I like to be honest to people and give them a number I actually think it’s going to sell at. There’s no point in quoting a number that I’ve never seen before. Then when you actually get to the number itself, I mean it’s very difficult to give it a blanket multiple, because it really does depend on the business. But all variables being equal with SaaS app, recently we’ve been seeing multiples of almost exactly 3 times, very rarely goes much above that, and it rarely goes below that.
[18:44] In the range of, say, 2 and a half to 3 times, and that’s of the SD number. What a lot of people don’t realize is that you do add back your own salary, so a lot of people think their business isn’t actually profitable, then their net might actually be zero, but they pay themselves 200,000 a year. So that business could actually be worth 600,000. One thing that some people get a little bit confused with, a bit of a misconception, is that any kind of underlying IP doesn’t add value, it’s literally just a multiple of your SD, SDC number. If you’ve got just any sort of IP generally does not add any value at all. A lot of people think you can take a multiple and then go, “Oh yeah, and the software source code is worth 100,000, the domain is worth 50,000.” I have seen people try that methodology, but in my experience that’s not how buyers work, at least.
[19:31] Rob: Right. Yeah, that’s something I’ve been trying to explain to people for a long, long time, because back in- as I started acquiring stuff in 2007, 8, and 9 is really when I started diving into it, quickly realized that money talks. Right? It’s the revenue, it’s the net profit that really speaks to it. As developers we might spend six months of our nights and weekends and then feel like we have something that’s worth something, and unfortunately, until you hit a point where you’re actually making a profit, it’s not. What I find interesting is I’ve- historically when people ask, “What’s the range of what a SaaS app or downloadable software might sell for?” and this is over the past several years, I always say between 1 and 3 X. 1 and 3 times net profit is what I’d say. I find it interesting that it’s up closer to 3. That actually feels like a decent multiple. That’s not a bad amount of money to get for your app.
[20:20] Thomas: Yeah, I mean one caviat I’d say is- I guess as far as brokers go, we’re very fussy what we take on. I like to keep a success rate that’s almost 100%. It’s very rare for us to take on something that doesn’t sell. So generally speaking, we’re not going to be talking on the lower quality apps that might sell for 1 time. There certainly are apps out there that would sell for 1 times, but that just wouldn’t be through us. I guess we’re somewhat spoiled in that anything we do list is going to be good quality, and it’s in our best interests obviously. Good buyers want to buy good businesses. It’s not to say that they don’t sell for 1 time to 1 and a half times, but if you sell in the right place, we generally expect to get 2 and a half to 3 times of all the verticals we look at. When we’re looking through our present transactions- we put together a blog post recently on comparables, so niche sites, e-commerce sites, service-based businesses, SaaS apps, are the highest multiples of all the different verticals we sell. We’ve got a reasonably good sample size, so I say that that with a high degree of confidence.
[21:22] Butmy thought on that is mainly because the recurring revenue factor, I think especially for buyers who are new to the space, if you’re looking at a worst case scenario and you’ve got the recurring revenues in there, even if you can’t grow the business at all, you’re still going to get a returner investment after X number of years just from the current clients, minus the churn. Whereas if you buy a niche sit that has all it’s traffic from search engines and it just relies on 50 articles, if your ranking drops, say, 50% overnight, you get hit by a Panda update or a Penguin update, or whatever, might even drop more than that. You’re then pretty much down to zero. Whereas at least for SaaS you’ve always got that client baseline. I’m borrowing any technical disasters, and assuming the quality is decent you should get quite a decent ROI without even having to grow it.
[22:10] Rob: Right. Your blog is at feinternation.com/blog and we’ll link that up in the show notes, because it’s a very in-depth article. I actually tweeted it when it came out, and it got a lot of attention on Twitter, because you do have data, right? You have data that nobody else does.
[22:27] Thomas: Yeah, it’s based off our data. Other brokers with other people might have different experiences, but that’s based on our internal data. Like I said, I think we’ve done enough sales that we have quite a high degree of confidence in that.
[22:38] Rob: Yeah, it’s kind of cool you have an example. You have a travel blog that sold at 1.5 X. You have photography software that sold at 3.7 X. Do you have multiples here based on category?
[22:49] Thomas: No, we don’t publish the multiples. What we published was an index, just because the multiples [crosstalk] don’t like to publicize, because if I started saying every SaaS business will sell at 3 times, and then I speak to someone and it’s actually worth 2 times because the product is their name and it’s on a bit of decline then it becomes a little bit of an issue. So we’ve used an index, and if you look at the index you can see that SaaS sells the highest.
[23:13] Rob: SaaS is highest. E-commerce is just below it. Membership and subscriptions is very close to e-commerce. Then you have content and media, which I’m assuming is like blogs and –
[23:23] Thomas: Yeah, and niche sites.
[23:24] Rob: Niche sites. Okay, and then lead gen is below that.
[23:25] Thomas: Yeah, one caveat is you have with that is, obviously, we’ve had to categorize it into the different things, and there is some crossover. But the way it’s categorized, if you read the post, kind of hopefully should make sense.
[23:36] Rob: Sure.
[23:38] Mike: So one of the things that you mentioned is the low-quality apps that people have. Obviously you’ve touched on a couple of different things as to why it would kind of drive the multiple down. What sorts of things should people address to help clean up their app if they’re looking to sell it, because obviously you want to sell it at the best possible rate that you can? So what are some of the things that people can, essentially, focus their efforts on to help improve the amount of money that they’re going to get from selling their app?
[24:04] Thomas: Yeah, that’s a good question. That’s actually, I don’t know if all of you read Rob’s blog, but that’s what I guest posted about a few months ago over there. It’s actually what I spend a lot of my time doing. I tend to be a first protocol for sellers when they come in the door inquiring about selling their business, so I like to spend a lot of time dealing with people who want to sell but aren’t necessarily quite ready. I might help them put together a plan for making it more sellable. I’m not necessarily going to sit there on the phones trying to sell more product for them, but I help them in getting to a position where it’s sellable. If you go through some of the key points, there’s actually tons of different things you can do, but if you want to focus on a few, the first one is transferability, how transferrable is everything. For example, payment processor, you can to go really down to the technical side of code, so if you’re a technical founder. You built it all yourself, you might have taught yourself programming, if you haven’t documented your code properly then that’s going to be difficult to transfer.
[25:03] Again, that’s the whole personalized side of things. If you’ve got your name all over it then it’s going to be a little bit harder to sell, and so look to depersonalize. We’ve done a few sales recently where people might get a lot of sales from their own blog or their own reputation, or whatever, so that’s something that will be into consideration when it comes to multiple. So depersonalize it as much as you can. Make sure if things transferrable so payment process kind of keep it clean. Try and keep the business consistent. A lot of people have this misconception that when you’re coming up to sale because your underlying net number is the most important, they try and bump it with fire sales, or trying to sell a load of annual subscriptions, or anything like that. So the actually worst thing you can do prior to sale is sell everybody on a 3 year subscription, because obviously when the buyer takes it over that’s not cash-flow they’re going to benefit from, and you tend to be expected to rebate that. So try and avoid selling really long annual subscriptions, because it can quite problematic, and just try and keep the business consistent. It’s good to see a business is on a general incline, but you don’t want to see anything that’s drastically jumped up. It just looks suspicious, and it’s very rare for that to be genuine.
[26:14] And vice versa don’t do anything stupid that will lose revenue. So if you’ve been meaning to do anything for a while, get it out the way. Just don’t try and sell it in a period when you’re in the middle of redesigning, or anything like that. Probably one of the biggest headaches for brokers is general documentation. When it comes to accounts, make sure your accounts in line. Ideally have them- something like QuickBooks or something similar. Hopefully you’ve got an accountant, or whatever, who can help you prepare those. Having your books in order is absolutely essential. We certainly don’t take on anything if you can’t provide accounts, and if you can’t prove those numbers. There’s no point in saying, “Hey, Oh! I make a million dollars a year.” But you can only prove 500,000. So make sure you can prove it all. Make sure it’s properly documented in an easy-to-understand way. It’s easier for a broker and easier for a buyer to understand if you’ve kept clean records. Then keep track of all your data, it’s something that you tend to find technical founders are quite good at. They might struggle on the sales side, if I’m making generalizations, but on the flip side when it comes to general data and metric tracking, they tend to be quite good. Simple things, like make sure you’ve got Google analytics on the site, or whatever analytics you want to use.
[27:24] Make sure you track conversions, track goals, track your financials properly, like what I was just saying, and track all your metrics. This is something that quite a few, especially smaller apps don’t seem to do, and that’s make sure you track your things like- a buyer will always want to know- we tend to provide a table, almost a page of general questions people are going to ask, particularly about SaaS businesses. That’s just basic things like know what your churn rate is, know what your customer lifetime value is, how long does the customer stay in months. There’s absolutely tons of things in there. Make sure you know. This is where a business that is a little bit older helps. If you’ve got a business that’s only 6 months old, it’s impossible for you to know lifetime value of your client. You got no idea how long anyone stays around. So the older it is and the more dates you’ve got the more likely you are to get a higher multiple, because it’s a little bit more predictable. You don’t necessarily need to be able to calculate that number yourself, but at least be able to provide that data to the broker.
[28:23] We spend a lot of time playing around with Excel, trying to like figure out these numbers, but it’s definitely important you can at least provide it. So don’t necessarily worry if you can’t work it out yourself, but track everything, and generally just try and be as transparent as possible. Don’t hold things back or try and hide things, because that really is something that can completely kill a sale. Probably the number one reason don’t sell is because its been so misrepresented. If you’re honest and upfront with the broker or with the buyer or whoever, you can generally find creative ways around problems. But if you try and hide things, that’s probably the number one reason it’s not going to sell.
[28:58] Rob: I like one of the other points you mentioned in that blog post on my blog was to build and utilize a mailing list. Since I own Drip, which is obviously a mailing list manager, I thought that was an interesting point. Having a mailing list is- I know it’s an asset, right? I’ve banked a lot on newsletters and having a list of folks over the years, but I guess I hadn’t thought that a potential buyer would necessarily value that.
[29:24] Thomas: Yeah, a mailing list can be quite a valuable asset. When you’re looking at mailing lists in general, just any sustainable part of the business, people say whether that’s a mailing list, whether it’s, I don’t know, say, a weekly webinar with your subscribers. Anything that kind of keeps people coming back or provides a sales funnel, so when it comes to mailing lists if you do a free trial, or whatever, if you’ve got a great process in place to convert people from a free trial to a paid account then that’s great. Whether that’s through a mailing list, whether it’s through webinars, whether it’s through telly sales, or whatever, just have things sustainable. I mentioned mailing lists as something that most people have but don’t really use very well. It’s surprising how many people have thousands of customers, but they’ve never emailed them. So even if you’re not the best salesman in the world at least email them once a month, even if you’re just linking out to general industry news, because people- buyers especially- if you’ve got an active mailing list it tends to be a positive signal that the product’s good. I would always be a little suspicious as a buyer if you say, “Hey, look. Yeah, everyone loves the product. We got a thousand customers, and they all love it.” But no one speaks to you, no one replies, you don’t email them. That’s where you can kind of get a few difficulties.
[30:34] Mike: So Thomas, when people are going through this process, roughly how long does it take to broker a sale, between the time that somebody first talks to you and the time that the application, or the product, is actually sold to a buyer?
[30:47] Thomas: The biggest headaches for me is that the actual process can be all over the place. So we’ve split into two parts, getting it ready for sale is where there’s all sorts of variants. It could be, if everything’s in order, and people have hopefully read that post I’ve put on Rob’s blog, and they’ve got everything in order it can take us two weeks to prep. Quite often people will come to me, and it might not be ready to sell at all, and there might be a two year gap. I was speaking to people four years ago who are coming back now saying, “Hey, look. I’ve gotten everything you’ve said.” Once you’re at the stage that it is sellable, so we’ll make that assumption, it generally takes us with SaaS businesses usually two weeks to prepare everything, so getting through the financials and getting through some initial questions, so like a kind of discovery phase. I tend to say to people, “We’ll work as fast as you do.” So if you provide everything, get through all the basic due diligence process before we list anything. So generally two weeks to get it to the sell stage.
[31:41] Depending on the size of it, how quickly you get offers kind of really depends where you sell. We would expect to see offers come in, assuming it’s not a huge business where they can take a little bit longer, you’d expect to see some offers within the first month. You’d generally expect to accept an offer by the end of month 2. That’s why there’s quite a big range. Sometimes you could get an offer within a week, other times it might take 6 weeks. The process from there, so let’s assume you’ve got an offer and taken it to the next stage, assuming you’ve qualified the buyer properly, or your broker has hopefully qualified the buyer properly to make sure they can actually complete on the sale, they’ve got the cash.
[32:20] They’re not going to run off scared or anything. You then get to a due diligence phase, which for, let’s say a $300,000 business, you would expect that to take 3 to 4 weeks, maybe a little bit less. It depends, again, on how well documented you are, and that’s just things like verifying your income, verifying your traffic, verifying your metrics, verifying your code base. All those kind of things, so expect due diligence to take 3 weeks, 4 weeks. It can be a lot quicker, but it’s definitely not a stage of the transaction you want to rush. Then from there you get into contract negotiations and hopefully if you’ve done everything properly, the vast majority of the major terms will be outlined in the initial LOI, which is a Letter of Intent, we use as kind of a formal offer. So you submit an LOI and then it’d be accepted as an offer, and this is where we would- we got an internal team full of legal experience who would draft a purchase agreement. Then we’re not lawyers, and you certainly not rely on your broker to say the contract is fine. Always speak to an independent legal, and then however long that takes. Generally not too long. We’ll get contracts out pretty quickly, depending on the complexity of it. Obviously some contracts can take longer than others. Assuming the broker’s done their job properly up-front, that process shouldn’t take too long. The transfer process with SaaS businesses, they tend to be one of the longest in terms of transfer time, just because they can be quite complicated. You’ve got recurring subscriptions in there, so sometimes it can take some time to transfer the payment process to get up to speed with everything.
[33:50] But that process, on average, I would say 2 weeks, and then from there you would obviously at that stage hopefully get paid. Then there’s generally going to be a support period. My general rule of thumb is 3 months, especially with technical SaaS products in the 6-figure range, but that’s really something that’s negotiated up-front. Generally you wouldn’t want to stay along much longer than that for free. It’s quite common to negotiate in a consulting period, be on that at a fixed rate. If you’re a technical founder you might agree to an hourly rate for technical work. You might say, “Hey, look. I want to sell the business because I haven’t got any time, but I’ll happily commit to coding future features for you at 100 bucks an hour.” So hopefully that’s sort of agreed up-front. The process on average is 3 to 4 months, but that’s a realistic average if you want to do everything properly. It certainly can be done quicker, but we tend to find that if we stick to a consistent process there are no nasty surprises along the way, which can happen if you try and rush it through in, say, 2 weeks.
[34:48] Mike: So it sounds like 6 months is really not all that bad, considering you hear about some of these larger acquisitions for multiple millions of dollars, and they take a year at least, sometimes 2 to figure out before it even comes to the public.
[35:02] Thomas: Yeah, absolutely. We would generally hope to get it sold quick in the 6 months, but if you bank for 6 months, that should be more than reasonable. I tend to say to people if that hasn’t sold in that time, which is quite rare with how fussy I am, but if something hasn’t sold in that time, it’s probably not going to sell at all, at least through that particular broker or sales channel.
[35:21] Rob: Very cool. Really appreciate your time today, Thomas. Where can folks get in touch with you if they want to find you on the web?
[35:30] Thomas: Yeah, so if you can go direct to our website, you got feinternational.com we’ve got a blog that you mentioned which is forward slash blog. My direct email now is Thomas, T-H-O-M-A-S, at FE International, but then if you go on our site you’ll see pages if you want to buy a site, we’ve got pages there, sell a site, the same if you generally want to contact. But if you email me I’m always happy to help people if they’re looking to kind of prepare for a sale, whether it’s 6 months, 12 months down the line. There’s no obligation. I don’t charge for that initial advice, and I’m generally, I like to think, quite friendly and responsive.
[36:03] Rob: Indeed. That’s what I’ve enjoyed about you. You respond to email at odd times of the day because you work until late.
[36:11] Thomas: Yeah, tend to have quite an international client base. I guess one of the problems for being an entrepreneur is you tend to be available 24/7.
[36:17] Rob: Yep, exactly. Well thanks again for coming on, Thomas, and I hope some folks get in touch with you.
[36:23] Thomas: Yeah, thanks very much.
[36:24] Mike: If you have a question for us you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at questions at startupsfortherestofus.com. Our theme music is an excerpt from “We’re out of Control” by Moot used under creative commons. You can subscribe to us in iTunes by searching for startups, or by RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening, and we’ll see you next time.
Episode 196 | How to Use a VA in Your Startup
Show Notes
- Rob’s Drip Explainer Video for SaaS
- Rob’s Startup VA Course
- Episode 68: How to Hire and Manage a Virtual Assistant
- Tier 1 email support
- Chat support
- Filtering your email
- Calendar mgmt and appointment scheduling
- Travel arrangement or planning
- Data entry
- competitor research
- lead generation / prospect research
- transcribe audio or video
- (HT) article approval
- audio/video editing (screencast editing, marketing vs documentation)
- Publish audio/video to blog
- Blog publishing management
- Twitter/Facebook/social media presence
- Turn blog posts into emails
- moderate blog comments
- find images for blog posts
- slide presentations
- proofreading/editing
- checking voicemail
- sending client invoices
- Upload videos to youtube or other
- Create slideshare presentations
- Migrating from one software tool to another (MailChimp to Drip, InDinero to Outright)
- Member management for membership website
- Concierge service for your app (installing tracking code for free, 5-day email mini course compilation)
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I discuss how to use a VA in your start-up. This is Startups for the Rest of Us, episode 196.
[00:08] Music
[00:15] Rob: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:24] Mike: And I’m Mike.
[00:25] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
[00:30] Mike: I’m getting ready to go on vacation next week. It kind of sucks because I’ve got a new version of the website for AuditShark that kind of really focuses on the desktop edition that I want to push live; but I don’t really want to push it live and then go on vacation for a week.
[00:43] Rob: Yeah, and you could potentially introduce 404’s or introduce something that Google – if it misindexes it and you’re not there and you don’t notice it. Because anytime I push a new site live, I’m going to be in Webmaster Tools once a day, just to kind of give it a once over and be like do I have any errors going on or anything like that, so. I probably wouldn’t do it, either.
[01:01] Mike: The thing is my build process pushes everything to a development area and then if everything is okay it copies it over to production; and right now my development area is having DLL issues. It just can’t figure out what’s what. I’m concerned about fixing it and then pushing it over to the live server because who knows what the heck’s going to happen there.
[01:20] Rob: I have a couple updates. One is, you know, we’ve rewritten HitTail and Rails but namely I couldn’t find developers to do classic ASP; so I wound up doing all the changes. You don’t have time and so stuff that needed to get fixed wasn’t getting fixed because it would sit in my queue and I have, frankly, more important things to do. So, couldn’t find developers; the servers were expensive and now I have three Rails dev’s, so it just made sense. It took just about two months of code time to completely rewrite it in Rails, which I was pleased with, that was the estimate. Then it took about another three to four weeks of other detail stuff, like getting the migration going, because you remember the database is really high IO and it’s about 200 gigs in size, so very hard to move. You know you can’t just back it up and put it across the wire. What do you think the fastest way is? We literally spent probably two weeks trying all these different ways to move that across the wire because we didn’t want to put it on a hard drive and FedEx it again. So what do you think the fastest way is to accomplish that?
[02:23] Mike: Do you have to move everything over, all at the same time? Is that the issue?
[02:27] Rob: Yeah. We do. We did it last night. So, yeah, we had about, let’s say a 10-hour window to move it all.
[02:33] Mike: I don’t know what you actually did. I probably would have thought about maybe writing some sort of little extension or something like that that runs on the current server so that you could call to it from the other one and make your queries from there, until you get all the data moved over.
[02:47] Rob: Yeah.
[02:48] Mike: That’s probably what I would have tried. I don’t know how well it would have worked, though, because you are using ASP. You probably could have thrown like a .net handler or something like that on there and it probably wouldn’t have been a big deal.
[02:57] Rob: We tried that. Yeah, we did that.
[02:58] Mike: Did you?
[02:59] Rob: We did that. And I did it in .net. Yeah, essentially that and it wasn’t fast enough, but that was the first thing we tried as well. We started doing exports and trying to figure out a way to get the data out because the biggest bulk of the 200 gigs is indexes, and it’s all the stuff that comes with the database and since we’re moving it from SQL Server into PostGres, you don’t need that, right? You’re not just going to copy it across and restore it. You just need the data out of it so we tried the remote copy, like you said, across the wire. Then I started writing a little thing to basically do a dump of insert statements, kind of like when you do a MySQL dump, how it just writes out insert statements into a text file? I did that and there’s about 180 million rows in one of the tables so we did that and tried to break it up into 10 million rows at a time and then Zip those files and then FTP them and then import them and that was taking a really long time to run so we kept honing on that and in the end we found that the biggest hang up was on the insert side, right? Inserting into PostGres, not actually getting it out of the database. So we found out that PostGres has just a basic copy to function, right? So it’s just a bulk import and you have to put it in a certain CSV format and in the end that was it. The end file for the biggest table was 150 million rows in CSV file,15 gigs CSV, and the punch line is that Zipping it would have taken longer than just copying it across the wire because the connection between Amazon EC2 and our old host was so fast, because they’re both in Virginia and they must both be on trunk lines. It took like six minutes to copy a 15 gig file across. So it’s crazy. So we didn’t even have to zip it and then it took 30 minutes to copy it in. So, it was cool.
[04:42] Mike: Interesting. Yeah, I know that if you’re inserting into a transactional database and if you can get away without the indexes, then you’re golden. I mean, it’s the indexes that take so long when you’re building those tables.
[04:55] Rob: That’s right.
[04:56] Mike: One of the things that I’ve found is, some of the enterprise software that I install, it just creates these one megabyte databases and then it expands it and it adds in like two or three gigs-worth of stuff, but in doing so it creates like 2 or 3 thousand chunks that are only one meg in size because of the way SQL Server is usually set up out of the box, and you have to do all this extra waiting time, and what I have found the easiest thing to do is pre-create the database and you allocate several gigs-worth of space more than you need. Then you just run the install and it will just push things in faster because it doesn’t have to reallocate space on disk.
[05:28] Rob: Right. Yeah. And we did, we actually dropped the indexes before inserting, just dumped it all in and then we had to recreate the indexes. So inserting took 20 minutes and creating the indexes took like six hours. That was my adventure last night, so by the time this goes live, which is about a week and a half away, we should have all the kinks worked out, still have a few minor issues, but it feels good to be closing down on the days of classic ASP. The other thing I did yesterday is I recorded an explainer video, you know one that kind of explains how your app works and what it does. It’s for the homepage of Drip, and I’ll link it up in the show notes. I did it with the figures that you move on and off and the hands are actually in the video. It was pretty fun, actually. It took a while. I need five of these videos because I’m creating a different one for each kind of niche or market I’m going after and I didn’t want to pay the bazillion dollars. After getting the first one done I kind of have a script that I can reuse and paper that I can reuse and all that stuff. I was shocked at how hard it was to find good artwork. That was probably the most time-consuming thing. Aside from the actual recording.
[06:28] Mike: I watched a preview of that video. It’s really well done. It was very seamless, first of all. It very clearly explained, in what? It was like a minute and 25 seconds, exactly what the problem was that it solved and it was very clear because you didn’t have to scan a wall of text and try and figure out if it was applicable to you because it was just like the first 15-20 seconds it really talked exactly to the pain point and it gives you that ability to clearly push your message in a much shorter time frame. As video, I think that it will capture people’s attention.
[07:01] Rob: Yeah, cool, thanks. I appreciate that. That was the intent. I have a long-form sales page now in Drip, but I was trying to figure out how to convey that Drip now handles marketing and trial emails and post-sample download emails, if you’re letting people download a sample chapter, and customer emails. It’s across that whole spectrum, trying to figure out the best way to communicate it. What I’ve noticed is that as I’ve talked one on one with people who are coming on with Drip, a lot of folks in my network – I’ll explain it to them via email and they’re kind of lukewarm, but then I’ll show them a screen cast of what it does and I’ll just kind of walk through a five-minute, seven-minute look at their specific use case and how I would implement it in Drip and almost every time people are like, oh my gosh, I’m leaving Mail Chimp or whatever other provider I’m on and I’m coming to Drip because of that. So I realized that there’s something about the actual demo and showing the concepts that I needed to do and I feel like screen casts are just a little bit too boring, right, for your home page? 80 seconds was my goal. I told the story instead and I’m pretty pleased with the way it turned out so far.
[08:04] Music
[08:07] Rob: We got an email from Jacob Norton, and he says, “Have you guys done an episode talking about how to use virtual assistants and when to get one? I’m thinking I’ll need one in the future, but I’m not sure what exactly I’d have them do or when I’d need one. I get the feeling I’d want to do too much on my own to make it worth it. I know you’ve done an episode on how to hire them, but I don’t recall this being discussed.”
[08:25] So, he’s referring back to episode 68, we talked about how to hire and manage a virtual assistant. Then I also created a video course, it’s up on Udemy, and that’s at startupvacourse.com, and there’s a lot in there about how to hire and there’s some in there about why you would need one and how to manage and how to delegate and all that kind of stuff.
[08:49] But today I wanted to talk through, basically some ideas of how to use a virtual assistant in your startups, specifically. If there’s one article I could recommend it’s chrisducker.com. You’ve heard of Chris Ducker, he’s an expert in the VA space. He runs a big virtual assistant staffing firm. He has a couple good ones. One is called “101 Ways to Use a Virtual Assistant”. I actually took some ideas from his as well; but frankly, most of the ideas in this episode are from my experience, and I’m sure, Mike, I know that you share a lot of these as well. It’s my experience using virtual assistants and how, the ways that I’ve found I’ve gotten the most benefit out of them as a startup founder.
[09:28] So we have 26 ways total. I was thinking that maybe first we’d start off, you know we had one question that was kind of parallel to this and he says, “when should you get one?” Do you have an opinion or thoughts on at what point you should think about getting a virtual assistant?
[09:43] Mike: I think it depends a lot on your situation. I think the inclination, for me, would be to start looking for one when you feel like you’re doing a lot of busy work. Whether that’s answering emails, looking at some of your different stats, if you’re going back and forth between a bunch of different platforms. What you can have a VA do is kind of aggregate some of that data. Anything that’s labor-intensive where you could theoretically write an application to do all that stuff for you but it’s not cost-effective to do it. Especially if it’s stuff that you’re only going to do once. So, for example, if you’re trying to gather data or do research of any kind. Those are all things that, yes, they take time, but they’re definitely things that you could outsource to a VA and have them do it. I would look to see what sorts of things you’re doing and wait until you get to a point where you’re going to probably regularly need one. I think that if you try and hire somebody and you bring them on, you have them do one or two tasks and then you never use them again or you don’t use them for six or eight weeks or something like that, your chances are really good that you’re going to experience a lot of turnover with those people. That’s good in the respect that it gets you experience delegating some of that stuff, but it’s bad in that you don’t necessarily get experience delegating to the same person over and over again.
[10:57]So you’re almost restarting the relationship every time you have to hire somebody for it. Then you get into the situation where you are spending so much time doing hiring that you’re not actually delegating enough stuff to them to make it worth your time investment. So part of it’s a learning experience and part of it is saving you time. And you kind of have to balance between the two.
[11:15] Rob: That’s a big part of it, I think, is finding someone that you can work with on an ongoing basis, even if it’s one or two hours a week, which is how I started with my very first virtual assistant. It was very low commitment, and it worked great. I didn’t have a ton of tasks at the time. I had enough money that it didn’t really matter to pay someone $5 or $10 an hour. I think it’s hard to be too early unless you have nothing that you could hand off to someone; but if you look at your task list, like Mike said, and you find that you have anything that you feel like someone else could do, especially someone who has kind of knowledge and administrative knowledge, I think that’s the time to start thinking about doing it because your time is limited, especially if you’re launching something on the side and so you need to try to take as much advantage of your hours as you can.
[12:00]I think the other thing I’ll say before we dive into the actual tasks that you can delegate is when I say virtual assistant, I don’t mean a specialist. I don’t mean a developer. I don’t mean a designer. I don’t mean a really, really good audio or video editor. I mean a general administrative virtual assistant, kind of like someone you would have working for you in an office, like an administrative assistant. Maybe a little more technical skill than that, but as soon as you get into someone writing code for you, then I call them a developer, I don’t call them a VA anymore and as soon as someone’s doing heavy design work for you, then in my mind they’re a designer. So, while I do have some light technical tasks in this list that we’ll cover, most of them do involve things that just a light technical person could do. If I’m going to hire a VA, it’s going to be for recurring tasks. That’s where you’re going to get the most value out of it because you can explain the task once and then every week, every month, it’s done for you.
[12:54]So, the number one item on my list is tier one e-mail support. That’s if you have an app or you sell an e-book or you have a membership website or a WordPress plugin, if you’re still handing your own support after maybe, let’s say a month or two after you go live, then, even if it’s only a trickle of e-mail, it’s not the time that you’re giving, it’s the distraction, right? The distraction is what you can’t afford to give to this stuff. So, that’s a point where I encourage a lot of people to get VA’s to help them with email support. And every time I’ve done it the person, I’ve heard this so many times, well, no I only get like an email a day or a few emails a week, it’s not that big of a deal and then as soon as they hire someone and it’s off their plate and they’re not answering the same questions over and over and doing non-founder activities, it’s always the same thing, it’s like wow I should have done that sooner.
[13:40] Mike: A lot of these tasks, you look at them and, at a glance you might think that you’re the only one who can do them because, especially when it comes to some of the e-mail support, for example. If you’ve got a very technical product, especially if you’re marketing to people and saying, hey, you get to talk directly to the developers, that’s something that you kind of have to not do when you’re outsourcing your tier one email support to a VA because they’re not a developer, so they’re not going to be able to answer some of those questions. As Rob said, anything where you’ve got this repetitive process in place, that is manually labor-intensive, and that can be data entry or it can be something where you have to have somebody interacting with your customers, either one of those it doesn’t matter, there’s obviously different skill levels involved, but you still have to have a human doing it. You can’t delegate it to a computer. That’s definitely a place where you can leverage a virtual assistant for answering some of those support e-mails.
[14:31] Rob: We used to do support for The Micropreneur Academy several years ago, and I hung on to that for a while because I felt like, man, this is our community, these are our people, how can I possibly find anyone who’s going to care as much about this as I do and answer these questions well; and we found someone. Andy is our support guy, and if you’ve emailed Academy support you’ve talked to Andy. And you know what, Andy does a better job than we’d do because he’s focused on it and that’s what he does all day is handle support. He handles support for that, Drip, and HitTail and he’s now a core part of my team. I wouldn’t have given him all that responsibility from day one, until I got to know him, but what you’ll find is that if you find someone who does a decent job, they’re probably going to do a better job than you will as a founder because you’re in so much of a hurry all the time that you can’t do the focused, step-by-step stuff that a virtual assistant, a trained one who’s actually focusing on things, can do probably better than you can.
[15:25] Mike: Well, the other thing is they can also afford to spend an extra five or ten minutes polishing up an email to send it to somebody who’s emailed in to support because they have the time to do it, whereas you’re distracted. I mean any time you’re answering those support emails you probably, not only have you got it in the back of your mind, “oh I’ve got to answer these support e-mails”, but then you go into start answering them and you have it in the back of your mind, “oh, I’ve got all these other things to do.” So you’re continually distracted when you’re trying to respond to these customers. So, you’re right, a virtual assistant is going to do it a lot better than you will, just because they’re not distracted.
[15:56] Rob: The second task you can think about delegating is chat support. So if you have like a chat widget on your website, this is another no-brainer one. You’ve got to train your VA and teach them how to answer questions, and answer questions specific to your app so they don’t always have to say, “well, we’ll have someone contact you”. If you get someone decent then they can definitely monitor this during business hours.
[16:17]The third task is filtering through your e-mail. This is one I haven’t done. I’m thinking not support e-mail but actually going into your G-mail account and deleting stuff that’s irrelevant and taking a lot of the work off your plate. Have you done this, Mike?
[16:30] Mike: I have, in a way. So I’ll argue that you actually have. So, you subscribe to a service called Unroll Me.
[16:38] Rob: That’s right.
[16:39] Mike: So that’s essentially Unroll Me going in and automatically figuring out what it should roll up and aggregate and present to you in a list that basically shows you a bunch of e-mails that are probably not nearly as important as a lot of the other ones. And if you think about it, in a way, you’ve outsourced part of your email in that mechanism.
[16:57] Rob: All right. Good point. I know folks who actually have virtual assistants who, you know, in Gmail you can give someone non-administrative access to your G-mail. So they can’t do all the settings, but that they can log in and filter and label and reply and do that kind of stuff. I have absolutely toyed with this idea many, many times but every time I do I go through my inbox and I realize I don’t know how I would delegate any of these emails that are left’ but every year around the first of January when we do our goals episode and I do the retreat, I try to think about how I can make this work. And so I think one of these years it’s going to be something I dive into. Another thing you can outsource to VA’s is calendar management and appointment scheduling. I know a lot of people who do this, especially if they run podcasts where they have to coordinate with guests.
[17:42] Mike: Yeah, I outsource this to a service called Doodle Me.
[17:45] Rob: So you’re finding software replacements.
[17:47] Mike: It’s actually called Doodle.com, I believe, but basically it just integrates with my G-mail calendar and just shows people when I’m available and lets them pick a couple of different times, that way I don’t have to go back and forth with them and I can say, “hey, here’s a link to my calendar. Set up a couple of times that work for you and I’ll pick one that also works for me” because there’s probably stuff that’s not quite on my schedule. Like, if I want to go to the gym I don’t necessarily put it on my calendar but it also integrates and allows me to combine my wife’s calendar and any other shared calendars in there; so it blocks off all those times that I’m not available, which is really kind of nice.
[18:19] Rob: Right. The next one is travel arrangement or planning and I’ve definitely had a couple of different virtual assistants help with some fairly complex travel stuff that I had when me and the family were going oversees. I had him investigate visas and look at passport stuff and then try to get the best plane flights for the best times and then look at some Airbnbs because we were going to four or five different cities. And put together a short list. It was pretty complicated. But, you know, he spent several hours and kind of put together a Google doc together for us that turned out to be useful in the end. So, I think if I’m just doing a straight-ahead flight and I just need to book a ticket, it’s going to take me longer to explain to a virtual assistant than it is to actually do it. As soon as it gets complicated that’s the kind of thing that I would see outsourcing.
[18:59] Mike: Yeah, I think that kind of ties in to the next one, which is competitor research. When I was targeting banks I hired somebody to go out and look for all the banks that were within 50 miles of me. And they came back with a list and it cost me I think $18 or something like that. And I just got a Google docs spreadsheet, which was kind of nice.
[19:17] Rob: Yeah, that is cool. I think another thing that ties into that is number 8, which is lead generation. It’s kind of like prospect research, right. It’s trying to put together a list of people who you’re going to be targeting. Put together a list of potential customers that you’re either going to cold call, cold email, somehow get in touch with.
[19:34] Mike: Yeah, and that’s all just data aggregation but it’s time consuming to actually go do it. You just give them some parameters, say this is generally what I’m looking for. The thing is, you can use it as an iterative process, too. You can say, okay, here’s what I want you to do and do five of them, or ten of them or something like that, and then come back to me and let me take a look at them, kind of validate the quality. And then you can give feedback. Then they can go back and keep going so that way you don’t have this span of 20 hours that you don’t know what they’re doing and they come back and everything’s wrong because you didn’t correct very early on in the process.
[20:05] Rob: Yeah. Another thing I’ve outsourced is data-entry. And whether you have hard copies of something, I’ve had that before where I’ve only had a hard copy and OCR wasn’t doing a good job and I just scanned it and sent it to the virtual assistant and I was like, “look, I’m sorry to do this to you but can you please type this out? Can you get it into a format that I can actually use?” Then I think you do this with a bookkeeper, right? You have physical paper coming to you and she’s essentially paying your bills and entering that into your bookkeeping system.
[20:34] Mike: Yeah, I have her go log in to my different bank accounts and everything. People find this weird that I give my bookkeeper complete access to my bank account as well. She’s got PIN numbers, she’s got signatory authority, so she could actually go into my bank, ask them to open up an account and they’ll do it because she’s on the paperwork and authorized to do it.
[20:55] Rob: People think it’s weird because they’re scared? They think that she could steal from you, I guess?
[20:57] Mike: Yeah.
[20:58] Rob: Next item you can outsource is transcribing audio or video. Now we’ve tended to use a transcription service, but I have had a VA transcribe a couple things for me. I think if they’re not a specialist in this they’re kind of slow at it, so it may or may not be worth it to you, but I’ve definitely known some folks who’ve done that. Something that piggybacks on that is audio and video editing. We heavily utilize that with our podcast, obviously we don’t do the audio editing. In fact our editor both edits and then spits out the MP3 file, puts the metadata into it, uploads it to the server, schedules the WordPress post to go live at the right date and time, and gets the transcript done. She sends it out to a service and then posts it for us. So, it’s not just editing, it’s like the full life cycle, and that’s the only way that we’ve been able to put out a podcast every week because if we had to do those steps they just wouldn’t get done because we’re too busy.
[21:52] Mike: Yeah and in a way she’s essentially outsourcing that part because she doesn’t want to do the transcription, either, which I can’t say I blame her. But, you know, she’s turning around and hiring somebody else to do that. It’s great the way that that whole process works and it gives us the ability to put these out every week.
[22:06] Rob: Right. As long as we don’t have to deal with it. I don’t think we really care how it gets done, you know, as long as it’s done well. Another way,a kind of a unique one within HitTail, we have articles that people can order, right? They’re one-click articles. And they go out to this group of writers, the writers write them, and then they submit them. Early on the articles were going straight back to our customers. Well, some of them weren’t of very high quality. So, I talked to you know my tier one support guy, virtual assistant and said would you be willing to vet these articles and do a little bit of editing if needed or to request rewrites as needed and to basically be an editor, right? It’s kind of like copy-editing and checking to make sure this stuff is decent. And with a little bit of training he’s done a fantastic job. It saves us money because the service that we use to get all the writers, they were going to do it for us, but it was pretty expensive so he’s able to do it at much less cost, we’re able to maintain the control, and he’s really committed to maintaining control because if he misreads an article or it isn’t very good, he’s going to hear about it. So it’s interesting that the motivation is tied, for him, to keeping it high quality so that he doesn’t have to deal with more support requests.
[23:13] Mike: I’ve actually gone out and ordered things to put out on some of my different product websites and have had to have written and then published and then had my assistant go in and take a look at those things that are coming back and essentially critique them and do the back and forth on my behalf so that I don’t have to do it. If something is below a certain level of quality, it’s pretty obvious to anyone and you don’t necessarily need a lot of training to be able to recognize that. So that’s definitely something you could also outsource if you wanted to.
[23:40] Rob: Yeah, I agree, Like proofreading slash editing. All right another one is I put blog publishing management. Basically the idea is I will often go into HitTail and I will see a bunch of keyword suggestions and I will order like 10 articles all at once and I’ll just spend the time to figure out the titles and the keywords that I want and I’ll order them all. Then I’ll let my virtual assistant know, as those articles come in, because they’re going out to writers who are going to write them, once they come in take them all and put them in WordPress in our articles section and schedule them out so that one goes out every week for the next five or ten weeks. Then I’m able to walk away from it and forget about it and he does a good job of it. He goes in and finds an image on, Creative Commons, Flickr, and credits the author, and does all that stuff and takes care of it and as a result I’m able to build this nice footprint of content and all I had to do was just go in and specify article titles and keywords based on suggestions that it gave me.
[24:37] Mike: I used to do this for my personal blog. If I were writing a new article, I’d have somebody go in and take a look at it and do all the publishing and then submit it to a bunch of different websites where it would get at least a little bit of publicity. And back links and things like that, but I haven’t really kept track of that stuff lately. I’ve really got to do a better job of that.
[24:57] Rob: Another thing I’ve seen outsourced from startups who have VA’s to basically manage their social media presence like to do their Twitter and their Facebook stuff and they’re either writing original thoughts or a lot of times they’re link aggregating based on a topic and as long as you give them enough knowledge and they understand your business, it’s not that hard to get this kind of thing going.
[25:16] Mike: Yeah I have this set up for my AuditShark Twitter account. Mostly just automated and I have somebody go in and aggregate a bunch of stories from a bunch of different sites and then put them through and just schedule them out into the future and it works pretty well.
[25:29] Rob: Another thing I’ve seen people do, and I actually do this as well, is you know there’s this RSS to email thing where it’s software that will take your RSS feed and then put it in emails and send it out in order to keep your list warm and talk to people on your newsletter. I don’t like those things because I don’t think they make the e-mails look very good. I don’t think they do a good job of kind of teasing and putting the image there and then making people click through to your blog. It really requires, typically requires, a human’s involvement to do it. And so that’s a really good task for a virtual assistant. If you train them where the cliff hanger is, you know where the point is at which point the email should leave off. This is kind of a no-brainer task for them to do this every week as blog posts go live.
[26:09] Mike: Yeah, and that kind of falls back into the blog publishing management because you could just add that in as part of your process and say, “okay, here are the 10 different steps that you do as part of posting something to the blog”. Then step number 9 might be to take it and turn it into an e-mail that goes out to a different set of subscribers.
[26:26] Rob: Exactly, and relating to that is moderating blog comments. As soon as you get any type of traction you’re going to start getting a lot of comments and that’s something that’s just enough of a distraction that it can be a pain and it’s a no-brainer to outsource that. Something you referenced earlier is finding images for blog posts, that’s an item I had here. Now there’s also one, slide presentations. It’s funny, I found a guy who called himself a virtual assistant but he had some good Keynote skills, so I used him to help put together my last couple of Microconf talks and he did a great job of finding images and getting just enough animations in there. I tweaked stuff at the end but he probably saved me 10 hours of work, each year. So for me that was just a total no-brainer.
[27:09] Mike: Yeah, that’s a huge time saver. And what I find is that it’s really helpful to have it done far enough in advance of any presentation that you have to do so that you can get used to what those animations are and then tweak them; because what you’re really trying to do is, you really want a VA to get you at least 80% of the way there. So in this particular case you create the content, you hand it off to somebody, and you can even create it in Word, which is what I’ve done. Hand it off to somebody, they give you back a mostly finished presentation and then you essentially tweak it from there. So if there’s animations that you don’t like, you can rip them out or put different ones in and it still gives you time to work with the content a little bit, but the reality is that they probably saved you 10-15 hours worth of work of putting together that presentation and you don’t have to do all the little tiny toggles and stuff that they had to in working everything together.
[28:01] Rob: Exactly, and so number 20 on our list, if you’re still dealing with voicemail, have your VA check it and just take the message down. Last few here. One is sending client invoices. I think that’s a no-brainer, right, if you’re still invoicing your own clients. Something’s wrong. Uploading videos to either Youtube or other video hosting. I do this all the time, holy cow, I’ve been recording screencasts lately. A lot of the screencasts I record are for training purposes, internal, and so I never edit those and I just use screencast.com. The hosting is not that great, but it works. Recently I’ve been creating a bunch of documentation screencasts for Drip, so I’ll walk through a concept and I need it to be edited pretty tight. It doesn’t have to be as tight as a marketing screencast, where it just has to shine and everything has to be polished but it has to be good enough that it’s respectable and professional. So what I’ve been doing is recording it and then giving that source file over to my virtual assistant and then he edits out the little bleeps and the um’s and the ah’s and stuff and then he uploads it to the video hosting and gives me the embed code. Next step I’m posting it to the knowledge base but the next step is to train them how to post it all the way to the knowledge base. Then it’ll be pretty much me recording and then magically seeing that go into the knowledge base a day or two later. That’s a great feeling. It really is a great feeling to be able to know that if you have to create a new knowledge base article that it’s you sitting down and recording for five minutes instead of the five minute of that and then 30 to 45 minutes of editing and then the upload. I mean, just all that stuff together, you save yourself a lot of time at that point.
[29:40] Mike: Yeah, I think people underestimate how much time you lose in doing all the context switching or just getting interrupted. And it’s easier just to outsource a lot of that stuff and just put a process in place and hand that off to a VA.
[29:53] Rob: Another thing I’ve seen Startups use VA’s for is to create SlideShare presentations from existing content. SlideShare is a pretty good marketing platform if you publish decent slides on a decent topic. If you already have good content on your blog or in an Infographic and you just need that translated into SlideShare, that’s kind of an easy way to do that. Another way I’ve seen them used I’ve actually used them is migrating from software tool to another. Do you remember when you moved from Indinero to Outright?
[30:20] Mike: Yes.
[30:21] Rob: I think you had a VA do it for you, didn’t you?
[30:22] Mike: Yes, I did.
[30:24] Rob: Yeah. Also, you know I moved from Mail Chimp into Drip and now that we’re moving more and more people I’m using the same virtual assistant to do that. So if you have a SaaS App there’s always that switching cost, but what’s interesting is you can cut some of the sting out of that if you have someone who you can show how to do that and then let them do the repetitive steps. Last two here, number 25 is member management for your membership website. Realistically it’s close to tier one support if you have a membership website, but especially with our software, WishList Member, which let’s just say it leaves a lot to be desired, there’s a lot of manual processes that have to happen so there’s some intense stuff that our virtual assistant has had to learn in order to keep that going well. There’s a lot of manual processes and some repetitive things that need to get done every month and even every week. So that’s something that I would think about outsourcing to someone.
[31:14] Mike: Yeah, the interesting thing is if you take a look at the Micropreneur Academy and how everything’s set up in there, the vast majority of the things that happen, most of them are systemized and outsourced to somebody because they’re labor intensive. It’s not just that they’re repetitive tasks, but it’s also that there are decisions that need to be made while performing those tasks. So you might need to process a payment or an email or something like that but there’s all these little things that factor into it and it’s very difficult to write code that’s actually going to take all those things into account. It’s easier to just give somebody some guidelines and say, “hey, if this happens then do this, but generally just use your best judgment about what to do in these specific cases.”
[31:56] Rob: And the 26th way to utilize a VA in your startup is to have them do the concierge service in your app. So, with HitTail we need tracking code installed or we used to need tracking code installed, and that was no-brainer for me to have the virtual assistant do it for free in order get people using the app and same thing with all of the five-day mini-course compilations and creations that we’re doing with Drip. I did those very, very early on. I did both of these things just to get enough experience with it to learn how to teach someone and then it was a no-brainer to hand it off. I am a big fan of concierge services in general. I think it sets you apart from your competitors and getting someone in there to help you with it and like a VA is a great way to do it.
[32:40] Mike: Well, Jacob, hopefully this episode helped answer your question. If anyone else has a question for us, you can call it in to our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Out of Control by MoOt” used under Creative Commons. You can subscribe to us in iTunes by searching for startups or by RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening, and we’ll see you next time.
Episode 195 | How to Craft a Great Story for Your Product or Service
Show Notes
- Getting Organized using Evernote by Andrew Connell
- How to Craft a Marketing Story that People Embrace and Share
- Storytelling for Fun and Profit
- To Tell a Tale, To Craft a Story
- The Hero’s Journey Outline
- The Science of Storytelling: Why Telling a Story is the Most Powerful Way to Activate Our Brains
- The Secrets of Storytelling: Why We Love a Good Yarn
Transcript
[00:00] Mike: In this episode of Startups for the Rest of Us, Rob and I are going to be talking about how to craft your story. This is Startups for the Rest of Us. Episode 195.
[00:06] Music
[00:13] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products whether you built your first product or you’re just thinking about it. I’m Mike-
[00:21] Rob: -and I’m Rob.
[00:22] Mike: -and we’re here to share experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
[00:26] Rob: I want to say a congratulations to lifetime Academy member Adrian Rosebrock on his first four-figure launch. He emailed me, and I know he’s used a lot of tactics and techniques that we’ve outlined in the Academy. And he’s also, he moved over to Drip from MailChimp because it was getting too complex to try to manage in MailChimp with segments and groups. And so once we got the rules built, he moved over to Drip. And he said, “I just wanted to say that Drip has helped me hit my first four-figure launch, and I’ve only emailed about 130 people from my 800 person subscriber list. I’m looking forward to the rest of the launch this weekend.”
[00:57] You know, I actually I actually have read through his crash course. He has a 21-day crash course in computer vision and image search engines.
[01:06] Mike: Oh my God.
[01:07] Rob: Yeah.
[01:07] Mike: Twenty-one days?
[01:08] Rob: And it’s really good. Like I would check this out, even if you’re not interested in this, just to see how to write a really good crash course. The content is exceptional. And there’s a bunch of really good content on his site as well. He cranks out lot of content, and it’s high quality. He knows what he’s talking about. The URL is pyimagesearch.com. It’s PY (python) imagesearch.com. You can go sign up for the crash course. And he’s released a couple of e-books you can find certainly on the site if you’re interested in this stuff. So that’s what this is, right? It’s using pythons and libraries to identify faces in photos and identify checks and stuff. So it’s pretty cool stuff.
[01:45] Mike: Oh, that’s really cool. So you remember a couple weeks ago I said that I had a hard drive crash on my network-attached storage device?
[01:50] Rob: Yep.
[01:51] Mike: And so I bought those four new two-terrabyte drives, and two of them I’ve had to send back because they were bad drives.
[01:57] Rob: That’s terrible. And you were talking about how they were inexpensive, right? The storage was so cheap. Was it because the drives were cheap, do you think? Are they off-brands?
[02:06] Mike: No, they were Seagate drives, so they were decent quality. And plus they were the enterprise versions of them. They weren’t the lower end ones. The smart drive piece of it was failing, was giving me errors. And I tried it in a couple different ways. I used one of Seagate’s tools. They have their own utility to check the drive, and that was coming back and telling me everything was okay, but I’m just like, “Yeah, I just bought these, and I’ve got two other pieces of software that are telling me they’re bad, so I’m going to send them back just to be on the safe side.”
[02:32] Rob: That’s such a bummer. When that mean time between failures is two days, that’s [laughs] too short. Hey, so remember a couple episodes ago we talked about ABCDE, it’s a prioritization approach?
[02:43] Mike: Sure.
[02:44] Rob: We got some really good comments for that episode. It was episode 191, and I wanted to talk about a couple of them. One is from Martin Frank, and he said, “I’m a big procrastinator myself, and I was hooked on the ABCDE method you present. My question: how do you manage different tasks from different projects? Do you have multiple Trello boards or do you merge them all into one?”
[03:03] I responded to him, and I said I put everything into a single list because otherwise I get project hypnotized, and I won’t switch between them, but I only keep stuff that really needs to be worked on in that board. So future tasks, nice to haves, etc, they’re on a different board. Because I don’t think you can manage 50-100 items with any level of efficiency in Trello. I do think if you have a to do list and you literally have 100 or 200 items that need to be arranged, then I would probably not use Trello. I would probably use something more like FogBugz or a took like that where you priority, backlog, and filtering are kind of these multiple dimensions to it. And it’s just better for organizing more information because you have more things to pivot on.
[03:40] Mike: My thoughts are probably pretty similar. What I do on Trello is I have the things that are the most important to me. And there’s some things that I’ll take from FogBugz and put into my Trello board, but then there’s other things that I’ll take from my Trello board and then add them into FogBugz and I just kind of wipe the slate clean at that point. And so if I’m moving it from Trello to FogBugz, I delete it from Trello, so that it’s no longer there kind of on my top level list of things to do. For exactly the reason that you said. If there’s too many things on that list, they tend to get lost, and you don’t necessarily go through and reprioritize those Trello boards every single day. Those are the top level things that you should be working on, and I find with FogBugz a lot of the stuff that is in there is stuff that tends to get shifted into the B or C column, and sometimes it’s just stuff that you need to get rid of. I just started taking things and just throwing them away and saying, “Look, I’m just not going to do this. I’m not going to do that because they don’t matter any more because they’ve sat there long enough that they never became a priority, so what’s the point? Just get rid of them.”
[04:35] Rob: Exactly. I definitely go through and purge items when I figure out that they’re never going to make it to the top of the board.
[04:42] We got another comment too from Andrew Connell. He says, “Like you, I used Trello but I recently jumped into Evernote and the secret weapon process.” Now everything is in Evernote. Email integration is killer so my inbox stays uncluttered. He uses a one through five priority so it’s like ABCDE, but it’s just numbers. And he’s basically doubled down on putting everything into Evernote, and it’s working really, really well for him. He wrote up the full process on his blog, andrewconnell.com, and we will definitely link that up in the show notes.
[05:10] Mike: Yeah, I think I’d have a hard time using Evernote for that. I feel like I never actually go back and do anything with it.
[05:17] Rob: I’d be curious. You should read through his post because he goes through the exact detail of how he’s using it, and I wonder if that would sway you so you maybe you could take a look at it.
[05:25] Mike: Yeah, that’s a good idea. I’ll have to do that.
[05:27] Well, today we’re going to be talking a little bit about how to craft your story. Some of this is taken from literary sources. How to write a good novel or a good story that would be published. But some of it is directly applicable to how to talk about your company, how to talk about your product and how that product came to be, and use that as essentially a marketing story that you can then use in your marketing collateral when you’re talking to people, explain your product and the services that you offer in relation to that story. Because the fact of the matter is that stories really resonate with people. In fact, there’s an article in the Scientific American Mind by Jeremy Hsu where he essentially points out that personal stories and gossip make up 65% of our conversations. People tend to remember stories, and if you relate your product in a story, it’s going to resonate better with them.
[06:16] Rob: This was the main premise of the book, “Made to Stick,” by Dan and Chip Heath. And I highly recommend listening to that book. It’s mostly about being able to talk about something in a way that gets people to remember it, and a really big part of that is telling stories. I have used the stuff I learned from “Made to Stick” in writing marketing copy, in writing blog posts, in crafting these podcasts, in organizing conference talk. I use it in everything I do. Anything public facing now, I think, “How can I integrate stories? How can I use stories?” And it was really heavily influenced by me reading that book.
[06:52] Mike: So before we get into this, why don’t we talk about some of the different companies that really do this well. Three that I thought of off the top of my head are 37 Signals, Apple, and Groove. And if you take a look at those three companies, if you take a look at Apple and what they do and how they position themselves and how they talk about stuff, every single one of their yearly demos at WWDC is them telling stories. Every single sales pitch for every product they’ve ever launched it’s all stories. It’s all about what sorts of problems they encountered, and they all follow a very, very similar formula.
[07:23] And then if you look at a company like 37 Signals, they came out with the rails platform, and if you take a look at how they’ve positioned themselves, they really say, “This is what we stand for. These are the types of things that are important to us.” And these are things that as a developer I should not have to worry about. We’re worried about design, and it should look good, and they take that to an extreme, and they definitely alienate some people. But in alienating some people they attract other people.
[07:49] And then Groove. I don’t know if you’re familiar with Groove. They have a help desk product that they’ve been pushing. They have a newsletter that they put out, and they really use that to push their story and talk about themselves, where they came from. And it does allude to the product a little bit, but it really does talk about the growth of their business. It really does come out and say, “Hey, this is who we are. This is what we do, and these are the trials and tribulations we’ve had to go through to get to where we are today.”
[08:12] Rob: Yeah, I’m familiar with Groove. He and I’ve emailed back a number of times actually going all the way back to 2011 it looks like. I was just searching through Gmail. He had asked for advice on a few things, and he’s doing a killer job at content marketing these days and getting people invested in his story as you said. I can think of a bunch of other examples off the top of my head. Think of Joel Spolsky when he was getting Fog Creek going. Him telling all the stories of hiring developers and his approach and everything. You buy into it, and you start getting invested in his success.
[08:39] Eric Sink did it with Source Gear. He doesn’t do it anymore, but he used to blog, and then he wrote the Business of Software book. I was so invested in that just hearing what’s it like to really be on the inside and then you start rooting for him.
[08:50] I think patio11 did this really well when he was blogging every week about bingo card creator, and that’s how he got known, right? He talked a lot about SEO and analytics and tactics, but it wasn’t just the tactics. It was that it was this once guy sharing the story of what he was doing.
[09:08] I found on my blog as I blogged about my journey through DotNetInvoice and then through HitTail telling those stories, the tactics are helpful, but that was when people really started to become more engaged with me and what was going on.
[09:21] I think Buffer’s doing a really decent job of that these days. They don’t necessarily tell the inside story like all the other guys, but they are giving you glimpses into how they pay their people. They released all their compensation number publicly. They have all their metrics up on Baremetrics at, I think it’s buffer.baremetrics.io so you can basically see how much money they’re making. And their transparency is part of that story.
[09:43] So stories get people talking if they’re told well and they’re told consistently over a long period of time. Especially if people start relating to you. We talked about this a week or two ago that when we started telling more of our story on this podcast then people become more engaged and they put up with an episode or two that isn’t as tactical, isn’t as super ultra productive or super helpful for them because they’re really just invested in your story.
[10:09] Mike: People can definitely have a story that they tell about themselves in relation to their company. It especially comes true when you talk about the product that you’ve built and you say, “I built this because” and you talk about some of your past work history experiences or problems you’ve encountered. And again, you’re telling a story, and it’s not necessarily about the product but it’s about the trials and tribulations that you went through in order to get to the point where you are today where you built that product because you had this problem that nobody seems to have solved in the way that you needed it to and here are the different reasons why those other things didn’t work. And you take a look at some of the corporate evangelists like Matt Cutts from Google and Rand Fishkin from Moz and then people like Scott Hanselmen from Microsoft, all of these people have a story about where they came from. As you start becoming more familiar with the things that they do you hear more and more bits of this story. Nobody ever sits down and listens to all of a particular person’s story, but you hear different pieces of it spaced out over the course of months or years in different places, and as you said, it’s one of those things that help the story resonate.
[11:10] So if you start looking at things like literary examples, a lot of what you would probably consider the classical stories that really resonate with millions of people, they tend to follow this common idea called the hero’s journey. Twelve different things in the hero’s journey. But if you start to think about classic literary examples that follow the hero’s journey you come across things like Lord of the Rings and Star Wars, The Godfather, Harry Potter, and the Lion King. All of these things kind of embody the hero’s journey. And one of the things that I came across in doing the research for this episode was Nick Reese, and I’ll link to his blog in this. He essentially simplifies this into what he calls the journey to success. And the journey to success boils down to these five basic points.
[11:51] And the first point is identity. Who were you when you started your journey? What was it that you were doing? How were you doing it? What was the lay of the land like when you first came into the picture where you want to start this story? Because obviously you don’t want to start all the way back when you were five years old unless the problem really came from that point. Where do you want to start talking about that? Where is the first place that you came across this problem and how can you introduce people to it in a way that’s going to be meaningful to them?
[12:18] Rob: Right, and you’ll notice as we step through these points, that this outline is very close to most Mixergy interviews. And Andrew has talked about that, how he uses the hero’s journey but how he uses that in his outlines to have a consistent format. And that’s what really separated his interviews early on from everyone else is that he started using this outline which is to- you’ll hear him start the interview, and the very first thing he says is, “Tell us where you are today.” So you want to start with success. And so my MicroConf talk two years ago was about HitTail and I was trying to talk about that journey, and I started- one of my first slides was the revenue curve. So I gave the punch line right at the beginning. And the revenue curve starts low and then does this big hockey stick thing. That’s what I started with. Then I said, “Now, let’s scroll it back, and let me tell you where I was and when I got it.” And I talked about the depths of getting started and how hard it was and how much money I paid. That was who I was when I started the journey, and again you’ll notice that Mixergy interviews do the same thing. He’ll say, “Where are you today?” And then he’ll say, “Okay, let’s roll the camera back. Let’s roll back a year or two. What were you doing then and then how did you move forward?”
[13:24] Mike: The second phase in this is turn against the status quo. What did you want to change about your prior identity or prior world? What sorts of things were you running into that were challenges? How were they not working out? How were you not able to overcome those challenges in a way that was satisfactory to you? This is kind of where you can start talking a little bit about your product or your service a little bit as well because those are the types of things that have led you to create the product or service you’re going to be selling.
[13:51] Rob: And so it depends on where you’re telling this story, but typically this is going to revolve around you being unhappy with all the software options that were out there or you really struggling with something that you needed to build a solution for. Or noticing that a friend had a problem and then going and building a solution. This is the impetus and this is where you really try to get people engaged because they can see themselves in your story. They start thinking, “Oh yeah, I have a problem too, and maybe I can do this.” or maybe “I’ve done this.” And then they start relating with you, and that’s really where stories start to succeed is when you bring people in and make them feel like they are or could be the protagonist.
[14:30] Mike: And that entire idea really helps them become much more engaged in the story. That kind of leads into number three which is the struggle. What sorts of things did you struggle against as you started to create this change?
[14:41] As you mentioned, if people kind of associate themselves as potentially that protagonist, you’re reaching out to people who may also have similar problems. You’re talking to them as if they’re they ones having these particular types of problems.
[14:53] Rob: This struggle has to be there. If there’s no struggle the story isn’t interesting. Because if you come out and say, “I was this person when I started, and then I really had this problem that I tried to solve. And then I coded it over a weekend, and it took off like a shot, and I’ve had a lot of success since then.” That’s interesting in a certain kind of unicorn and Cinderella way. It’s a Cinderella story. But most of us do struggle as we get our apps going and as we’re trying to start these businesses. It’s typically more interesting to hear about the long struggles and then breaking through and what they did to break through. We can relate more to that. As much as we do want that lottery ticket idea that just takes off, I think the struggle is a big part of it.
[15:37] Mike: I think the point you made about the Cinderella stories is only warranted in these cases where we want to be the person who doesn’t struggle. We want to be a Cinderella story. We want to be in a situation where things just get that hockey stick curve growth and we don’t really run into any challenges. That’s what we want for our own story, but at the same time, that’s not what we generally encounter and not what we experience. So those struggles resonate with us and that’s why they resonate with us. If you hear those stories where the person really didn’t struggle with whatever the challenges were, that doesn’t resonate with us which is why don’t tend to remember those types of things.
[16:13] Step four of this journey is insight. And what sorts of unique tools did you build or what insights did you have that made overcoming this challenge easier? Did you have ten or fifteen years’ experience in that particular industry? Was there some library that you came across that connected the dots for you that you decided to build on top of? There’s a lot of different things that kind of factor into this. But if you look at anybody who’s successful and look back at their history, generally there’s this situation that they were in that the reason they’re successful today is because of the situation they were in. And one of the things that I’ve seen is a lot of people relate themselves to other people, but along with that. You also have to remember that somebody else’s experiences helped shape them and get them to where they are today. And trying to copy somebody else’s success just by copying the things that they do is never going to work, and the reason it won’t work is because you didn’t go through the exact same experiences that they did. So because of that you’re not necessarily going to have the same insights that they did into the problems that they’re trying to solve.
[17:14] Rob: There’s a really good point here. If you don’t have struggles and it just takes off for you, you really rarely will have insights that are worth anything because if you don’t have to struggle through it and try different options and fail and then eventually succeed, then let’s say you had this amazing idea and it took off like a shot. You sell that app, you start the next one. You’re going to run into problems that you don’t know how to overcome because you have never faced them before because you lucked out with a good idea. We’ve seen this. There are entrepreneurs who A) have a really big first hit, and then they can’t repeat it, and they continuously struggle after that.
[17:49] The other thing that I’ve seen is people who have one big hit, and then they go write a book or they do talks or they write blog posts about how you can make it big or how they did it, but it’s not applicable. The insight isn’t there because they didn’t have to struggle through it. I especially think this is common with first-time entrepreneurs who have some success because they do learn a lot of things, but if they had that hockey stick idea right away and didn’t have to grind it out, then you do skip over a lot of the learning and you won’t have as much insight as someone who did in fact have to grind it out and who’s able to then repeat that, right? Because those insights are what allows them to do it a second, third, and fourth time.
[18:29] Mike: And this is kind of the very idea behind fail fast. You want to run into those challenges and try to overcome them and fail only to have to turn around and say, “Okay, that didn’t work. Let me try something else.” And the idea behind fail fast is to just simply iterate as quickly as you possibly can in order to gain insights as fast as you can.
[18:48] There’s people out there who say you shouldn’t aim to fail at all, and that’s not what that’s talking about. It’s about being able to make your mistakes quickly and then pivot and then make the right decision from there so you do get those insights and you do learn quickly.
[19:00] Step five in the journey to success that Nick Reese talks about is resolution. Who are you today and who do you serve? I do have a question for you. You said that you tend to start out with the resolution first as opposed to starting out with who you are. Do you find that that works better or is that something that you’ve tested or no?
[19:17] Rob: Yes. That’s what I’ve found. I haven’t tested it, I just know that I’ve done it many times in talks, done it in interviews where I start with the end. The thing that it does, it gets someone to buy in early to care about your story. Because if you just start and you say, “Here I am. I’m the founder of this, and five years ago I was a developer” and you start talking about your story from there, people aren’t that interested. But if you start and you say, “Look, I took an app and I grew it from zero to $25,000 a month.” That’s where you start with the resolution of the story, and then you back up, then everyone’s like, “Wow! I totally want to hear how he did that.” Right? It gives them that punch line. Now, you don’t tell them the whole resolution because your whole resolution might be a five or ten minute discussion. But you give them a glimpse into it. Just a teaser – maybe thirty seconds or sixty seconds – just enough to show them what it was, and then if they stick around at the end then you can really dive in to what it was and how you got there.
[20:09] Mike: So as you’re going through these different steps, there’s a bunch of things that you need to keep in mind. The first one is that you need to know what your audience is. And if you don’t have an audience because you’re really just starting out, you need to pick one. Who is it that you want to serve? Who is it that you can think of that’s going to be your ideal customer? And in many cases that’s going to be somebody who’s like you, who is in your situation, who’s experiencing similar problems, and you want to be able to talk to that person and essentially put them in your shoes. You could look at it the other way, you’re trying to put yourself in their shoes, but the reality is you have the insight from your point of view, and you’re trying to create a story or create surroundings around them that they can relate to. That they can say, “Oh, I went through this and it’s really close to the things that you’re talking about.”
[20:51] Rob: Yeah, and one thing you’ll notice is that a lot of the people that we’ve mentioned who have told their stories – Joel Spolsky or Eric Sink – they were telling their stories to designers, developers, startup founders. I think the reason these guys all come to mind is because that’s the space we’re in and that’s what we pay attention to. But I also think it just works better if your people are online because then it’s easier to tell that story online. I think there are limitations to picking an audience- if you pick an audience that’s completely offline and not talking to each other or they aren’t on forums and they aren’t doing the discussion stuff then it’s hard to tell your story online. Now, if you’re going to give a conference talk, that’s a different story, right? Then you know what your audience is and even if you’re talking to electricians or counter top installers or whatever, then you’re going to know them, you’re going to know how to communicate to them, and you have their ear for the duration of your talk.
[21:22] Mike: I heard a podcast, it was the business and boot strapping podcast, it was with Brecht Palumbo who gave an attendee talk at MicroConf a couple years ago. And he said that when he was first getting started one of the things that he did was he went to local groups of real estate investors and was talking to them about the types of challenges that he was running into as a real estate investor and how he was solving those. And it kind of led into his story about how he built his product from using public data sources and essentially selling subscriptions to that data online now. If you listen to that particular episode he very closely goes through that and sets that up. And he is affiliated with that audience. He is one of them, so it makes it a lot easier for him to relate that story to them even though it is in an offline fashion because he is giving a talk to them in person.
[22:30] The second thing is to choose your point of view, and it’s perfectly okay to be contrarian. If you look at a company like 37 Signals they are very contrarian. They really want to draw a line in the sand and divide people and say, “We’re on this side, and you’re on that side.” And then to the audience they’re essentially saying, “Choose. You need to choose whether you’re on our side and you understand what we’re talking about and are with us or you’re going to go off and be somebody else.” And in some ways at least early on it was very much about either you’re a designer or you’re not. If you’re not a designer, go away. This information is probably not for you. And since that time it has expanded quite a bit I think. But in the beginning stages you really need to draw those lines in the sand and figure out who it is that you’re affiliated with and who is probably not a good candidate to pay attention to you.
[23:17] Rob: Yeah, I would go beyond saying it’s okay to be contrarian. I would actually encourage you to try to think of insane things in ways that other people haven’t. I think that’s the way that if you believe in your opinions and you’re able to justify them and you are contrarian that’s a way to make a name for yourself. With that said, there’s a difference between being contrarian, having an opinion and being a jerk. And being overbearing and using words like “always” and “never” which I hear people use and it just pisses me off when someone comes out and they’re like, “You should always do this! You should never outsource your core product!” Whatever. You hear people say that, and that’s not true. Maybe it’s most of the time. Maybe it’s 70-80%, but it’s really troublesome to me. It’s okay to be contrarian, but you let people abuse this and they sometimes take it too far. Be careful with that. Know yourself. Know if you’re the kind of person that would take it too far, and just be careful with taking your frame of reference which is probably pretty limited and trying to extrapolate that to the whole world in always and never language.
[24:17] Mike: The third thing to keep in mind is that you need to choose the premise that sets up the story that you want to tell. And by that I really mean that you need to be able to set up your story in such a way that you can logically move from the beginning of the story to the end of the story without losing people in the middle. So that you’re not making these giant gaps where you talk a lot about getting your first customers and then fast forward a lot and skip over a lot of important things. You end up in a situation where you’ve got 10,000 or 20,000 customers, and people are like, “Wait a second. I don’t understand how you got from 100 customers to 20,000. That just doesn’t make any sense to me.” You really need to pay attention to the audience’s point of view, and understand that they simply don’t know everything that you are talking about. They don’t know the whole story. There’s lots of details that they’re not going to know, and if you have a completely fresh set of eyes on the story, you need to be able to make sure that you’re not skipping important things that are going to confuse them.
[25:09] Rob: Yeah, I think this touches on the next point that you make. You have an outline here which is honor the audience and view the story from their side. Everything needs to flow and make sense. This is what editors are for.
[25:20] So that means if you’re going to do a talk, if you haven’t written a bunch of talks, then you probably want someone to hear it before you give to everyone to make sure that there aren’t gaps because it is really easy to have gaps in a talk. It’s also easy to have gaps in a series of blog posts if you’re doing content or even on your about page. It is easy to have gaps. It’s also easy to give too much detail, right? It’s hard to edit it down to a palatable amount of data, palatable amount of information that still tells the story and doesn’t leave anything out. So there’s a lot of craftsmanship that comes into this, and I think that spending quite a bit of time honing the story will be well worth it because it will resonate with people more.
[26:03] Mike: I think that’s one of the things that when you start looking into how to write a good story and deliver a great presentation, things like that, I don’t know if enough time is spent on cutting stuff out. As you said, it’s very easy to overwhelm somebody, and if you start overwhelming them, you end up with all this content in there that isn’t necessarily relevant or doesn’t highlight what you wanted to highlight, and you get people bored. People start to listen or they’re invested early on but then they’re like, “Come on. Please move things along. You’re not getting to the point.” That’s one of the things that people definitely need to pay attention to when they’re trying to craft these stories.
[26:39] Rob: Yeah, I think an interesting illustration in this is that any Mixergy interview you listen to is going to be about an hour long, and typically when you listen to them you’re kind of like, “Huh.” I think it’d be nice if this was thirty minutes long because I would be able to listen to the whole thing. But what you don’t realize is when you’re being interviewed you’re leaving huge amounts of information out. You just have to. Because even to just squeeze your story down into an hour you have to leave so much out, and Andrew really pushes the thing along in order to really do it. So even getting a good story into an hour long interview or forty-five or fifty minute talk onstage is a lot harder than it sounds, and you will find that you have to leave things out and keep only the pertinent points that actually keep the story flowing and making sense.
[27:26] Mike: Yeah. And I think the last point I want to make about this is that your story is really an argument for a particular point of view. How it is that you address this particular challenge or this problem or if you have software that solves a problem in a very specific space, your story can be an argument for why your product is the best at doing that. And that helps you to position yourself against the competitors in a number of different ways. It can be not just pricing, but it can also be about where you came from. Are the people that you’re going against these large enterprise challenges or are they funded companies? Are you the underdog? And you really want to position yourself in a way that shows that you are struggling to do it, and you are overcoming challenges. Whereas those other people are lazy, they’re kicking back, they’re not really doing anything because they don’t really care. And if you can show those struggles you can illustrate them to people, that’s what will resonate with them, and that’s what will attract people to your brand.
[28:19] Rob: I’m going to let you in on a marketing secret that I’ve used for years. We just talked about how to tell your story. If you turn it around you learn how to tell your customers’ story, and you learn how to tell their hero’s journey from not having the software to having your software and what life will look like before and after that and the things they struggle with early on and the results they’ll get once they use it and you can learn to craft that story, that is one of the best long form sales letters you will ever read. You have to genere-size it. You have to talk to “you.” You can’t tell a story like, “Hey, John did this.” I guess you could, but it wouldn’t work as well. What you really have to do is get into the conversation that’s in the person’s head who is reading the sales letter, and tell them their story to themselves. And as you come along side them in the first few paragraphs, they will buy in and they’ll be like, “Yes, this is exactly me.” And then as you move on, then they’ll say, “Well, of course I want to do that. I want the end of my journey to look like that.” It’s an amazing marketing technique that is very powerful. I’ve done this with some long form sales copy. Actually, I’ve done it quite a few times. My most recent example of this is if you go to the Drip homepage, getdrip.com, we just pushed a new long form homepage live a couple days before recording this, and it pits us no longer against increasing conversions in email marketing, but it’s going into the marketing automation space. Email marketing automation. But if you read that story and it gets in the mind of someone who has tried marketing automation and is fed up with the status quo and Drip’s positioning itself to be the answer to that. So if you read through that it’s another way to tell a story, and it’s not about you in this case; it’s about the customer.
[29:59] Mike: So again, just to point out this outline was put together from a bunch of different resources including Nick Reese’s blog, Copy Blogger: Narrative First, The Writer’s Journey. We’ll link up to all the different references that were used for this in the show notes.
[30:11] Rob: 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” or by RSS at Startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 194 | Should You Charge Before Product/Market Fit?
Show Notes
- Craig McKeachie’s JavaScript Framework Guide
- The GrowthHackers.com thread we discuss in this episode
- Sean Ellis’ interview on Venture Hacks
Transcript
[00:00] Rob: In this episode of “Startups for the Rest of Us,” Mike and I discuss whether you should charge before product/market fit. This is “Startups for the Rest of Us,” episode 194.
[00:08] Music
[00:17] Rob: Welcome to “Startups for the Rest of Us,” the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product, or you’re just thinking about it. I’m Rob.
[00:25]Mike: And I’m Mike.
[00:26] Rob: 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?
[00:31] Mike: I’ve undertaken the task of teaching my six- and seven-year-old boys how to play Dungeons & Dragons.
[00:37] Rob: Sweet!
[00:38] Mike: It’s not even the advanced Dungeons & Dragons. It’s, like, the original one from – I think the ’70s is when it first came out. But, yeah, it’s the really, really old stuff. [Laughs]
[00:46] Rob: Yeah, it’s fun.
[00:47] Mike: But it’s a lot more simple than, like, any of the advanced Dungeons & Dragons stuff. So, you know, they’re picking it up. They’re loving it.
[00:52] Rob: Yeah, I bet. It doesn’t have, like, encumbrance and pack loading and all that stuff. It’s super realistic, but it’s super time-consuming.
[00:59] Mike: Well, it does have that stuff. It’s just it’s a little bit different. Like, all the equipment lists are simplified, and –
[01:05] Rob: Right.
[01:05] Mike: – everything is just simpler. It’s more stripped-down. There’s less to keep track of. There’s less in terms of the equipment lists and stuff that you can buy, and prices aren’t measured in copper pieces for different things. It’s, like, all straight – you know, no matter what it is, it costs at least one gold piece.
[01:18] Rob: Right. Yeah, that makes sense.
You know, there’s a couple other options to teach their kid. There’s a game. It’s a board game called Dungeon. It’s like a Dungeons & Dragons board game; and it was put out, I think in the ’70s to kind of get – it’s like an on-road. It’s like D&D lite, basically – right? You actually have a board, and you have pieces that you move around in a dungeon. And it’s pretty cheap. I think it’s maybe 15 bucks on Amazon. That’s a pretty good way to get in there, because it’s really simple, and it’s all self-contained. You don’t have to create characters or any of that stuff.
[01:46] The other thing that I started teaching my son is Magic: The Gathering. And that’s, like, making a resurgence with, you know, the – I don’t know – the eight- to thirteen-year-old set. I played it in college back in the late ’90s, but you can get a Magic: The Gathering starter deck, or a couple starter decks, for – I think it’s like 15, 20 bucks on Amazon. And my son and I just sat down and just picked it right up, and so it’s great. We don’t have to bring all the stuff; and you can just sit down and, you know, just start playing with the cards. So, I don’t know if you played those in the past, but they’re really cool to get kids kind of on-ramped into this type of game.
[02:17] Mike: Yeah, I think Dungeon was re-released, and then there’s a couple of other variations. I think one of them is called “Hero,” or “Hero Quest,” or something along those lines. It’s another board game. I know I played Magic: The Gathering back in college, but I haven’t really played that in years. I still have a lot of my cards and stuff, which many of them they just don’t make anymore, so –
[02:33] Rob: Yeah.
[02:34] Mike: – they’re worth a lot of money now. But I haven’t played it in a long time.
[02:36] Rob: Yeah. So, you might want to buy a new, cheaper set if you’re going to play with a six-year-old [chuckles].
[02:39] So, things are going pretty well for me. DRIP – things are picking up with it. We’ve moved several people from MailChimp to DRIP in the past couple of weeks, and we’re doing the manual migration right now. Basically either myself or my support guy are helping people move not only subscribers, but auto-responder sequences and create rules based on stuff. We’ve integrated with Gumroad and Stripe now. You know, events in Stripe just can hit right into your DRIP account and send someone an email when their trial’s going to expire. Or, send someone an email when their card is charged, like an invoice email, with dynamic fields and everything. So, we’re hitting that critical mass point, I feel, where we have enough features that people are really starting to take notice; and we’re now differentiated from a lot of things.
[03:19] What’s a trip is that there really is this steady flow of people who are either outgrowing MailChimp, or who have tried to move from MailChimp to Infusionsoft, and they hate it. They don’t like the software, and it’s just not working for them. And so that’s where we’re getting refugees coming from – and I’m learning a ton about the next wave of features that we’re finishing up, but that we need to build in order to better serve those markets. So, it’s been a really good source of not only some new users, but more importantly, information on a future direction of the product.
[03:51] Mike: It’s interesting that you use the term “refugees” from other products, because it’s funny; because I’ve been talking to a lot of AuditShark users lately, and people who I’m trying to talk into using AuditShark. And they keep bringing up products that they’re essentially trying to move away from because they’ve either gotten too enterprisey, or they’re not serving their needs. They say, “Oh, we’ll, do this update,” and they never get through with it. And they talk to Product Management, and they’re like, “Oh, yeah, we decided that that wasn’t a feature that we were going to go after.” So, I’m seeing a lot of people take looks at AuditShark specifically because other products that they’re using and working with just aren’t doing it for them. So, it’s interesting. Maybe we should do a podcast about trying to target refugees [chuckles] from other products.
[04:29] Rob: Um-hm. Yeah, and the nice part about it is that these conversations – or, that type of thinking can then be worked into your marketing and into, like, a sales message of, “Have you outgrown product X?” or, “Are you using product Y; but this, this and that are wrong with it?” because I keep hearing the same this, this and that from all these people. Like, it’s the same stuff they all hate. And so to be able to address that and enter the mind of your prospect in that way – there’s a lot of power in that.
[04:57] For me, I’ve just rewritten the entire home page. It’s not live yet, but I’ve used a lot of that, and I’m hoping it’ll outperform what I have there now.
[05:03] Mike: Very cool. Well, I wanted to say congratulations to Micropreneur Academy member and MicroConf attendee Craig McKeitsche [phonetic], and he just recently launched his “JavaScript Framework Guide.” We’ll link it up to over in the show notes, but it’s at funnyant.com. And he basically walks through some of the different JavaScript frameworks, like Angular JS and Backbone and Ember and Knockout, and kind of talks about what sorts of things you can do with them, or why you should choose each of them. So, you know, kind of choosing the right tools for the job.
[05:31] Rob: Yeah, he sent me a copy, and I read through it. It’s good stuff. I definitely learned quite a bit about it.
[05:36] So, I have a retraction. Last week, I talked about Player.FM, and I said that I had downloaded and installed it on my iPhone. And when I went on to my iPhone to look for it, it wasn’t there. There was some other player there, and I was so confused. And it turns out Player.FM is Android-only. What I had done is I’d gone into the iTunes store. I searched for Player.FM, and I clicked the first one in there; but it’s some other thing called Pod Cruncher, which is a good app, but I realized as I listened to last week’s episode, it was like, “Uh-oh. Someone’s going to call me on this basically saying that I had downloaded something that didn’t exist.” So, if you’re on android, I’d recommend checking out Player.FM. Obviously, they got invited to Google.IO. Mike is doing something right.
[06:13]Music
[06:16] Rob: I want to give a thanks to Franz C for sending this into us. He sent us an email and pointed us to a growthhackers.com thread. I don’t know if you’ve noticed, but Hacker News is no longer moderated by Paul Graham. He’s handed off the moderation to someone else. This was months ago. And the focus of the site has shifted. There’s a lot less marketing stuff on there. There’s a lot less ways about how to grow product, and it’s become more – it’s startup stuff, but it’s definitely different than it was a few years ago; you know, even, maybe, a year ago. And so growthhackers.com was started by Sean Ellis. It has kind of become the de facto place for more of that marketing stuff – the startup marketing and the startup growth approaches. And Sean Ellis is on it, obviously, because he runs it; and he’s grown it pretty quick. And then you’ll see, you know, people chime in in the threads. And Noah Kagan, Hiten Shah, I’ve chimed in on a few of them. There’s a lot of people in there talking, and there’re some really knowledgeable marketers.
[07:08] So, there’s a thread on there. The question in the thread is, “Should you charge or not before you’ve reached product/market fit?” So, I’ll read through the original post, and then we’ll dive into some thoughts that we have on it. I’ll also bring up some thoughts that other folks have in the thread.
[07:23] So, the original post says, “In Sean Ellis’ prolific interviews on Venture Hacks, he recommends not charging before product/market fit, because you allow people to explore all of the functionality of your app and can continuously survey them until some are saying they would be very disappointed without the product.” And that’s kind of the definition of “product/market fit” they’re using.
[07:41] So, the exact quote from Sean in the interview is, “I think that it’s easier to evolve towards product/market fit without a business model in place, meaning users are free to try everything without worrying about price. As soon as you have enough users saying they would be very disappointed without your product, then it’s critical to quickly implement a business model; and it will be much easier to map the business model to user-perceived value.”
[08:03] And the original poster says, “So, I’d love to hear this discussed further.”
[08:06] I think, to start off, I’d like to limit our discussion; because, you know, does this apply to B to C? Does it apply to B to B only ? Is it only SaaS apps? Is it mobile? And I think for the sake of our discussion, I’d like to limit it to services that will one day have a price. But I think B to B or B to C could work. So, Shawn has worked on products like Dropbox; and you would say, especially when they launched, they were more of a B to C play than B to B. But I still think that what we’re going to talk about today applies to that. So, I don’t think it’s a B to B, B to C line. I think it’s if you have a service that people value and will pay money for – not like a social network, a marketplace, an ad-based revenue model which charging isn’t even really relevant at that point.
[08:44] Mike: And I think that a[n] issue [that’s?] kind of trying to go down that road is that you’re talking about trying to achieve this product/market fit where you’re solving some sort of a problem for people versus something where it’s very nebulous about whether or not there’s any actual value in it for them to be able to pay for – for the users to be paying you directly for it. So, obviously, Facebook kind of falls into that line; because if you were to ask a lot of Facebook users right now, “Would you be disappointed without Facebook?” a lot of them would probably say yes. But at the same time, can you charge those people for it? And the answer is “no.” And for our purposes, I think we just want to limit it and say, you know, it’s only if you are directly charging those people.
[09:22] Rob: Now what I’d like to run through are some dangers of charging, kind of some negative aspects to doing that, and then some dangers of not charging and how to deal with those. And then we’re going to wrap it up with what I consider kind of the middle ground, like suggested solutions and approaches to this after we’ve looked at the pros and cons of each side.
[09:39] So, just kick us off. The first danger of charging is pretty obvious. It limits your user pool, because you’re going to get so many fewer people to come in and use your app. You know, even if you have a free trial, even if you just have a price up front and are not actually charging for it yet, fewer people are going to sign up for it, for sure.
[09:54] Mike: I think this becomes much more of a problem where you don’t have a mechanism for getting in front of people, or you don’t necessarily truly understand the right profile of the ideal target customer. If you have ideas about it, I mean that’s helpful, but obviously charging them is going to push people away. And I don’t know whether this goes back to why Google decided, “All of our products are going to be in beta. We’re not going to charge for anything.” There’s lots of companies that do it that way. There’s lots of people who go down this path, and as soon as you start mentioning money, they’re going to want to kick the tires enough to say, “Is this worth my cash?” “Is this worth the business revenue that we’ve got?” It does negatively impact it because then they have to start making value decisions, and there may very well be a timeline around how much time they can dedicated to it, how much effort can they put forward to kick the tires before the end of that trial period.
[10:46] Rob: I think the second danger of charging is that not only does it limit the number of people that will be involved, but it’s going to limit the range of feedback. So, could there be a market that you had never even thought of that may not be as willing to pay up front; but that, if you let people in for free, you could get added feedback?
[11:05] And then the third danger of charging is that it’s going to take you longer to receive the same amount of feedback; because since you have fewer users, you have a smaller range of feedback. You’re going to have to wait longer; and if you’re, you know, an impatient start-up founder, like most of us are, that’s kind of a pain. You can’t move as quickly, and you can’t get to market as fast as if you let more people in if you’re not charging.
[11:25] Mike: I think there needs to be a clarification here, because I think when Sean is saying this, he doesn’t necessarily mean that it takes longer to receive feedback. What he’s really saying is that it takes you longer to receive enough feedback to be certain of what your conclusions are. It’s almost like making sure that you have a statistically valid response, because if you have a limited trial period for somebody and they only have 14 days, they’re going to try to get feedback back to you within that 14 days; because they know they’ve only got 14 days to work with the software versus if you’ve only got ten people, you’re only going to get those ten responses back from people. You’re not going to get a hundred, or a thousand, or a critical mass of responses that will help you draw the conclusions that you need to draw.
[12:04] Rob: Yeah, and if you’re listening to this and you haven’t read through the thread, it’s definitely worth the listen. There’s good discussion back and forth. Several of these dangers that we’re talking about, or the negatives of doing these things, I came up with and put them in the outline. Some of them I also pulled from the discussion, and I’ll try to credit people.
[12:19] I couldn’t think of a ton of dangers of charging aside from the ones we’ve covered, but I can think of a lot of drawbacks to not charging. And the first one is that, if you’re not charging, and you have an app that people are using, you need a bucket of money to build and support the app in the meantime. So, what this means is really, if you’re truly, truly bootstrapping – and I don’t mean self-funding; there’s a difference – right? Bootstrapping is when you have a hundred bucks to start, or 200 bucks, or a very small budget; and you get to market, and you need revenue just to stay alive. Whereas, self-funding means you have some funding that is coming out of your pocket. And that may only be – maybe it’s 500 or a thousand dollars a month, or maybe it’s 10 or 20 grand that you’ve saved up for it. But if you’re truly bootstrapping it, then you really can’t go this way, because you need revenue up front very quickly.
[13:09] Mike: Yeah, I would say that that’s probably the biggest danger of not charging. I can’t think of too many other things that would so negatively impact your ability to move forward with a product, is this one right here.
[13:20] Rob: [A] second danger of not charging is you can potentially receive too much feedback, some of which can be from people who might never be willing to pay for the product. So, the original poster actually said – and I’m quoting him. He says, “It creates less noise. You can listen to the feedback of people who are paying, if you charge.”
[13:37] And then Sean Ellis talks back and forth about this, which is kind of cool. He gives kind of both sides of it, and he says, “Even if you are a great marketer, you can only get people to keep using your app if it actually provides real value. The noise issue tends to sort itself out further down the funnel, and here’s how. Each step in the funnel that a user takes imposes a real cost on that user’s time and effort.” And he doesn’t just mean marketing funnel. He actually means usage of your app funnel – like, how deep do they get in, and how much usage do they do, and how much value do they get out of it.
[14:05] So, continuing with Sean, he says, “If you think of repeat usage as a step in the funnel, the reward of a great, useful experience needs to be there to justify coming back. Fact is people are just as fickle about a free product as they are for a paid product. Free can drive lots of sign-ups, but often those people give up on the product just as impulsively.” Then he goes on to say, “If you have KISSmetrics, you can actually query specific users; get their emails if they’ve done X, Y and Z events; and then you’ll have a great customer development pool. Even without charging, you’ll know who’s really getting the value from the app.”
[14:36] And he wraps up by saying, “In my original answer, I did say it depends. For pure enterprise products, I generally don’t recommend having it be free during a beta period,” for some of the reasons the original poster had mentioned in his original question.
[14:48] So, what do you think about this issue of having too much feedback, or that you could potentially be receiving it from people who aren’t willing to pay?
[14:55] Mike: That’s definitely a danger when you’ve got a lot of people in there who aren’t paying for it, because they’re like, “Oh, this would be cool if X.” And suddenly, everybody’s an expert in what your software should do, even if they’re not going to use it. And so the danger there is you’ve got these people who are not necessarily well-qualified leads who are giving you feedback and advice that you look at their advice, and it may sound reasonable on the surface, and you don’t necessarily know whether or not they’re going to use it down the road. So, you may follow that advice and find out, oh, well, sure. That’s what they said, but they weren’t going to pay for it anyway. So, you build these features, or do these things that just have no bearing on what the critical mass of users that really would pay for it need or want.
[15:35] So, you do have to, I think, prequalify some of those people a little bit better than just taking in advice from those people. So, when you ask questions, you do things like you ask them what their market is; you know, what problems they’re trying to solve; what it is they do on a regular basis – basically, take a lot of their input with a grain of salt. And until you hear enough people saying the same types of things, you don’t necessarily go down those directions, even if you’re having great conversations with them; because they can definitely you down those rabbit holes that you’re not going walk out of with paying customers.
[16:05] Rob: Yeah, I’ve gotten in a lot of really in-depth conversations with people who weren’t willing to pay for one of my products. And they’ve given a lot of feedback. I’ll say some of it’s good. Some of it is kind of wandery, but I didn’t really know if they were going to pay for it or not. And, in retrospect, I should have; and the feedback sent me off-track. So, I do like Sean’s hack of looking in KISSmetrics and querying what users have done X, Y and Z events and then using those as the people who are actually using the app. So, I think that’s a nice, feasibly work-around around this issue.
[16:35] The third danger of not charging is the danger of legitimate users or businesses not checking out your tool because it’s free and their concern that it’s of low value, or that it’s going to be shut down. I try to avoid tools that really are free, because I know that either they’re not going to stay around very long, or at some point they’re going to implement a business model where they need to charge. And then they’re either going to dump the free users, or give them crappy service. I mean we see this happen time and time again; and, frankly, the switching cost once I’m invested in using an app is bigger than the savings of moving somewhere else.
[17:07] Mike: Yeah, I look at this a lot as well. I think it’s a little different if the app or the business behind it is funded, because you know that they’ve got money and they’ll figure out a business model eventually. And although you may not be paying for it initially, the concern, of course, is that at some point down the road, the pricing may be such that it just doesn’t work for you. And as you said, the switching cost is big; and it’s not necessarily just the monetary cost of switching. It’s the time investment of doing that. If you’re faced with a decision between two players, one of whom is well-established, and they’re doing a reasonably okay job versus another one that’s new; and it sounds great, but who knows what their business model is and whether they’re going to be around or not, I don’t know about you. I tend to bank on the ones that have been around for a while just by default, because I don’t want to have to move my stuff later on.
[17:53] Rob: Yeah, I’m the same way.
[17:54] So, the fourth danger of not charging is that you don’t know if people will pay for your product, or if they’re just using it because it’s free. And Sean weighs in on this point. He said, “The benefit of charging from day one is that it tells you if your product promise is something people would pay for.” And when he says “promise,” he’s talking about the value proposition – right – the value that your customer is going to get out of it.
[18:15] Back to Sean. He says, “In my experience, I can rarely guess the product promise.” I found that very interesting. And he says, “I have to learn what it is based on the feedback from people who consider the product a must-have.” And here he’s implying that, whether they’re paying for it or not, that if it is a must-have for them, that their feedback is valuable.
[18:34] Mike: But I think that goes back to finding out why. If they are paying for it, you need to ask the direct questions about exactly, “What is it that this product is doing for you that is making you pay for it, giving you the necessary impetus to pull out your credit card and say, I’m willing to pay for this?'” “What are the key features for you?” “What business problems or personal problems are you having that you’re using this software to solve?” And whatever those features happen to be, those are the things that you can harp on in your marketing collateral as your headlines and as your product promise. And you can use it to hone in and to help you get to that product/market fit.
[19:09] Rob: And the fifth danger of not charging, Trevor Owens posted in the thread. And he actually does a good of this, so I’ll just quote him directly. He says, “My problem with doing a free beta is that when users stop using the product, I wouldn’t know if it was because the product wasn’t good enough, or they weren’t serious enough. If I charge a small amount, I only get people who, based on the idea of the product, actually have a need for it. Furthermore, if they cancel their account, I can immediately reach out and get their feedback.”
[19:37] Mike: Yeah, this is one of those situations where it’s kind of like one of those long-distance relationships where you gradually grow apart, and you don’t necessarily have that feedback loop, or the daily check-in, or weekly check-in to kind of know really what’s going on. And customers are kind of the same way, but if you’re not getting that feedback from them and they kind of gradually drift apart from your product, sometimes it’s hard to know when that happens, or there was some other, external event. And if they are paying for it, you can reach out and directly ask them. But you also want to draw a line between how often you check in with them; because, sure, you can reach out to them on a weekly or monthly basis; but eventually they’re going to stop listening anyway. You know, I’ve seen email and auto-responder campaigns where you send them a bunch of emails; and gradually over time, most people tune out over time. There’s a lot of engagement up front, and then over time – unless they’re continually using it – that engagement just fades.
[20:31] Rob: Most of the time, when someone actually cancels, they actually churn out of your SaaS app. They’ve typically already churned two months earlier. They just never cancelled. Most people stop using your app and then cancel a few months later, and it’s way too late at that point to try to rescue it.
[20:47] Mike: Oh, yeah. It also depends on what type of application it is, too. Like, I recently cancelled my LessAccounting subscription, and I stopped using it back in January. And I only recently cancelled it within the past couple of weeks, so you’re talking six months later. And the reason I kept it around was because of, you know, the tax season; and I wanted to make sure I got all my data out. And I wanted to make absolutely sure that I didn’t need to go in there for anything else. And to their credit, they did follow up with me and say, “Hey, we see that you haven’t logged in in X number of days.” I think it was a month, or two months, or something like that. They reached out a couple of times [and] said, “Hey, you haven’t logged in in a little while. Is there something we can help you out with?”
[21:19] I thought that their follow-up was extremely good, but at that point, I had obviously already made the decision way, way in advance to say, “Look, I’m going to move to something else, and I just really just need my data here.”
[21:30] Rob: The last bit I’ll add is a quote from Andy Newborn, who weighs in in this thread, and I really liked the way he’s thinking about product/market fit. I never heard it phrased this way. You know, typically product/market fit means that your product solves a problem for everybody, and you’ve found the market, and that’s when it’s time to scale. And you pump money in. You pump marketing, and you just scale that sucker up. It’s really hard to get there. Most apps never get to that point. And Sean Ellis has a test. It’s a three- or four-question quiz. Maybe it’s a one-question quiz, but the big question that he looks at is, if product X went away today and you could no longer use it, would you be mildly inconvenienced? Would you kind of care? Would you be a little bit disappointed? Very disappointed? Extremely disappointed? And if – I think the number is 40 percent or more are very or extremely, then that’s his definition. That’s when you’ve hit product/market fit. Okay?
[22:19] Andy Newborn chimes in. He says, “I’ve found that someone getting excited about your product does not mean you have product/market fit. It only means that you are good at explaining it and found an obvious solution-need pairing. What makes true product/market fit, in my opinion, is when the user changes their behavior to match your product or service and it becomes sticky. That’s fit that can be charged for.”
[22:43] And so while it’s only tangentially related to the topic at hand today, I love the way he put that. In fact, Sean references it back in the thread again. I love the idea of someone using your app, because you know you have a lot of people who come in and log in, and then they never really get on board. And you have some people who come in and get on-boarded and start using it, and then they kind of drift away. And then there are those who use it all the time. Like, they log into it every day to look at an analytics dashboard. Or, they get an email. They rely on an email they get from it once a week. Or, they need it every time they talk to their customers, or every project management “to do” is in there. You know, that’s when an app really becomes sticky, and that’s when you can scale something up; because people really need it.
[23:20] Mike: I think another way to phrase that is that they start using it for things that it was never really originally designed for. You see this with products like FogBugz, where people are using it for customer support. And it wasn’t necessarily meant for that, but people really shoe-horn it in there, and Fog Creek to their credit, has kind of made the products do that sort of thing; because they kind of did it internally for themselves. And then it has kind of caught on, and a lot of people use it for that. But there’s all sorts of things that, you know, that particular product and lots of other products are doing today that are not advertised on their website; because they weren’t ever really designed do that. But they work for it, so people use it for that, and it works for their own mental way of picturing the world of that particular problem.
[24:00] Rob: So, we’ve covered the dangers of both sides. Let’s look at three suggested solutions. These are things that I came up with. These are middle-ground approaches. I came up with the three of them, and then I went and looked in the thread, and all three of them were suggested in the thread as well. So, it was cool to see that the collective had also come up with some good approaches.
[24:19] So, the first of the three is to maybe not charge right from the start, but to have a free trial and maybe have a really long free trial when you start, like a 90-day free trial, or a 60-day, or something that gives people a ton of time to get in there and really knock it out and use it. At the back of my mind, you could even have some lower pricing at the start to allow more people to sign up, because there is a barrier. If you’re going to start, “All right, 99 bucks a month is my lowest plan,” you’re going to get a lot fewer people than if you dropped that down to $20 or $30. They’re going to get different people signing up; but, hopefully, you know, more people signing up. And as I said, it’s like a middle ground, so it’s not charging at all; but it’s giving people a long time to really get in and get on-boarded. And this was also suggested in the forums by Anonda Sanwal [phonetic]. So, I wanted to give him credit there.
[25:02] Mike: The second one is to make it free, but with the expectation that it’s not going to be free forever. So, the way Sean puts it is essentially the product is free during beta. And whether that beta is 30 days, or three months, or six months, it doesn’t necessarily matter. The idea is that you’re setting the expectation up front that they are going to be charged for it, and you have a rough idea of what it is that they’re going to be charged.I think the difference between this and the previous one is that, with a free trial you’re specifying, and there’s almost like this hard line in the sand that’s like, you know, “Once you cross this, we’re going to start charging for it.” But with free and the expectation being placed that it’s not going to be free forever, you’re essentially going to bring in on in the future. And I think you actually did this with DRIP. You basically said to people, “Hey, this is going to cost you money, but it’s going to be free for the time being until you start seeing value out of it.” And I really like that approach just because you’re on-boarding people, and at the point where you feel like they’re getting the value out of it and they can justify paying for it, that’s when you start charging them for it. You don’t draw this arbitrary line in the sand that says, “Okay, after 30 days,” or 90 days, “that’s when I’m going to charge you,” because you don’t necessarily know if they’ve gotten the value out of it. And you don’t know if the product itself needs to be adjusted or changed in order to meet some of their needs.
[26:16] Rob: Yeah, I did this with DRIP, like you said. I did it when I was doing the high-touch sales early on, or the high-touch, on boarding when it had – maybe it was up to about the first 15. “Early-access users” is what I called it – right? And so Sean says “free during beta.” Mine really was “free during early access until you get enough value out of that it’s worth 49 bucks a month.” And since I emailed with every person and manually on-boarded everybody – we didn’t even have a sign-up page at the time, I don’t think – I created their account, and then I would let them know that, like, “We intend to charge this much, but you can have as long as you want until you get value out of it.” I think that was a decent approach.
[26:50] I mean you could do that with – let’s say you have 500 or a thousand people that you’re emailing all at once. I suppose you could just put that as a line, that it’s free during early access. And early access is as long as it takes, but a minimum of 60 or 90 days. I think this could work. I really do feel like this is a decent middle ground to get a lot of people in and trying it. To be honest, early on I didn’t ask for a credit card. Again, we even didn’t have a credit card form in there. So, I had no credit card info for people, and this is for me – right – the guy who always wants to put a credit [chuckles] card form up and have the commitment. But I knew that people were committed. If they were going to take the time to get in and use it and get on-boarded and spend the time to just try stuff out, that if it worked for them, they’d probably be willing to pay for it.
[27:30] Mike: That’s kind of a difference – or, you know, one of those quantifiable points is you said that it’s going to take them some effort. It’s not like a drive-by, where you can sign up for an account, and you can check something out and then kind of walk away and never come back to it, and it’s not really a big deal. With DRIP – and there’s a lot of other applications that are like this, where you go to sign up for it, and it takes some work to set things up. I mean it’s not sign up for a form, and you immediately get value out of it; or, you could start seeing all these analytics from your web server, or something along those lines. You really have to put some effort in in order to make it work for you. It’s not something that you can just be up and running in a couple of minutes with.
[28:05] Rob: And the third middle-ground suggested solution is to go freemium. And I know this is not going to work in all cases; but if you have that bucket of money, and if you have maybe the support staff; or, your app is of low support, and you can actually handle a good number of people using the app, I think freemium could be interesting. Even if you were only freemium during early access, and you had a premium plan that people could upgrade to; or, even having a limited plan – I mean there are cases when this is going to work, and it’s definitely going to get you a lot of feedback. And it gets you a lot of users quickly. And then if you can pinpoint those who are getting a lot of value out of it, whether they’re free, or whether they’re on the premium plan and paying you – and if you can use the technique Sean talked about in KISSmetrics, or if you can just query your own data of who’s using what, I think there’s some potential merit to this approach.
[28:56] But to couch this, I don’t love freemium. I haven’t done it. I didn’t do it with DRIP, but I do think there are some times when it could be used.
[29:04] Mike: If you’re making it a freemium up until you’ve lost and are actually putting a revenue model behind it, then it’s not really freemium; it’s more that free trial. But you’re right. Unless you’ve got this bucket of money behind you, I still don’t think the freemium’s really the way to go – especially out of the gate. I mean once you’ve got everything kind of scaled up, and you’re trying to figure out how to scale the business, and you’ve got a lot of quantifiable metrics behind it in terms of on-boarding and how much it costs to acquire a customer; and, you know, you’ve got your product/market fit, then maybe it makes sense to try out freemium.
[29:34] Mike: Well, I think that about wraps us up. If you have a question for us, you can call it in to our voicemail number at 1.888.801.9690. Or, you can email it to us at questions@startupsfortherestofus.com.
Our theme music is except “We’re Outta Control” by MoOt, used under Creative Commons. You can subscribe to us on iTunes by searching for startups, or by RSS at startupsfortherestofus.com, where you’ll also find a full transcript of each episode.
Thanks for listening, and we’ll see you next time.
Episode 193 | Distributed Team Collaboration for Startups
Show Notes
- SqlSmash by Latish Sehgal
- Remote: Office Not Required by Jason Fried & David Heinemeier Hansson
- Episode 64 – Hiring and Managing Remote Developers
- Episode 68 – How to Hire and Manage Virtual Assistants
- Episore 143 – How to Hire Like a Bootstrapper with Special Guest Laura Roeder
Transcript
[00:00] Mike: In this episode of Startups For The Rest of Us, Rob and I are going to be talking about distributed team collaboration for startups. This is Startups For The Rest of Us episode 193.
[00:07] Music
[00:15] Mike: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
[00:23] Rob: And I’m Rob.
[00:24] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week Rob?
[00:28] Rob: We, meaning you and I and this podcast appeared on the floor of Google IO last week.
[00:34] Mike: Wooo Hoooo!!!
[00:35] Rob: Yeah. We were contacted by Michael Mahemoff. He’s the creator of player.fm. Which is a podcast app. And he said that 13 companies were invited by Google to participate in the developer sandbox at IO. And he emailed us. He wanted to find out if he could basically use our logo or use us as one of the place holders in the big player.fm app on the floor.
[00:58] So, it was really cool. He sent me two pictures of what the display looked like. You can see our logo. And it’s huge on this big on this extra large monitor. That’s always exciting. It’s kind of a nice tip of the hat and I really appreciate it. You know, Michael doing that for us.
[01:11] I have not checked out player.fm. I have since downloaded it. And let me tell you it’s quite a bit better than the built in Apple podcast app. Which I have been looking to leave for…Well, since pretty much the day they launched it. I think I might be trying to start migrating to player.fm.
[01:28] Mike: Got it. I’ve been using Casts, which is an interesting app. I like the fact that you can just set it up to download everything in the background. And you can set up these filters so that you can filter in different criteria. And what I do is I set mine up so that it is unplayed and then I have it unplayed by date in reverse order. So that way if I’m behind at all I can just catch up in the order that the podcasts were received on my phone.
[01:50] Mike: So it’s kind of nice it doesn’t make you go episode 30 then 29, 28 ect. You go the other direction. So that’s kind of a nice feature. And then like I said, it just downloads stuff in the background while you’re connected to wifi. And you don’t necessarily have to worry about it. It pops up little notifications to let you know that new episode have been downloaded. It cleans up after itself after things have been played. And you just have to delete stuff afterwards.
[02:13] Rob: Yeah. None of those things happen in the Apple podcast app. It’s a mess.
[02:17] Mike: The biggest problem I had with it was it would start to download an episode and then wouldn’t download the whole thing and if you were not home or on Wi-Fi then it would say “Oh! I can’t play this would you like to stream it?” I’m like; I don’t really want to be sucking up all my data.
[02:31] Rob: But even then if it got stuck in the middle and then you tried to stream it, it would choke.
[02:35] Mike: Yeah. Well, we got an email from Latish Sehgal. And he says “Hi, guys! I’ve been a regular listener for the last year or so. I’m a developer and love building tools and utilities. Over the last year I worked on one of my side projects and launched it last month. It’s called SQL smash. It’s productivity plug-in for people who work with SQL server. I have a few paying customers and I’m getting a lot of good feedback. I’ve made mistakes on this journey but have avoided a lot more because of everything you guys talk about. Just wanted to drop a note and say thanks.”
[03:00] Rob: Very cool. Congrats Latish.
[03:02] So, we have some new iTunes reviews, several actually. One is from Santa Monica Boone and he says “Best podcast for how to do anything in business. Podcast gets right to real advice on how to implement tactics. There’s no fluff, filter or lame teasers. Content is not just for software startups any business can benefit from Rob and Mike’s advice.
[03:22] I have another one from Lucas. And he says, “Amazing show-always learn something. Love the show and listen to it all the time. Rob and Mike always have interesting items to talk about and they don’t “talk down” to the audience at all- they move at a fast pace that is perfect for any developer looking to start a business.”
[03:36] We really appreciate 5 star reviews in iTunes. It helps us out tremendously.
[03:41] Mike: So we are slightly behind on this announcement but June was back up awareness month. And in the spirit of that I recently had a hard drive in my network attached storage device die on me earlier this week. It’s a 1.5 TB drive and fortunately I didn’t lose any data because I have everything at rate six already but I ordered 4 new 2 TB drives for measly $330.
[04:04] Rob: Oh Jeez.
[04:04] Mike: [Laughter] I think I paid more than that back when I bought one of my first computers for a 1.6 GB drive
[04:11] Rob: Incredible, yeah I paid more than that for my hard drive on my Apple IIe. That’s for sure. It had…but it wasn’t hard dive, I’m sorry. It was a floppy disk drive. It had no storage. [Laughter] Ahhh. That’s crazy.
[04:22] Mike: Crazy how much things have advanced. And how cheap, just computer parts in general have gotten.
[04:27] Music
[04:31] Mike: Today we’re going to be talking about distributed team collaboration for startups. And some of the topic sections are kind of pulled from the 37 signals book called, Remote: Office Not Required. So what we’re going to do is we’re going to talk through some of the different general topics of the book and kind of give it our own unique spin for much smaller teams.
[04:49] Rob: So, it looks like you’ve put together 5 points and each of those points has several specific items that we will be talking about. This first point is why you should think about hiring a remote team.
[04:59] Mike: Yeah. And I think the first one is for somebody who is starting a small business or running a small business, the first one is probably the most important one, which is it’s a lot more cost effective both for hiring the people themselves and for avoiding the office costs. Office costs tend more to be more of a sunk cost. I mean, you put the money in. You don’t necessarily get anything out of it. And then in terms of hiring people you are somewhat limited to the people that you have in your geographic vicinity. One problem that I had, for example, I put out an advertisement to hire people, several years ago, because my office was located near the monster.com office my advertisements for employees were getting overrun by their advertisements on their own website. Which totally sucked. I complained to them and everything.
[05:42] But the issue of course is that if I want somebody to come into my office they have to be located near me. And within a reasonable commuting distance. I know that there’s people out there who have 2 and 3 hour commutes each way. And that absolutely sucks. I mean, that’s probably part of why a lot of people gravitate towards building their own businesses. But when you kind of extend your reach and you say “Hey! I don’t care about you coming into an office. I don’t need you to do that.” Then you can extend your reach across the globe. And then you can use things like Odesk and outsourcing facilities and lots of other ways to get quality people in the door to help you build a unique business.
[06:19] Rob: Yeah. And I think you touched on two things there. One is that it tends to be more cost effective. And the second is that you’re not limited to geography. And so you can find the best talent in the world, at basically the budget that you can afford. I think another reason to think about hiring a remote team is that generally people like working remotely. Right. They like either working at a co-working facility working at their house and to be able to save time and avoid a commute and avoid sitting in traffic with everyone else. That flexible telecommuting type situation. But a lot of developers that I talk to that work for big companies, they’re still grinding it out on the 405 in L.A. an hour each way, you know. What is that 10 hours a week of wasted time? And not only is that exhausting mentally but it’s a huge time suck. And it’s time you can’t spend with your kids or you can’t spend working, frankly, developing the product.
[07:06] So, I think that the benefit, the perk of allowing people to work remotely not only benefits the employee but the employer as well.
[07:13] Mike: I mean, with something you just mentioned there, is if you’re spending two hours a day commuting, that’s 10 hours a week. That’s an extra full day of work that you’re not actually getting anything done, which totally sucks. You know both for the employer and for the employee.
[07:26] The other thing I think that people tend to forget a little bit about when you’re putting together a distributed team is that when you have a distributed team it means that any sort of office disaster is not nearly as destructive to the productivity of the team. And by office disaster I mean the electricity goes out or there’s a storm. I live in New England. So snowstorms are fairly common. And that will just kill productivity because you don’t necessarily want people to come into work at that point anyway but then you also have to deal with the aftermath because of the weather. And sometimes there are power outages that go along with it. If people are working in a distributed fashion that might happen to one or two people but that doesn’t necessarily happen to everybody all at the same time.
[08:03] Rob: Yeah, this is one that I haven’t really counted on or thought of as a big benefit in the past. But I do suppose that if you do have customers around the world it’s nice to have folks in time zones around the world, both to handle support as well as get around local disasters like you’re saying.
[08:18] Mike: When you’re talking about putting together a distributed team there’s a lot of common objections that come about. And many of these come from what I’ll call the big company line of thinking. One of which is how do I know that people are working? How do I keep my data secure? How do I keep things moving along because they’re not working in the same time zone as I am, so I send them a message and it takes 4 hours or 8 or sometimes 12 hours to get a response back. Which means you’re kind of pushing answers into the next day.
[08:45] Those are some fairly common objections. All of which have some fairly straight forward answers. In terms of knowing how people are working, you just look at what they’re doing. Whether it’s…If they’re developers you can look at code commits, whether they are closing out bugs anything like that. I can almost guarantee that in large companies there are so many different ways that data can be lost or compromised that it almost doesn’t matter. You’re almost on par with the large companies as you are with a small company in terms of data security. And obviously you have to do at least the bare minimums, like making sure that you don’t have open firewalls and you’re running antivirus and basic things like that.
[09:21] But at the same time you don’t necessarily have to worry too much about losing IP because really the marketing behind your products is the core of it. It’s not necessarily about the code or compiling everything. It’s about all the different business processes that you are putting in place. That’s where the value of your business is. Not necessarily just the source code.
[09:40] Rob: I understand both of these objections, I think. How do I know people are working is reasonable. Right, it’s a reasonable concern to have especially when I’ve worked with contractors internationally, some of whom took advantage of the fact that we were remote. And they basically just billed me for hours that, in retrospect as I looked through stuff that they were not working. And that’s one of the reasons that I really liked when Odesk came out with their thing that actually gave you screen shots every 5-7 minutes.
[10:07] Because it was a really effective tool for managing people. And now anyone I work with who I don’t know already I will ask them to use Odesk. Working locally here now that I have a couple of developers that I work with. I know these guys well enough that if one of them moved away; I know they are working because I trust them. This trust has been built up through a relationship and through working close with people. So, to me that those are the two sides of it. If you know and trust them then you know they’re working. If you don’t know them well enough to trust them then I think you need to fall back on some software whether it’s Odesk or there are actual third party apps that you can buy that will monitor what people are doing, with their permission of course. You tell them this is a condition of getting hired or whatever. And they have to install it and it will send you screen shots. Or of you don’t trust your employees. And that’s just a problem, right? Then I think you’ve hired the wrong people. If you do know them well enough and you still don’t trust them. That’s kind of a whole other issue that I think is unrelated to whether or not they are working remotely or not.
[11:03] Mike: One of the things that the book Remote brings up is that if you can’t see somebody. If they’re not in your line of sight then you have a much harder time feeling like you’re in control of the situation. And what they’re working on and what they’re doing. And I feel like that’s more of a mental hurdle than anything else. There’s lots of people who just because they’re sitting in a chair does not necessarily mean they’re working. If you can see them that doesn’t necessarily indicate progress is being made. It’s really what you need to focus on is the work itself as opposed to seeing them as a person.
[11:33] Rob: Yeah, I totally agree. I do agree with the objection of “How do we keep things moving along because of latency issues”. Because that is probably my one biggest hang-up that still gets me to this day having worked with dozens and dozens of remote workers for the past, what?, 7 years maybe, is the latency issues. And I’ve figured out some work arounds and ways where I will stay up late. And make sure to work on that stuff late or early so that if I do have questions they’re at least online and they can back to me and stuff. But overall I think, this is the…Perhaps the biggest drawback for me, is that if people are not in your same time zone there’s just latency and in my opinion the other positives outweigh it. But I don’t know anyone who is getting around this that effectively.
[12:16] Mike: And that’s something I have a little bit of trouble with as well. What I’ve found is that, you suggested one mechanism for handling it which is kind of arrange your hours to overlap with the people who are working in different zones. Another one that is helpful, but obviously not something you can do all the time, is if you’re able to plan far enough in advance to be able to have them working on something that isn’t necessarily time critical. Then you can ask them questions about it and kind of have a couple of different things going on at the same time. I do find it when a project sprint is coming down to the wire and you really need things done on a specific time schedule. That’s when it becomes much more of a problem. At that point you really have to just start adjusting your schedule to be able to get the answers you need. But otherwise you can sort of slip stream things in as you’re working.
[13:04] Rob: Another common objection to having remote workers is that you won’t have a company culture. And if you listen back to episode 143 of this podcast where we had Laura Roeder on the show. One thing that she said that we discussed at length was that she says that every company even companies with remote workers have a culture. And that you need to be deliberate about it. And the companies that I’ve seen make the remote thing work. They definitely have a culture. And they have a culture whether it’s be it through their email system, whether they’re all in kind of a chat window at the same time, whether they meet up once or twice a year as a group but there’s definitely a culture and a vibe to the company. And I think it’s …It’s possible to have it. It may not be as easy to have as when everyone is in the same office. In fact I know it’s not. But it’s still possible to have a specific culture and a specific, kind of, mentality that everyone at the company embodies
[13:58] Mike: Yeah, one of the things that I’ve found that’s pretty helpful for keeping everybody on the same page in terms of company culture is getting HipChat up and running. HipChat basic is free right now. They recently changed it over. Previously it was up to five users it was free. And now it’s unlimited users and it’s free forever. So, you can just install HipChat on your Windows machine or your Mac machine. And it will just be sitting there running in the background and it’s basically just a nice private instant messaging utility that everybody can be on. They also have HipChat Plus which is only $2 per user, which gives you video chat and screen sharing and several other features. But again that’s still very very cheap for what it is.
[14:39] Rob: Right. And the other tool, that Ruben actually just mentioned to me today, is Slack. Slack.com. And supposedly it has a better UI than HipChat. Definitely has mobile versions and all types of stuff. So, I think those are two pretty good options if you want everyone to be basically chatting all day or available to chat during the day. I think those are pretty good ways to do it. I think the last objection that we’ll look at is “Who will answer the phone?” And this one’s laughable. I’m pretty much going to skip it. Because in this day in age with IP phones. It’s like, you can have a phone number and you can actually have more people answering it at more hours of the day if you have them on multiple time zones, right? You don’t need a physical phone in a physical location in order to do this.
[15:19] Mike: Yeah. I think that even, I’d say probably 3 years ago this was a much bigger problem because I think it’s only been in the past 2 or 3 years that it’s been a lot easier to have essentially a virtual PDX that you can, kind of, manage from your phone or manage from the web and be able to redirect people to from a centralized number to be calling different people in your organization. So, like I said, even 3 years ago I think that it was a lot harder than it is today. I mean, today you can just sign up for a Grasshopper account and you’re up and running.
[15:51] Rob: So, we’ve talk about why you should think about hiring a remote team, talk about common objections. The next step, the third point we have here is how to hire a remote team.
[16:01]Mike: Yeah, so I don’t know as we should dig too much into how to hire people because I think that we’ve talked about this quite a bit before in three different episodes that I can think of; episode 64, where we talked about hiring and managing remote developers. And then in episode 68 we talked specifically about how to hire and manage virtual assistants. And then again in 143 we talked about how to hire like a bootstrapper. And that was the one with Laura Roeder.
[16:25] So I think we’ll go on to the next one which is how to collaborate effectively. And the primary thing here I think to keep in mind is you really need to be using web based tools, especially ones that you are not actively managing. You know, there’s any number of services out there for all kinds of different tools that you can sign up for. That most of them are subscriptions based but you just pay that monthly fee. And you can add in the users that you need to be able to access the system. Whether its wikis or bug tracking, source control. I use a combination of things like Basecamp, HipChat, Skype and then there are all these CRM systems out there like PipeDrive and Act CRM. You can also use Grasshopper if you need phone systems. You can also use WebEx. I use a WebEx account. There’s … You can also use GoToMeeting. GoToMeeting and WebEx are pretty comparable I think in terms of features. But those are all the different tools you can use and just sign up for an account for them. And it’s like I said some of them are free. And you can use them until you get to a certain point. Once you get to that point chances are really good that your business is in a position to be able to pay for those services.
[17:24]Rob: Another tool someone told me about just today is called I done this. Idonethis.com. And it’s basically email as UI. So everybody on your team gets an email and they reply to it and I done this parses though it and gives everyone a status report the next morning with what everyone accomplished. And if you’re running into things you can comment on their stuff. But it just tracks your progress every day. This is obviously not a real time thing but it can be super helpful for distributed teams. And knowing what’s going on on your team. Because even whether you are the manager of the team or you’re just a member of the team it’s a good tool to know what everyone else is up to.
[17:58] Mike: Another key piece of collaborating effectively with your team is to try to operate on a non interruptive schedule. And by that I really mean make sure that you’re reserving voice and instant messaging communication for critical items. Not the everyday stuff. For all of the everyday stuff use email. Use something like I Done This. There’s also a service you can sign up for called 15 Five. It’s the numbers 15 and then f i v e. com. And essentially what that does is that … You’re essentially getting these weekly reports from people to help the management stay informed about what’s going on. And does I Done This go to everybody or just the managers?
[18:37] Rob: Everyone.
[18:38] Mike: I think that 15five only goes to the managers, but I could be wrong on that. But I came across that a few weeks ago as well. But the idea there is that you’re really trying to get information from people and surface it in a way that does not interrupt your daily flow. And leave it up to the people who are working to not only get their jobs done but at some point communicate information back. And that kind of goes back to the latency thing that we talked about a little bit before. And if you can kind of plan around that you’re impacting people’s productivity a lot less which allows them to get more done.
[19:09] Rob: Yeah, I have heard of some remote teams who are in a chat window all day. So they’re in CampFire or HipChat all day. I did that about 10 or 15 years ago when I worked at a dot com startup in the first wave of the dot com boom. And it was great fun but it was not very productive. And these days I have no chat windows open ever. And if my team needs to get a hold of me then they email me. If they need to get a hold of me urgently they text me. Those are the ways that I want to be contacted because I’ve found that being in a chat window, for me personally, it leads me to either get interrupted more than I want or to interrupt other people more than I want. Because if something pops into my head I’ll just ask them and often times it’s better to just have to wait. Right? It’s better for the whole teams productivity if it’s not as easy for me to just interrupt somebody and if I kind of get the discipline where I can just send someone an email and then wait for it. And then if there is something urgent then we do communicate on the spot but other than that. Personally I am not a fan of this. Not to say that this is right or wrong to all be in the same chat window, everyone has their own working style, but that’s the direction I tend to lean.
[20:15] Mike: Yeah, I think that just comes down to just how you’re comfortable working and how your team’s comfortable working. We use HipChat. And it’s kind of nice. But if I need to get work done I’ll put myself on do not disturb. So that even if stuff goes in there I don’t end up seeing it. But you can also just use email to schedule time to say, “Hey, can you get on chat. We’ll chat at such and such time.” One thing that I like doing is using a common set of sprints or scheduled milestones to get people working towards the same things at the same time. Remember before I talked about how if you have a couple of different things going on at the same time if one of them is sort of a blocking issue and you need an answer to move forward on it, you can kind of switch to the next one. It’s nice to be able to kind of aggregate some of those into a specific sprint or a scheduled milestone so that everyone is working toward the same goal. And they know when those deadlines are coming up.
[21:02] They know when that stuff’s got to be done. So they’re rearranging whatever their personal lives schedule is in order to be able to meet those. And it’s nice because then everybody is on the same page. I find that just having those, I’ll call them snapshots or of points of where people’s work crosses one another, you know, converge. That can be very very helpful for keeping people on track. And not only meeting that particular milestone but meeting further milestones moving forward.
[21:28] Rob: Yeah, I think this makes sense if you’re working on big features in separate subsystems. Right. And this allows people to sync up and not just do integration testing but see how the whole app works and get an idea of how everything is working together. I think with our stuff with HitTail and Drip since we are building and deploying new features constantly. I mean, we may do, there are days we do multiple deployments in a day. And launching tiny little features as they’re done. We have less of a need for this. We don’t really have, aside from like the rules engine, that was a milestone. Aside from that we don’t tend to have many grouped launches of features. They just tend to go out when they’re tested and when they are ready. There doesn’t tend to be so much overlap between work people are doing. Now I also don’t have 5 developers working on one product either. People are kind of spread out among multiple products.
[22:19] Mike: If you’re deploying a lot of things very very quickly then having those sprints or milestones doesn’t make nearly as much sense. But it’s obviously the things that are a little more complicated. And your situation also with those developers is a little bit different because they’re working in the same office. So, it’s a little bit easier to coordinate some of those things because you can just stop by and talk to somebody. And hash things out over half an hour and that’s not to say that you can’t do that over Skype or through a chat message or something like that. But obviously some of those things play into it a little bit.
[22:49] Rob: Yeah. That’s true.
[22:51] Mike: So I think the next section we’re going to talk about is some of the common pitfalls that people run into. And I think the first major one that I’ve seen is that people are not on the same page. If you set yourself up as the manager for a bunch of different people who are working for you and you don’t keep everybody informed about everything that’s going on. Then everybody feel like they’re in a closet and in the dark. And they don’t necessarily know all the other stuff that’s going on and they don’t know the interdependencies between the stuff that they’re working on and the things that other people are working on. And I find that that is not helpful for the team morale but it’s also not helpful for making sure that people are kind of working on their timelines and deadlines. So, if somebody doesn’t know that there’s 4 or 5 different things coming together and they just know what they’re working on and they say “Oh! It’s got to be done by Friday.” But if they know that there’s 3 or 4 other things that are also coming together on Friday and there’s a press release or something like that going out. Or some new marketing campaign and if they don’t get it done everything is going to be held up because of them. I’ve seen that this has kind of a motivational factor to it. People tend to make sure that they buckle down and rearrange their schedule to be sure those deadlines are being met.
[23:57]Rob: Yeah, I think there’s a lot of ways to get people on the same page. The daily check-ins that we talked about with 15five and I Done This is a really nice way to keep people communicating. I think another way is to have coding standards. And style guides for HTML/CSS and that kind of stuff. This sounds like big company stuff but its shocking how once you have two or three developers working on the same project. Things like how many spaces should a tab be in your editor? Should you always run the clear trailing spaces command when you’re done with a file? Are the variable names upper camel case, lower camel case or do we put under scores in the variable names? I mean there’s all this kind of stuff and if you want consistency in your code files then this is stuff that even a one page doc can do wonders. If someone is able to refer back to that. And there’s some pretty good examples of this, there’s a GitHub ruby style guide and I think there’s one for CSS as well. If you read through it, it’s like “Yeah. This stuff makes sense.” They’ve done a good job in a very short amount of time. This is not a 50 page style guide. Its one to two pages but they communicate a lot with it. And I think being able to document that in one place where everyone can go back to. And it’s living and breathing too, right. We can go in and edit it. And anyone should be able to keep it up to date as it goes. It’s not set in stone. But just to have a common understanding, keep your consistency across all the technical assets you have will keep that consistency high.
[25:21] Mike: Yeah. And some of those things you can do with technical controls as well. So like for C# there’s things like Style Cop and FX Cop that you can use to essentially do a static code analysis of the software that is being written. To make sure that it is conforming to whatever the style guides that you’ve set forth are. And then you can just integrate it directly into the build process. If somebody checks some code in that doesn’t meet the style guidelines you can kick it out and say “Hey! You’ve got to go fix this because it’s not passing. The build server’s crashing on it.” It says “No! I’m not going to allow you to build this and push it out because you’re not following the style guidelines.”
[25:54] Another thing you can do is incorporate some of those things into just standard operating documents or procedures, some of your general operating guidelines. As long as people generally know how the business is being run and this isn’t just necessarily about software development. But how the business processes are done. If they run into a situation where they’re going to be doing something and there may very well be a situation where somebody could come in after them and have to do it themselves. They should be empowered to go in there and modify those to be able to document that stuff and say “This is how it is done.” And if we need to change this process later on it’s not a big deal but here’s the documentation that explains how to do this.
[26:31] My bookkeeper’s actually been really good about documenting the things that she’s been doing and adding them into our Google Docs so that she just links to them from our standard operating documents. And just puts it in there so that if she ever moves on and goes to do something else then whoever comes in afterwards and picks up the books can go in and basically pick up where she left off. And know exactly how everything is supposed to be done. And if they don’t like it they can change the documents and change the process. But you need to be able to empower these people to actually do that stuff, so that everybody’s doing it consistently.
[27:02]Rob: Another common pitfall that we have listed here is employee burnout. I have to be honest I’ve never encountered this. And I don’t know if it’s the culture of the company here or it’s just the folks who I’ve hired specifically but I haven’t had anyone kind of work themselves into the ground. Do you think this is a common pitfall?
[27:19]Mike: I think it’s a common for the founder of the company.
[27:21]Rob: Ahhh. Got it.
[27:23]Mike: Yes, I don’t know that it’s so much for the people who are, you know the contractors, especially for contractors I’ll say. Because with contractors I think the issue is, like, they’re getting paid however much they’re getting paid for however many hours. So, you know generally speaking how many hours they’re working because you’re paying them for that. So, if they work 30 hours a week at $20 an hour you’re going to pay $600 for the week. And if you start paying $800 or $900 a week for that person then it’s pretty clear that they are working a lot. But I think that if you’re not tracking their hours for whatever reason. And they’re not tracking them. Then it becomes much easier to kind of to go into the… down the road of burnout without being aware of it. And I think that that’s a…that’s the biggest part of that is that if you’re not aware that burnout could become an issue.
[28:07] You could get to a point where it’s just too late. It’s become a problem and it’s too late to do anything about it. You need to basically need to send them on vacation for a while. It’s more of a problem for the business owner than it is for the people working in the business.
[28:21] The next pitfall is accounting and HR problems. When you are hiring people across state lines or in other countries there’s all these different problems that come to mind like, how do you pay them? for one. How do you account for any sort of benefits? You know, how do you give them time off? And I think the general consensus between at least you and me for these types of situations is go as long as you possibly can using people as contractors. Because then you are able to avoid those things. And you’re going to be paying them as a contractor you’re going to be paying them hourly. Such that they can go out and take care of that stuff themselves. There’s two different things that happen there. One is that you don’t have to worry about what sort of health plan you’re going to be using to cover everybody in all different states and different countries and things like that. And the other thing is that they get to choose whatever it is that they want.
[29:07] Using something like Odesk really helps out with that because they also handle things like 1099 forms. So what I’ve had to do every year is whenever I’m working with contractors if I pay them more than $600 a year. Then I have to issue them what is called a 1099 form. In the US that’s just a standard form that notifies them and the IRS that this is how much you paid them. And let’s the IRS know that they should be expecting tax money from that revenue. I don’t know what it’s like in other countries with that regard but if you’re using Odesk. Odesk takes care of all that stuff for you.
[29:39]Rob: Another common pitfall is people doing their own thing. Either not following instructions, not doing good work or doing other work during the time that they are billing you for. I mean, this is just a matter of keeping an eye out and like we said earlier, it’s like trusting your people. And watching what they’re up to, looking at their productivity and stuff. And if you do find out that stuff isn’t working out then it starts with a one on one conversation of you raising the issue. And if it doesn’t clean itself up really fast. This is where letting someone go that you don’t have a relationship with, right? If you’ve know and worked with them for a couple of years and you know and trust them and something is going awry. Then in my opinion, it’s up to you to dig deeper and figure that out. But if it’s someone that you just started working with, you are 2 or 3 weeks in and you know things are kind of going awry. I’ll give someone one chance and have a really good talk with them. Solid talk explaining exactly what’s going on and what my expectations are and if it doesn’t clean up after that I consider it a lost cause at that point. I don’t have the time to teach someone that they need to be productive or that they need to not be doing someone else’s work while they’re billing my company for it.
[30:41] Mike: I think sometimes it’s very hard for people who are starting a new business, I’ll say, come to grips with because a lot of times you feel like, “Awww. I went through all this effort and time to vet this developer or vet this new employee and I’ve done all this extra work to essentially integrate them into the processes that run the business. And you don’t want to spend all that time and essentially walk away with nothing out of it.” You really want to be able to get that person to be productive. But, as you’ve said, I mean, I really like your approach with it. To just say “Okay. I’ll have one talk with them.” But after that but if it doesn’t straighten itself out, you kind of have to pull the plug. Because otherwise you’re going to be back in that situation in six months or 9 months later or even maybe three weeks later. And you don’t want to have to keep going through that. You’re much better off finding somebody else who’s a good fit. Who is going to be able to provide you with what you need without the micromanagement oversight that you’re going to have to apparently provide in that situation.
[31:38]And along with that is that, as I said, there’s this sunk cost that you have in hiring these people. And you have to remember that there are always more people out there who are just as good. You can find somebody else, who’s just as good, if you are willing to put the effort in and look for them. Because you already found somebody like that once, what’s to say that you can’t find somebody else like that again.
[31:57] Rob: Yeah, I agree. It’s not easy to find good people but the times where I have hung onto people. Or given them too many chances. What in retrospect was too many chances. I’ve always regretted and as soon as I have let them go and found someone new who is what I needed, it’s like a smack to the forehead. And why didn’t I do this months ago. Every time it works out to that. So, yes there are still costs in hiring and training to bring someone else onboard but if you really work with them and things aren’t working out then there’s no other choice here. Right? Just the same if you’re working on site with someone. There’s some costs in that. You’ve gotta let them go, find someone new. It’s time to do it.
[32:34] So to recap the 5 main points we touched on with distributed team collaborations for startups was: 1) Why to consider hiring a remote team. 2) Common Objections. 3) How to Hire 4) How to collaborate effectively and 5) Common Pitfalls.
[32:50] If you have question for us, call our voice mail 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 or by RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 192 | How to Make Your SaaS App More Contagious
Show Notes
- Principle 1: Social Currency
- Principle 2: Public
- Principle 3: Practical Value
- Principle 4: Stories
Transcript
[00:00]Rob: In this episode of Startups For the Rest of Us, Mike and I discuss how to make your SaaS app more contagious. This is Startups for the Rest of Us, episode 189.
[00:08] Music
[00:16] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you built you first product or your just thinking about it. I’m Rob.
[00:25] Mike: And I’m Mike,
[00:26] Rob: We are here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week sir?
[00:30] Mike: I apparently have lost $7,000.
[00:32] Rob: Really?!
[00:33] Mike: I received a check for $7,000 in the mail. And I put it someplace because I had to go away for the weekend and then I got back and forgot about it. I’ve been looking around for it. Because I was trying to make sure all of my books and stuff were straightened out because it was the end of the month. I can’t find this check.
[00:48] Rob: So, you either… you going to have to reissue it or something?
[00:50] Mike: It’s frustrating because I have a system to take this into account. I usually put all that stuff into this little blue box for all my business stuff. But it’s just like, I got it. I was on my way out the door for like a long weekend. I think it was like a Thursday afternoon. I’m like “I’ll take care of this when I get back.” And I didn’t do it.
[01:09] Rob: Yeah, that’s a bummer. You know the the thing that’s saved me from losing checks recently is my bank finally started doing their deposits through their iPhone app. And so now almost everytime, unless I am in a rush out the door, when a check comes I open it right then. I endorse the back. I flip it. I take two pictures of it using the my banks app. And it is electronically deposited. And that keeps me from having to put it in my wallet or put it in some envelope and then bring it to the ATM next time I go. It saves me a lot of time.
[01:38] Mike: It’s just frustrating. It throws off your entire day. That’s the problem.
[01:40] Rob: Oh, totally. Yeah, because your thinking about it. And you keep thinking maybe it’s in my car. And so you go out and do that. It’s distracting, right?
[01:47] Mike: Yes, yes.
[01:48] Rob: By the way, How has it been not consulting for the past week or so?
[01:52] Mike: It has been very very nice. [Laughter]
[01:54] Rob: I bet it has. Yeah.
[01:55]Mike: My wife has opened up her own fitness studio. So it frees up a lot of time for her to do that and I find that I’m kind of splicing my work in between when she’s going out. So it’s like I’ll be watching the kids and she’ll come back . And I’ll go back and do a lot more work. And what I’ve found is that I’ve actually gotten a lot more time to concentrate on myself , in terms of like going to the gym and eating healthy and doing all those other things. It has helped me become more productive too. It’s a nice side benefit that I didn’t quite expect.
[02:23] I expected, oh well, I’ll get a lot more productivity out of working these extra hours. And the reality is that I am actually working less but I’m getting more done during the time I am working because I’m so much more productive. At certain times of the day I am concentrating on going to the gym and I’m listening to podcasts and things like that. And I come back and I plow through work for a couple of hours. But that couple of hours is way more productive than it would have ever been previously when I was just trying to, you know, just work 9-5 on my stuff.
[02:49] Rob: Right, right. I guess you’re just not wasting your good glucose on other things. You’re able to focus it on the things that really matter to you. That’s cool.
[02:57] So couple things for me. We’re moving HitTail to new servers. We’ve already rewritten it in Rails. Only took a couple of months. One developer and we’re just about beyond that now. But we… its code complete and we’ve already started kind of setting up the database migration. We have new servers and stuff. But I am excited about this to not be the technical guy. The reason I’m doing this, you know back in the day, people kept saying “Are you gonna rewrite it? Are you gonna rewrite it?” and I never wanted to there’s no reason to. But it’s gotten to the point now I have three Rails devs working for me.
[03:28] And HitTail is written in classic ASP and.net and so I’m the guy who always has to go in and make code changes. Which means they just don’t get done very quickly. They don’t get done very well because I’m in a hurry all the time because it’s not my primary focus. So, I’m just excited to be able to step away from this and just be able to, you know, when feature requests come through, it’s not a matter of me putting a day aside to try to code something up, but now I can delegate it to a developer.
[03:51] Mike: Yeah, whenever you’re the bottleneck like that it’s hard. Is there a wish or desire that you could read it or figure it out the architecture well enough to be able just go in and make changes yourself if you really had to. I mean, like I have some people who are working for me who are doing stuff. And I have no idea how any of it works so, like literally I’m hamstrung to the point that if I wanted to go make some of the changes I couldn’t. But the reality is like it would take me 5 or 10 times longer to do than it would to just say “Hey can you do this.” Even waiting for them two or three or four days to make those changes
[04:23] Rob: Yup, I have hit that point as well. That’s something I’m I’m okay with this point, Right? Because I’ve hired a couple of employees and I feel good working with them and they’re doing a job and so I know that the team has kind of enough cross-pollination that the architectures are now the same between Drip and HitTail or very very similar and there’s enough knowledge between everybody that even if …The danger is always if you have one developer and he or she leaves that what are you going to do? Right? But I have three guys now who have reasonable knowledge of both apps. So, it’s also nice that I can move people back and forth based on what we’re focusing on. So I basically had one guy dedicated to HitTail for the past couple of months and the other two on Drip. Kinda looking forward to getting standardized. And we’ve learned a bunch of best practices with Drip. Like, how to host on EC2, bunch of the infrastructure stuff and we’re basically just replicating that entire process, you know, and the structure of that with HitTail. So I’m looking forward to that.
[05:14] I think we’re going to do kind of a dry run early next week of the actual migration. We’re going to move the whole database and then do a bunch of testing, but not do a switch over and so it’ll probably be within about…I’d say about two weeks for me getting HitTail moved.
[05:27] Mike: Very cool.
[05:28] Rob: The other thing I had was I read a couple other books that I wanted to mention. One is called Hooked. And it’s about how to make your app or your game or you’re whatever you’r ebuilding more like addictive. Kind of how to keep people coming back and using it and if you hear about this book I liked it reasonably well. What I didn’t like is almost all the examples were were consumer stuff. It is all about viral videos. It was about iPhone app games. It was about stuff like that and I really had a tough time trying to apply it to our space.
[06:02] Instead of reading Hooked, I would recommend reading a book called Contagious. And that’s more about why things catch on and how to make your things more viral. And that’s actually what we’re…That’s what the whole outline is pulled from Contagious. Unless you are doing B2C stuff I would stay away from Hooked. The other book that I just read is called The Hard Thing About Hard Things. It’s written by Ben Horowitz, who is, you know, a venture capital fund Andreessen Horowitz. This was a gut wrenching tale of him basically growing a company, having it almost go bankrupt multiple times. Not having funding and then selling. It’s it’s a crazy crazy tale about his perseverance. I recommended if you just want to get into the dirt. It is a dark book because you feel his pain, like I actually got sad at several points. I got really tied into his story. So it’s gut wrenching. It’s not a feel good tale by any means but it definitely teaches you a lot about perhaps what it take to succeed at that level. And have a multi billion dollar exit.
[06:57] And frankly, I want no part of it. I’ve always thought that anyways. But in listening to this book…Yup. I wouldn’t of wanted to do that. I wouldn’t have wanted to put myself , my family, my friends just put your body mentally and physically through that ordeals, but it is definitely an interesting story about a big venture capital raise and exit.
[07:14] Yup, So today as I mentioned before we’re going to talk about how to make your SaaS app more contagious. And I pulled this from a book called Contagious: Why Things Catch On and it’s written by Jonah Berger. Mr. Berger is a marketing professor at Wharton. And he spent the last decade studying why things spread through word of mouth and social transmission.
[07:32] So, in his book he outlines six principles that he’s found in his studies, in his research that drive things to become contagious. He looks at consumer products, policy initiative , work place rumors, YouTube videos, there’s a couple B2B things. It’s really not a focus of it. But what I hope to do today is that in our examples of these principles of ways to apply it to more like B2B software, B2B SaaS and even some info products.
[07:58]The book is actionable if you make the effort to apply it to your product. We’re not going to discuss all six of his principles because two of them I was not able to apply to our space. I do recommend the book. But let’s dive into this first principle.
[08:10] The first principle he brings up is social currency. And what he says is that people share things because of social currency. They basically want to share things that make them look good. They’re three steps to increasing the social currency of something, so of a YouTube video or of your SaaS app and when you increase the social currency of something. That means when someone passes that along they get more benefit out of it for recommending it to someone else.
[08:36] And so these three steps which are kind of principles on their own but we will group them under here because he does, the first one is to find inner remark ability. The way I like to think about this is What is your purple cow? How can you find the purple cow for your app or your idea? And to throw out just one example of a B2B app that people are talking about one is BareMetrics. Right? BareMetrics.io. It’s Josh Pickford’s app that hooks into Stripe. And gives you a really nice kind of a SaaS dashboard. Something people talking about with BareMetrics, like it’s a B2B app. What could be remarkable about this? Well he has two things right off the bat that people are sharing.
[09:14] One is if you go to demo.baremetrics.io that is Josh’s live revenue data for his app. For BareMetrics. And so you can watch his app grow over time. You can see what his lifetime value is, his churn, his retention, his monthly revenue per user all that stuff. The other thing he did is he got Buffer, who many of you have heard of, to also to put their metrics live. So I am pretty sure that’s buffer.baremetrics.io. So, these two things, while not baked into his app, obviously when people see this. People sharing it on the Internet. And then you click through on a Tweet. It’s remarkable, right? This is a purple cow. This is a shocking thing. You say “Wow! These guys are totally sharing everything about their business.” And it has resulted in more traffic, more customers for BareMetrics.
[09:59] Mike: I think that part of that has to do with transparency, as well. And I don’t think that the inner remarkablility is a direct translation to, Oh that means you have to go out and be transparent. Just being transparent is one example of finding something that is remarkable about your application. Because you look at a lot of SaaS apps out there and it’s very difficult to get this kind of information from them. And that’s what makes this information that they’re displaying very remarkable. When you’ve got Buffer and Bare Metrics showing their own data, most people don’t show that. Most people don’t get a sense of that. They just see what they see on TechCrunch and all these other websites where they just send out a blast of “Oh this great company made tons of money!” And you don’t see all the stuff leading up to it. And this gives you that. This gives you that sense of, kind of, what’s going on today, what things looked like previously and how things are, kind of, shaping up to be in the future.
[10:53] And that is just not something you get a lot and I think that’s where the idea of the purple cow comes in and because you don’t see it. But I think that being remarkably transparent is one of those ways.
[11:02] Rob: Yeah, I would agree. I think another example I could bring up is with Drip. When we launched it, I thought there was marketability but it turns out people didn’t think it was that interesting. There was no sharing going on. How is it different from other apps? Well, it is similar to MailChimp but at that time it was similar to MailChimp but you could put kind of a widget on the front end of it. And then we tracked goals and we did all this stuff. But we did stuff that you could cobble together if you really wanted to using other tools. And so there was really nothing remarkable about it.
[11:30] What I found is that within the last month as we finished building the rules engine. Right, the email automation, behavioral email people have started talking about that. I’m seeing it on Twitter. I’m getting emails and saying “Hey! I saw what Brennan Dunn is doing.” or, you know, what another customer is doing with Drip now. I saw a screencast about what the rules do. And right away, that baked right into the product, we found something that people are remarking about. It is in a sense a purple cow. And I think that I can refine that a little more especially with improved marketing and encouragement for people to share. But at this point, that’s an example of an app that really didn’t have inter remarkability but by building some features and going towards a into a newer space. I’m pretty sure we’ve now achieved that. And that that’s going to be our push moving forward.
[12:12] The second step into improving your social currency is to leverage game mechanics. And this is essentially encouraging competition among your users or customers and encouraging people to reach goals. And this is often called gamification. And so a decent example of this of more of a B2C model is Stack Overflow. Right? One of the things that they did really well, that Jeff Attwood executed really well, was having people compete for these badges and answer more questions and get more points and that kind of stuff.
[12:41] I think another example is, that you could do, is to have your customers compare their results. Right? Maybe in an aggregated way or in an anonymous way. But have customers, have a leader board of like who has the highest conversion rate from their campaigns. And obviously people could opt in or opt out of this. But people take pride in, like, being on a leader board. And what would be interesting is if it was anonymous at first but then as people got into it and if you asked people, “Hey, do you want to not be anonymous and we’ll actually give you a link back, right.” So that people know what you’re doing. And the people with the highest conversion rate of their email campaign or the highest number of hits from their SEO campaign or whatever it is your app does. That getting people to kind of compete against each other with definitely will bring people together and hopefully get folks talking about it.
[13:27] Mike: Yeah. That’s definitely one way to do it. It’s something that I actually started out trying to do within AuditShark. And realized that I actually needed a lot more data and a lot more customers in order to be able to pull it off. And I think that’s one of those traps that you have to be at least a little bit cautious of because if you’re trying to do this and you’ve only got a handful of customers in there or one customer is very large in relation to the others. Then what you can have is that all of your statistics get completely get thrown out of whack when that one customer does something different. Or something fails in a dramatic fashion with regards to the stats. So you have to be a little bit careful when you’re doing that. But I think that there are definitely ways that it could work. I don’t think that it is a strategy that you can try pulling off on day one. It’s something you have to do down the road a little bit.
[14:13] Rob: I agree. Yup, you definitely need a little bit of critical mass if you’re going to aggregate stuff from your customers.
[14:18] So the third and final step to increasing the social currency of your app is to make people feel like insiders. And there’s a bunch of ways to do this with B2B apps. One way is to have a members only area and members only information. And training, whether it’s videos or blog posts or something that you’re giving them that you do not release to the public and that you value. And you let them know how valuable that is. The idea here is to actually perhaps an info product that you would essentially sell but you give it away to people on the inside. So, that’s one way that I am actually heading towards with Drip is to up the level of training, but not charge for it. Right. Just let Drip customers use it.
[15:00] Another way that I’ve seen work, and Mike, you and I have experienced this first hand is to only let in X number of people into your app per month. Now we do that with the Micropreneur Academy, Micropreneur.com. And the reason we started doing it was more because we wanted to bring in cohorts of people and we didn’t want 50 people or 100 people coming in all at once. Because we just couldn’t manage the onboarding. But what we found is by collecting emails upfront and not just having it open all the time that both the upfront conversion rate increased the people who did sign up. And people got more value out of the academy because they were more serious about it when they got in. They were able to focus the time. And people stuck around longer. They got more value out of it.
[15:39] Borrowed from that in a conversation I had with Nathan Berry about Convert Kit a couple of months ago. He took that and now he’s doing a similar thing with Convert Kit. So he…It’s a SaaS app. Right? It’s like a landing page and email marketing SaaS app. He’s doing the same thing. So you can’t just sign up for that anymore. You have to sign up for an email list. And then he does a launch. And he only lets a certain number of people in. And he provides a lot of education and makes you feel like an insider.
[16:01] Mike: Yeah, and I think the surprising that you and I found was that our conversion rate for that was something like four times what it was if we opened it up. We ended up fielding and still probably field a lot of support questions about, “Hey, why can I just sign up anytime? I want to sign up now.”And we’ve run the numbers. We ran it for several months and found that the sign up rate and the retention rate was roughly 4x what it was if we just left it open at all times. So there’s some significant advantages to being able to limit the number of people who are coming in. You know, part of it is helping them as well. It’s not just about the revenue. It’s about making sure that what you’re distributing is actually being used. Because if they can sign up for it at any time. They’re going to come back some other time. They’re going to say “Well, I can put this off.” And you want them to sign up for this now. You want them to get the value out of it as soon as possible. And that’s one of the ways that can do that.
[16:51] Rob:To recap that. That was all a single principle, which is increasing the social currency of your app. Increasing the likelihood that people will want to share it. And those three steps were: find inter remarkablility, just like finding your purple cow; leveraging game mechanics and making people feel like insiders.
[17:06] The second principle we’ll look at today is Public. And the idea here is, can people see when others are using your app? Is it observable? People want to follow a crowd, in general. There’s a lot to say for social proof. And so some of the examples he lists, which again B2C examples, he talks about the white earbuds that Apple released with their iPod. Now the Beats by Dre headphones. It’s obvious when someone’s wearing those because they have the flat sides and they have the big B on them. What about your app is observable by the public?
[17:38] Here’s some examples in the B2B space. Someone’s using Olark. You know they are because it says powered by Olark at the bottom. Someone’s using Drip. It says powered by Drip at the bottom. Now both of those apps allow you to upgrade to a certain plan and hide that but most people don’t. That right there is a nice viral loop. And a nice way to see if a lot of people are using it. So if you have any type of UI widget that people are installing on their site you’re in a good spot. Even if you don’t, I’ve seen apps that allow people to put badges on their sites. An example could be AuditShark. That someone could say protected by AuditShark in the footer of their site. If AuditShark had gone into the SaaS space and really going after SaaS users that could be something that much like a Verisign Certificate of security and that kind of thing. I think that AuditShark could be prime for that.
[18:24] Mike: I actually have that code written. [Laughter]
[18:25] Rob: Do you? That’s Awesome!
[18:27] Mike: It’s something that we basically put together in sort of like a little java script. It appears in the bottom right corner of the screen in the browser that you can enable on your website. And you could put that in there and it would pop up and say “This server is protected by AuditShark.” You’re absolutely right, there are a lot of other examples as well, if you have a customer facing website for support software for example, there’s companies like UserVoice. Where you can sign up and you get an account and you have a custom URL, for example, and customers can go there. And they see that that is that companies URL. So it’s not just widgets on your website, it’s also software that your customers might interact with as part of a support function or something like that.
[19:06] Rob: Sure. And even imagine if you’re sending emails on your customers behalf. So let’s say you’re a MailChimp, even like Rueben with BidSketch, where he sends out proposal emails. At a certain plan level and it wouldn’t be your top plans but maybe it would be your bottom plans that includes a tiny thing in the footer that says, powered by BidSketch. This proposal powered by BidSketch. And MailChimp does have that, right? And I think, in their free tier one of the things is that you have to have this powered by MailChimp thing in the footer. It’s the same way Hotmail grew virally in the late 90’s was having a powered by Hotmail thing and I think it was under your signature or something. So, there’s a lot of ways where, especially these days if you’re sending things or having any interaction with your customers.
[19:45] There’s ways to get in front of them and ways to do it elegantly. Yes, you can go too far with this. So you have to use your judgment. In my opinion you should have a plan or kind of a step up where people can definitely opt out of this. Right. To where it’s truly totally white label. But what I’ve found is that most people don’t mind. And that they’re frankly, if you do the job and you’re actually helping them out, people don’t mind helping you out a little bit. Right. They don’t mind allowing you to have that little tag line. And if that means that you’re going to be able to stick around. That you are going to be able to grow as an app and that they will be able to use you longer.
[20:17] Mike: I that, for example, FreshBooks whenever you send out invoices, that people can login and see their invoices using FreshBooks website. And it’s clear that you are using FreshBooks software. I think a lot of other accounting software does that as well. I think Zero does it. You’ll see their logo in there and like the invoice and things like that. But again, as you said, you can pay to have that stuff removed. I think Basecamp when they send out emails, they come from the Basecamp domain. They don’t come from your own domain. Basecamp has made the effort such that you can reply to those emails and things go right back into Basecamp. Which is great. But it also allows them to kind of expand the reach and let people know hey “This person is using Basecamp.”
[20:56] Rob: So that was principle number 2, and it was observablility, Can people see when others are using your app?
The 3rd principle of the 4 we’ll cover today is practical value. And what I love about this one is, since he talks so much about B2C a lot of the examples he gives are like viral videos they aren’t practically valuable. Right. They don’t have utility. They don’t provide useful information. For us, if we’re talking specifically about the B2B space it’s a piece of cake right. Because we typically do sell on value. We save someone money. We make them money or we save them time.
[21:27] And so, what he says here is if your product or whatever you want to go viral has useful information, basically do as much as you can to highlight how valuable it actually is. And I think the best example of this I can think of in the B2B marketing space is to include benefits on your homepage. Right. It is to have a powerful headline, that calls out exactly what you do. What your app does for people. And then talk about how much money it saves them. Or how much time it’ going to saves them. And really focus on the value that it’s going to provide.
[22:00] Mike: Yeah. I mean, this is just the basic value proposition for any given piece of software that’s going to take somebody an extra 15 or 20 minutes to put together a proposal or something like that and they have to do 10 of them. Then you’re saving them presumably, an extra 150 to 200 minutes a month. And how much is that worth of their time. And if you can put it in relation to the value of their time then you’ve got a solid mechanism for selling that piece of software. And again as you said, it’s a lot easier to sell to businesses than it is to consumers. Consumers are very much about I’ll spend my time to do it versus businesses where it’s worth it for them to spend the money to get things done faster.
[22:37] Rob: One other tidbit that I noted down, that someone has done a study, and he quotes it and he says, that if you’re giving someone a discount on something. Whether it’s signing up for annual or going moving up to higher plans so they get more for something. He said that if your product costs less the $100 and you’re giving them a discount, then use percentage. Meaning how large of a percentage discount they are getting. And if your product costs more than $100 then use the absolute dollar amount of the discount that you’re getting.
[23:06] Mike: That is interesting. I mean was there a specific amount of improvement over one versus the other. I assume there was some sort of A/B Test right?
[23:14] Rob: I think it was more of a research study with consumers. So it wasn’t like on a webpage. It had to do with getting real live people in an office and doing stuff. I don’t think there was a percentage improvement that he mentioned but my guess is if you went to look at the study we could figure it out.
[23:27] Alright, and our 4th principle we look at today are stories. The idea here is that people remember stories. And an example of this and how you can do it in B2B marketing is not to aggregate data, to give percentages, to give dollar amounts, while that does work in certain cases you also need to couch that with stories of customer successes. That’s why case studies often work better than aggregate stats. Aggregate stats can give people an idea, an order of magnitude, but to really impact them and get them to remember and to potentially share telling stories. It’s a winner. I would actually recommend it. He had a good chapter on this in this book, but it pales in comparison to the entire book called, Made To Stick by Dan and Chip Heath. And that for me, that’s the seminal work on a way to describe ideas using stories in a way that gets people to remember them and in effect share them.
[24:21] Mike: There’s a lot of examples of this kind of thing going on but I’ve also seen through various blogs and Twitter websites where they talk about doing conversion optimization and they point out that if you call out specific numbers so instead of saying save $700 say save $684.35 because that’s a very real number. Somebody can look at that number and you know that it is not made up. It wasn’t just pulled out of the air. And you can probably relate that back to a customer who saved exactly that amount of money using your software. Yeah you’re absolutely right using those testimonials but being able to point to those specific instances as opposed to kind of aggregate because people I think a tendency to look at those aggregate numbers and say well I don’t believe that. And the reason I don’t believe it is because you see in all kinds of marketing material especially on TV. You look at something like Weight Watchers.
[25:15] And they’ll pull out all of these statistics. Oh you know, so and so dropped X number of pounds. They almost never say on average people lose X pounds. They always pull out specific people and use testimonials to drive people to sign up for their service because it is more believable. It’s more relatable than this mass of people that you have no way to identify yourself with.
[17:13] Rob: Right and we see this in Presidential campaigns too right or any type of political campaign, where they will name some stats. It’s the epidemic of the “you know, Joe the plumber here. Here’s his story.” And whoever , who did this and that and they actually go into this whole story. That’s why they do that is to personalize it. You see it with charities trying to raise money. They can say a million people a month die in this country. But it’s when they actually start following a single story that you become engaged. Another way where I’ve seen this play out is in podcasts. There are podcasts that are mostly about the tips, trick and tactics. And then there are some that are mostly about the stories of the founders or of the people who are doing the podcast. And then there are some that are a mix. My favorites personally are the ones that are a mix. And here’s why. Because if it’s all stories and kind of just bouncing from one thing to the next it’s harder for me to justify spending a lot of time listening to it. And if it’s all tips, tricks and tactics then I don’t necessarily engage or feel empathy for the people or really get into their story. I don’t want to hear it every week and sometimes I’ll skip it if it’s not on a topic I want. But when it’s a mix and I feel both for the people and for the stuff they’re sharing that’s when I’m really into it. Like, Bootstrapped with Kids is actually a really good example of that because they do both. They share tips and tactics and even if I already know them I still want to hear what they’re up to that week. Frankly, this happened with us early on. I think the first 15 or 20 episodes of this show was much more about the tips and tactics. And we started engaging the audience and we started growing once we started sharing stuff that we were actually doing, sharing our experiences. And now people will certainly listen to it for the tactics but I bet there’s a lot of people who are listening to hear what’s next with us. To hear what we’re up to next. What we’re working on and how things are going in our stories.
[27:16] Mike: Yeah, I have definitely talked to people who have said that is why they listen. I mean they do get a lot of value out of the discussions of the different things that we’re talking about but a lot of them listen just for the weekly updates and stuff in the beginning. I’ve heard from some people that just say they listen just to see how long we’re going to run the podcast. Because it’s kind of amazing to them that we push out a podcast every single week like clockwork
[27:38] Rob: So to recap our 4 principles are: Social Currency, Observability, which is, Can people see when others are using your app? 3rd principle is Practical Value and the 4th principle is Stories. And again, the book title is Contagious: Why Things Catch On.
[27:52] Mike: 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 Out of Control by MoOt, used under creative commands. You can subscribe to us in iTunes, by searching for startups or by RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 191 | Brian Tracy’s ABCDE Method For Setting Better Priorities
Show Notes
- Eat That Frog by Brian Tracy
Transcript
[00:00] Mike Taber: In this episode of Startups For the Rest of Us, Rob and I are going to be talking about the ABCDE method for setting better priorities, this is Startups For the Rest of Us episode 191.
[00:08] Music
[00:16] Mike: Welcome to Startups For the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome in launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
[00:23] Rob Walling: I am Rob.
[00:24] Mike: And we are here to share experiences to help you to avoid the same mistakes we’ve made, what the word this week Rob?
[00:28] Rob: You know we have another success story, Mathew Paulson wrote in and he said I started listening to Startups For the Rest of Us shortly after it started in 2010, using the advice and strategies mentioned on your show, I have been able to build 3 profitable software businesses including an investment research software business called Analyst Ratings Network, a press release distribution service and a piece of fund-raising software for animals, shelters and human societies. I am on track to have my first 7-figure year and I have just finished writing a book about the lessons I learned from building these businesses, the book is called 40 Rules For Internet Business Success it will be out on July 21st, you can learn more better at 40rulesbook.com, thank you for your continued inspiration to the bootstrapped startup community.
[01:07] Mike: Wow that awesome.
[01:08] Rob: I love to hear stories of people who are even in the small way are impacted by what we are doing, it helps them build their business, and then they go onto build really cool stuff and then go on to teach others as well.
[01:17] Mike: Yeah certainly so my wife and I are starting to really follow through on cutting the cord cable and this past week we called up Verizon, and just dumped our cable itself, we kept our internet and phone but just cutting the cable alone cut more than a $100 a month, so we still have Neflix and Hulu Plus and Amazon Prime, that was the second night after we cancelled cable, and we are sitting there, just kind of looking at each other, and it is like well we could go watch a movie, but I am tired let’s go to bed.
[01:42] Rob: Yeah you don’t just flip the fun and watch like HDTV or other kind of mindless shows.
[01:46] Mike: Yeah we just went to bed and got more sleep instead.
[01:50] Rob: You know we first cut the cord like 7 or 8 years ago, and it was a big leap then because there was no Hulu Plus, no Amazon Prime, it really was just Neflix but we still had DVD’s you know, so we watched a lot of movies, it was a sacrifice at first, but especially these days I think it’s something that unless you need live sports pretty much everything else including like the Super Bowl, you know like Academy Awards ceremony and that kind of stuff tends to be streamed online now, and so you really don’t miss out on too much, and I found the same thing as you, I don’t spend very much time watching TV I watch a lot of shows, like probably 4 or 5 shows I follow but aside from that I don’t sit down and watch TV, so I really only watch like let’s say 4 or 5 hours a week total and I never watch commercials, so it’s actually not that much time that I spent in front of the TV. Speaking of that I had a recommendation for a show, have you watched Silicon Valley, it’s on HBO.
[02:44] Mike: I have not.
[02:45] Rob: Obviously you either got to have HBO Go or you know some other way to obtain it, the first episode was in full on YouTube. It’s interesting you know, it’s fun to kind of see people poking fun into the space, and Mike Judge who did Office Space is the creator and I think that he wrote the first few episodes. It’s worth checking out. It’s pretty vulgar and if you can tolerate that kind of stuff, then it’s a good show.
[03:03] Mike: So you say you don’t watch commercials, how do you deal with that when you are watching Hulu Plus?
[03:07] Rob: That to be honest that’s the one place where we watch it and it’s driving me nuts now, and I think I am going to cancel my Hulu Plus subscription, and if I want to watch something that’s on Hulu Plus I am going to buy it. I prefer to pay two bucks for an episode rather than watch, what is now like almost as many commercials as that are on now like in a network. What it started up is like 2 or 3 commercials for a 22-minute show and now it’s like 2 or 3 commercials per break, and then you have 3 or 4 breaks, it’s pretty ridiculous.
[03:33] I have been reading a lot of books lately, I am a big Audible fan and with that the, you know there were 13 hours of travel to and from Scotland and being in the airports and stuff, I just had a lot of audio time in the past month or so. So I want to run through a few of them and kind of give recommendations and my thoughts on them, there are related to just startups and then entrepreneurship in general. First is called Predictable Revenue, and it’s written by a guy or one of the guys who built the sales pipeline or the sales force at salesforce.com, and it’s an interesting book. I found that I got a little bit out of the first couple of chapters, but overall it’s about scaling a sales organization, so if you are not going to be scaling a sales organization, I would not recommend this book.
[04:12] He does have something early on and he hints at cold calling 2.0, and he talks about it and you are all intrigued and he really builds it up, and then when he gets to it, it’s cold emailing, it is getting a list of people and cold emailing them with a certain technique and I am like oh that was a big let down, I imagined that they maybe partially responsible for all the cold emails I get pitching me different products now, it’s not spam technically right it’s not stuff that it is getting spam, but it is people sending it through like YesWare and Tout app and that kind of a stuff, overall probably for our audience not really worth reading.
[04:41] Two that I think would be interesting to our audience, one is called Hatching Twitter, I think I mentioned it in our previous broadcast and a very, very good story of the beginnings of Twitter, and just all the chaos, the soap opera that went along with that. The other one that I just listened to is called Things A Little Bird Told Me, and this is Biz Stone, he is one of the co-founders of Twitter, it’s kind of his story, it’s a life story, and so his early stories aren’t as interesting as you know once he starts doing tech stuff, but he does a good job of kind of taking lessons away from different parts of his life, and linking them into his startup success.
[05:13] Rob: I have a lot of respect for Biz, he just seems to be, seems to be a hardworking legitimate guy, he didn’t stab much people in the back, I guess I have respect for him, so Things A Little Bird Told To Me is good, but I definitely would recommend you add it to you Audible list. The last one I will talk about is another one that I would recommend, and when it started off it is called Contagious, when it started off, I was thinking you know this is just like every other book about virality, and it’s going to focus solely on B2C stuff, and it’s all about viral videos, and it’s about the blend tech, you know will blend videos and it’s about that kind of stuff and to be honest it did have a lot of B2C leanings, but what I found is that he lays out five discrete steps, that makes something contagious, but what I liked about it is that, just listening to it I almost turned it off but once I started taking each of the points he talked about, when I started specifically applying it to Drip. It really started making a difference, and I actually was able to take a bunch of notes from it, like actual action steps, that I am going to either think about with Drip, or that I am going to implement on Drip and it’s ways to make it something that is easier for people to talk about and makes it more interesting for people who are using it, so I think if you have a product and you can apply this to it even if you are not in a B2C niche. I think Contagious is good for you. I think if you don’t have a product, and you are still kind of looking to launch or pre-launch or whatever I don’t think it’s going to necessarily give you a lot of value.
[06:34] Mike: I think that’s one of the big problems I have with a lot of business type books, it’s very difficult to find ones where you can get actionable stuff that comes out.
[06:43] Rob: I know when I read business books I really try to stick to specific niches that actually relate to us, because most books are like for the Fortune 500 VP of sales, and when you start reading you are like this does nothing to do with what I am doing.
[06:57] Mike: Yeah it’s just not relevant in any way, shape or form.
[06:59] Rob: Yeah exactly.
[07:01] Mike : But I think the only other thing I have is my wife finally opened up her own fitness studio in town, so I have been helping her through all of the “essential but unimportant aspects of setting up her business”….
[07:11] Rob: What are those?
[07:12] Mike: Well those are the things like filing the paperwork, and making sure that you get a checking account and things like that, you know it’s like the stuff that you need to do but doesn’t actually do anything for your business.
[07:20] Rob: Yeah so how come she gave that to you?
[07:22] Mike: It’s not that she gave it to me, she was asking for my advice on how to do different things and how to structure different stuff, and since I have done some of the stuff before, it makes it easy to…I’m east to access, I guess.
[07:31] Rob: Sure, sure.
[07:33] Mike: So just because I have gone through it a bunch of different times for several different businesses, you know I went down to the bank with her to help her out and just to help her ask like the right questions, and then in terms of the business paperwork going to the county clerk she actually did all that stuff, I didn’t, but then in terms of getting her lease straightened out you know I gave her some advice on that, and I think that the beneficial thing is that now that I am home all the time, it’s actually kind of allowed her to get herself in a position where she can open up a studio, because before when I was on the road all the time, it’s hard for her to have a studio because my schedules in flux which means that she can’t have a set schedule for her fitness studio. So having both of us at home is actually is going to be quite a bit more beneficial that I had probably thought it was in the past.
[08:13] Rob: Yeah sure that’s kind of a side effect I wouldn’t have thought about but it totally makes sense. Nice to mean it’s extra income that you wouldn’t have had. It’s pretty cool, congratulations.
[08:20]Music
[08:25] Mike: I guess we’ll piggyback a little bit on the book recommendations that you had, but this episode is kind of a summary of a method that I had picked up from Chapter 6 of a book called Eat That Frog, 21 Ways to Stop Procrastinating, Improve Your Organizational Skills and Get More Done in Less Time, the book is by Brian Tracy. And this episode is just gonna to be one chapter the book, there is another 20 interesting ideas that are in there which if you are struggling with time management or procrastination or anything like that, you know there is a lot of different things in there that could certainly help you out, but I primarily picked it up because I have been looking at a lot of different things on time management and getting more things done faster, and this was definitely a way to do that.
[09:01] Mike: So the specific techniques that we are going to talk about today is I have actually used a variation of it for quite some time, but it was really interesting to see a much more formalized structure of this mechanism, so I have kind of restructured a little bit of how I am handling it. But the basics of it is that what Brian Tracy lays out is that the Step 1 is to write out your to do list, so you lay down every single thing that it is, that you have to, you know anything where you can list them out, I actually use Trello for my variation of this strategy, and then once you’ve done that, Step 2 is to assign each item to a specific category, so the categories are labeled A, B,C,D, and E and we will go through each of them.
[09:39] Mike: The first one is A, A stands for Very important, it’s something that you absolutely must do and if you don’t do it, there are serious negative consequences, if you don’t do it, so examples of that would be, if you don’t pay your bills when it’s due in 2 or 3 days, it’s like that’s something that you really have to do, and if you don’t do it, like a mortgage payment for example then something like that, although it is not business related it is I will say life related, and because of that it falls into your to do list, so you have to pay the mortgage and it’s got to get done and it’s got to get done very, very quickly and if you don’t do it, then you are going to get into smack with late fees, and then on top of that it could end up on your credit report, if you don’t do it for long enough.
[10:18] Rob: Right and I think another example probably dealing with business is like paying your taxes, or getting deliverable to a client, or getting someone who is trying to use your App to the next step of onboarding, if you are doing kind of intensive high touch sales type of stuff, I realize that one could be bumped to B where it’s just important, but I would say if you are going to be losing revenue or having to pay a penalty or something then that would stand in A, like A is revenue driving stuff, but I would say that probably in A marketing tasks would not go there, not unless they are super time critical, like it’s a Black Friday, promotion and it has to go on that day, and it’s Wednesday of that week, and then your Black Friday email drafting would go into very important, but if it’s not time sensitive if it’s just like drafting copy for a new ad or trying to run a new campaign or exploring stuff I would say that would go on lower priority stuff.
[11:11] Mike: That’s right. So as you are kind of alluded to B stands for Important, it’s something you should do, it’s not as important as your A task. But you know there is relatively minor consequences for not completing it today, you know as you said some of the marketing tasks if you don’t finish rewriting your webpage today, then you can always come back to it tomorrow and it’s not that big a deal. Sure, you know it’s going to get pushed out and there are things that it would be nice to have it done today, but it’s not so critical, it’s not time sensitive in most cases, but as you said if there are times where, you know you’ve got a deadline of some kind. Let’s say that there is marketing materials that you’ve got to get out for a press release, because it’s coinciding with a launch event, sure those things will fall into an A task, but otherwise if you don’t have a lot of things that are kind of coming in together all at once, they would probably fall into the B category.
[11:58] Rob: Yeah this is where the majority of my tasks fall, as a kind of day to day marketing startups and doing conferences, and doing the Podcast and all that stuff. I think the stuff moves into the A point, where A it is going to cost me money, B it is going to make me money, and I am going to lose that if I don’t do it, or C it’s a deadline like you and I are going to be recording the podcast at 2:00 o’clock and it’s 1:00 o’clock and I need to outline it. Right? So then it’s very important because otherwise I am really, basically have like a hard deadline that I really can’t push off, so I think B is kind of where the bulk of my stuff that I ever do is where I want to prioritizing it, and I to be honest I don’t use A, B, C, D, E, I don’t like but I really like the idea of it right now, based on your previous mention I just have two Trello boards one is my to do A, and then I have to do B, and A is not critical important stuff. It’s kind of everything I am working on and then B is stuff that I want to do long-term or that it is less important and I rarely get to my B, but I like the idea, you know once we get down to D and E and people hear about those, I think I am going to be adding those to my Trello boards as well.
[13:03] Mike: One of the things you kind of mentioned was that you know a lot of the stuff that you work on kind of falls into the B category, what I found is that things kind of move from one category into the next based on how close you are to the deadline. So for example something might start out as a B task and then it moves into an A Task as the deadline gets closer because you push it off, because you got other things that are kind of more important, but then that deadline comes up and you move it from B to A because you’ve got to work on it now because you are not going to have time later on.
[13:32] Rob: And you know I think this is why early stage startups are so hard, because there isn’t so much that has such a strict deadline, and there isn’t so much that is going to make you money, or cost you money when you pre-launch, and you are just trying to get to launch. Right? So it’s hard to prioritize because everything kind of falls into B, and then you need to go with your gut of what’s going to have the most impact, either to your motivation or to getting you closer to launch, and that’s where I do think it’s tricky and there is a lot of judgment calls, and to what task should you step to next.
[14:06] Mike: Yeah, and I think a lot of those things you know for example things like the billing code, that’s something that typically you would say, “oh well I have got to get this done and it’s pretty important”, but at the same time until you start getting customers the billing code just doesn’t matter, so the reality is you could almost push that into the C category which stands for things that are nice to do but are not as important as A or B, and there is no negative consequences for not completing it, so if I don’t do the billing code today, and I don’t have any customers it really doesn’t matter. If I don’t do the billing code for 3 months, and I have 5 or 10 customers, the reality is that it probably still doesn’t matter that much. It’s only when going through the billing process is so cumbersome that it’s actually costing you a lot of time and effort to do it. That’s when it should probably progress into a B or an A task, because you want to be able to scale but that becomes a limiting factor in your business. So if it’s a time crunch or some kind or if it’s becoming a limitation on your business and how quickly you can move and how many things you can get done that’s kind of in my mind, when it can move from C to B to A and then there is things where you just completely miss the deadline, and it completely goes from A to okay well why am I going to even bother doing this.
[15:17] Rob: Yeah we were at somewhere between 12 and 15 essentially paying customers with Drip before I had billing code rolled, and I was just doing manual billing, I had a bunch of calendar reminders that would pop up every 30 days, and I would bill a person for the next month and it wasn’t even that time consuming. I did it myself, I didn’t even delegate it to anyone. And that was my MVP for my billing engine was me sitting there clicking a button and entering a dollar amount, billing code definitely fell into C at that point. What else I think is interesting is how this applies to your email inbox as well, and I know emails are a form of to dos, but you know I have been traveling a lot over the past couple of years and when I leave for 2, 3, 4 weeks and I don’t answer anything except for an A email during that time, I find that a lot of the C emails disappear by the time I get back, and what I mean by that it’s still in my inbox they are irrelevant and I never needed to respond, either the person figures the stuff out, or it just wasn’t really that important. Whereas if I am sitting here in my office and I am checking email every couple of hours. I feel the need to respond to those but when you are on vacation, it’s like an excuse to maybe not even on vacation just traveling right, it’s kind of an excuse to not have to answer those, and I actually think that’s better for your time management overall, and I think it forces you into the time constraint of you know what if I could only work 1 hour a day, which was something I did all of October last year, and you know what it wasn’t actually that bad, we launched to 600 people because Drip wasn’t live yet, we launched to 600 people in October, and everything was in place to handle that, and there were no major fallouts not only with that launch but all the other businesses and all the other things that I am working on, it all turned out okay, so they really do have this kind of false sense I think of needing to work 8 hours a day or more on things, having more time really doesn’t make you necessarily more efficient, and if you choose which things to put in your A’s and B’s and you can ignore the others I really think that you can get more power out of the hours a day that you do work.
[17:13] Mike: People use going on vacation as an excuse to not replying to emails. I was listening to the Tim Farris Podcast, it’s called the Tim Farris Show, he had a guest on, I think it was the episode where we had Neil Strauss on, who is the author of The Game, and he was asking Neil what his thoughts were on email, and how he gets things done, and one of the things that came out of it, was that he does not even actually have internet access, so he can’t check his email during most of the day, he has this software installed that it’s aimed at keeping your kids safe, and making sure that they can only access the internet while you are around. Well he has it in place but his wife has the password, and it only opens up during two hours of the day, so he literally cannot check his email or do anything online unless his wife is there, to put in the password for him during these two hours of the day, so he is kind of taking it to an extreme level.
[18:05] Rob: I heard that too and what I really loved about it was his quote he said “It’s amazing how quickly you can get through email when you know you only have 60 minutes to do it.” And that’s it, you force that you put an artificial constraint on it, and you will crank through things, things that you would take 3 hours to do, you can get done in 60 minutes, if you just hustle through it.
[18:23] Mike: So we’ve talked about A, B and C tasks so far, let’s talk about the D task, the D in this system stands for delegate, and these are the tasks that you can assign to somebody else who can do that job instead of you. And you know we are kind of big proponents on the show about doing a lot of outsourcing and taking things off your plate, recording screen casts, and setting up standard operating documents and procedures, and handing those things off to other people. But really if you are taking a look at your task, there is a lot of things that if you are looking through your task, before you even get started, and you are going to find that there is a ton of stuff on there, that you just cannot possibly finish all of it in any given day, and in fact most of it is going to take you a very long time, and I think one of the big fallacies or myths that I kind of got caught by very early on was that all if once I scale to a certain amount of revenue and have enough people working for me, I will have enough time to get all of this stuff done, I will never be in a situation where my to do list will outstrip my ability to actually get stuffed done because I got to hand these things off to people where I can get all the stuff that’s not important off my plate.
[19:25] But reality is that, you can’t I mean there is only so much that you can do no matter what. In order to get a lot of these things done, you are going to have to delegate it, you are going to have to outsource it to some people, and whether that’s accounting stuff or whether its’ programming or marketing or you know you can bring other people in to do some of that stuff for you, but the key is to be able to concretely identify what it is that you can outsource and what you can’t.
[19:50] Rob: What I like about the system is, he is basically having you decide if it’s a D right when you come up with a task, and so you are kind of doing it in bulk, what I do is I just this A and B list. I put everything in A that I am working on, and when I get to a task, I ask myself can I delegate it, can I eliminate this task, that means that I am processing each one individually and I don’t think it is efficient as what he has.
[20:13] Mike: You know what I found out is that I tend to forget that stuff so like if I am going through my to do list I will get to something, and I just immediately think, okay I got to get this done and it doesn’t necessarily occur to me that oh insert this if statement and say hey can I delegate this, and if not, you know then do it but otherwise if I can then figure out how to delegate. I tend to get into the mode of getting things done and going through that list and I don’t stop to think at the beginning of each one to you know see if I can delegate it.
[20:41] Rob: Right. Yeah, I think I have gotten into a habit, a pretty good habit of, every task that I get, every email I get and everything in my to do list that the first question I ask is can I delegate it, and it’s taking a while to get into that habit. There are two points this week one was I emailed you about it actually the audio player inside the Micropreneur Academy started having problems and our audio files were fine, but if you played it in the browser, it was all chunky and I went around tried to figure out what it was, turns out there is a new version of it that works in new browsers, we had to update 89 pages because of the way it is a WordPress thing, and it’s an individual post. So my first thought was “Boy! I am sure not going to go through it and update 89 pages,” even though it was a little bit of a technical thing where you had to update some java script and make a couple of changes but instead of going through and doing it, which probably would have taken me who knows maybe 20 minutes, maybe 30 minutes it wasn’t be another world instead of doing that I recorded a screen cast really quick, and poof it was just gone like magic right I mean I got it and emailed back 6 hours later whatever and Andy had taken care of it, and there was another point where someone emailed and they wanted an invoice for a MicroConf Europe ticket they purchased, and again how long does that take, you know it takes 5 minutes maybe to get a Word format up and we have a template already and you enter some info but instead shot off an email, and just had replied directly to that guy I don’t need to see this again you know, and both of those are small examples of delegation. They are not things that are going to save me, hours a week, but by combining a bunch of those together and considering I get 10 things a week like that come up, it actually does save me hours a week.
[22:13] Mike: Yeah the bottom-line there is that all of those different things that you delegate they add up. I mean even if you are only saving 5 or 10 minutes for 5 or 6 different tasks, I mean if you just saved yourself half an hour out of the day, you know that’s a significant chunk of the day, that you just freed up to do other things. So let’s move onto E, E stands for Eliminate, if at any time if it’s ever possible to just eliminate something, because it’s not important, go ahead and do it, if it’s something that you deem to be qualified for elimination, then chances are that it’s just not good enough for you to do. I mean it’s not even worth your time to go through the effort of delegating it to somebody just to get it done.
[22:52] Rob: I feel like in my system I do this before I add stuff to the to do list at all, I have a pretty itchy trigger finger, so when new tasks come up I will just fire them off to my Trello board via email, but before I do that I have a pretty heavy filter like do I actually need to do this, so I rarely go through my to do list and eliminate things, I feel like I eliminate them in advance, right and I don’t actually put them on the to do list.
[23:16] Mike: I think one of the more interesting examples of where you could use this, this E step is if you are brainstorming with people on your team and you just, you know when you are brainstorming stuff you don’t want to throw anything away, you just want to throw ideas out there, write them down and get them out, and then discuss them after the fact. So I think that’s very key part of the process where you can brainstorm just throw the stuff on paper and instead of eliminating it before you add it to the to do list, you do it afterwards kind of that batching process. Another place where that might come up is the customer suggestions that come in that are just so off the wall, those are places where I could see it being used as well.
[23:52] Rob: Yeah I do have a list in Trello which is obviously a collection of the little Trello cards and it’s just called future, and it’s stuff that I think we want to do, but it’s some bigger picture projects that haven’t been flushed out into individual steps. And I would definitely want to track it, it’s not something should be eliminated it can’t be delegated yet, it will probably be delegated to maybe multiple people or it’s a pretty in depth spec that’s needed to give to a developer, and it’s stuff that’s not critical to get done now, but it’s kind of like a future marketing idea that needs some coding or an E-book written or something like that, so I do have a future board and I think that will probably fit into my I guess that’s like my C, but realistically I think that might be a combination of C and D for me.
[24:35] Mike: So we will just quickly recap on the ABCDE method: A stands for Very Important, and it’s things that you have to do, B stands for Important and something that you should do, C is something that is nice to do, D stands for delegate and E stands for eliminate, so if you are interested in hearing more about this particular book, again this is just chapter 6 of Eat That Frog, there is 20 other time management and organization management skills that you can learn through the book, it’s only $9 on Amazon. It’s a very, very short book but if you want to speed through it even faster which you can do is you can skip to the end of each chapter, and at the very end of each chapter there is probably 2 or 3 paragraphs, where it just summarizes the content of the chapter itself, and you can get a very quick overview of some of the different things are that they are talking about in depth, and if there is anything that you don’t understand, you can just flip back through the chapter and read it a little bit more, but the book itself I think is only about a 120 pages or so, it’s pretty short.
[25:29] Rob: If you’ve listened to this episode and you have a question for us, you can email us at questions@startsupsfortherestofus.com, we also have a voice mail number, it’s 888-801-9690, you can subscribe to us in iTunes by searching for startups or by RSS at StartupsFortheRestofUs.com where we also include a full transcript of each episode, our theme music is an excerpt from We’re Out of Control by MoOt and it is used under Creative Commons. Thanks for listening, see you next time.
Episode 190 | SEO Across Multiple Domains, Charging Before Product/Market Fit, and More Listener Questions
Show Notes
- MicroConf Europe Tickets Available
- Success story: LogoMaker.com and LogoDesign.com
- Music to get motivated: Noon Pacific
- FogBugz
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I discuss SEO across multiple domains charging before product market fit and more listener questions. This is Startups for the Rest of Us: Episode 190.
[00:10] Music
[00:18] Rob: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:27] Mike: And I’m Mike.
[00:28] Rob: 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?
[00:31] Mike: MicroConf Europe is not yet sold out, so if you are interested in acquiring some tickets to that, you can get your tickets over at Microconfeurope.com and sign up for that mailing list, we have some emails going out shortly. There are some advanced emails that have gone out so far, I believe next Tuesday when this episode goes live is when we will start opening up the doors on that list, so definitely head on over if you are interested, hopefully we will see there.
[00:54] Rob: Come hang with us in Prague in late October. So hey, kind of a milestone for me today, Drip email automation that we have been working on since January, we released it to an early access group, I think it was about a month ago, I mentioned it on the podcast when we did, but we launched to all of our customers, new and old, all new sign ups, everyone as of just a few hours ago, everyone has access to it, so it feels pretty good to get that out.
[01:20] Rob: I recorded a bunch of screencasts, because I found email automation is simple enough its bunch of rules where you can move people in and out of lists, you can do stuff based on whether they click a link or whether they make a purchase or whether they do something else. They sign up for a trial or whatever, but there is so much more complexity to this that needs to be explained. That’s what I spent the last several days doing. Before we announce it, I mean the feature has been ready for frankly 3 or 4 weeks. We haven’t made any changes to it since early access except from adding new stuff but I really wanted to get enough, a couple of case studies and I have some blueprints for different rules that we are using internally, on our SaaS apps and that I am seeing other people use it like e-book downloads, that it’s having the idea of how to use this powerful tool rather than just saying here is this powerful tool, go use it, right? So that’s what, I really wanted to help folks get on board with it, so we will see how that pans out.
[02:11] Mike: Neat, well, and news on my end, I have got half a day left of consulting work and then after that I will be on AuditShark full time at that point. Around noon tomorrow I will be a “free man.”
[02:19] Rob: How does that feel?
[02:20] Mike: A little disconcerting to be kind of back in that position, but I am looking forward to it, my schedule has backed off significantly, so I have been working kind of part time and I have been laying out like what my days look like working on it full time so far, so it will be an interesting change, I have definately been splitting up my mornings and afternoons considerably more than I ever did when I was consulting, so.
[02:40] Rob: Right, I remember when I kind of quit consulting that I suddenly had way more time than I knew what to do with but I really had to convince myself to focus and to take that time and put it to good use to move the product forward, because I was no longer forced into this artificial two or three hour a day thing, of evenings and weekends, and so I had to be more mindful of my time but it was fantastic, I remember the day vividly, I hope you celebrate, go to a coffee shop.
[03:07] Mike: I try to coffee shop last Friday and didn’t go so well.
[03:09] Rob: Didn’t go well, yeah.
[03:11] Mike: The issue was that they didn’t have a place for me to plug my laptop in, so at around noon I was almost out of battery power.
[03:20] Rob: Oh! Yeah, that’s, you can’t do that. So we got an email with the subject line of Music To Get Focused and it was from Michael Koper. And he says “Hey, Mike and Rob, love your podcast, I am a new listener, and it helps me a lot with the creation of my first SaaS app and he goes on to reference the, when we talked about music to help getting you focused and he says, “I found this iPhone web app called Noon Pacific and it’s noonpacific.com, every week they release a new playlist with 6 to 8 songs for free, the music is handpicked from different music blogs, the type of music really helps me to focus, it’s very relaxing and nondisturbing. You can loop on the playlist for the week over and over and you can listen to other playlists, hope it helps the others same as it helped me.”
[03:58] Mike: Yeah, speaking of sharing good news and tips, we got an email from Rob Marsh who says “Hi, Rob and Mike, just wanted to drop you guys a line and say thanks for the podcast, it’s definitely the top of my listening list, and as a non-techie I find much of the advice you guys give very useful. I found the podcast about the time I was asked by my corporate boss to downsize my entire division of 40 people. I was the last person on the termination list. Your podcast gave me ideas and information, that made acquiring my first app much easier, that app logomaker.com is an online logo design resource for people looking to start a business or prove a concept with a professional looking but inexpensive logo design, although I didn’t build it, I have learned a lot as I have been trying to grow it over the past two years, this week I am launching my second site logodesign.com which has a different focus. Helping designers connect with potential clients. Just want to say thanks for the ideas, information, and encouragement, you give your listeners each week, you guys have been a great resource.” So that email comes in to us from Rob Marsh. Keep up the good work, Rob and let us know how things go.
[04:50] Rob: So last update before we dive into some listener questions. Drips growth is just starting to pickup to a point like, I have been on that learning phase, remember on my MicroConf talk we talked about building, learning and scaling. We have been in the learning phase trying to figure out what people need, getting email automation out the doors is a big step in that process, probably not coincidentally within the past 1-2 months, growth is just starting to creep up. So I can’t tell yet if it’s a blip, if it’s a coincidence but I have some aspirations, some high hopes that, a, it’s going to continue and, b, now that automation is out, there will be more of a compelling reason to keep people around. Trying to hit product market fit so that people come in, use the product, get a lot of value out of it and then change their behavior, you know, and actually continue to stick with it. So I will obviously update in future episodes as things go with that, but so far so good, last couple of months.
[05:44] Mike: You know, there were some people on Twitter who were asking me about how things were going with Google because of AuditShark’s experience with the panda update and things have actually not only reverted back to normal, but they have actually been better than they were before.
[05:56] Rob: Nice see that typically happens with sites that aren’t doing anything, gray hat, black hat that when these updates come the gray hat, black hat guys get booted, right, or just get downgraded and then the other I say, more legitimate SEO sites are able to move up, so that’s good news.
[06:14] Mike: It is disconcerting in the fact that it happened at all. So it means that I am kind of in that, I am probably in that gray zone, so that means that I need to kind of revisit a lot of those pages and make sure that I move, I guess into more of a legitimate territory in Google’s eyes, which kind of sucks because you don’t necessarily know everything that they are looking at, I have been looking through the moz collateral that they publish every year, basically kind of indicating what they believe, the Google’s algorithms are based on, and how much weight each of those things carry, so I have been going through those, and taking a look at them and trying to match them up with what I am doing on some of those pages to make sure that hopefully this won’t happen again.
[06:49] Rob: Very cool. Well, let’s dive into some listener questions today, we have several backed up and I want to cover them, our first one comes from Jay Adams and he has two questions, he says the first is I received a different amount than what was invoiced to an enterprise customer overseas, it turns out that an intermediary bank charged a wire transfer fee, I have no way to track these fees and wondered how other startups are doing with it.
[07:13] Mike: Banks are just such a black box, I don’t even know how they calculate some of the fees.
[07:18] Rob: To be honest, I have never heard of an intermediary bank charging a fee on it and I would question the legality of that because typically it’s the sending bank and the receiving bank, right? And the sending back will often charge a fee, it’s like a $35, $45 fee for an international wire transfer depending on what country it goes to. The receiving bank sometimes has fees for receiving wires, and that’s a whole other deal. I have never heard of like an in between bank, I would personally call your bank and try to figure out how that happened, why that happened, there has to be a schedule of fees somewhere, that’s how I would look to handle it, the way I have handled this in the past when I have had international contractors that I have had to do wire transfers to, is if the payment is broken up over multiple payments, I will cover the wire transfer on one and then make the contractor cover it on another or just split the fee 50:50, sometimes I ask them to eat it, I mean it kind of all depends. Not knowing the fee in advance is probably the more disconcerting part of this.
[08:15] Rob: Jay’s second question, he said it’s an unrelated question but he says, I currently have two websites, noxigen.com for the main company site and systemfrontier.com for the product landing page. I may offer a few other products in the future but I really want to push my primary product’s brand as well as simplify site management. I plan on relaunching the sites soon with a fresh new look and more content. Am I hurting my marketing and SEO efforts by having multiple sites?
[08:42] Mike: I would say you are probably not hurting your marketing efforts. The thing I would wonder about is how related are these products that you are going to be launching, how much overlap is there between them, could you do any sort of cross sales or up sales to people, because if you are selling into similar markets, there is the potential that you could bundle it and so if there are complimentary features between the two products or any sort of integrations that you could build and especially if you are going to go down the road of offering 3, 4, 5, different products and then bundle them together as a suite, if you look over companies like Red Gate where they have got all these tools around databases so they have got all these SQL server tools, SQL developer tools, dot net development tools, and they start bundling them together, I mean you can buy any of them for their lowest and at one point it was $30 but most of them are anywhere between $100 and $800 or $900, but then they start bundling them, if you were to buy just one of – every single one of the products individually it will cost you $4000, $5000, $6000, but they bundle them together and it will cost you $1500 or $2500 or something along those lines. So I would look at what you are doing and see if it kind of fits that model and if so, then you probably want to have one site for everything where you have this hierarchy on the pages, where you are doing all of your sales and marketing and trying to figure out on that main page, whether people are interested in one thing or another and then kind of pushing them down the tree but it really depends on what your outlook is for those future products and how much integration there is going to be.
[10:08] Mike: Now in terms of being able to maintain them, it depends on whether or not you are going to be the one maintaining them, that might be something that maybe you put together the initial architecture for that site, and then hand that off to somebody to actually implement a lot of those things, because implementing the look and feel can be extremely time consuming on an ongoing basis, especially if you are going to changing all right lot of that stuff.
[10:29] Rob: My take on this would be you should have a product site, you don’t need a company site since you already have one, I would tend to make that a thinner smaller site and not have a bunch of product info on it, because then you are competing with yourself for search terms and you really want the product site to rank for your main terms. So I do think that in terms of SEO, you are going to want to, you know, have more links pointing to your product site because that’s where people are going to go, research it and buy it, whereas if they come to your company site and see a bunch of products, it’s just a much harder path for them to actually get to a purchase. With that said, I think there is some value in having a company site that does list all of your products, if you go to the numagroup.com, you can see an example of that, I think Wildbit has a similar website, where they kind of list all their products and it gives you an idea of who is behind the company and what they are up to. I think there is value there but that’s not something that I would push a lot of traffic to, and I think if you are looking at having multiple products and you want to integrate or have upsells between them and bundle them with Mike was saying, I think you do that on the individual product sites that you still have systemfrontier ranking well when you introduce your second product then you can have like a little side bar in systemfrontier and you can have a checkout option where it’s an easy add on, a check box to also get this other piece and that you educate them on each of the individual product sites, you can also mention this on your company site, and again the company site in my opinion is more about information rather than commerce and each of the product sites are about product information with always a push towards a call to action of buying. So I hope that helps, Jay, thanks for writing in.
[12:12] Rob: Our next question comes from Ben Porov [ph] and he says, “Hey, Rob and Mike, I am just curious to get your thoughts on the test driven approach to development. Is it better to incorporate this principle into your project from an early stage or is it more of a hindrance to progress? It seems there is a lot of pros and cons to consider, if you were starting a new project today, would you test or not test? And for those who aren’t aware of test driven development or don’t know what it is, if you are really going to be strict about it, you would actually write a test first before you write any application code and you always start a new feature by writing a test, having it fail and then writing code. That’s the strict adherence to it. I know a lot of people who do “TDD” and they don’t actually write the test first, they just write a feature and then write a bunch of test to kind of test suite to test that feature before it’s every released into production.
[12:57] Mike: That’s how I do it, I will write the function and then make sure that it’s working and then write a bunch of tests after the fact in order test edge cases and make sure that it’s working and then when you have your build process kick off, it runs through all those tests, and you can make sure that nothing else that you did broke anything core, it’s a hard question to answer. I think it depends a lot on the product and how much you are going to be involved in the development process because I think that as you start outsourcing software development those tests become more and more critical, especially for a lot of the core pieces because you are going to have people in there and making changes that they don’t necessarily understand why the architecture is the way that it is and there maybe some very, very subtle nuances to how it’s put together that they are just not familiar with or they don’t know or maybe it was documented and they just didn’t read that part or it didn’t stick in their head, so there is advantages to that but the downside is that it takes you extra time to put these tests in there. So it kind of depends on what I guess, stage you are in terms of customer development to figure out, are you actually solving right problem because the worst thing in the world would be to go out build the products and have all these unit tests in there that are going to make sure that it’s functioning correctly but then if you are not actually solving problems for the customer, then it doesn’t really matter, you have written all this, not only have a written a product for nothing but you have written all these extra tests for nothing as well. So I think it depends a lot on how sure you are of that market and your ability to sell into it and as time marches on you really want to make sure that you are putting some of those tests in place. I am at a point right now where I am actually looking into potentially hire somebody to just write unit tests because there is a lot of–there are some core libraries that I wrote that I have some unit tests in because I knew that those would not change and then I kind of backed off from unit testing for a while and now I am at the point where I am revisiting it and going back to it, maybe that’s the right answer to my situation but it may not necessarily be the right answer for your situation.
[12:56] Rob: Yeah, I have written a lot of code without tests just because we didn’t used to write tests, right, I mean it wasn’t until 2006-ish that I started really hearing about TDD and started implementing it around 2007. It is a learning curve. Like when you first start it takes a long time just to figure out how to write tests, what to test, you become effective at it, you get faster at it the more you do it, it s a learned skill and so that first uphill learning curve is pretty steep but then you get better at it. I have heard estimates that its around 20% additional development effort. So if a feature is going to take 10 hours, it will probably take around 12 hours if you write tests. For me I will never have another piece of software written without tests, especially not a SaaS app, we have full test suites literally in the thousands for Drip and it has allowed us to make some major changes to the app without too much worry that things were going to go bad and trying to go back now and write the Drip test suite would be an enormous amount of time, it probably would be a developer or two for a month and I don’t think they would do as good a job as Derrick did as he went through the code, because you know, once it’s all fresh in your head, it’s easier to write the test. With that said, I do agree with Mike that it could be viewed as premature optimization by some. If you are building a prototype, you are entering a really uncertain market, yeah, it can be faster to release software without tests, but for my money anything I launch I am going to probably stick with it until it works and if you are going to have multiple developers working on a project over time, if you are going to keep it around for multiple years and if it’s going to be a somewhat complex and critical app that you are going to make your living on, by my vote I will never have another one that does not have a full test suite, and in fact we are in the process, we are almost done, rewriting HitTail in Rails, I am going to moving it to over to Amazon ec2, so I don’t have to deal with classic ASP anymore and that was one of the reasons that I wanted to do that. One of the pros to it is that we have just a massive test suite now.
[17:03] Mike: One of the other benefits of having that test suite as you write it and this is kind of one of the clear benefits of test driven development is that when you start making changes in your own code, you can know whether or not you broke stuff in the core that you may not have tested fully and I will give you a very specific example from AuditShark is when I was writing all of those unit tests because the core of AuditShark uses this essentially a scripting language that I wrote, I test a lot of things in the scripting language to make sure that it still works and there was one point where I was making some what I thought were relatively minor modifications to how the engine was operating essentially make it more efficient and I ran it through the test suite and it broke like 200 different things and it was not obvious that it broke them. This very, very small piece that I thought was just an edge case, I literally didn’t even think too much about it. I was like, Oh! I will get to that and then I forgot about it and it was that edge case that bailed me. And there were couple of hundreds of these things that just failed and I wouldn’t have noticed it unless I had that test suite because I was doing some very small tests and saying, okay, does this work or does it not, and it does but as soon as you start running it through all these edge cases which test suites tend to exercise those edge cases and they will do it a lot more efficiently than you ever will by hand it will catch all those things. So it could have been almost disastrous had I kind of rolled that out, and not really thought about it, I just threw it in here and then 3, 4, 5 months down the road, I found out that there is all this stuff that just doesn’t work, it would have been so much more difficult to find that.
[18:34] Rob: Thanks for the question, Ben. Hope that helps. Our next question is from Jim Monroe and he says “Hi guys, as always fabulous show. I went back and listened to an older episode, I can’t remember which episode, where Rob was talking about a funnel to convert a mailing list to a group of customers who are interested enough to pay for early access.” So I think Jim is talking about as I was going through the Drip process. Jim says “I am not sure I understand this transition process, can you elaborate on, #1, how to identify the best target customers you’re your list? Do they self select? #2. Assuming the product is a minimum viable product are you just having them pay via PayPal, I don’t have any payment methods setup, and #3, how do you go from asking if they would pay for the product to actually agreeing to drop money and get early access to what is probably not a complete product yet.
[19:19] Mike: So I think there is couple of different ways you can do this. If you are using something like MailChimp and I assume that Aweber and Constant Contact have very similar mechanisms. But with MailChimp you can actually see who is opening the emails and who because they rate them with a star system to see kind of how engaged those people are.
[19:37] Rob: You can do that in Drip too I will just note.
[19:39] Mike: So you go in there and you take a look at those and you can essentially eyeball it and that’s how you select those people because if people are skipping over your headlines and not even opening up the rest of the emails that you are sending to them, then chances are really good that those people are not your “best” target customers on your list. In terms of targeting those people and trying to find out more information about them to kind of really see who is and is not a good fit, because if you talk to any of them one on one, they are going to seem like a good fit but what you can do is you can find those people who according to the statistics say, hey, this person is actually opening the emails or interested, send those people a survey of some kind and ask them some very specific questions and you can almost cross-section the people who are on your list to find out what criteria they match. How are these people similar to these other people over here, what are the differences between them? So maybe one person runs Windows, another person runs Linux. Maybe somebody does SaaS development, somebody else does desktop development. There is a lot of different ways you can kind of cross section them and once you figure that out, you map those back to essentially figure out who your ideal customers is, who is going to be the best person and the most likely to pay for your product, those are the people that you want to go after and those are the ones you want to ask, hey, would you pay money for this right here? Whether the product is complete or not, if you are actually solving their problem those are the ones you want to try and get to pay for it.
[20:58] Rob: So when I was working with the launch list for Drip I really had two lists, I had this list of about 17 people who I knew in some form or fashion had committed to at least trying Drip out and they were willing to pay for it and those people I communicated with individually one on one and each one of them I onboarded manually. I told them they would have to pay for it eventually, the price would be X, and I named a specific price, but told them that they could try it as long as they need it without paying until they gotten value out of it. Then I had this launch list of 3500 people by the end and that launch list is more something like Mike said you have to start looking into and start trying to see patterns. Opens is one good metric to be able to see how people are interacting with your stuff. The other thing I did was I emailed a survey that we discussed in an episode, is around the 130s or 140s where I talked, I called it a customer development survey, it essentially asked what their biggest pain points are, what they were hoping Drip is going to solve for them, now anyone who responded to that instantly becomes a much more interested party to me and I think around that time I had somewhere between 1500 and 2000 on the list and I got just under 200 responses, so that was a nice chunk and then from there based on the responses I could sort even further and actually have real data individually and I asked them for the email in the survey email with just a Google spreadsheet with a Google Form over it. So it’s very simple to set up. Now that I had their email again I could then map it to individual people and I started talking to those people one on one as needed and the people with whom Drip was going to have the most resonance based on what we build, those are the folks that I contacted sooner, and by the time I contacted them I was already through 3 or 4 months of early access of these other 17 people and so I did ask for credit card upfront and at that point I did have like 21 or 30 days trial by the time I got down the line with the bigger list. Jim, I appreciate you writing in and I hope that’s helpful.
[23:01] Rob: Our next question is from Margo Kaypax [ph] and she says “Hi, Rob and Mike, I have been a long time listener of your podcast and you have motivated to bootstrap my own businesses. It’s more than motivation, I have been taking little bits and pieces from you every week, thanks for that. I am writing because I have started to work on having someone produce content for my sites and most important an email newsletter. What is your favorite newsletter tool to handle email newsletters from start to finish? Over the last 24 months, I have seen so many businesses that offer this service and I am unclear which is better than another and why. What is your criteria for choosing a tool, is MailChimp still the best? Which is your favorite and why? Thanks for everything, Margo.”
[23:37] Mike: I will tell you what I use. I use a combination of MailChimp and Drip and there are two reasons for that, one is because MailChimp was around long before Drip ever was. So I needed a newsletter tool and essentially MailChimp fit the bill very, very well, they will give you couple of thousand emails subscribers up front for no cost, if you want to get rid of their logos and stuff you have to start paying it around the 500 mark, but even then once you start paying, it’s only, I think their pricing starts at like $10 or $15 a month or something like that, it’s fairly inexpensive. The problem that I see with MailChimp is that they don’t necessarily give you the fancy things to put stuff on your website to drive people into the list and that’s partly why I use a combination of Drip and MailChimp. I will say the line is starting to get blurred but obviously Rob is kind of going in a different direction than MailChimp with his marketing automation. So I think the two of them serve, I will say, different purposes and obviously there is different price points as well.
[24:32] Mike: Some of the stuff that I do in Drip I actually take those and hand them off over into MailChimp and then there is other things where I just leave them in Drip, depends on what I am doing and which is the lists that I am working with but I do use a combination of both. I don’t think that there is a best one out there, there is no best one, it’s really which one meets your needs and which one is simple to use. I mean you may very well start off using one particular product because it’s easy to get into but then as you use it more and more you start to find that there is limitations around it and you just can’t use it for everything. So for example, very early on, one of Drip’s limitations was that you couldn’t really put in any sort of template and then that got added in. So over time, a lot of these the downsides and the cons of going with a particular piece of software can go away, unless you have gone back and reevaluated them, probably not going to see those. So for example, if I were to look at AWeber today there are probably things in there that I didn’t know they could do or they added in there that I never noticed before because I am just not a customer of theirs. So your needs change over time, the tools change over time and what’s best for you today may not be the best for you in 2 or 3 years. That said, you can sort of end up with little bit of vendor lock in just because you get on to a tool and you are there for so long, you have got all these processes and procedures in place for using that tool. It’s integrated in all your different websites and applications and then it can be hard to get out of that because it takes so much engineering effort to walk away and use something else even if it is a better tool for you at that time, I would say especially if you are early on pick one that is easier to get started with and just understand that your needs very well may change and the tool may not do what you want it to do later on and that’s just life, every single tool is like that, whether it’s email newsletter or whether it’s a CRM package or database, doesn’t matter, I mean your needs change, products change.
[26:26] Rob: Yeah, I think if you are just getting started and you are going to be building a list probably fairly slowly and you just want to send a few broadcast emails I would go with MailChimp because it’s free to 2000 subscribers, it’s perfectly fine for sending broadcast emails, it really works for beginners and I think don’t waste time paying for a tool for six months while you kind of figure this out and build your list slowly. I do think that MailChimp it is limited, you may hit a point where you want to do more exotic stuff with your list and if you even get auto responders going it’s kind of a fiasco with MailChimp, the UI is not clear, there are just some issues there, so that’s where you look at a tool like a Drip or AWeber’s UI is not great either, but there is like Vero and customer.io and companies like that that are doing some to there things and help you send auto responders and the UI is much easier to use. We all have more advanced automation stuff but if you never get there then MailChimp could certainly service your needs well for quite some time.
[27:32] Rob: Our next question is from Boris and he says, “I have developed a SaaS app, its skyfeedback.com. It allows businesses and customers to communicate instantly and privately via SMS, I just launched about a month ago, I ran a Google AdWords campaign and so far no customers, expect it was only used during a church conference and it worked great. I have a question, what is the strategy to advertise something that businesses are not searching for? I find that SMS customer feedback is something people do not search for and I feel like this service has to be explained and sold through a sales agent, am I correct in that assumption? Thanks for you advice, Boris.”
[28:10] Mike: It would seem to me that something like a SMS customer feedback mechanism, software service is probably going to be something where you can’t justifiably charge a heck a lot of money for, it seems like it would be a relatively low price point, by low I mean less than $30, $40, $50 a month or possibly a year, it kind of depends on what customer segment you are going after, and why it is that they are using the service, what problem is that they are actually solving. So your example of using it for a church conference and it works great, it seems to me like the price point for something like that maybe either free or something that maybe they pay $10 for it, that’s not something that you are going to be able to use sales agents for. I mean you are not going to have a sales rep come and start making all these cold calls and trying to sell it for $10 a pop or $20 a pop. It’s just not going to work, especially if it’s one time fee. So I think you need to little bit more digging and find out who is actually having these problems and dig a little further than that to figure out what is the value of getting answers to those things, why do they want that feedback? Is this the only way to do it because I think what you will find is that for example on a church conference or any given conference for example, the way to get feedback is one is to send him an email and point them to a Google Form which is great, what is this SMS tools have over that, what are the advantages of using your mechanism versus something like that and really try to position yourself against them and figure out whether this is even viable because from my standpoint I am looking at it and saying, well, if I were to use this at a conference, I don’t know is a SMS message out to people is really the most effective way to get information back from people because you can send it out to a bunch of people, you are not going to get it back in real formatted mechanism and you are going to be limited in the number of characters that people are willing to type on their phones. So those are the things that kind of come to mind and I know that that is not a direct answer on it but it seems to me like customer development around the actual problem itself is really where you need to go with this.
[30:10] Rob: Yeah, I would agree with Mike, this feels a little bit like a solution in search of a problem that’s not ideal now that you have launched but it’s not the end of the world and you have to go find people who are having this problem and niche it down. That’s what I would start with. Because your home page says this is for businesses and customers to communicate and that is just way too broad, so if it’s conferences or conference organizers that are going to put this on or if it’s churches themselves or if it’s meet up groups, or if it’s SaaS apps, you figure out who needs this, where this really is a pain and this really improves their experience find those people. Yeah, you are not going to be able to advertise to them because they are not looking for it, but once you find who they are then you know where they are. You can look in on LinkedIn groups, you can find them on Facebook and post ads there, you can post ads through something like BuySellAds once you find out what types of sites they frequent, you can go directly to trade sites and buy ads there, you can go to trade shows. I mean there is all these ways to do it but you have to know who your customer is. It is a big advantage if your customer is actually searching for the thing you offer in a generic way and you can just do SEO and do AdWords and get to the top of Google and get clicks but in your case, that’s not the case and a lot of business don’t have that and instead they have to target a market rather than targeting the customer as they are searching for it.
[31:32] Mike: Something like this it might be best to kind of figure out who your ideal customer for it would be, and the one that kind of pops into my head would be radio stations and for something like that you could presumably use a sales rep of some kind because it would be easier to track down radio stations and find somebody in there but as people are talking on the radio they have got this giant audience of people that they are talking to and they could ask them stuff. They could poll them for information, so they can run contests like very, very quickly using this type of tool but you would have to explain to them the benefits and maybe put a working prototype in front of them and let them use it for a month or couple of weeks or whatever and teach them, you would have to onboard them but that seems to me that might be a better fit and that kind of goes towards a profile where you have got this one business to many customers relationship, it might also work for companies like Dunkin Donuts where they have got a coffee shop on every corner and they want to send an SMS message to people, maybe to integrate with geo location, maybe not but those are some things to think about. I mean you need to find out who is actually going to use this and what problems you are trying to solve.
[32:37] Rob: So hope that helps you out, Boris. Our last question today comes from Mark Stevens and he says, “Hi! guys, I was interested in your comments on FogBugz. I think I probably signed up for the same business software conference as Rob, I wondered if you could expand on what you think it now lacks and what newer tools are offering.”
[32:55] Mike: I think for me there are a couple of things that I would say FogBugz lacks, and the first one is on the service desk side. So using FogBugzas a customer support mechanism is passable, it does work. I wouldn’t say that it’s the best tool in the world for it, so it’s just not as nice as I would like it to be from a customer perspective. I can’t really integrate a widget onto my website or into my SaaS app and allow people to interact with that and essentially talk directly back to FogBugz. Now they have APIs, I could do it, I could engineer something but I don’t want to have to. I mean I am already paying for their software, I don’t want to have to pay for this add-on and I would have to engineer it probably from scratch. Couple of other things is their Kiln integration I think is pretty good but I would also like to see something where you can get – you can either subscribe to or get notifications of some kind, maybe their web hooks or something along those lines, for when check-ins happen. For example, I mean I have a bunch of people working on things. I actually use BitBucket in some cases because I want an email notification whenever somebody checks something in and I want to see information about that check in who did it, which repository it went into and those kinds of things. So those types of things I think are very, very helpful and I think that they could take those things there, I am not allowed to switch just for the sole reason of getting some of the things because then I lose a lot of history and I lose a lot of other stuff as well.
[34:17] Rob: Yeah, I have several in mind as well. We use FogBugz a lot. I use it for both driving development like product management as well as for customer support and there are few things that I found are like limitations these days. One is there is no mobile app and really the mobile web interface is terrible, and so I often check email on my phone and whenever I have a FogBugz issue, I am kind of screwed because I can click through, I can kind of read the issue but then try to do anything with it is a pain and I know that if someone built a really nice web app I am sure Zendesk or Desk or Snappy or somebody has a good mobile app and makes this actually usable.
[34:55] Rob: Another thing is I would love to be able to and I don’t know if anybody does this one, but I have thought of this a lot. I get the issue in my queue and in my email to be able to reply to it and actually reply have something appended and then assign it to someone would be amazing via email because I can do it all within my gmail app on my phone. That’s something I found just to be a limitation is that when I am on mobile it’s kind of a fiasco. Another thing is it is pricey compared to other solutions. Check out a solution like Snappy, at besnappy.com, that’s from Ian Landsman at UserScape and I think they would be 10 bucks a user, 15 bucks a user, so quite a bit cheaper than FogBugz or half the price and a lot of the other helpdesk systems are similarly less expensive.
[35:41] Rob: I find that not having a knowledge base built in is kind of a pain because I would love to be able to resolve an issue and then just move it into a knowledge based article kind of beef up my response and migrate that in to have a searchable knowledge base but instead I have a third party knowledge base that I am using and I have to migrate stuff manually over there. The UI of FogBugz, I think is out of date. It’s kind of slow, it’s kind of Ajax, but it was built really what? 10 years ago and they added Ajax onto it, so it’s just not as usable, not as fast as like a more modern system would be and there are a couple of other things mostly around CRM stuff. Like we use it for support. I would love to be able to attach notification like attach an email to an issue so that often times five people will request a feature and I am just adding them manually into the issue itself and then I go in manually and email each of them but I know there are systems where they request a feature, you add them into a notification list and when that thing is resolved then they all get emailed and it says, this has been built and it is done per your request. So it’s more of an automated process, it’s more strongly typed. And also really in terms of CRM type stuff and unless I see someone’s name and recognize it, I have no concept when I get a new support request, all I see is an email and a name and so I don’t know like, is this person a customer, what plan are they on, how long have they been a customer? How many campaigns do they have? How long have they been using their app, all of that stuff, and I know that there are apps that will integrate with it. They will give an easy API and I could pipe some of my customer data in to make it just – give me a bit more of an intelligent view of who I am actually supporting, and what they mean to my business. So those are actually 4-5 things mostly off the top of my head. I would guess there are systems out there that are doing most of the things I have said but since we use FogBugz, I don’t really have a recommendation but surely if you have one, it would be good to see it in the comments for this episode, episode 190.
[37:40] Mike: Well, 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 email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Out of Control by MoOt, used under creative comments. You can subscribe to us in iTunes, by searching for startups or by RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 189 | Founder Hot Seat with Matt from Quote Manager Pro
Show Notes
- ZipGrade – iOS, turns a teacher’s iPhone into a scantron grader
- Use Twitter Lead Gen Cards to Boost Your Drip Campaign
- David Hehenberger’s WP Plugin business, FatCatApps
- Our hot seat guest was Matt from Quote Manager Pro
Transcript
[00:00]Rob: In this episode of startups for the rest of us, Mike and I have our first ever founder hot seat with Matt from Quote Manager. This is Startups for the Rest of Us, episode 189.
[00:08] Music
[00:16] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you built you first product or your just thinking about it. I’m Rob.
[00:25] Mike: And I’m Mike,
[00:26] Rob: We are here to share our experiences to help you avoid the same mistakes we’ve made. So where we at this week sir?
[00:30] Mike: We have another bootstrap list in our success, his name is John from Zip Grade and he says, ‘I started listening to your podcast about two years ago while having a fulltime job in a commodities trading firm, each day I on my two plus hour roundtrip train commute, I started building an app that turns a teacher’s iPhone into a grading scanner. Last week I gave notice at my job so I can spend the summer focused on building the product and the company in time for the new school year in the fall. It’s a leap of faith, but with support from my family and friends, I think it’s a viable approach based on sales growth and research.’ And he goes on to say that he’s graded 1.6 million tests with his app and 15,000 installs and several thousand paying customers.
[01:05] Rob: Awesome, congratulations John. That’s really cool. We have another one. When I was in Scotland last week I met David Hamburger; he has a WordPress plug in business also a podcast listener. He quit consulting a while ago because of this WordPress plug in business, said he’s followed a lot of our advices about doing WordPress first, wants to do SaaS ultimately but he’s taken a bite out of it early and so he’s making enough revenue now. He’s kind of travelling the world, he’s in the tropical MBA crew, so he does a lot of perpetual travelling but I added him to our success stories page as well and he has a WordPress pricing grid plug in. You can check that out at fatcatapps.com.
[01:42] Mike: So in other news, Google hates me
[01:44] Rob: Why do they hate you?
[01:45] Mike: Well I have evidence in my Google Analytics account that they hate me. The panda update went out a couple of weeks ago and I apparently got hit by it.
[01:53] Rob: Yeah, Panda 4.0, yeah
[01:54] Mike: AuditShark seems to have been hit by it, but on the bright side, it seems like it’s coming back. About three or four days ago things went back to the way that they were and they’ve been there ever since there, since Friday
[02:06] Rob: You weren’t doing any funky SEO stuff there, were you? Did you build links or anything?
[02:10] Mike: No, I wasn’t. I think that what happened is that they pushed out an update and then it probably, you know, kind of like similar to some of their other ones where they push on an update and it goes a little bit too far and then they make some tweaks and then it pulls back a little bit and then puts some people from the red zone, back into the black zone.
[02:25] Rob: Right, Google hates me on any given month as well. So I wouldn’t feel too bad about it. I need a Postgres DBA. Do you know one?
[02:32] Mike: You know what; I don’t even know anybody using Postgres.
[02:36] Rob: Really, so they’re not easy to find. But if you’re listening to this and you are Postgres DBA, or I mean if you are a systems admin with heavy Postgres DBA experience, I need someone to help with. We are migrating an app from one system to Postgres and needs some optimization help with it and then get backup set up and then just monthly backup monitoring, so. I’m looking for someone freelance.
[02:55] Another thing I wanted to note is guest post went live today on Drip’s blog and its blog.getdrip.com, It’s a really interesting hack for building your mailing list for free using Twitter lead gen cards. I won’t go into the approach too much but it truly is a free way that if someone’s on Twitter, you can put this lead gen and pin it to the top of your feed and then if they click the Join Us, all they have to do is click the Join Us button and since Twitter already has their email address, it opts them in right away and you just paste certain amount of code in and this dude the guy who did it, put the submit URL for his Drip form right into Twitter and so it just posts it right to his Drip campaign and so just with one click, you can get people in there. And I’ve already seen a few tweets, someone said it was actually Derrick Bailey, he said that they received like a thousand opt ins in the last month. Really cool hack and it’s written up like in grave detail on the drip blog, I wanted to call attention to it.
[03:51] Mike: Very cool.
[03:52] Rob: Last thing I have, have you seen the TV show Halt and Catch Fire?
[03:57] Mike: I have not.
[03:58] Rob: Okay, so it’s a new show on AMC, it’s two episodes in and its basically, it’s very similar to Mad Men but instead of advertising execs, it is set in like 1981/82 right around the time that IBM PC is being developed and so its all about the people who are trying to reverse engineer the IBM PC. Basically make the first PC clone. So far it’s pretty good, it’s pretty well executed and they’ve invested in the writing and the acting for this show, so, very good show for our audience. Very good show for the nerd in me, the geek in me who likes to see a high quality show based on stuff that you are familiar with because they are showing all types of chips and they are talking about operating systems and using acronyms, VLSI and I’m like, ‘Hey I know what…I learnt about that in college,’ So I don’t know if it’s for everyone but I would recommend it
[04:43] Mike: Well the real question is, is it accurate? Because I’ve seen some of those shows where they try to act like they know what they are talking about and for 90% of the people on the planet, they wouldn’t know anything otherwise, but then they’ll get some of the acronyms wrong and you are just like, ‘Oh, dear God’..
[04:57] Rob: From what I’ve heard and what I’ve seen, they have a couple of consultants on the set at all times. There’s like an IBM thing at the very beginning and they got the exact same font and they wanted to replicate that in the display. So I think that they, as far as I can tell, they are holding pretty near and dear to that. They knew that it would be a bunch of computer people watching it, and they knew that we’d nitpick it. So I think they are being kind of cautious in that respect.
[05:18] Music
[05:22] Mike: So today we’re going to have a hot seat style interview with Matt from Quote Manager Pro and if you want to get in touch with Matt, his email address is Matt@quotemanagerpro.
[05:32] Rob: Yeah, I guess the other thing is that Matt mentioned after our interview that he is interested in finding a person or two for a Skype mastermind and so if you hear his story and it resonates with you, and you feel like you are working either slightly ahead or slightly behind him in a similar niche, like a related app idea, I would consider emailing him at the email Mike mentioned earlier because certainly getting together in a mastermind would be a good idea.
[05:58] Mike: So this week, what we’re going to do, we’re going to have sort of a hot seat style interview with Matt from Quote Manager Pro and what we’re going to do, this episode is going to be a little bit different than most of the episodes that we do and we’re going to have Matt talk to us about what his application is, how it works, what pain points it solves and what market he’s going after with this. And then we’re going to start asking him some questions, he’s going to ask us some questions about how he’s going to attack this market, and how he can take his product to market.
[06:24] Rob: Matt is prelaunch. He’s working on a product called Quote Manager Pro, it solves a pain point of his, and he emailed us out of the blue. Mike and I had been discussing it for a few months
[06:34] Mike: So Matt, I guess we’ll start off and how are you doing today?
[06:37] Matt: Doing well. I appreciate this opportunity to speak with you today. I’m really excited about it.
[06:41] Mike: Great, I think maybe you should give us a little bit of short description of the app and kind of what problems it’s solving.
[06:47] Matt: Sure, so Quote Manager Pro is targeted at the manufacturers around the world really. I’m focusing on the US, but really what it does is it allows for companies who are manufacturers that build assemblies, might be electrical assemblies, pneumatic assemblies, liquid fluid distribution assemblies, these types of assemblies when their quotes are put together for their customers, the process of going to get quotes for the line items, the components, the build to print items that go into that build is very manual. So it’s usually done through email. So it’s a process of emailing multiple suppliers for every line item.
[07:26] And then that estimator as it’s called in the industry, is waiting on that supplier to feedback information to them so that they can then make a decision about which supplier they want to award that business to and then they have to take that over and put it into a spreadsheet where they can add it all up, put it together, by multiple quantity breaks and then they have their total material costs. So Quote Manager Pro is going to effectively automate all of that. So the industry is a bit old school in its ways, so it’s going to be a bit of a challenge to educate the industry about this automation
[08:00] Mike: Based on that, what is the current status of this. I mean obviously as Rob said, you are pre-launch but is the application built, do you have any early access customers that you are working with, where are things right now?
[08:11] Matt: The application is in development. I’ve been working with a developer, and I outsourced the development to a company in India, that was mostly driven by cost. It’s about a month into development right now, and we’re targeting a release in, a beta release sometime in the August time frame. As far as who we’re marketing it to or who I’m speaking to or have been speaking to in the way of customers, I really really wanted to focus, before I even started any development, I wanted to focus on validating the idea with multiple customers. It solves my own pain because truth be told I have a day job to work, and I work for a manufacturer and I’ve had this pain. I’ve suffered with this pain for eight years, believe it or not, so it’s taken me this long to really realize that I should do something about it and I can do something about it. So, I went out and I contacted a lot of different companies in the industry, a lot it’s initially about eight or ten companies and just asked them, just by cold calling or people that I had in my network, I asked them, I educated them on the software and made sure that it was going to be something that would suit their needs like it did mine. So, it’s been validated and I’ve got a great response, there’s going to be some people that it doesn’t work for but I’m anticipating a large market that it will solve a problem.
[09:30] Rob: I’m curious, when you spoke to these eight companies, was it easy to explain. Are they all on the same page in terms of everybody using, I think u mentioned they used Excel to manage this right now. So when you called them up and you said, ‘Look the estimating process is this, I’m going to have software that’s going to automate that’. Was that enough or did it require an in-depth conversation where you really had to explain to them how you were going to automate this?
[09:56] Matt: It’s a pretty in-depth explanation, like I mentioned earlier, it’s kind of an old school mentality, so it’s a little difficult to pull people from that manual way of doing things with Excel and simple email to a SaaS solution. I dare not mention the phrase SaaS because nobody’s going to know what that means. It’s a good in depth conversation to have because they are experiencing the same pains. Like in a lot of cases, you don’t know you are experiencing a pain until somebody lets you know that there’s a different way of doing it. So those conversations have been successful.
[10:29] Rob: Okay, so if you spoke with eight or ten companies, how many of them told you, ‘Yes, this absolutely fills a pain point and solves something for us and we’d absolutely be at least willing to give it a look’.
[10:41] Matt: I’d say it’s at least 80%
[10:44] Rob: Okay, did you talk price, did you talk a specific price when you spoke with them
[10:48] Matt: Some of the customers I have, about four of them I had and they…something of this, it’s easy to demonstrate an ROI so, I did talk price with them and they said absolutely, that would be something that we would be interested in at that price point.
[11:04] Rob: Got it. And you have price plans from that. I see you have like a free plan, it’s pretty low usage, and then you have like 139 and maybe a 299 and up, right, so it’s enterprise-ish. Not true enterprise, but it’s kind of like it’s above the tiny little SaaS pricing which is warranted because this is obviously a high touch sales market. You’re not going to put up a learning page and gather emails and then run Facebook ads and automate split test your way out of this one. This is definitely a very time consuming sales process, long sales cycle and so the high price point based on what I’ve read about the product is definitely a requirement in order to just justify the time that either you or someone else is going to spend. Given that, how did you come up with the pricing?
[11:46] Matt: I can easily, like I’ve said, do some ROI numbers and say, if it saves a person…if it increases their efficiency by 10%, meaning it saves them 10% of their time, then I can easily calculate that on a monthly basis and therefore I have a value that I can put on it. There was a little bit of guessing, I’m kind of walking around in the dark here a little bit because I’ve never done this before. So I’m trying to use as much as an analytical well thought out model as possible. So I tried to use a mathematical formula like I mentioned to come up with something, but I also wanted to have a price that is low barrier to entry. There’s companies out there that have…I talked to a company a few weeks ago that’s got fifteen estimators, so that would be fifteen seats. In my plan that would be an enterprise level sale, but there’s others that are just mom and pop type of operations where they have one. So I didn’t want it to be a barrier entry to them either, because I think, like I said, it’s going to provide a lot of value to them as well.
[12:45] Rob: Sure, now I know we’re going to dive into marketing stuff. In terms of your pricing, it’s always in the dark. Every time we come up with pricing, you really- no matter how many times you do it, you’re kind of just taking your best guess to start with and then as you get feedback, you’ll be able to- as you get feedback and as you become more of a name, right? You’ll become a brand name at some point. If you launch and everyone going to start using Quote Manager Pro, then you can raise prices. So I think you’re fine for now. I would consider, and looking at prices, you have five plans. I would consider getting rid of the free plan just because I’m not a fan of free plans, and especially in this enterprise market. You can easily offer a long trial, right? because you can say 30 day trial or you can say 60 day trial or you can even get people in there and continuing to extend their trial as you work with them through the sales cycle. But I don’t know if many higher priced apps like this do a free plan, per se. It’s kind of off the books. It’s like call us, and they’ll give you a free plan while you’re adopting it, but once you start using it in production, you’re paying a hefty price for it.
[13:50] Mike: Yeah, I was going to mention that as well. I would kill that free plan. And part of the reason why I would kill that, I think Rob made some good points about being able to extend somebody’s trials for as long as you need. But the fact of the matter is that, because this is such a manual sales process, you’ve got to do a lot of hand holding for these people because most of them- you said yourself already, just in talking to people, there is a hefty amount of explanation that needs to go into it upfront. you don’t want them to say, ‘Oh, well this is great, but what I’m going to do is I’m going to use your product and because I can use the free plan and I don’t need to have files and stuff uploaded, I can just have them email me those files and then manually enter data or whatever’, they can kind of get around those things anyways. So I think that maybe you just want to kill that free plan to kind of by pass that issue. But also just kind of simplify your pricing because you’ve got five plans down there and I look at it and it’s just like, wow, you’ve got free, and then you’ve got pro and enterprise and enterprise obviously is going to be much north of a thousand dollars a month but then you’ve got zero on the other end, and it just- it looks awkward. It puts a weight on what the value of the product actually is.
[15:03] Matt: Yeah, that’s an excellent point, I hadn’t thought of it that way. The whole reason, my whole thought process of having- adding that free level there is to really hook people in at a low level. I am going to offer a trial, I was thinking fourteen days there and that’s just an arbitrary number; I’d love to hear your thoughts on that, I think you mentioned a longer trial period might be beneficial but again the zero dollars per month was going to be, as you see there’s a limited amount of disk space and a limited amount of bandwidth, so two things. One, it would hook people in to get people to use it, even if they think that they don’t need it. And then number two, once they reach those limits, they would QuoteManager Pro would probably be integrated into their processes and then they would want to- they would go to that first paid level.
[15:49] Mike: The thing is, though, I’ve seen like my uncle does stuff in the manufacturing industry. And I’ve seen some of the files and stuff that he deals with and you can have one file that will literally chew through 20 Megs and like three, four, five those and you could chew through your entire bandwidth very very quickly. So that free plan at that point kind of goes out the window. It’s not useful for those types of things, whether they are CAD drawings, some of those things can be just massive. You want to be very careful about some of those limits as well. I’ve seen people get scared off just by those limits, because they are like, ‘Oh, I’ve got these files that are huge, so I’m not going to sign up for this plan because it only gives me 10 gigs of disk space and I know that I’m going to need 40 or 50 and there’s nothing that kind of talks them through saying that that’s not going to be an issue because you can buy extra disk space or anything like that. And that’s not on here but that’s something to kind of think about or keep in the back of your mind. It depends on what specific niches that you are going after and what types of files they have, what size those files are. So I almost might back off of those limits until you kind of get enough customers in there to kind of figure out what the averages are. Because it seems like what you are trying to do is put the cart before the horse where you want to say, ‘I want somebody to move from 139 dollar plan to the 399 plan if they go over 100 gigs of space but reality is you might have these customers coming in and they might be chewing up either significantly less or significantly more.
[17:13] Rob: You are selling the not truly non-technical users they are not going to know what 100 gigs really is. Or what that means. I think that you’re pricing looks more complicated that it needs to be. It looks more technical than it needs to be to a non-techie. We all know what gigs are and I totally get it. But the storage is fairly cheap especially if you are using something like S3 or a server with a bigger hard drive. So I would agree with Mike at this point, I would probably remove the limits until you get ten customers in there using and paying it. then you’re going to be able to see the curve and you’re going to be like, ‘Wow, these guys are using a tremendous amount’ And even then, I don’t know that I would put limits as much as I’d just raise prices across the board. Unless you feel like they really understand what these limits mean, if you were to have these phone conversations with the eight people that you’ve already talked to and say, ‘Hey, you can have 100 gigs a file’, if they were to say, ‘Oh, I know exactly what that means’, then you’re safe doing it, but my guess is that’s not the case given the folks you’re dealing with.
[18:11] Matt: That is great feedback. Not to belabor this point, but the point of that was to number one to have a tipping point so that they would get over a hundred gigabytes and then they would have to go to the next level. Number two it’s a limit, just kind of as a safety precaution before we roll out in case they start using a huge amount. Then they would have to- because I don’t want the cost to be prohibitive. If its unlimited, and somebody’s using it- just blowing it way out of proportion, a terabyte, then I don’t want it to be eating away at the profit and cost more than it…
[18:45] Rob: That makes sense. I think initially, I think I would handle it- your first ten customers, you are going to personally be handling them the whole way to get them on and get them using it and I think during your discussions this is something that can be handled with nuance, because you can say exactly what you just told us. Right? Like you can say, ‘Look, there’s no hard limit’ or you can say, ‘Hey, the limit on all the plans is 500 gigs. Just kind of make up a number that you feel comfortable with. They are not going to know what that means upfront, and then you’ll be able to see pretty quickly as they start using it, ‘Oh, these guys aren’t using anything’. The limits may be irrelevant. Everybody may use less than ten gigs. Or if you get in there and it really is an issue, then the pricing needs to adjust to that, but I feel like you don’t know yet and getting your first five or ten customers in is not going to be- even if you are underpriced, it’s probably not going to take you under if you have maybe some kind of limit that you communicated to them at some point.
[19:38] Matt: Okay, great
[19:40] Rob: I’m back and forth on this. But I would consider not doing tiers to start with and just doing a per user pricing, to keep it really simple. And seeing how that goes. If you look at…
[19:51] Matt: Just a quick question if I can interject, Is there any industry data that talks about- that measures the effectiveness of projects, SaaS projects like this that have done on a per user basis or on a limits basis?
[20:06] Rob: No, I haven’t seen it. And the idea is that the per user, if it really is a per user thing, like that the more user who use it within a company the more value they get out of it and everything else doesn’t really cost you money, then per user is simpler and per user is better for your customer. It’s just because then they can come and they don’t have to get auto upgraded to a tier where, like right now you have a one user and then the next year is three users and the next year is five users, so when they go up to that second tier, it’s not ideal for the customer. You’re making more money, but they are not getting the value out of it, because they may only have two users at that point. So that’s kind of the push and pull. I don’t know any data about this or any studies anyone has done with it, that’s just how I think about it as I’m going into it. So early on before I have a brand name, before everybody loves my product and before it’s something that’s easier to sell, I would lean towards making it simpler especially for the initial customers. And thinking about not doing tiered pricing and making 99 dollars or 149 per user and then put a flat limit on usage and then allow them to buy extra disk space if they need it, it’s probably how I’d do it
[21:13] Mike: Yeah, I think if you talked to Patrick McKenzie, some of the consulting that he’s done in the past, he’s basically shown outright that if you- generally speaking, if you go more towards a tiered pricing model, you’ll make more money. In the early stages I don’t think you should necessarily be concerned about making as much money as you possibly can and optimize for profit; you need to optimize for figuring out what your marketing plan is and getting people on boarded and figuring out all the hurdles and the objections that they have and the way to do that is to remove as many possible things as you can so that they are not asking questions about stuff that’s totally irrelevant. So for example, when Rob and I were talking about the bandwidth and disk space, you remove those things and those questions don’t even enter their minds, just like, ‘what does 300 gigs mean? How much stuff am I going to have that I can upload?’ If don’t even show it, they are not even going to think about it.
[22:01] Matt: Right, got it.
[22:03] Mike: So we’ve talked a little bit about the application and what it does. I think the next place we want to go is to start talking about what sorts of marketing have you done so far. It sounds like you’ve talked to some early prospects; gotten some feedback from them about the fact that they do have these issues and they are willing to pay for it. What sorts of marketing plans have you put together and road maps have you laid out as to where you think you’re going to be going next with the product and how are you going to reach out to people?
[22:30] Matt: This has been an area where I’ve struggled in the past. I like to think that it’s coming together a little bit better with this project but I’ll just let you know where I’m at. So I’ve kind of segmented the marketing approach into stages. And one is prelaunch, and then post launch and then onboarding and then retention. Really the marketing for reasons that we’ve already talked about, the most effective marketing that I’m seeing is calling. Is talking to people. I’ve done some emailing using my ISP, but then I’ve recently started to use a CRM package to do some emailing and that’s not been effective. [23:08] There have been a few people that have responded but generally people either don’t open the email or maybe 20-25% open it and I get very very few responses. So, it’s been a challenge. I think a lot of the marketing plan that I have, I’m finding that it really is intertwined with the tools that you use. And that’s CRM tools and also marketing automation tool. So this is an area that I’m having to quickly learn about and how to utilize the tools that are out there, they are relatively new tools to me since my last start up which was iPhone apps in 2009, I think. So since then, a lot has changed and I want to utilize those as much as possible.
[23:50] Rob: Yeah, I think before we dive into marketing or as we go into it, I guess the question in my mind is, have you solved a problem yet? I feel like we’re still- you know that you have a problem and you know that you are building a solution for it. How can you validate with those, you said you called eight to ten people, 80% of them said they were interested, so let’s just say they are seven people. Seven people that said yes, they are interested in this. What’s the quickest way or easiest way to talk to each of those seven now and figure out if what you are building is going to solve their problem? Because we don’t know that yet. Is there a way to get them screenshots of what you are planning to build or what you have built, have they already walked through that? Or is that all done?
[24:35] Matt: So yeah, I get what you’re asking now. So no, the answer very quickly is no, its not- the development is not at a level to where screenshots are ready. I do have some wire frames that I just made out in PowerPoint and they are really kind of awful to be honest with you. I’m not much of an artist but they get the point across to a developer. I’m hesitant to send those wire frames out to potential customers because I just don’t want it to look bad. I don’t want them to get the first impression that it’s going to look horrible like this and then that’s it for them. So I’m actually waiting to the point where those screen shots are available and that will probably be, I’m hoping six weeks or so, six or eight weeks and then I can use that as a tool in my marketing efforts. As of right now, I’m just smiling and dialing as they say, when I can I’m calling people and I’m really introducing myself as a software entrepreneur and getting feedback and letting them know with words here are the features. That’s all I have right now.
[25:33] Mike: You said you work in this industry, the manufacturing industry, correct?
[25:38] Matt: Correct.
[25:39] Mike: So you have seen, not competing products, but other types of software products that they generally use, right?
[25:46] Matt: Not really. As I mentioned earlier, it’s very manual. Its email and Excel and some people have given me feedback or sent me screen shots of their own systems of doing it and I’ve validated that they are doing the same thing that we do.
[25:58] Mike: Okay, I guess what I wanted to concentrate on was not sending them screen shots and things that you have so far because I’ve done some work in the manufacturing area and I’ve seen some of the stuff that they use and some of it is just God awful ugly. And that’s being nice.
[26:15] I don’t know as I’d be too scared about that, sending what things you have, because what they’re ultimately end up seeing is going to be better. And I know you said you did these in PowerPoint, I might recommend using something like Balsamiq Mockups to build the UI and present those to them, because then it’s very clearly a mock up and it doesn’t give them the impression that it’s done. And that’s one of the key advantages of using something like Balsamiq. And it’s only I think 80 dollars or something like that for a license. But you need to just build these screenshots and send them over to them and say, these are the thing that you would use. And you don’t have to build everything, you can just build the pieces that you think are going to be most interesting to them and show them generally how it’s going to work.
[26:56] Because they are going to want to know, ‘what is the process for using this product going to be like, how is it going to integrate into my system and how is it going to integrate into the process that I currently use. As manufacturing, they are probably not going to want to change the way that they do things and you need to know that upfront. you need to know what processes they are currently going through, you know generally what they do, but there’s probably a lot of nuances that you’re not necessarily aware of between the different companies, You’re going to need to account for those. And my concern would be you spend the next couple of months building this thing and it matches for you but they may do things in a slightly different order or just different enough that it makes it difficult for them to sign on because now they have to change their process. And as you said, they are old school, they don’t want to change but that’s going to make it difficult for them to say, ‘Hey, let’s drop what we’re doing and sign on to this.’ Because they don’t want to change what they’re doing now. They want to make it as seamless as possible.
[27:53] Matt: Right, okay. That’s great feedback. The bigger problem is how do I manage my time? How do I accomplish things with a limited amount of time? Because I’ve got a day job, so, I’d love to hear if you have comments there.
[28:05] Rob: I think you have three risks that I see. The three biggest risks are have you really solved the problem. And you don’t know that for sure yet. I know that you know you’ve solved your own problem, but it’s going to be another month or two until you know if you’re able to solve every one’s problem, the seven people you have on the list. So that’s something I think you want to answer and eliminate as quickly as possible. The next thing is, just the adoption rate of non techies, non-technical folks don’t jump from app to app, it’s going to be an enterprise sales process and it’s going to take months and months of working with each client to get them to sign on.
[28:42] Now, the good side of that is if your pricing is structured accordingly, it’s not going to matter, because you’re revenue is going to grow. Even if you want to sign up one new customer a month, if they are paying 300 bucks a month, that’s actually, a decent growth rate for a really early SaaS app in a market like this. In a non-hockey stick market. That’s your second risk. And I think you’re probably well aware of that, that you’re not going to be able to put up a landing page and get people to sign up directly from it. I would take some hints from companies like Hub Spot or like MoreAware software. I don’t know if you’ve been to MoreAware software but Ted and Harry are friends of ours, longtime MicroConf antendees, and they sell software to countertop installers. And it’s a similar audience, it’s more of the construction of the industrial area, People do not buy from the website. Ted and Harry don’t do SEO as far as I know.
[29:32] If you go to their pricing page, there are some pricing grids, but then its call to buy. Because the almost always, not almost, they always have to walk people through it and tell them what it does. There is like a pdf order form but the reason they don’t have the try online or anything like that and the reason that I’m not wild about you having a free plan or even having a defined free trial, is that you’re going to be dealing with each person one on one and so you’re going to be able to decide what they need and give them that individually. That’s much more of what this is going to look like, so, I think that’s the second risk, is just figuring out how to optimize this sales process and I think taking hints from Hub Spot and MoreAware where you’re trying to get people to do a webinar, do a phone call, do a demo, that’s what’s going to sell this. Not them reading a sales page and clicking a free trial, because they are not going to take the initiative to do this because what they have works now, it works well enough and it’s a pretty big commitment for them to get into new software and then try to sell their company on it, their boss on it and all that stuff.
[30:34] So I really do think it’s going to take time with you or someone that you hire truly sitting down and doing a sales gig. Those are the two big risks. The third one is exactly what you just said, your time on a weekly basis. You have a full time gig and so you’re going to be trying to tackle this market that is going to require a lot of time for each sale and you’re going to be trying to tackle it on nights and weekends, presumably. And I think there are a number of ways around it. So, I’ll throw one out. I read through your emails because you talked about this at length and it was helpful for me to think about it today. I think you have two options. One is that if you have money, if you have some money saved up, that you need to hire someone to do this. Someone how is experienced enough at sales and who is hungry and who is willing to learn about your product and really take this thing forward.
[31:26] I think this is a risky approach. I don’t know anyone who has made this work, who has not been- typically the best sales person is the CEO, it’s the founder, it’s the first person, because they know it, so no one’s going to sell it as good as you. And especially in these early days, it’s going to be really really hard. So even if, let’s say you found a top- a really good software sales person, and don’t get me wrong, software sales people they make a lot of money. There’s a lot of money in software, so you’re going to be paying top dollar. You’re not going to find someone on Odesk for fifteen bucks an hour to do what you need. You may be able to piece some of it out into just doing a demo of it; you can farm that out to an assistant or to someone but you’re not going to sell software in these early days unless it’s someone who’s really hungry for it. I just don’t think it’s optimal at this point.
[32:10] I think the next best solution is for you to either have the time to do it, to make the time to do it or for you to find a cofounder. I’m a single founder and I’m not often telling folks to find cofounders but someone without equity in this venture, it’s going to be hard in these early days unless you think you can scrap it through. Because here’s the thing, if you scrap it through and you do this early customer development on your own, get those first ten customers in, at that point, you may have a sales process that’s down and that you know well enough. And the product may be mature enough and by then let’s say you have ten customers, and average monthly is 300 bucks and now you have three grand a month to play with in addition to whatever extra from your salary, you have a little bit more. So if you can scrap it out just for the next x months, let’s say takes you six months or nine months to get the first ten paying customers in there, I do think you’re in a better position at that point. You’ve also reduced risk, so then the equity you have to give away is lower. That’s kind of my initial thoughts
[33:06] Mike: One that I found helpful is targeting customers who are not in your time zone. If you have a full time job that you’re working eight to five or nine to five or something like that, then presumably everyone else is kind of working on a similar schedule and what you can do is once it gets to the end of the day, you can go up to your car, go on your way home or if you live close to the office, you get home quickly and you can start making calls into customers who are in different time zones. So I’m on Eastern Time and if you go to Google and you just search for manufacturing in California or manufacturing in Oregon, or manufacturing in Washington State, search down there’s probably a handful of links that you’ll find one from Wikipedia that lists a bunch of manufacturing companies that are based in each of those states.
[33:51] Now on Wikipedia, there’s literally a category that’s called manufacturing companies based in x and it’ll show you whichever state. Go through those lists and start targeting those people. Because what that’ll do is that’ll give you a couple of extra hours where you’re at the end of the day, you’re off hours for your company and there still working because it’s still three o’clock there or four o’clock there and you can make those calls which is still very regular business hours for them, but it’s not for you. And they’re not going to care one way or the other. So that gives you a good starting point to be able to get in front of those people and talk to them in a way that fits everyone schedule
[34:27] Matt: Yeah, I agree, great feedback and that’s actually something that I’ve had success with. I do- I have been doing that where I get to the house at 5:15 or so and then start calling and it’s 3:15 on the West Coast, so that has been successful for me and some of these customers where I’m generating interest with have been on the West Coast. What about hiring- I’m kind of concerned about your comments that you can’t find anybody on Odesk for fifteen bucks or whatever. I’ve dealt with people oversees the whole time I’ve been doing startups which is probably ten years or so, but there’s only been two startups but anyway, I think it’s more prevalent now and available to us now as a group of entrepreneurs but are you really sold on the fact that there can’t be somebody in say the Philippines that would be able to do a decent job for appointment setting or something.
[35:17] Because, if I’ve got a huge list of potential clients, I need to weed through those and categorize them out, the ones that are interested or the ones that have zero chance
[35:26] Rob: Got it, yes, I definitely think you can find someone to do that. Just to do the initial call and just train them to answer some very basic questions and do a pitch, yes, I do think you could find someone. I have not personally done it. I know some folks who have hired people to do that – assistants and such, I do think that’s probably a viable way, is to figure out what can you strip away. There’s the core sales gig and you kind of need to handle that right now, but what else can you strip away. And there’s actually a service, there’s a couple of services that have cold emailed me and maybe when we’re off the call I can look for that because I have them in a marketing doc somewhere, but they’ve cold emailed me and they said they are like an appointment setting service.
[36:04] Matt: I try to be as realistic as possible with my situation and realism is that I’m busy all day long, so I’m trying to find resources and ways that I can work around that. So I’m actually already using a person in the Philippines to do some web research and find companies. That list that I’m calling off of, she’s doing a great job with that and that’s very inexpensive to do. But the next level I think is that verbal communication with a potential customer, so yeah, I would appreciate any type of service or something that you might recommend or if anybody could recommend a service that I could use, or they have used that would be fantastic.
[36:42] Rob: Sure, feel free to post that in the comments for this episode. It’s episode 189.
[36:48] Matt: One thing that I hear a lot in podcasts is sort of the theoretical things about how to set up marketing programs and the different stages of marketing and the ARRR model and the get keep and whatever, I can’t even remember anymore, but I don’t hear a lot about the tools that are used- that companies use successfully to make that happen. I’ve heard marketing automation is something that I’ve just in the past few days started to do some research on and there’s things like InfusionSoft and there some other ones that can be fairly expensive, so I want to try to avoid that expense as much as possible. What recommendations do you have for integrated CRM and marketing automation tool to get the word out but also to help manage the existing customers and the potential customers?
[37:39] Rob: I’ve got to be honest; I think you’re getting ahead of yourself by thinking about marketing automation. Split testing, all of the marketing stuff that comes with scaling, you are months and months away from that.
[37:51] Matt: I don’t disagree, I like to be- take a systems approach towards a project as much as I can so I like to set up early for that, so I don’t have to come back later and set up. And now since the project is in development I figured that that’s one area that I can try to set up or at least have an idea of which direction I might want to go. But I don’t disagree with you on that.
[38:13] Mike: I think the issue though is that by spending the time on that now, you’ve already said flat out that you’re strapped for time. If you’re going to spend time going after that aspect of it, what are you not getting done that you could have spent that time on? Because six months, nine months down the road, once you get in a better position, your needs may very well change and chances are really good that they will change which means that all the time that you spend now is completely wasted.
[38:38] Rob: yeah, and I can throw out some simple recommendations that will help you in the present day because even if you only have ten people you’re talking to, having a very simple CRM just to weave people through the funnel I think could be helpful. And there’s something called Pipe drive, pipedrive.com that I would take a look at. It’s probably stripped down just enough that it’ll work really well for your solution. Certainly something like Sales Force is going to be way overkill, its way expensive and it’s complicated. But you’re doing a sales job now for probably the next six months, rather than a marketing job. I think building an email list, you could sign up for MailChimp and throw a form there, you could sign up for Drip, and put a drip email capture form, probably worth doing, might take an hour or two. I’m building marketing automation into Drip right now; we’ve just launched some of it, so that could be a less expensive. Because InfusionSoft is about 200 bucks a month, Drip is like 50 bucks a month and we’re going to raise prices soon, but all of that really just feels too early. I don’t feel like you know yet if you’ve built something that people want. And the premature optimization and the losing of even a few hours a week is not something I would recommend at this point I think.
[39:48] Matt: Okay, so maybe focus more on continued validation and then just potential sales.
[39:54] Rob: Sales, yes. Because marketing and sales are obviously two different things and you’re talking about marketing automation, which is down the line. You need to just start that marketing- that funnel optimization and all that stuff once you’re starting to scale. And who knows when that’ll happen. You’ll know when it happens but you may never get there. A lot of apps never get to that point where they can actually retain someone, retain enough customers to make it worthwhile. I think sales and investing into sales and investing into lead gen, you’re already on that track. You know where you need to go with this. Everything you said indicates you know that you have to do high touch sales and you know you’re going to have to spend a lot of time to do it, the more leads you have in your funnel, that would be great. So if you can figure out a way to easily do that I think the way that you found that works is the cold calling for now.
[40:38] Obviously in bound marketing is going to be something but is very time consuming to do that. And are your people going to be online? Are they doing any types researches? Is it worth doing SEO for some of these terms? You don’t know yet. It could be worth some research, but I don’t think it’s going to be a high volume of leads, but if you’ve done some keyword research at all and seen if there are any searches for your software, you would have to know what that term is. It’s kind of estimate software but it’s very specific for manufacturers. I think there’s perhaps some value in there but I would hate for you to go down the rabbit trail of writing a bunch of articles and setting up a blog and then not getting any traffic and cold calling would have yielded you several thousand dollars a month in revenue by that point.
[41:22] Mike: So Matt, I think that about wraps us up. Do you have any final questions for us?
[41:26] Matt: I have millions of questions but we don’t have that much time, so what you’ve offered has been fantastic information and getting your perspective is very helpful for me so thank you very much. That’s about it I can think of right now.
[41:40] Mike: Well thanks for being our guinea pig
[41:43] Rob: I appreciate you coming on the show Matt
[41:44] Matt: Glad to be here. I hope it’s useful to some people out there
[41:48] Mike: If you have a question you can call it into our voicemail number at 1-888-801-9690 or email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Out of Control by MoOt, used under creative comments. You can subscribe to us in iTunes, by searching for startups or by RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 188 | Six Hacks for Building Your Mailing List
Show Notes
- Bose QuietComfort 20i Acoustic Noise Cancelling in-ear Headphones
- JeffBullas.com
- 6 Simple Tips to Grow a Large Email List
- LeadPages
Transcript
[00:00] Mike Taber: In this episode of Startups for the Rest of Us, Rob and I are going to be talking about Six Hacks for Building Your Mailing List. This is Startups for the Rest of Us, Episode 188.
[00:07] Music
[00:14] Welcome to Startups for the Rest of Us. The podcast that helps developers, designers and entrepreneurs be awesome at launching software products whether you’ve build your first product or you’re just thinking about it. I’m Mike.
[00:23] Rob Walling: I’m Rob.
[00:23] Mike: We’re here to share experiences to help you avoid the same mistakes we’ve made. What’s the word of this week, Rob?
[00:28] Rob: Yeah, I got some good comments on Episode 185 about moving from Windows to Mac. Robert Graham specifically laid out a bunch of really cool keyboard shortcuts. He says that he’s been exclusively on the Mac since 2000. He talks about something called AlfredApp.com which helps with their command space search. It helps improve it even more. Command space allows you to search anything on your box, but Alfred allows you to configure out even more.
[00:51] Then, Jumpcut which is Jumpcut.SourceForge.net. It creates a history and a buffer for your clipboard which obviously would be pretty cool. Windowing is improved by Shift It, he says, and he could just link this all and the comments for 185. Just a lot of good tips for some other stuff that we didn’t cover about text editing and taking screen shots, and that kind of stuff. I want to send a thanks out to Robert Graham for that.
[01:13] Mike: Very cool. Thanks. I think we talked a little bit in the past about getting a good set of headphones for listening to podcasts or working out and just trying to get in the zone but I came across Bose QuietComfort 20i Noise Cancelling In-Ear Headphones. I already have a pair of noise cancelling headphones that go over your ear, and I always wanted in-ear headphones that were noise cancelling but I can never find them. I guess, Bose came out with these in-ear headphones, and I was using them the other day when I was mowing the lawn. I couldn’t hear anything. I was just listening to the podcast. It was great. It was fantastic use of like an hour-and-a-half of my time.
[01:48] Rob: Wow. In-ear headphones that blocked out the lawn mower.
[01:52] Mike: Yes. It was awesome. I couldn’t believe it. I didn’t expect it to work as well as it did and I also have in-ear headphones that don’t have noise cancelling but I tried this out. They’re expensive. They’re like $300 but they work really, really well. I couldn’t hear the lawn mower, I couldn’t hear the weed whacker. It was just everything in my ear was crystal clear.
[02:09] Rob: Yeah, that’s impressive. That’s the kind of stuff, when I talk about listening to 50 or 60 podcasts, it’s because I am listening to them all the time when my brain is not occupied. It is when you’re mowing the lawn or when I am out doing yard work, all that kind of stuff. It really is a nice way to get some time back.
[02:26] If you do have room for the bulkier over-ear headphones, I use the Sennheiser HD280s. I think they’re about 80 or 90 bucks on Amazon. What were the ones that you got that are in your ear?
[02:37] Mike: It’s the QuietComfort 20i.
[02:39] Rob: I got it. A few hundred bucks, so it’s an investment. We have several new reviews in iTunes. They’re from Cozy200. He says, “Just another fan. Fantastic show. As a new bootstrap startup founder, I rely heavily on my developers and shows like yours for guidance through the process. We’re extremely bootstrapped. Well, more like strapped than anything else, but a quick shout out to you both. Thanks for helping the entire community improve.”
[03:02] A Son Watcher from the UK says, “This is an undiscovered gem. I only recently discovered the show after reading a post on Hacker News about useful podcasts for startups, and it’s awesome. I listened to it consistently for a couple of weeks and it’s reinvigorating my motivation to push some niche-SaaS apps to market.”
[03:18] Tyler Bandfield from the US, he says, “This is the only podcast I am subscribed to. I think the title says it all. Well, I enjoy listening to a variety of podcasts. This is the only one I view as a can’t-miss. Not only is there always something actionable and relevant in each episode but Mike and Rob’s initial discussion of what they’ve both been working on with their own projects is always a nice dose of motivation. If you’re running your own business, working on a side project, or just want to start creating something, this is the podcast for you.”
[03:42] As always, thanks a ton for the reviews. If you’ve been listening and getting value out of the show, we’d really appreciate it if you would log in to iTunes, and give us a five star. You don’t even have to write the full review. You can just do a five-star rating without having to spend any other time and we’d very much appreciate it. What are we talking about today?
[03:58] Mike: Back in Episode 72, we had talked about eight tactics for building a pre-launched mailing list. We talked a little bit about leveraging your existing audience and doing some SEO, and trying to rely on some viral content like infographics and things like that. Then, where to try and pick up people to add to your mailing list, whether it’s Hacker News or Facebook Ads or a variety of other places where you could do advertising, Twitter, Facebook.
[04:42] What I think we’re going to focus on today is specific hacks that you can use to grow an e-mail list, and this is based off of a blog post by Jeff Bullas who provided six simple tips to grow a large e-mail list. We’ll link back to this in the show notes but we’ve got our own take on some of this and modify at least one of them substantially.
[04:44] The first one is to turn your price and page into a lead generation page. This is something I am actually in the process of doing for AuditShark for the pricing page. Something I’ve seen somebody do is request contact info before showing pricing. This is an interesting idea because it gets you people’s contact info and allows you to follow up directly with them before they even really start looking at pricing or signing up.
[05:07] If you have any long sales process or it’s a complicated sales process, I think that this is something that can work really well. There’s definitely cases where this is not going to work. If you look on anyone’s websites now, for example, I don’t think that it would work very well for Drip because the sales process and the value proposition for that I’d say is probably fairly straightforward for the most part but for something like AuditShark, compliance is a complicated product. It’s a complicated proposition to make to somebody. I think that getting that contact information from people so that you can follow up with additional marketing is a much better way to go in cases like that but as I said, there’s definitely cases where doing something like this is not going to work.
[05:48] Rob: Yeah. For lower price, obviously for B-to-C, it’s probably not going to work very well and for lower priced SaaS, the odds are you’re going to be able to get someone to sign up for a trial round and didn’t happen to get on the list but I agree with enterprise, more complex stuff, a new product that needs to be explained, any of that stuff.
[06:05] That’s why you see the Hub Spots and the KissMetrics, and a lot of the more expensive apps out there, they really have a lead gen form right there. They really want you to call and talk to someone, or to do a demo, or to sign up for a webinar. That’s the call to action rather than actually getting you to sign up directly on your first visit because they know that it’s such a big decision that you really need more information before you can do that. That is where doing lead gen on your pricing pages instead of trying to push people towards your trial is obviously a win.
[06:35] Mike: The next hack is to use pop-overs on your website and more specifically use something like an exit popup. The way an exit popup works is while they’re on the page, and viewing it, and working through the content, you’re not going to show any sort of popup but as soon as they try to move the mouse cursor off of the website, maybe up to the browser bar so that they can click on the back button, it will show a popup to the person and ask them to either subscribe or provide their name and e-mail address, or take some sort of other call to action.
[07:02] There’s a lot of variations of this type of thing that you can find at WordPress.org like WordPress popup or Popup Domination but at the end of the day, the idea is pretty similar. You’re really trying to drive them to a call to action to get them on your mailing list or get some contact information from them so you can follow up with them later.
[07:18] At the end of the day, it actually works. People use them. Internet marketers use these types of things because they work. Other things that are a little bit less intrusive I’d say is something like Hello Bar. The real key to using a popup successfully is to not be a jerk about it. You really want to measure what works and what doesn’t, and anything that’s working to drive people on to your mailing list, you want to use those things and anything that isn’t that’s driving people away, you want to avoid those things.
[07:43] Rob: Yeah. I’d throw out another nonintrusive popup is the Drip widget. It’s in the lower right of your screen. It’s like an Olark chat window and it just pops up unobtrusively after x seconds. You can configure it to do that. The reason with that is because I agree, I am not a big fan of the really big, take-over-the-screen popups.
[08:03] With that said, you have to ask yourself what you feel comfortable with. I think each person’s decision as to how much they want to optimize something, how much they want and they’re comfortable optimizing it. I will probably never have and I never have had basically a light box that comes over my blog website to try to build my mailing list. I know that it would build it faster but I also know that over-optimizing it creates a negative experience for some of my users, and I am not willing to do that.
[08:31] You have to ask yourself that. Just because something works, do you want to go to that point? If you think about selling something. Let’s say, you’re trying to sell something in a presentation or sell something on TV, the maximum amount of optimization is to do an infomercial. All the stuff that they do in those infomercials, where they, say, “Only three low payments of this but wait, there is more,” and all that stuff, it really works; but at a certain point you have to ask. Do I want to go to that extreme and to eke out every last percentage point? I think it comes down to a personal or a brand decision at that point.
[09:02] Mike: The third hack is to follow a strong writing formula for your blog posts and for the content that’s on your blog. You can definitely do these types of things in landing pages as well but for your blog post, you want to have a clean intro to a specific problem. You want to include some story because statistically, people remember stories significantly more than they remember actual numbers and statistics. They’ll remember that story and they’ll relate it to statistics, and they will go look it up; but they won’t remember the statistics themselves. They will remember the story. They just won’t remember the exact numbers that went with it.
[09:34] The other thing is to make sure that there is value for your target audience. When you’re looking at the value that you’re going to provide to that target audience, you want to know who that target audience is. Are they a beginner in your field? Are they intermediate? Are they advanced? Who is it that you’re actually talking to because not every blog post is going to be able to talk to everybody who is at each stage of using the type of product that you’re offering. You want to make sure that you’re talking to a very specific audience and know what it is that you’re offering to them.
[10:01] Then, the next step is to make sure that you’re crafting a great headline for that blog post, and then publish it with a call to action of some kind. You want people to take an action after they have read the blog post and whether that is a popup of some kind or just a little footer at the end of it where you say, “Hey, if you want to hear more information, subscribe to this newsletter.”
[10:19] Rob: Something interesting. I started writing an experiment on SoftwareByRob.com which is my blog. It was that in terms of getting folks on to the e-mail newsletter, the right-hand side, upper right, which is my sidebar, that widget got way, way more and I don’t remember if it was three times or four times but it was substantially more signups than did the signup thing at the end of the blog posts.
[10:44] I thought that the signup thing at the end of the blog post would be it because that’s where a lot of the individual traffic comes to. If someone reads the post and at the end, it says, “Did you like that? Do you want to hear more? Like this.” It just seemed like the natural place to be asking someone for their e-mail address. It was good enough to keep around but nothing compared to that upper-right position.
[11:04] Obviously, your milage may vary depending on your blog but it was nice to be able to test that and know for sure. Then, what I noticed is that I put it at the bottom of my about page and a couple of my pages that are non-post, and those got almost zero signups. Pretty confidently, I could take those off and not feel like it was hurting my subscriber growth, but at the same time, I felt like it was cleaning up my site. It was simplifying and actually improving the user experience without hurting the newsletter signup process.
[11:31] Definitely in terms of that call to action and all the stuff, you do want to test as much as you can. You don’t want to go overboard with it if you don’t have a ton of traffic but I get enough traffic that it was worth figuring out the difference between those two.
[11:44] Mike: The fourth hack for building up your mailing list is to use landing pages that provide incentives to subscribe. Whether you’re offering an e-book, or videos, or screencasts that you can offer interviews, cheat sheets, case studies, any of those things are good things to offer people in exchange for their e-mail address. Most people would be incentivized enough to provide an e-mail address because what’s an e-mail address worth? They can always come back and unsubscribe.
[12:08] Obviously, you have to make sure that you’re going to let them know upfront you’re not going to spam them and they can unsubscribe at any time because nobody wants to give away their e-mail address to somebody who is just going to hand it out to everybody or sell it off. There are definitely things that you can use like those e-books, and screencasts, and things like that to help incentive people and give them something in return for that e-mail address.
[12:28] Rob: The nice part is that you can reuse content especially if you do have a blog, a lot of people don’t go back and read early posts but they can still be very valuable. At one point, I had a virtual assistant go through and I told her some posts that I wanted her to gather together, she put them in a big word doc. Then, I paid a designer to format it. I, now, have a 170-page PDF e-book and that’s like a 12-point font. It really is almost a full-sized book. It’s all writing that I had done over the past seven or eight years. I had it packaged up really nice, and that is one of the incentives that I hand out.
[13:02] Just because you have older content that you already published somewhere doesn’t mean you can’t go back and use that as an incentive if it is in fact something that someone is going to want to read. I’ve also seen something working lately or I’ve heard really from Clay Collins of LeadPages but he said that having something that is very specific to the actual post, assuming that that post is getting enough traffic to make it worthwhile but having something specific to the post really escalates how many people will opt in.
[13:30] If you write a blog post about a specific kind of landing page, then LeadPages will give away that landing page template as HTML at the bottom, or if you’re talking about how to write, craft specific types of e-mails, then giving away an e-mail template at the bottom, or giving away an Excel spreadsheet that has something to do with it. That will accelerate your opt-in rate. It makes sense because it’s in context. It’s not a generic giveaway. It’s actually something relating to the post.
[13:54] I think you’d want to probably publish the post and either know that it’s going to get a lot of traffic before you create that giveaway or watch it as traffic builds overtime through SEO and other viral stuff, and then create the lead magnet because to be honest, you probably can’t do this for every blog post. You need to pick and choose, and you want to put your effort where you think there’s actually going to be enough traffic.
[14:16] Mike: The fifth hack is to run A/B tests on critical elements once your webpage or your blog reaches a critical mass. If you are drawing enough traffic in to be able to run this test, and you definitely want to start testing your headlines. Google Analytics will help you identify which pages are getting the most traffic. Obviously, if you have any other type of tracking software on your website where it’s able to track webpages that are getting the most traffic, you can use those as well.
[14:42] There are also WordPress plugins where you can use them to automatically do A/B testing on some of the different headlines. For example, I think AppSumo has one but there’s other ones as well. Those are the types of things that you want to start testing. If you’re not using WordPress, then it’s not terribly difficult to code your own but you definitely want to figure out which ones are resonating with people and which ones aren’t, and use those headlines.
[15:04] Another thing that I’ve done in the past which has been helpful is to use something like Bitly, for example, where you are going back to a particular webpage and creating those URLs. Then, on Twitter, if you’re posting those URLs using very specific headlines, people see the URLs but they don’t necessarily see where the link goes until after they click on it. You can test the same URL with different headlines in Twitter and see which ones are resonating with people.
[15:31] The sixth hack for building your mailing list is to essentially keep your subscribers happy because you don’t want to have people on your mailing list if in two weeks, three weeks, or four weeks down the road they leave because you’re abusing them as subscribers.
[15:45] You want to provide relevant content to them. You want to think twice before you start hitting that publish button, and really think about what is it that you’re sending to them and are you providing value to them. The last thing to keep in mind is that you have to understand that not everyone is going to read everything that you write.
[16:0o] And as Rob mentioned earlier, a lot of his content from his blog repurposed into an e-book for his website to give away as an incentive but you can repurpose a lot of that content into your mailing list because not everyone is going to go back and read everything that you’ve written. Repurposing content has its place but it doesn’t mean that every blog post should go into your newsletter.
[16:20] You shouldn’t go all the way back to the beginning of time and start sending those out to everybody because there are going to be people who have read those and if they start seeing things that they’ve already read or they see too much of that slanted in that direction, they’re probably going to unsubscribe and you’ll lose them as subscribers. You do want to keep your churn rate down.
[16:36] Rob: I think another part of keeping your subscribers happy is sending stuff that is super, super relevant and obviously really valuable to them. There’s this movement and this change that I see coming in e-mail now that I am knee-deep in the marketing space with Drip is that people are … In terms of folks who have successful newsletters, the thing that they are doing differently is they are using this behavioral e-mail that sends subscribers different e-mails based on behaviors they take.
[17:04] If someone makes a purchase from you and they buy a specific book, then you now know that they have an interest in that and that they’re a customer, and you can start them on a different sequence based on them clicking that button. If they click on a lot of links that involve SEO, you tag them with the SEO tag and then you start sending them more SEO links and less about conversion rate optimization or whatever.
[17:24] This behavioral e-mail stuff and I am talking about this because at first, I wasn’t a believer. This is even a year or a year-and-a-half ago where I didn’t quite get it yet but I am really understanding the power or the ability to go from one to many, which is what e-mail marketing is today, to going down the one to a few. To where you’re really talking and customizing your newsletter, your list, just your whole movement through your funnel and your relationship building, and you’re able to customize that for multiple people, and that is why we launched this rules engine in Drip, the automation rules, the behavioral e-mail aspect.
[17:58] I am still trying to figure out exactly how to talk about it. It’s amazing, the stuff that you can do and the stuff that you can build with this, and I am not just talking about Drip. There is InfusionSoft, and there is Office Auto Pilot, and there is other ways to do it but just that entire concept. I think that’s where we’re all going to be moving and I just think that’s the future of personalizing this e-mail stuff so that I think that heavly ties in to this keeping your subscribers happy point.
[18:21] I also wanted to add, I think maybe a bonus seventh tip, and it’s just based on my experience building my mailing list. It’s really all embodied. I’ve done some split testing and then it was just some best practices but it’s all embodied in the subscribe form at SoftwarebyRob.com in the upper right. If you look at it, I want to call out a few elements.
[18:39] First thing is I don’t call it a newsletter. I did it at one point but I quickly realized like that feels generic and it feels like something that a corporation is handing out. It’s their quarterly newsletter. I call it Growth Secrets for Self-Funded Startups, not a newsletter. It’s not an e-mail list. It doesn’t say join the list. It doesn’t say anything like that. It just talks about growth secrets for self-funded startups. The call to action which is the button, it doesn’t say, subscribe, it doesn’t say sign me up. It says get the Book. That’s what it says because that’s what people want.
[19:07] Then, I have a couple of bullet points. The bullet points I have are what you get for signing up, and the bullet points are: a 170-page e-book collecting my best startup articles from the past five years. Then the next one is, previously unpublished startup-related screencasts. You’re getting stuff that no one else is getting. The third is, exclusive techniques I don’t publish on this blog. Lastly, I have a quote. It’s a testimonial.
[19:28] It’s all in a pretty compact space. It sounds like a lot of information. It’s really tiny and like I said, I have tested some parts of this and seen this iteration of it performs the best. I think having a quote is a big deal and I think having multiple things really describing what people get for signing up and putting a lot of value there, like a 170-page e-book filled with startup articles is actually pretty interesting. As I am reading this, I’d probably change it to, say, startup tricks or startup growth secrets instead of just articles.
[19:57] I want to throw that out as a framework of a descent way to really describe that if you’re going to get someone to buy in the type of information that you’re going to want to give them in order to get them to get over that friction of giving in their e-mail address.
[20:10] Mike: I think those are all really great tips. I do something similar on my blog. I don’t have anything there for my mailing list where I say flat out, you’re going to be getting these things but I basically tell people that they are going to get actual advice, tips, and stories.
[20:24] Rob: I think that about wraps us up for the day. If you have a question for us, call our voicemail number at 888-801-9690 or e-mail 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 or via RSS at StartupsForTheRestOfUs.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
