Episodes

Rob Walling:
It works this way for products too. Pay attention to the problem customers describe, not so much the solution they propose. This is an encapsulation and a really intelligent rephrasing of something that Derek Reimer and I started talking about probably I’d say 2014, 2015, which is your customers will come to you with featured ideas. Don’t build those features, dig in and find out what is the job that feature is trying to accomplish. 

Welcome back to another episode of Startups For The Rest of Us. As always, I’m your host, Rob Walling. And this is the podcast where we dive deep into building real companies for real customers who pay us real money where we’re not constantly on the venture treadmill needing to raise money every 18 months or go broke. We’re not anti-funding, we’re just anti the narrative that the only way to build an incredible software company is by raising funding. 

Today is a Rob solo adventure. I’m going to cover some topics that have been on my mind lately, including listening to problems, not solutions. Listening to your customers instead of a customer doing what it takes and maybe a few more topics based on how the time winds up. And one more thing, we’ve recently reopened the doors for our online community, MicroConf Connect. MicroConf Connect is our virtual hallway track. It’s a vibrant community of SaaS founders helping each other and discussing wins, challenges, and frankly how to grow faster. 

A couple months ago we paused new signups to improve the platform based on your request. With MicroComp Connect 2.0, we’re rolling out three membership tiers packed with new perks like weekly coworking, exclusive discounts, a searchable content library and more. Whether you’ve been a member of Connect or not, you really should check it out. microconfconnect.com. 

My first topic of the day comes from Twitter. I just refuse to call it X. I’m sorry. I saw a tweet from Ruben Gamez, Earthlingworks and he was quote tweeting sequence film. Sequence underscore film. Sequence was quoting comedian, Bill Hader on receiving feedback. And there’s a little video clip that’s, I don’t know, a minute long and it’s pretty insightful. But the quote that they post in the tweet is, “When people tell you something is wrong, they’re usually right. When they tell you how to fix it, they’re usually wrong. And Bill Hader is talking about being a standup comedian or being a writer in film and how people can tell you when a joke doesn’t land or when a concept doesn’t land. 

But knowing how to fix it requires something that I’ve talked about many times on the show, which is that creative spark and taste to be able to find the right solution because there are infinite ways to try to make a joke or a scene better. And most of them won’t land. 

So how do you find one or two that makes it really scream? And usually people giving you feedback are not those that are also creating. It is this interesting thing where you are on the outside and I’m listening to a podcast. And if I’ve never recorded a podcast, I have a certain amount of taste to say, “Oh, this is good or this is bad based on my taste, or this is high quality and this isn’t.” But for me to then suggest, “Here’s how I would change it. I would add different music here. I would’ve asked this question. That’s another level. That’s that Ira Glass level of your ability, your skill through hard work has to catch up to your taste. 

And that’s what Bill is calling out here. When people tell you something is wrong, they’re usually right. And when they tell you how to fix it, they’re usually wrong. So why is Ruben Gamez retweeting this? Because he says it works this way for products too. Pay attention to the problem customers describe not so much the solution they propose. This is an encapsulation and a really intelligent rephrasing of something that Derek Reimer and I started talking about probably I’d say 2014, 2015, which is your customers will come to you with featured ideas. 

Don’t build those features, dig in and find out what is the job that feature is trying to accomplish. Over and over we would receive different feature requests from folks who are trying to do complex workflows and they would come in and say, “I have an email sequence in Drip and I want to be able to have an if-then L statement and add a tag between them and then branch based on that. Can you add that to this screen?” 

And we even had people mock-up the email sequence screen to work for their exact use case. Derek and I would get together and it never felt right. It was like that solution is terrible, but this problem is real. This person is this marketer, is trying to accomplish something that is very difficult or impossible with our current setup. So how do we build this in? And we mold it over four months, at least six months, maybe a year. And we took all these disparate points of feedback and you’d get that one and then you’d get one that was quite a bit different. But it was like, “Well, these are similar,” and that someone wants to do something off the cuff and they want branching decision-making. 

How do we build that into the product in an elegant way? And of course, after six to 12 months of building and growing and we hired another engineer, it started culminating in the sense that we need something probably visual to allow people to do all of this stuff. And that was when we started looking around realizing, “Oh, there are actual visual workflow builders in email marketing and marketing automation and they allow you to do some of the things these folks are asking plus more.” 

And that was a big lightning strike realization for me where I realized that a swath of problems, a swath of requests, could all be fixed with one feature. Now it was a huge feature and took Derek five months full time to build, which if you’re looking at it from a big company perspective, that’s actually very fast. And if you’re looking at it from a startup perspective, it’s agonizing that it takes that long. But that was our visual workflow builder in Drip and it solved literally 50 feature requests that had come through in the span of a year. And all these feature requests could have been individual settings, an individual toggle, an individual hack to a screen. 

This is, in my opinion, what separates great product people from average. I wouldn’t say mediocre, but an average product person will listen to something and say, “Oh, the customer wants this. Let’s go build it and let’s add that checkbox. Let’s add that slider. And let’s hack this screen because It’ll get us to what this customer needs. Not looking ahead 10 moves, only looking ahead one move on the board.” And that’s what Ruben Gamez is talking about here is your customers are not going to have the product sense to be able to design your product. They don’t have the vision for what it needs to look like. They don’t have the vision for what the UX needs to be to keep the elegance in. They see a problem they have and the shortest path to a solution. And they’re not worried about maintenance or the user interface getting crafty. 

They’re not looking three, five, 10 years down the road like you as a founder should be. So just one more reminder again in the words of Ruben Gamez, “Pay attention to the problem customers describe not so much the solutions they propose.” 

My second topic of the day is a quote from one of the co-hosts of the Comic Lab podcast. I like listening to podcasts that are not in the startup space. Comic Lab is two comic artists who have made a living doing Kickstarters and Patreon. Their comics are quite funny, especially Dave Kellett. I’m a huge fan of Drive and of Sheldon. Sheldon is just tasty, goodness, nerdy humor that my sons and I have read and love. And the thing I like about this podcast is they talk about things like ventriloquism doesn’t work in comics. They talk about things like kerning and about drawing thought bubbles versus speech bubbles in comics, panel construction, thumbnails. These are things I have no understanding of and will never need to because I have no aspiration to be a comic artist. 

But so many of the principles that they talk about as two 20-year professionals who have made it in a space that is very competitive and I would say is similar to startups. And the fact that there’s a lot of people that want to do it and a few people who actually do it, and even fewer who can make a living at it, and even fewer who can make a living at it for 20 years. So listening to them talk about the lessons they’ve learned, and realizing the massive parallels between that and starting up. And also taking some thought lessons, some thought experiment lessons away from them I think has been beneficial to me. 

One of the quotes that co-host, Brad Geiger said was don’t listen to a customer, always listen to your customers. What he means by that is the squeaky wheel. There’s often one person who is so squeaky and so loud about a thing and they can convince you that just because they’re being loud and repeating it over and over that you should do that. So in their world, it’s making a T-shirt with this particular character on it or it’s publishing a book, collecting whatever particular strips on a theme that you could collect. 

And in our world, it’s listening to that customer who is just so convinced that if you built this one feature that they need so badly that it would just blow your market wide open. In fact, they’re so shocked. They’re shocked it already doesn’t do this. Really surprised that your product doesn’t do this massive edge case feature that you’re probably never going to build. But boy, they just know. They’re a business person and they’ve run a business for 20 years and they just know that that feature. 

It’s only going to take two or three months of development is going to make or break your business. And that’s a case of don’t listen to a customer, always listen to your customers. If five customers are starting to request this or 10, or 50, this is where being a founder or a product owner in any form requires a little bit of some science, but it has to have some art in it as well, right? There’s that founder gut. There’s the vision for your product mixed along with the actual hard left brain data that you’re getting. 

This is where you have to balance that. And this is why finding product market fit specifically and then even the first few years of product development are so challenging because it’s a ton of decisions, hundreds of little decisions that you’re making, they’re very hard and they set the tone of your product and of your company. And you’re making them with dramatically incomplete information. It’s not like you have 50% of the information. You have 10, 15% if you’re lucky. 

And that’s why if you take someone who does product management at a large company or a mature product that’s been around for 10 years and you put them in the spot of we don’t have product market fit or we have five customers get us there to where we’ve built something that people want and are willing to pay for. Usually they won’t succeed because they’re too used to having so much data and they’re used to making hard decisions with mostly complete information. But in your shoes, whether you’re on day one of your company or day 1000 a few years in, you’re still probably making a lot of hard decisions with incomplete information. And that’s why listening to your customers rather than a customer was a good reminder for me to hear from Brad Geiger. 

Well, the exact application of it obviously differs between writing a comic strip and building a product. It can be especially hard when let’s say you have 10 customers and one customer says something over and over. It’s like 10% of your customer base. You just don’t have enough data to know if that’s the right way to go. And that’s why in that early phase you do have to think about how do I trust my gut and what’s my vision of the product? And that has to play a pretty big role in guiding where you are headed because if you let customers guide you, most of the time, they’ll just have you rebuild MailChimp or Basecamp or HubSpot. 

They’ll just have you replicate that because that’s what they’ve used and that’s what they know and they’ll just keep suggesting those features and pretty soon you will have just a clone of another product. You have to ask yourself along the way, “Am I properly integrating my own vision for this product along with listening to my customers?” 

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My next topic is about doing what it takes. Sometimes you have to roll your sleeves up and you have to grind. And sometimes it’s grinding for five hours on a Sunday afternoon and sometimes it’s grinding 60-hour weeks for two or three months when it really needs to get done. Now, that’s not necessarily a sustainable pace, but there have absolutely been many, many times during my career, especially as I became an entrepreneur where I had to work harder than I wanted to. I wanted to work 40-hour weeks and instead I worked 60 sometimes a little more when I was working a day job and working nights and weekends. 

I get questions from time to time. Sometimes they’re directly to me and sometimes they’re on this podcast about how to balance that, about how it’s difficult. And frankly sometimes I get questions about how do you even manage it and balance it all. 

Not me in particular, but how does a founder. How do other bootstrappers go about making this happen when doing what it takes can be hard and it can push you past a comfort zone. So to demonstrate this, I want to tell you a story. So as you know, over the summer I did a Kickstarter for The SaaS Playbook. That went really well, sold a few thousand copies, and once the Kickstarter ended, I wanted there to be an opportunity for people to be able to purchase the book because the day it ended, there was still all this traffic to the Kickstarter page and all this traffic coming to saasplaybook.com, which is where the book lives. It’s the home of the book. 

And while the Kickstarter was on, there was a button that said, “Go back to the Kickstarter.” But the day it ended still getting hundreds of uniques a day, I want to be able to take pre-orders that are after the Kickstarter, right? So the Kickstarter had exclusives. It was a limited and one time print run of hardcovers. But when the Kickstarter ended, you could basically, I think pay the same amount and get a paperback copy that would come after the book was released. 

So I was taking pre-orders. And while the Kickstarter was fulfilled by a professional fulfillment house, because of course it was thousands of copies of the book, the paperback copies, I figured they might sell 100, 200 paperback copies, which it is feasible to have an assistant as we had back then who comes to our house, drives our kid to school and then can help with little packing needs like that. She’s a part-time local assistant. And it’s totally feasible to have someone print shipping labels, pack up books and get them fulfilled. 

So that’s what I did. I took pre-orders on The SaaS Playbook. It uses Squarespace cart and I ordered a couple hundred copies of the paperback print on demand from Amazon. And I waited until the book was released. As the release date of the book approached, because obviously I wanted to fulfill all the Kickstarters before shipping out anyone who had ordered after that. As that date approached, our assistant who had been with us for a couple years, decided to move on. 

She’s headed off to a master’s program and she decided it was time for her next act and we wished her well. So I thought no problem. I have a 17-year-old in the house. He’s going to college in the fall, but certainly I can pay him $2, $3 a package to just fulfill… It’s about the same as you pay at a fulfillment house to print these and fulfill them. Again, if there’s 100, he makes two or $300 just sitting around listening to podcasts and watching YouTube and filling these out, doing it on a weekend day. 

This is a great gig for him and it means that I don’t have to do it because I don’t particularly want to pack a bunch of books. And then as the timing approached and everything actually landed, the Kickstarter was fulfilled effectively the day that my son left for a two-week writer’s camp during the summer. And so suddenly it’s me and my 13-year-old. Sherry was here too, but she’s not going to fulfill books. So I asked my 13-year-old, “Will you help me fulfill these?” And he said, “No, not really. Seems like a lot of work.” 

So I asked myself, “Do I wait two weeks?” Some people had ordered what a month and a half, two months prior for these books and it didn’t feel great to wait another couple of weeks to fulfill it. And I asked myself, “Do I try to hire someone on Craigslist? Do I try to find a local college kid? Do I just wait and not fulfill these yet?” There are all these options. And one afternoon Sherry went to trapeze as she’s apt to do. For those who don’t know she does a lot of circus training. That’s her hobby. 

I sat down and I thought, “You know what? I’m going to fulfill maybe 50 of the orders just to see how hard it is and if I can get a system down, I’ll convince my 13-year-old to help me with it.” And so I sat down and I massaged the CSV. Man, it was like 30 minutes just doing that to get the CSV out of Squarespace and get it to work, and the shipping software that I’m using. So I’m messing around 30, 45 minutes. 

Finally, I do it bulk prints, a bunch of labels. So then I’m sitting there and I think I was watching YouTube or I was listening to podcasts and I was like, “I have all these labels and I have all these envelopes and these books. I can totally just listen to it. It’s like doing the dishes. It’s just a rote thing. You pack, pack, pack. I was even writing notes if someone will say in Minnesota or California since I’ve lived there. I was like, “Hey, California represent.” It was a fun thing and I was able to write notes on it and say, “Hey, see on the Twitters.” 

I’m packing these books and before I knew it I was maybe 90 minutes in and I had packed up 50 books. But still had a bunch more address labels. Maybe I was a couple hours in. I realized this isn’t fun per se, but this feels good to get this done. And is this the best use of my time? Can’t I pay someone two or $3 to pack these books? In a perfect world, yes. But the way it was working out, it was going to be hassle to do it, right? Because again, lack of assistant, lack of 17-year-old. I could go try to hire someone. It’s a one-off job on and on and on. It’s that thing of do I just do what it takes to ship these books? 

And so that’s what I did. Honestly, at a certain point my back started hurting because you’re doing the same thing over and over. It took me about five hours, all told start to finish to get everything packed, labeled, boxed up for the post office. And during that time I thought a lot about how I used to do this when I worked construction. As an electrician, I used to prefab things where you prefabricate, you attach a box to some MC cable and you make a hundred of these. And then when they’re out in the field, they can just grab one. It’s a certain length. It’s marked with tape and they don’t have to do it on the job site and you are sitting in a warehouse doing it and so you can do it very efficiently. 

It’s just fabrication, right? It’s like manufacturing of something. And that’s what this felt like. It was a rote process. And while I didn’t necessarily enjoy doing it, nor do I consider it something I would do again, nor do I consider it the best use of my time. I just did what it took to get it done. And I’m going to be honest, a lot of the founders that I see that succeed, they just do what it takes to get done. 

Now, maybe they’re not packing and shipping books. Again, I’m not saying, “As a startup founder, you need to be willing to pack and ship books because that’s not the point of this.” The point is that even though today I run two successful companies, we’ve raised $42 million. We’ve invested in 130 SaaS companies. MicroConf has this incredible audience. Even though all that’s in place, I’m never above taking the trash out. I’m never above doing the dishes. I’m never above packing books when it needs to get done. 

I’m going to be honest, so many of the founders that I see who are wildly successful, they do what it takes to get it done. When I look at what Jason Cohen was doing in the early days of WP Engine, now this is 12 years ago now, he just did what it took. He didn’t say, “I’m above that or since I’m a third time founder I’m not going to do grunt work.” He did the grunt work. He had the conversations,.he validated the idea. He wrote some code before he hired developers. He did what it took. When I watched Heath Shaw do his most recent effort, FYI, he was grinding on that trying to find product market fit for a couple years. 

When I look at TinySeed founders who are building these incredible multimillion dollar businesses and we have quite a few of them now, I won’t say every single one of them we know is willing to just grind and go all in and do what it takes. But a lot of them are. And this is not something that you have to do every day, all day for the rest of your life. This is not 60 hour weeks, 12 months a year, but this is not five hours packing books every Sunday, five hours checking your support queue every Sunday, five hours writing content every Sunday. 

But does this need to get done once in a while? Probably in the life of a business, especially when you are at idea stage and you’re just grinding, and you think, “I don’t know if I really want to do this.” If you’re not sure if you want to do it, you probably shouldn’t because I talk about how success is made up of hard work, luck and skill. Luck is something you really can’t control directly. 

Skills are something that you can build over time. But the other thing that you can really control is putting in hard work. And when I think about the nights and weekends that I put in when I was getting started and how I didn’t really want to do that, but the end goal of quitting that day job and having enough income that I didn’t have to beholden to someone else and I didn’t have a boss, it was worth it. 

So when I would stay up till 1:00 AM, I’d get off at five or 6:00 PM. I’d come home, I’d eat dinner. And if Sherry was out, I would stay up till 1:00 AM working on stuff, working on website copy, writing some code, doing support, and then I’d get up and go to work. Did I do that endlessly for years? No, I didn’t. But being willing to sometimes just do what it takes to sometimes work a little harder than maybe you’re used to is the quality that I think more entrepreneurs need to embrace. 

I can imagine someone listening to this thinking hustle culture, work all the time. Again, that is not what I’m saying. But at certain times, there’s a time and a place where you have to buckle down and do what it takes to be successful. I hope you enjoyed the three topics for today about doing what it takes, not listening to a customer, always listening to your customers and paying attention to the problem customers have not solutions. 

I’ll tell you a problem I have. I don’t have 100 five star reviews on Amazon or Audible. If you have read The SaaS Playbook and you think It’s worthy of a five star review, I would really appreciate it. If you go to amazon.com or amazon.co.uk or Audible, wherever you bought the book and leave a five star Review, it would mean a lot to me and it helps me tremendously in being able to spread the word about the book. 

I believe The SaaS Playbook across the Kickstarter and all the other sales through the website and the Amazon ecosystem, and Apple Books, and all that, I believe it’s north of 5,000 copies sold now. I think it might be north of 5,500 if I’m honest, which is pretty dang good for a self-published book. I’m looking to continue to push that forward. I truly appreciate any support you’ve lent. I know many of you listening to this back the Kickstarter or have since bought the book from saasplaybook.com or Audible or Amazon. And again, I’m on a drive to get to 100 reviews on Amazon and Audible. I truly appreciate any help you can lend. With that, I’ll wrap up this episode. I will talk to you in one week. This is Rob Walling signing off from episode 680.

Rob Walling:
It’s another episode of Startups For the Rest of Us. This is one of these 0.5 episodes where we insert announcements and things that are not normal startups for the rest of us full episodes, we tend to drop these now and again on a Thursday. Today’s episode is all about the future of MicroConf, where I make seven announcements about new things that we are doing in the upcoming year. I’m really excited about what we are up to over the next 12 months. The last time we did a future of MicroConf announcement was four years ago. In 2019, we announced the launch of MicroConf Connect, of our YouTube channel, of our video vault. We announced MicroConf locals. There were several other super interesting things in that announcement, all of which have come to fruition. 

So when we make this proclamation and we look ahead and like Babe Ruth, we call our shot of what’s going to happen in 2024, I hope that you can get excited about this as well. Everything we’ve developed here and are planning on launching is from feedback from folks just like you, from podcast listeners, from folks in MicroConf Connect, from folks at our in-person events. So without further introduction, I’m going to roll the audio. It’s seven announcements packed in to five and a half minutes. And if you have any questions, comments, or thoughts once you’ve heard them, you can head to Twitter, @robwalling and @microconf. 

Whether you’ve been part of MicroConf for years or you’ve just recently joined our crew of misfits, you know that we’re all about helping you build and scale your SaaS company. From our humble start as a 100 person event in Las Vegas to where we stand today impacting more than a hundred thousand bootstrap founders around the world through MicroConf Connect Mastermind Matching, our in-person events and all of our other offerings, MicroConf has played a huge role in igniting a global movement for software entrepreneurs. And in 2024, we’re kicking it up a notch. Today I have seven announcements for you, so let’s dive in. First up, big news for our online community, MicroConf Connect. We’ve leveled it up and are reopening the doors to new members. MicroConf Connect is our online community and virtual hallway track. It’s a vibrant community of SaaS founders helping one another, discussing wins, challenges, and how to grow faster. 

A couple months ago we paused new signups to improve the platform based on your requests and the good news, applications reopen next week. The wait list is already 1500 strong and with MicroConf Connect 2.0, we’re rolling out three membership tiers packed with new perks, like weekly coworking, exclusive discounts, a searchable content library and more. Announcement number two is that the state of independent SaaS report is back. We took last year off because frankly between 2020 and 2022, not a ton had changed with the companies that we were serving. But the bootstrap SaaS landscape has since been shaken up by the rise of remote work, no code and AI. This has fueled a new wave of entrepreneurs and created new ways for existing startups to level up. So with that, I’m excited to roll out our completely revamped state of independent SaaS survey and report. 

Teaming up with DemandMaven, we’re going to offer go-to benchmarks for the bootstraps SaaS world. Over 2000 founders have taken the survey to date, and this year I hope to add your experience to the report. Next, we’re putting the power in your hands to bring a MicroConf local in-person event to your city. Until now, we’ve picked locations based on our assessment of which cities could use an in-person event, and in 2024, you get to decide. We’re going to run a community voting campaign to help choose which cities we visit next. With almost 100,000 entrepreneurs globally engaged with MicroConf, your city shot at hosting the next MicroConf local means you’ll need to rally founders in your community to get the most votes. Announcement number four is our debut course, Starting Up From Idea to Traction. It’s designed to kickstart you on your entrepreneurial journey as you launch your SaaS product. 

I know that many of you are stuck in startup limbo full of ideas, but unsure how to get started. And this video course tackles exactly that guiding you through idea generation, validation and finding early traction. Whether you’re a first timer, a pivoter, or a serial entrepreneur, this course aims to help you take your next SaaS venture to escape velocity. Also, in 2024, we’re going to help you find a co-founder. Almost every day we hear from folks in the MicroConf community who are looking for a co-founder. We know that finding the right partner in crime can be a make or break moment for your startup. Whether you’re a tech wizard with zero marketing chops or a sales pro looking for someone to build your product, we will help you find someone that compliments your skill sets, your goals, and your personality. Drawing on years of experience observing co-founder hits and misses, we’re designing a data-driven matching service to help you find your ideal co-founder because we know that the right partnership can have a huge impact on your success. 

Announcement number six is Team Sync by MicroConf. We’re hosting an event where you can host your team retreat. We’re merging two needs into one in-person event. So first, you’re going to soak up best practices for managing a remote team, curated by our team of experts in remote work and second retreat into your own team huddles. We’ll handle logistics while you focus on strategy and connection. Ideal for remote SaaS teams of five or more, this will be a game changer for team coherence and productivity. Next up, we’re going to start hosting exclusive intimate experiences called MicroConf Platinum Events. Imagine getting tailored advice about selling your company while sitting poolside with 15 other seven or eight figure founders or boosting your enterprise conversions during a trek to the bottom of the Grand Canyon. We’re rolling out small curated experiences that combine unique settings with laser-focused business goals, meet like-minded, high achieving founders and experts ready to elevate your game. 

And of course, we’re going to keep running our annual flagship conferences, MicroConf US and MicroConf Europe, as well as MicroConf Remote, which is our online conference that focuses on early stage SaaS marketing in the fall and SaaS sales in the spring. And of course, we also have our Mastermind Matching podcast and YouTube channel. And if your SaaS is growing, but you’re looking for the perfect amount of funding and mentorship to help take you to the next level, TinySeed is our investment fund and startup accelerator aimed specifically at bootstrap SaaS founders. So there it is. That’s your glimpse into the next era of MicroConf. 

I know I’m biased, but I firmly believe that our community of misfits is one of the best in the world. My team has spent the last several months working nonstop to nail down this pretty incredible lineup focused on helping you be more successful faster. I hope you’re as excited as I am to see these play out over the next year. I can’t wait to continue helping you find success on your founder journey in 2024. All of these programs will be launching over the course of the next year. So head over to futureofmicroconf.com to sign up to be notified as they launch.

Rob Walling:
In a phased launch, you get them in, you realize, “Oh, pricing’s screwed up, don’t have the features.” And then you correct that. You launch to the next few 100 people. I’ve done it myself. I’ve seen other folks do these phased launches. And that is, I would say a much, much more optimal way to bring a product to market. 

Welcome To this episode of Startups For the Rest of Us. I’m Rob Walling, and this is the podcast where we talk about building amazing, bootstrapped, and mostly bootstrapped companies to change our little corner of the world. We believe that you don’t need venture capitalists to start your company. We’re not anti venture capital, but we’re anti the narrative that the only way to start a tech company is to raise buckets of funding. This week I’m answering listener questions on topics ranging from building mock features. It’s a really interesting Twitter thread I want to talk about in this episode, how to recover from a failed launch, creating content for your SaaS tool that is outside of your expertise, and more. 

Before we dive into that, I’m on a mission to get to 105 star ratings on Amazon for my new book, The SaaS Playbook, Build a Multimillion Dollar Startup Without Venture Capital. If you have bought the book and you enjoyed it and you think it deserves five stars, it would be amazing if you could go to amazon.com and whether it’s dot com or whether it’s your country’s extension of Amazon, a five star rating and maybe a comment, would really help me out. 

I kind of chuckle because as I record this, The SaaS Playbook is the number one new release in the venture capital category of Amazon. I think because it has the word venture capital in the subtitle because the subtitle of the book is Build a Multimillion Dollar Startup Without Venture Capital. And the book has already been a number one new release and bestseller in several different categories ranging from entrepreneurship to, there was one really esoteric one that I don’t remember, but it was kind of a subcategory of another tech entrepreneurship thing, and today, it’s venture capital. So again, would really appreciate it if you could potentially give me a review there. 

And one more thing – We’ve recently re-opened the doors for our online community, MicroConf Connect. MicroConf Connect is our virtual hallway track. It’s a vibrant community of SaaS founders helping each other and discussing wins, challenges, and frankly how to grow faster. A couple months ago we paused new sign-ups to improve the platform based on your requests. With MicroConf Connect 2.0 we’re rolling out three membership tiers packed with new perks like weekly co-working, exclusive discounts, a searchable content library, and more. Whether you’ve been a member of Connect or not, you really should check it out, Microconfconnect.com. And with that, let’s dive into listener questions. 

My first one is not a question, but a comment from listener Tom who is commenting on episode 671 all about hard work, luck, and skill, where I talked a lot about how success is a combination of these three things, hard work, luck, and skill. Tom says, “Just a thank you for your podcast keeping me going, slapping me upside the head sometimes to keep focused and persevere.” And thanks for that note, Tom. I always love hearing from listeners even if they don’t have a question and they just want to thank the show for keeping them motivated. 

Because that’s how I think about it too, I don’t think of it as Rob is keeping me motivated. It’s the show. Startups for the Rest of Us is its own entity, its own flywheel, that keeps going every week and it delivers value back to me in terms of motivation to keep shipping and I hope that it delivers value back to you in terms of strategies and tactics to implement to grow your startup faster in terms of motivation and inspiration. Whether it’s me talking about solo topics or me interviewing someone on the show, I try to bring a variety of topics and thoughts and concepts to the show to keep it feeling new and to help you get where you’re going faster. So thanks for that comment, Tom. 

The next topic I want to cover is from Twitter from Ab Advany, and we will link up this thread in the show notes, but I was impacted by the genius of Ab’s approach and we were talking about it in the TinySeed Slack and several people commented about how they’re either doing this or would consider doing this, and I think it’s a really clever hack. The tweets go like this, “Mock features for B2B SaaS. It’s one of the techniques I’ve used in the last 10 years to sell $6 million worth of software licenses. When you were selling software above $1,000 a month, there is a weird dynamic happening that doesn’t occur with lower pricing.” And Ab continues, “We would build mock features that the buyer would demand before purchase, but were almost never used by the super user or end user of the product.” 

Let me give you a very specific example, and this is me chiming in. I used to call these checklist features. So when we were growing Drip, people would say, “Do you have split testing because we need to split test everything?” And eventually we built split testing and 1% of our users used it, but everyone thought they wanted it. Aspirational features, or checklist features, is what Ab is talking about. Ab continues, “A buyer who wanted to buy the software for $10,000 a month on a two-year license, so if you do the math on that, that’s a quarter of a million dollars. This buyer requested that there be an ability to build a report generator with 20 different kinds of filters, and we said we can do that, but we only built it as a mock feature in the following way. We added a button deep inside the software that only specific customers could see. When clicking it, they could request a report with all the filters. After submitting, we showed it will take 48 to 72 hours to generate. You will receive an email when it’s finished.” 

This is so great. “But guess how many times the feature was used in the two years the customer licensed our software? Zero, nada. We have built more than 50 of these mock features in the last 10 years. Some were requested and we would then manually execute them, but most were never used. These kinds of mock features only work if the buyer isn’t the same person as the end user or the super user. Most buyers don’t know their own users and come up with ridiculous demands during the sales process. Mock features are an easy way to increase your closing rate.” 

So I really appreciated that thread. I think it’s a great idea, and again, it doesn’t work when you’re building software for $100 a month or when you’re selling to the end user. But if you are selling to some corporate procurement person, Ab is 100% correct. I’ve seen it myself. Ridiculous checklist requirements are very common, and I thought this idea of building mock features was too smart not to share on the show. 

My first question question of the day is from Laszlo Kiss about how to recover from a failed launch.  

Laszlo Kiss:
Hi Rob, this is Laszlo. I previously asked you about better to further development game platform or get into the SaaS business. I followed your suggestion and my own feelings and began to concentrate on my SaaS project named Real Feedback. It’s an AI powered user feedback chatbot. However, I made some mistakes with the launch. It gained significant traction initially, but I launched too soon, so the product wasn’t very stable yet and the pricing plan weren’t properly figured out. Since then, I’ve improved the product and that fired my first users, but the initial hype has completely disappeared. Do you have any strategies for recovering from a failed launch like I had? I would really appreciate any advice on relaunching and regaining momentum after messing up the initial release. Please let me know if you have any suggestions.  

Rob Walling:
As always, voicemails and video questions go to the top of the stack. Thanks for this question, Laszlo. It’s tough to have a failed launch like that. It’s not uncommon. Most of us don’t have product market fit. None of us really have product market fit before we launch, and that’s why the way around this is to start marketing the day you start coding such that you have a list of 500, 1,000, 10,000 people interested in your app such that you don’t have to do the public launch until your product is ready, until you have an idea that you do have some product market fit. And so if you’d had that launch list, you could have trickled out to 50 people or 300 people. In a phased launch, you get them in, you realize, “Oh, pricing’s screwed up, don’t have the features.” And then you correct that, you launch to the next few hundred people. 

I’ve done it myself. I’ve seen other folks do these phased launches. And that is, I would say a much, much more optimal way to bring a product to market rather than try to do the big product hunt, Reddit Hacker News launch where this is what you run into, and now you find yourself in a more challenging situation. I’ll say it’s certainly salvageable. The way I would think about it is, I now have a better product and I now have my pricing dialed in more and I’m ready to take it to market. 

And so, if there were other launch avenues that I could tap into, let’s say you didn’t do a product not launched, then now I would launch it. Alternatively, just market it like every other SaaS product. People think that a launch is so important and in fact, so many of the products that we see being successful had mediocre launches at best, or maybe they didn’t do some big launch. They really just started cold calling, cold emailing, they started content, SEO, integrations, partnerships, all the blocking and tackling that it takes to grow a SaaS app. 

So can a launch get you a few customers, a few dozen customers, a few 100 customers? Maybe. But you don’t need that to build an incredible 6, 7, 8 figure SaaS company. So I wouldn’t take it too hard in terms of the launch failing. I would chalk it up as a learning experience. I hope that folks listening to this podcast will learn from it and I would get to work on marketing the product. 

One last thought on this is with Drip, we did do a Drip 2.0 launch, because the 1.0 launch happened in, say, November of 2013, and we peaked at 8 or 9,000 MRR and then plateaued because to your point, our pricing wasn’t figured out, our features were not there, we didn’t have product market fit, and we spent the next nine months agonizingly moving towards product market fit, and eventually we had it in August of 2014. And I wanted to do essentially another launch to the world, and so I called it Drip 2.0 and I described our journey. I described how we built something people didn’t want early on, and then how we found product market fit and how we saw trial to paid accelerating and our churn plummeted and it was very obvious that we had it. 

And so, I launched Drip 2.0 and I hit the product hunt and our original launch email list and, frankly, my personal email list. And all the places that you would do a launch, I hit them again and I said, “This is Drip 2.0. Here’s what I learned and here’s why this is interesting.” I’m really relaunching something that’s not totally different, but that now is a much, much better product, and something that you’re more likely to be interested in. So that’s another alternative, is you can do this like 2.0 launch or revamp launch where you say, “Oh, remember how we launched and that thing wasn’t that great? Well, it is great now because we learned a bunch and encourage people to give another try.” 

My next question is from Zach asking for advice for a consumer vitamin product. “Hey Rob, I’ve fallen in love with a product to scratch my own itch. It’s absolutely a vitamin.” So you’ve heard me say aspirin and vitamins, aspirins solve a desperate pain point and vitamins are nice to haves. “It’s also consumer facing, not for businesses. It’s completely free for now. Maybe I can add display ads if enough people use it. I know there are a lot of red flags here. The early feedback is pretty positive, but some mixed feelings. Do you have any advice for navigating a consumer facing vitamin product? My itch has been scratched, but it’s hard to know how much energy to put into a product like this.” 

This is kind of within my policy of not answering questions like this on the podcast. And I don’t mean to be glib about it, but I can’t help you, because consumer facing products are a completely different world. I have owned a couple of them and they are not in my wheelhouse and they’re not something I enjoy dealing with. The churn is way too high. If you’re not Netflix or Disney, they’re very, very, very difficult to grow. And no matter how much I say this, people continue to do it and that’s fine. But this show, my expertise, I just can’t help you. 

And especially if it’s consumer vitamin. Are there some that are successful? Have I seen some get huge traction because of virality or because they figured out Instagram ads? Of course. In your shoes, I would not ask me. I would look for an expert on that topic. Is there a podcast, YouTube channel on someone who builds consumer vitamin products, because they’re going to know so much more about it than I will. And I have kind of this, it’s a little bit jokey stance on this podcast, but I’m kind of serious about it. I’m not going to answer questions about two-sided marketplaces about bootstrapping them unless you already have one side of the marketplace, because my answer is just don’t. 

And same thing with a consumer vitamin product. I can’t give you advice, because my advice is don’t do it. It’s scratch your own itch. That’s great. Don’t put any more time into it and start a B2B SaaS. Do the stair-step approach. Do one of the other approaches that I’ve seen be so much more repeatable and work for so many more people rather than going down this path that I have seen fail for myself and hundreds if not thousands of other aspiring founders. So I do appreciate the question, Zach, and obviously I wish you the best of luck, and I’m guessing there is a chance that you can make this work, but unfortunately I’m not the person to weigh in on this because I just can’t help you like I can with B2B SaaS. 

My next question is from Jordan Riddle.  

Jordan Riddle:
Hey Rob, this is Jordan Riddle. I’m in Columbia, South Carolina. Just want to say thanks for everything. I’ve been following you for a while and it’s been really helpful. My question is about coming up with organic content for my SaaS tool. So I’ve created a tool that’s not really in the space where I have worked before. So I’m struggling with creating content because I don’t know a whole lot about this space, but I still feel like it’s a useful SaaS tool. So what I want to know is how you just juggle creating content and where the best bang for your buck is of coming up with organic stuff, if I should do it myself, if I should get a part-time job and then hire a writer to do it for me. Just looking for some insight on what’s the best way to go about that. Again, thanks for everything and I look forward to hearing from you.  

Rob Walling:
Thanks for the question, Jordan. It’s a good one. I’m sure it’s something other people have run into. So first off, I want to say this is the challenge of starting a tool catering to folks that are outside your profession. Now, I know a lot of folks who do it and are successful. Some of the approaches they take is they don’t necessarily create content, they do cold outreach, they go to in-person events and trade shows, integrations and partnerships. It’s the 20 B2B SaaS marketing approaches I outline in the SaaS Playbook. And they execute on all of those. They don’t do the content and SEO plays because they aren’t an expert. So that’s one way to think about it. 

Another is to hire a writer, as you said. You said get a part-time job so that you can hire a writer. So it depends on what your financial situation is, but certainly if you’re catering to accountants or salon owners, you can find an accountant or a salon owner with some spare time or someone with knowledge of these topics, whether it’s on Upwork or a writer’s marketplace, and you can find folks with expertise in these fields. Another option that I’ve seen is to bring a co-founder on for whether you have the developer entrepreneur, then you have the subject matter expert, and that subject matter expert has that expertise in accounting, bookkeeping, or in interior design. And that is a relatively common founder combination that I see in the MicroConf and TinySeed communities. 

So I guess to summarize, you have a couple options. One is don’t create content, just do all the other marketing approaches or just pick one other frankly and execute on that to where you don’t need the expertise to create the content. The second one is, yes, hire a writer with subject matter expertise, not a generic writer who’s going to have to learn it like you would. And I would not encourage you to, say, use ChatGPT or other AI because I think without the expertise yourself, it’s going to write really bland content. Because the content I see around topics that I know and understand, I can see through it pretty quickly. I think the AI generated stuff, it just isn’t there yet. And so if you don’t have that last 20% to get it, again, it’s 80/20, Where AI can maybe get you 80% of the way there. But if you don’t have the last 20% yourself, I think it’s a tough road. And if you’re competing against other people who actually have the expertise and are trying to rank for these SEO terms or folks who are doing the content pop where they’re trying to get virality on the Hacker News, the Reddits and such, I just don’t think you’re going to do it with AI generated content at this point without human involvement. 

I will say that one of the very first businesses that I built, in fact several of the businesses I built, I didn’t need content for. And we see a good chunk of TinySeed companies, which is a sample size that I have, or maybe it’s just all my investments. I think I have 151 B2B SaaS investments. There are a lot of them that don’t use content and they use the other marketing approaches. And so, I wouldn’t necessarily say that that is the one way to go. If you can make it work, it’s a great scalable, sustainable flywheel to build, and there’s a reason a lot of people go in on it, but it’s not a hard requirement to build a great company. So thanks for that question. I hope it was helpful. 

My last two questions are a little different than the ones I often answer, but I was intrigued by them. This first one’s about being an employee of an early stage startup and the last one’s about consulting and contracting, which I think a lot of us think about, especially early stage founders who maybe are trying to quit the day job and get to working full-time on their startup. I think hearing more about these topics can be helpful. 

So this first question is from Tyler and he asks, “I’m just joining a seed stage startup with a lot of traction. I’ll be basically the third full-time hire, and I have a sense that the business is looking for an acquisition during my tenure, which is likely if they’ve raised funding. It’s a small engineering team. It’s just me. I’m excited about what an acquisition means for my equity and also for my resume. And I’m also curious about what a typical acquisition looks like for a small team of a recently acquired SaaS. As anything in business or software goes, I’m sure the answer is it depends, but I’d appreciate it if you could lend insight on this situation. Say a small company gets acquired and has a solo engineer with equity, does that engineer usually get hired to the acquirer? Do they ever get contractually obligated to stick around for equity to vest, i.e. to help with a smooth transition, or is it usually a clean break? Are the single trigger/double trigger clauses the only mechanism at play here? Or do businesses have some other way to determine what is required of the team? Personally, I’m excited to experience any outcome. I’m just curious how you would conceptualize your future if you were me and assuming a desired acquisition actually happens, of course.” 

So yeah, I think it’s an interesting question. Of course it depends, but realistically, in almost all of the acquisitions that I see, maybe it is truly all, but in 99 plus percent, the acquirer wants the team. The acquirer wants the team. It’s very unusual that they just are acquiring technology, and unless you’ve built some amazing novel tech, the team is one of the most valuable pieces of it. So the first question, does the engineer usually get hired to the acquirer? The answer is usually yes. Do they ever get contractually obligated to stick around for equity divest? So that’s going to depend on your equity agreement with your current employer. 

When I have issued equity in the past, I have made it fully vest if we were acquired, because I wanted my people to own that equity or own those options or be able to purchase the options when the acquisition came through such that they were not compelled to stick around by agreements we had already made, but that the acquirer, if they wanted them to stick around, could make them an offer for additional stock options or additional incentives to stick around. So I have heard of founders being contractually obligated to stick around in order for equity to vest. It’s often called a key person clause where in order to get the full purchase price, you stick around for a year or two years or three years, but usually, not in all cases, usually what I’ve seen is that for employees or engineers, they are offered a new grant of stock options in the acquiring entity and then that starts vesting over usually four years. And so that really is the motivation to stick around. 

It obviously depends on your specific agreement and how your options are vesting, and if they don’t have that acceleration clause and you have options that are in the middle of vesting, let’s say you’re two years into your four year, I suppose the acquirer could elect to have all of your stock vest instantly and then issue you new, or they could just say, “Well, we’ll roll that into the acquiring company.” Could that happen? Yeah. Have I seen it happen? Not a lot. I also think the size of the acquisition is going to dramatically impact this. If you’re part of a company, as you said, where you’re the only engineer, it’s going to be different than if there are 1,000 engineers. But thanks for that question, Tyler. I hope it was helpful. 

Last question of the day comes from Jay Lee asking about consulting for software engineers.  

Jay Lee:
Hey Rob, huge congrats in your new book, The SaaS Playbook and thanks always for your podcast. So my name is Jay, I’m from Southern California, and I had a quick question about consulting. So it’s not about SaaS, but you do mention consulting quite a lot, especially related to your early days. As someone who is a software engineer and my background is from big tech, I know pretty much nothing about consulting. I know it’s about helping people and giving advice, but what is consulting? Could you give us a one-on-one breakdown? How do you find your clients? Do you just start in your network? What’s the pay like? Can a junior engineer or a mid-level engineer also be a consultant? And generally things like that, because I would really like to know what my options are aside from just engineering. Thanks so much.  

Rob Walling:
Thanks for the congrats on the book, Jay. So when I use the term consulting, really I did some consulting. I did a lot of contracting. And the way I think about it is if you’re a software developer, contracting is where you’re writing code for dollars per hour. And so originally I was writing code for $60 an hour, and then I started blogging and making a name for myself around 2005. Suddenly I had people coming directly to me. I could go get retail rates of $100 an hour, and then it was 125. And then I think by the time I stopped contracting, consulting, it was 120, 150 an hour. 

Now, if you go to an agency these days and you’re going to contract for them and just write code dollars for hours, basically you could call it you’re a 1099 contractor, the rates are going to vary, but you’re going to get lower rates if you go through an agency versus finding clients yourself. And you’re also going to get a lower rate if you go onto a marketplace like an Upwork. But Upwork can be a great source for finding new clients. So I often use consulting and contracting interchangeably. They aren’t exactly the same. I think consulting is more about giving advice and not implementing, and contracting is usually about someone who is doing the work. It’s a software developer who is writing code. And I did a bit of both, but certainly what paid the bills was contracting. 

And then Jay, you asked about how do you find your clients? Do you start with your network? Yes and yes. What’s the pay? It depends on where you live. It depends on the kind of work you’re doing. Honestly, you can charge $10 an hour if you live in the Philippines, and you might charge 150, $200 an hour if you live in Los Angeles. Can a junior engineer or a mid-level engineer be a consultant? Yes, they can. I think to start off with, you want to find people who need software development or web development or whatever your expertise is. They need help with that. And this might be big companies, it might be small companies, or it might be someone who’s looking on Upwork to have you do a little one-off project. One-off projects sound amazing and like you’re going to have a bunch of freedom, but realistically it’s so feast or famine. 

I used to work project basis and I would make $15,000 in one month and then I’d make $0 in the next month, and that wasn’t a great feeling. And I would be stressed of when’s my next project coming along versus if you can find someone who can put you to work for 10, 20, 30 or full-time every week. Honestly, you’re less of a consultant contractor and you kind of become, you’re not an employee per se, but it becomes more of a consistent income for you. That’s what I think of as being self-employed, you’re not actually in control of your own schedule, but you’re not an employee. It’s kind of being in between. There’s employed, there is entrepreneur, and there’s being an investor. Those are the four links up the chain. 

And being employed, we all know what that means. Self-employed is when you’re selling dollars for hours, whether you’re consulting, whether you’re a contractor. If you’re doing it individually and let’s say you’re running a full service organization where you have 30 developers working under you and you are now just doing sales and operating the company. That’s when you’re an entrepreneur, when you’re leveraging other people’s time to generate revenue. If you’re still leveraging your own time as a consultant or a contractor, that’s when you are self-employed. And obviously being a SaaS founder, that’s where I would say, “Oh, you’re an entrepreneur there because now you’re leveraging technology in order to make more money than you could make by charging dollars for hours.” 

So the only reason I’m weighing in on this is because I did this myself and I moved from W2 employment to being a freelancer/contractor/consultant, which I’ll just say they’re different, but they’re kind of all the same thing for the purpose of this conversation. And that helped me transition to having products full-time because I was stair stepping on nights and weekends while I was doing this. And then I was able to dial back my contract work from five days to four days to three days as my product scaled. And it was a nice balance for me where I didn’t have a boss, per se, I did have a client or two, but it was a good in-between for me. And that doesn’t work for everyone. I hear some people say they just can’t manage it all and it’s too hard to work on your own products that aren’t really making much money when you can bill $150 every hour for 40 hours a week. It is hard to say no to that contract work, because the money is “easy” compared to building your software product or building up revenue for a SaaS product. 

So there are trade-offs there. I’m guessing there have to be better podcasts or YouTube channels for this particular question. If you really want to get into, “Hey, how do I transition from full-time work to being a contract or consulting developer?” I don’t know any off the top of my head, because it’s just not an interest I have these days. But I would certainly look around whether you ask on Twitter, whether you head to Apple Podcasts or YouTube to look for folks, like What is the Startups for the Rest of Us equivalent show for folks who are in your situation and looking to get into that self-employed contractor freelance game. So thanks for the question, Jay. It was a good one. As I said, it’s a little different than I often answer on this show, but I felt like a lot of folks might be thinking about the same thing. 

And with that, I’ll remind you that I am on a quest to get 105 star Amazon reviews for the SaaS Playbook and would really appreciate if you loved the book and you feel like it’s five star worthy, heading into Amazon and giving it that five stars. Thanks for joining me this week and every week. This is Rob Walling signing off from episode 679.

Rob Walling:
Platform risk exists in a lot of apps and it certainly exists in the stair-step approach, and what I don’t say is, “Then don’t do it because there’s some risk.” Realize what you’re getting into and realize the risk is there. Think about how to potentially mitigate it or just live with the risk and realize, “This is not a 20-year business. This is a business that’s going to get me to the next step to where I could potentially get away from the platform risk.” 

Welcome to Startups For The Rest Of Us. This is the podcast where we talk about building companies that are unlikely to change the whole world, but very likely to change our little corner of it. 

I’m Rob Walling, I’m your host and this week I’m going to be answering listener questions. Before I dive into those, I wanted to ask if you have read the SaaS Playbook, my most recent book, saasplaybook.com. If you could go to Amazon and leave a five star rating for me, the ratings go a long way towards helping other people discover the book and they’re a strong signal to folks who may have never heard of me and are considering buying the book based on the name and the cover and a recommendation. And in fact, it looks like there’s one or two folks who have something out for me because I believe I have a two star review that says something to the effect of, “This book is really light on actionable information,” and I chuckle because it’s just a very dense book and it’s full of self-promotion and the book fell apart. 

“I got the book and it just fell apart at my house.” And I’m thinking to myself, if I knew who this person was, I would just send them another copy. But I genuinely think they’re either out to troll me directly or just in general are trolling Amazon authors. I don’t know. If the book falls apart, email Amazon and they’ll send you a new book. But with that said, it would be amazing if I could get a few more five star reviews and help out the average on this new book. 

Before we dive into the episode, I have two announcements for you. The first is that TinySeed applications for our fall 2023 accelerator batch will be open from September 4th to the 16th. We are funding companies in two batches. We have our Americas and our EMEA batch, that’s Europe, Middle East and Africa. And if you have at least $500 in MRR and you are looking for the perfect amount of funding as well as world-class mentorship, you can’t get anywhere else, and a tight-knit community, unlike any you’ve been part of, head to tinyseed.com/apply. If it’s from September 4th to the 16th, applications will be open and you can apply there. It usually takes about 10 minutes. If they’re not open, you can enter your email to be notified when we open the doors. I hope to see your application. 

My second announcement is that while some of you might have spent the summer vacationing or spending time at the lake, our team at MicroConf has been gearing up for one of the biggest announcements we’ve ever made. The last time we made a major announcement was in 2019. I don’t want to jinx it, but there are some pretty amazing things coming down the line to help you build, launch and grow your SaaS business. If you want to be the first to hear about it, head over to futureofmicroconf.com and sign up for our announcement event. It’s going to happen on September 14th, 2023. You won’t want to miss it. 

And with that, let’s dive in to my first listener question.  

Speaker 2:
Hi Rob. Big fan of the podcast. I have a question for you. I recently made my first SaaS product. I am not a developer myself. I teamed up with a team of student developers. I realize now that I’m in over my head. I didn’t know that so many things could break and that it would be so challenging to maintain a SaaS product over time. I have some early traction in the sense that I have a few people placing test orders and quite a lot of interest, but I want to exit this thing as soon as possible because I’m pretty sure that if I keep it I’m going to drop it and it’s going to break. 

My question is are there any communities or platforms where you can sell SaaS products that are only half done or what would you do in my situation? Thanks.  

Rob Walling:
Thanks for the question, Max and for keeping it succinct, Max actually sent a second voicemail that gave me more context, but that really, you don’t need to hear all of that, and he did a really good job of keeping it as a succinct question that I can answer on the show. Probably the only additional piece of information he gave that is necessary for you to understand the problem is the product itself is in Dutch, the market of people who could potentially buy it is obviously a lot smaller than if it was in English. 

Definitely a tough position Max, and frankly there aren’t any places. Basically you don’t have any value until you have customers or I should say very, very little value. Could I imagine paying a thousand dollars for a code base with a few customers? Maybe. If you found a strategic who really needed this, and again it being in Dutch in that case is a challenge because it really limits who you can sell to, but realistically, products sell based on revenue, traction and growth and until you have that you have nothing. 

If I were to do a hot take on Twitter, I would say you have zero value until people are paying you money. That’s not totally true, but mostly it is. And I don’t have a great recommendation of a place you can go to sell this, to be honest. What I do like about your question is you talked about how complex it is to build and run a SaaS app and people don’t believe me when I tell them they should stair-step and everyone wants to start a SaaS app and a lot of people run into what you’re running into and I feel your pain and I’m sorry that you’re having to learn this lesson this way. I’m sure it’s tough. I’m sure it’s a hard process for you to be going through. With all that said, the only recommendations I could make in terms of selling this, there are a handful of these side project marketplaces, acquire.com is the big one. 

You could of course list it there. Do I think you’ll sell it or get any traction? Probably not, but it’s worth it. It’s a marketplace and you can list it at an asking price. There used to be some others. There was 1kprojects.com, sideprojects.com are the other two and I believe one of them acquired the other or merged with the other and it’s a totally different domain name now, and I’m not going to pull up Google and go looking for these, but if you go to Google and search for those domains, you’ll likely find a couple other sites that are small and basically it’s Indie Hackers. It’s usually people who have indie hacked and launched on Product Hunt and they have $200 in MRR and they’re like, “I’m willing to sell this for a few thousand dollars.” Those are the types of marketplaces that I could recommend for this. 

And of course there’s communities. There’s MicroConf Connect. We actually stopped taking new community members into Connect over the summer as we retooled and revamped some things, but we are going to be relaunching that in the next couple of weeks. Had to microconfconnect.com, if you are interested, you can get on the wait list to hear more about it. But a community like that of other SaaS founders, you could feasibly go in and specifically look if there’s a Dutch channel or I believe there is a buy sell channel in MicroConf Connect where you could bring up this kind of thing and outline what you’re looking for and potentially get feedback or find a buyer. It’s a tough spot to be in. I feel your pain Max and I hope that was helpful. As a reminder, if you want to send a question in to be answered by me and potentially a guest in a future episode, startupswiththerestofus.com and look in the top nav for ask-a-question, audio and video questions go to the top of the stack. 

Although I will say in this episode, I do want to get to a few text questions since there are so many audio and video questions in the queue, I wanted to sprinkle a couple in. The next question is from Andrew and he says, “Hey Rob, I enjoyed your episode with Tara Reed,” so you can tell how old this text question is. That’s back when Tara and I talked about No-Code, the pros and cons of it. Back to Andrew’s email. “I recently sold my startup and I’m looking to start my next business. I’m not technical and No-Code is intriguing to me. One thing you didn’t seem to address is platform risk. If you build your business on a No-Code platform, what happens if the No-Code platform closes significantly raises prices or changes how it operates?” This is a great point Andrew, and what’s interesting is I believe this email’s almost a year old now. 

Sorry about that. That’s the backlog we have with text questions. But shortly after that episode with Tara Reed, I actually had a conversation on Twitter where someone else pointed this out as well, that platform risk is such a huge risk with No-Code. And a few months after that I recorded a YouTube video on the MicroConf channel, that’s microconf.com/youtube and we’ll link it up in the show notes, but it’s called The Number One Mistake No-Code SaaS Founders Make. And in it I talk about how Bubble had dramatically raised their prices and people were furious because migrating off of Bubble is really hard. Migrating off a No-Code is really hard. Compared to AWS, not that that’s a breeze, but if you have code that can run on any server, you can move from Heroku to AWS to GCP to Azure to your own homegrown Dell Box sitting in your bedroom connected to a fiber connection, which of course I wouldn’t recommend. 

But you get the idea. Moving code-code from place to place while it’s a pane is totally doable. No-Code’s not portable as far as I know. There’s no standard. You don’t export to XML or to JSON and move it into another No-Code platform. It’s all proprietary and it has massive platform risk. If they dramatically raise prices as several have done, if they change how they operate, which Airtable does about every month or two, they break, they don’t break it, I’m overstating it, but they break how our podcast and our video production systems work because they changed their top nav and they changed the left nav and they forced us to only have a left nav and we don’t really want to, but it’s No-Code and we can’t do anything. You are 100% at the mercy of the No-Code platform when you are building on it. 

I appreciate you writing in with that, Andrew, because we did miss it in the initial conversation. Since then have obviously done quite a bit of talking about it, but I did want folks to know, and I should add one other point here, that doesn’t mean you shouldn’t build something in No-Code. Platform risk exists in a lot of apps and it certainly exists in the stairs-step approach. And what I don’t say is, “Then don’t do it because there’s some risk.” Realize what you’re getting into and realize the risk is there. Think about how to potentially mitigate it or just live with the risk and realize, “This is not a 20-year business, this is a business that’s going to get me to the next step to where I could potentially get away from the platform risk.” Thanks again for that email Andrew, I appreciate you weighing in. 

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My next question is from Franz about bookkeeping.  

Speaker 3:
Hey Rob, Franz here, longtime listener, started listening during the Hit Tail era. My question is, I’m not from the US, I’m not familiar with any the tax laws and everything there. How do I go about bookkeeping? Just background, just start my own SaaS, just took the plunge recently. Apparently I need a US entity to open a Stripe account, I did that, now I have a Stripe account, but now it’s think about, “What about bookkeeping like taxes in like March or April?” How do I go about it? Do I do it myself? It’s simple enough. Or do I get somebody to do it? And if I get somebody, that would take a chunk of money from my very early stage startup, do you have any suggestions how to go about that one? Thanks.  

Rob Walling:
This is a question of whether or not you want to take time away from your startup or money away from your startup. And if you don’t have funding and you are on a shoestring budget, paying for a bookkeeper can be a challenge to justify. I’ll admit that in the early stages of say, Drip, I was doing the books, wasn’t the best use of my time, but I just didn’t have the budget to pay someone like Bench. You go to bench.co and it’s 250 to $350 a month for them to do your books. I actually did hire a couple different bookkeepers on Upwork with varying degrees of success. Sometimes I had math errors in my books, other times categorization errors, and I was frustrated with my books for a very long time and eventually I just plunked it down. I actually talked to my CPA, my accountant and he started doing it for I think it was about $180 a month and I just bit the bullet and I moved on and I never looked back. 

I think in the very early stages of a startup where there’s almost no money coming in and mostly no money going out, signing up for Bench or Xero, which is X-E-R-O, linking up a credit card and a bank account or a Stripe account for that matter and letting most of it auto categorize and going in and spending 20 minutes a month, 10 minutes a month if you really don’t have much going on, I don’t think that’s the end of the world. The thing to be aware of and to be careful of is when that turns into a few hours a month and you’re still justifying to yourself that you should be doing it. By the time it’s complicated enough for you to be spending a chunk of time on it, you should have enough revenue to be able to go and hire a service. 

And Bench themselves, I’ve heard mixed reviews, I’ve heard some real positive reviews and other people it hasn’t worked for. I think it really does just depend on the bookkeeper you get in any given month. There are definitely services out there that are less expensive. There are zero approved bookkeepers and I think if you expect to pay a hundred dollars to $200 a month to do your books, that’s probably a reasonable expectation. I think in the very early days I would do it myself until it became a little annoying and then I would hire it out at that point. My next question is from John Potter and he says, “Hey Rob. I’m the non-technical co-founder of a bootstrap SaaS for accountants. I’m an accountant by trade, so I’m unfamiliar with how to set up the ideal marketing engine.” It’s good you’re listening to this podcast. I would also recommend purchasing the SaaS Playbook at saasplaybook.com and reading Traction by Gabriel Weinberg. 

His email continues, “I plan to focus my sales and marketing energy on my network first, but I will need to reach out to cold contacts eventually. I do plan to have a self-serve sales motion for a long time with no sales reps. Could you walk me through a few ways to set up a marketing engine for someone who has little marketing experience?” 

All right, John, here’s I think a big mistake that you’re making is if you’re going to sell to accountants, self-serve is 99% not going to work. Pretty much it’s not going to work. I never say never and always and these kinds of things, but I cannot imagine trying to sell to non-technical folks, especially folks who are busy and bill by the hour. We’re talking legal, accounting, consulting, non-technical consultants, coaches, you are going to want to demo to handhold and to get them on board. 

It doesn’t have to be enterprise sales, it doesn’t have to be five call closes, should be a one call close frankly, but I don’t think you will succeed without having some type of sales process. Accountants are just going to want to talk to someone and it doesn’t have to be complicated. It doesn’t have to be a long process. With that in mind, I literally wrote an entire chapter of the book, saasplaybook.com, it’s $10 on Kindle or on PDF and I talk about the three factor framework, which is that each marketing approach has these three factors that dictate whether you should try them or not. The first is speed. Is it slow or is it fast? Meaning does it work tomorrow or does it work in a year? SEO is slow, cold email could feasibly work quickly. It may or may not, but it could feasibly. 

The second is scalability. There are things like a Product Hunt launch that are not scalable. You can do them once and you get a few customers and that’s it. Versus SEO content, cold outbound, there’s things that really scale up. Often those ones are perhaps more expensive or more hard to get right, but the scalability of those is a far cry from something like answering questions on Quora or doing a Product Hunt launch. The third factor is cost. We could say that if you’re writing your own content, it’s free. We know that’s not totally true, but let’s just say in answering questions on Quora, which is something I did in the early days of Hit Tail and the early days of Drip and even a little bit in the early days of TinySeed, and I did that myself. The cost in effect was zero, but it was my time versus ramping up AdWords or paying a third party to do cold email outreach on your behalf. 

Those three factors are different for each marketing approach. And in my chapter on marketing, I go through the 20 B2B SaaS marketing approaches and then I talk about how to use the ICE framework to prioritize them based on the impact you think they might have, you’re going to take a guess at it, the cost to do it and ease of implementing it. And I basically walked through a framework that would make no sense to walk through here on a podcast, but is it foolproof? Is it 100% going to tell you exactly what you should do in what order? No, of course not. Being a founder is making hard decisions with incomplete information and figuring out which marketing approach to try first is a hard decision that you have no data on until you try it. And using a framework like I’ve outlined, and there are others like go look at Sean Ellis and his book, I believe it’s called Hacking Growth. 

He talks about ways to think about growing your company. This is just a matter of getting educated and realizing that there is no one right answer. There’s going to be a lot of gut feel in it, but you have to mix that gut feel with rules of thumb. And my rule of thumb is a three factor framework and Sean Ellis’ is different and Gabriel Weinberg’s, in Traction, is also different. These are just frameworks and mental models to help folks who haven’t marketed for learn, which marketing approach should I try first? And then you get to decide if I pick a marketing approach, like cold email for example, do I go and learn it or do I hire a productized agency, for example, Postaga, they’re a TinySeed company and they have a done-for-you outreach product as well as a SaaS app that you can use for your outreach, but do you hire someone like that who has sent tens of thousands, hundreds of thousands of emails and LinkedIn outreach and do you hire them to do it? 

Usually it’s budget, do you have the budget to hire them? So that you can test this and feel good that if it doesn’t work, the channel probably doesn’t work because the person or the team implementing it knows what they’re doing. They have a pretty high success rate. This goes back to the bad instrument or bad player analogy I mentioned on a recent solo episode where I talked about my 13-year old who is an amazing violinist. He’d been playing for 10 years and he picked up an old clunky violin. It was his first or second violin. It sounds terrible. He played it and it sounded awful because it’s just a toy, it’s like a hundred dollars thing and the strings are barely real strings. 

And if you walked into the room, you wouldn’t know is it that he has a bad instrument or is it that he doesn’t know how to play? And then of course he picks up a full-size violin. Sounds amazing. And that’s when you know that it was a bad instrument. With marketing approaches, if you try and approach and you’re doing the work yourself and the marketing approach doesn’t work, you don’t know if it was a bad instrument or a bad player. And I often encourage founders that I’m advising if you have the budget, try to find someone who’s good at this to test it out, to dip your toe in the water and to put your best foot forward such that if it does work great, and if it doesn’t, which is honestly the more likely outcome, then at least you know that you took the best shot you could. 

But oftentimes budget stands in the way and hiring someone good to do a marketing task is hard. It’s not as easy as snapping your finger and finding someone amazing. And sometimes it can be hard to know are they good at what they do or not? There’s some complexity here, but I hope that gives you an idea, John, thanks for the question.  

Speaker 4:
Hi Rob. Hi Steve. We met briefly, MicroConf in 2019 in Croatia. I was working on a different set idea back then, which unfortunately didn’t work out, classic, rookie mistake, building something that I thought somebody wanted, but turns out they didn’t. But that’s fine. I learned a lot. I’ve since moved on and I’ve had a new idea. It is essentially a SaaS tool for property finders in the UK, but particularly focused on foreign buyers trying to buy property in the UK. This time around, I’m going to do it differently. I’ve run a few Facebook ads to see if there’s any interest to try and get some emails to build a launch list. And that’s been really successful. We’ve 500 plus emails from foreign customers or foreign target customers, and that list is growing daily, I think that’s probably going to get to about a thousand. 

My question is what’s the best way to approach launching the new products to said thousand lead list? We’re obviously going to do an MVP. Is it 50 users at a time? Or the usual question of how big should the MVP be? And then final question, because I know a lot of our users are essentially coming to us through Facebook or Facebook leads, they’re obviously using their mobile phones. Now my question is that in terms of getting them to our sales website and buying and starting their subscription, what’s your views on Apple Pay? Can it work? Should it work? Does it work for subscription businesses like the one hopefully that we’re going to get going? Love the content and hopefully see you again soon. Cheers. Bye.  

Rob Walling:
Thanks for that question. I think there’s some good stuff to dig here. I actually recorded a YouTube video called, How to Build SaaS from Scratch in Eight Simplified Steps. It’s also on the MicroConf YouTube channel, and we will link it up in the show notes. One of those steps is the phased launch, and if you have a tiny little launch list of 30 people, 50 people, there’s no reason to phase it. What I mean by phases is breaking it up into chunks exactly as you have mentioned. But if you have a product that you’re not sure if you have product market fit yet, or even you’re concerned that you don’t have the features that you want or that it’s just not anything more than an MVP, then if you add thousands of people on an email list and you put them all into your product, they’re just going to bleed out. 

You’re not going to retain any of them. Everybody’s going to churn, no one’s going to convert. And the idea of phasing your launch is to let in a group of users to let them try it out. And this is not beta. This is early access. This is something you charge for. They’re not beta testing the product. You should have the bugs worked out, but you’re trying to find out do they need it? Do they love it? What else do you need to build in order to retain as many as possible? Then you rinse and repeat. Yes, if I had a list of 500 people, I probably would break it up into chunks of 50 at least to start with. With Drip, we had 3,400 people on an email list, and I think I started doing it in, I think the first launch was to 300, and then we did another 300, and I realized we could totally handle it. 

Then we went up to like four or 500, and I believe by the end we were doing 600 at a time for the last couple. And I just increased it as my comfort level improved, my comfort level with the product, my comfort level with our conversion rate, my comfort level with our ability to support it and to close deals frankly. Again, I have that YouTube video where I talk more about this and I have a YouTube video where I talked all about the Drip launch. I believe it’s titled, From Launch To 7K MRR, and it’s also on the MicroConf channel. And I probably spent 10 or 15 minutes talking about how we did it, and that was within six months of doing it. The data was fresh in my mind at that point. And then your second question was about using Apple Pay. 

I’m going to be honest, I’ve never used it and I’ve never heard, I don’t know of many SaaS apps that do it right. Most of the time that’s a mobile app. Now, can Apple Pay work for subscriptions? Of course. Now, I want to be clear here that Apple Pay is different than having an iOS app in the app store. In that case, Apple’s going to take 30%, but using my Google-fu, I have looked at Apple Pay, which again, I haven’t used, but it says that Apple Pay takes no fee. This is where you just allow someone to buy your app or charge a subscription, which Apple Pay supports according to the Apple website, and you still pay the typical charge, the 3% credit card charge, but Apple Pay is a layer on top of that. I guess a concern of mine as I think this through is can I administer that? 

Because we used to need to upgrade or downgrade subscriptions or refund subscriptions or do all types of craziness with it. And if I don’t have a dashboard where I can do that, and it’s all the customer themselves doing it through iTunes, I don’t know if that’s how it’s managed or not. Steven, in your shoes, that’s where I would want to see the entire flow from the start to the finish of how do they subscribe, how do I administer those, how do they cancel, upgrade, downgrade, do I have the flexibility that I want when using Apple Pay, or is it going to be easier and better for me to spend whatever three, four days upfront to really build out a top-notch custom, Stripe integration or Braintree or Paddle, whoever you want to use, such that I have full control? And that I don’t know because I just haven’t evaluated the two options side by side. But if you do and you have something to report back, feel free to send it, questions at startupsfortherestofus.com and we can educate the entire community with your findings. 

Those are all the questions we have time for today. Thanks so much for joining me again this week. I think I’m going to answer more listener questions next week as well to try to work through some of the backlog. I hope you join me for that episode. This is Rob Walling signing off from episode 678.

Rob Walling:
Uh-oh, you’re not going to make yourself throw up, are you?  

Tracy Osborn:
I’m like, “Wait, I have a list. [inaudible] I can fix this.”  

Rob Walling:
Yeah. Yeah. Have you ever seen Pitch Perfect, the show about the a capella singers?  

Tracy Osborn:
No, I haven’t.  

Rob Walling:
The women in college and they… It’s super fun. It’s like-  

Tracy Osborn:
That sounds cool.  

Rob Walling:
… tongue in cheek doesn’t take itself too seriously. Good songs like Glee-ish. I’m not the biggest fan of Glee, but at least, it has cool music every 10 minutes. Anyways, there’s one of them that projectile vomits when she gets nervous, so when you were going like this, I’m like, “Uh-oh, are you Pitch Perfecting?  

Tracy Osborn:
That’s my interview prep, right?  

Rob Walling:
Yeah, that’s the interview prep. Welcome back to Startups For The Rest of Us. I’m Rob Walling, and this week, I’m joined by Tracy Osborn. You know her as tracymakes on x.com, and she spoke with Leon Barnard of Balsamiq. They talk about how to design faster and more effectively with wireframing. Tracy, welcome to the show.  

Tracy Osborn:
Yeah. Happy to be here. Happy to be part of the podcast.  

Rob Walling:
Yeah. We’re trying something a little different this week. We are longtime friends with Balsamiq as people know. This podcast as well as MicroConf have long followed Peldi. Peldi spoken at MicroConf many times and has been a long longtime supporter. Balsamiq reached out and said, “We’ve written a book. Several of our team members have written a book,” and I thought this is a great opportunity to talk about wireframing and design on the podcast, but I don’t have expertise in it, and frankly, my interest level with it is not as high as other folks I know, so I sent you an email. I said, “Tracy, you want to handle this?” And you said?  

Tracy Osborn:
Absolutely.  

Rob Walling:
I tease it a little bit. You interviewed Leon. What’s the book and what’s it about?  

Tracy Osborn:
When people see the word wireframing, they think of something like the super designers out there who focus on all the super designy stuff, and wireframing seems like a concept that only applies to someone who has a degree or who is doing that as their full-time job. I left at the opportunity to do this interview because this wireframing is something that I’ve had in my toolbox since I have a graphic design degree, but it’s not something I see often talked about in the startup entrepreneur non-designer world. It looks kind of intimidating. It looks like it’s something that might slow down your processes, but in reality, it’s something that can help you go faster and do more and communicate better with other folks out there. So, it was really exciting to kind of leap into with Leon.  

Rob Walling:
Well, we shouldn’t leave out Leon’s co-authors. There’s actually three authors of the book and all three of them work at Balsamiq, and who better to write a book like this than folks who are day-to-day 40 hours a week thinking about wireframing, building software products for people who want to wireframe? There’s probably software entrepreneurs listening to this or aspiring founders who may think they don’t care about wireframing. Why would they need to know that? So, as a final pitch before we dive in, Tracy, why should someone listen to this episode?  

Tracy Osborn:
Wireframing helps you figure out the ideas you want for the way that your website works, whether that’s the front end or the back end, it allows you to try different concepts in a faster way, allows you to take those concepts to folks who may give you feedback or the design you’re working with so you can share what you want to work on, allows you to talk with your team members about what you want to do without having to have a full-fledged final mockup, and overall allows founders to work faster.  

Rob Walling:
Before we dive into the episode, I have two announcements for you. The first is that TinySeed applications for our Fall 2023 Accelerator batch will be open from September 4th to the 16th. We are funding companies in two batches. We have our Americas and our EMEA batch. That’s Europe, Middle East, and Africa. And if you have at least $500 in MRR and you are looking for the perfect amount of funding, as well as world-class mentorship you can’t get anywhere else, and a tight-knit community unlike any you’ve been part of, head to tinyseed.com/apply. If it’s from September 4th to the 16th, applications will be open and you can apply there. It usually takes about 10 minutes. If they’re not open, you can enter your email to be notified when we open the doors. I hope to see your application. 

My second announcement is that while some of you might have spent the summer vacationing or spending time at the lake, our team at MicroConf has been gearing up for one of the biggest announcements we’ve ever made. The last time we made a major announcement was in 2019, so I don’t want to jinx it, but there are some pretty amazing things coming down the line to help you build, launch, and grow your SaaS business. If you want to be the first to hear about it, head over to futureofmicroconf.com and sign up for our announcement event that’s going to happen on September 14th of 2023. You won’t want to miss it. Book is Wireframing for Everyone. It’s available on Amazon. With that, let’s dive into your conversation.  

Tracy Osborn:
Leon, thank you so much for joining us here at Startups For The Rest of Us. I left on this chance to run this interview because I have a degree in draft design and I’m personally already aware around the benefits of wireframing and why you should use wireframing, but when I joined the startup world and started working with the entrepreneurs and founders, I found that the term wireframing wasn’t often used. So, what brought you to this wireframing world and what drives your passion to it? Maybe you can kind of explain what wireframing is for the audience that is listening to the podcast.  

Leon Barnard:
Sure. Happy to answer these questions. I’m really excited to be here. I started my career as a UX designer, and when I started a long, long time ago, the default tools for UX designers were things like Photoshop, and designers were expected to create these pixel perfect mockups. And then, when I was in my first job, I was realizing that that work was not making its way into the product, except for maybe icons or some of these graphic assets that the tools that we were expected to use were not really actually very effective for helping to build a product. So, I found myself turning to tools like PowerPoint and Visio to capture ideas and concepts that I thought would be much more useful in having actual conversations. 

I don’t know if I even knew the term wireframing at that time. And then, when this tool Balsamiq came out and I heard it was for creating wireframes, I was like, “Oh, this is the tool for me. This is a tool that will help me communicate my design ideas,” which is a very different process from say, building something that looks like a final product because I was finding that really, in the organization I worked at, it was enterprise software. It was very developer focused. It was the developers that were leading things. So, I needed a way to participate in those conversations and insert myself into the conversations. And I found that having these sketchy low-fidelity artifacts, which is what wireframes are, they’re like a digital version of a napkin sketch. It was really a great way to get more engagement with the people who are actually having an effect on the product.  

Tracy Osborn:
Yeah. I think that’s a term that most entrepreneurs or founders have heard is the napkin sketch. The stories of that brilliant entrepreneur who has this big company, it all started because that person was at a restaurant sketching on a napkin their first ideas or prototypes. So, that’s a wireframe in a sense.  

Leon Barnard:
Yes, exactly, but it’s funny because the product Balsamiq was originally called Balsamiq Mockups because that’s what they were called at Adobe, where the founder worked prior to this. Some people also call them prototypes because they’re a way to kind of prototype the interaction of a product, but I think wireframe is the best term because it’s a sketch. It’s an outline. It’s meant to be low-fidelity, which means mostly black and white, not as many details, and obviously it comes from the world of industrial design, pre-digital days where you were building something made of frame, made out of wire, which obviously wasn’t going to be the final thing. So, yes, I think wireframe is a good term for people to understand and use, but I understand there’s a lot of terms out there in every industry, so if people are not using the right technically correct term, then that’s okay. Part of the book is helping to explain the difference between a wireframe and other types of artifacts.  

Tracy Osborn:
So, a founder could look at a wireframe that they’re going to put into more founder terms, that they might be used to that napkin sketch, those lines and boxes, things that are super low-fidelity like you mentioned. So, what are some of the specific differences and the reasons why you should start with low-fidelity for wireframing? First, is the urge to start adding those details. I know that I had to struggle with this as a designer because I’ll start with my page and I say, “What do I want on this page? What do I want? How do I want things to work?” You’re like, “Okay, cool. I have my headline on the top, and then I have my images.” And then, you’re like, “Ooh, what is my headline going to say? What are things I could use in my headline?” And then like, “Oh, what is that photo going to be?” So, the initial prototype I’m working on is moving more and more high-fidelity, just more and more detail there. 

So, can you expand on some of the reasons why you want to keep something low-fidelity and maybe go into the ideation process there or reducing that urge to move into high-fidelity, something that has more content?  

Leon Barnard:
Yeah. You really captured some of the traps that are out there, and really, it’s just human nature. People aren’t wrong or bad for doing it. It’s so easy to get ahead of ourselves when we get into design. Especially when you’re building a product and you have other competitors to look at, you want to make something real. It’s kind of in our nature, and that’s what’s so attractive about the napkin sketches, that there’s only so far you can take it, but with digital tools today, you can make something that looks and feels real in an afternoon. But the big challenge is, is that the right product? Is that the product you should be building? Is that what people are going to pay you to ship? 

In my experience, what I’ve found is that if you really ask the right questions and do the right work upfront, then the design details can come later and they kind of fall into place, but if you get things wrong in the beginning and you’re not answering those fundamental questions about what is the goal of this product, who are my users, what is this trying to serve, what information needs to go on there and what doesn’t, then that’s really what’s going to be most useful. And a wireframe, especially if you’re using a tool that’s dedicated only for wireframing, then it kind of forces you to do that and makes it hard even to get into some of those details because the design process has separate distinct phases, and there’s a right time and a place for different levels of detail.  

Tracy Osborn:
Right. I think that’s a great place to dive into in terms of that, how-to, how do founders get started and how they start using wireframes for ideation because another urge I think a lot of people might have is to create one wireframe, and then take that one wireframe and go to different people in their company, to their customers and get feedback on that one wireframe. I think your book does a really good job of talking about the value of creating lots of different ideas. So, maybe from a founder’s perspective, what does that look like? How do you use wireframes to start generating those ideas and start going through different thoughts you might have or different directions you want to take?  

Leon Barnard:
Yeah. The first chapter of our book, Wireframing for Everyone, is really dedicated to explaining why wireframes matter, and really more than that, the value of low-fidelity and iteration and coming up with lots of different ideas. We reference examples from other industries where a very successful chef is going to try 10 different dishes for every one that they’re actually going to put out there, and the same with a lot of other industries and examples. So, your first idea is often not your best idea and you can build it. It’s great that you can build that idea right so quickly, but you really owe it to yourself and your audience to try to come up with as many ideas as you can early on, and that’s really going to help you generate better ideas, kind of merge and combine ideas. So, it’s really all about making time for creativity in the beginning and allowing yourself to be creative. 

It doesn’t have to take a long time because you’re not investing a lot of time to make something that looks final. You’re just letting your imagination go wild and being okay with that, and reserving judgment and all of that kind of things, that kind of brainstorming mentality. And that can be really useful because you can do it in an afternoon and you’ve got 10, 20 different ideas that you didn’t have when you started, and you’ve learned things that you didn’t know that you knew maybe, or you’ve found out questions that you didn’t know that you needed answers to. Just spending a day to do that, it’s going to get you off on such a better foot than trying and going ahead and building your first idea.  

Tracy Osborn:
Yeah. For example, they’re working on their landing page for their product, so rather than creating one wireframe with their initial idea and just building it, I don’t know, do you have a rule of thumb for how many different iterations, something where someone can say like, “This is a good amount of ideas out there”? I think your book goes into… There’s the obvious ideas, but there’s also tactics that you have in your book and how to find the nonobvious ideas, how to step out of there. So, specifically, how would a founder go through this process if they’re say, creating a landing page?  

Leon Barnard:
Yeah. Yeah. Thanks for bringing that up. Yeah. There’s a whole art to creativity, and sometimes, often the best way to be more creative is to impose constraints. If you just say, “Oh, let just come up with a landing page,” then you’re like, “Well…” You’re only maybe going to come up with what you already can picture in your head. But if you say, what if I can’t use any text or what if it has to be text only, or let me start with a mobile version of it, or let me do it in the… What if it has to be targeted at children? Coming up with kind of these sometimes artificial constraints or sometimes they can be realistic constraints. What if I’m targeting people in countries that don’t have good access to the internet and the whole page needs to load and be half a megabyte or something like that? 

So, there are some techniques that you can use or you can just tap into that subconscious and say, “Okay, I’m going to make myself to eight different ideas in five minutes.” So, you don’t really engage the judgmental part of your brain, and you just let that more primitive subconscious part kind of kick into high gear. And then, there’s also this idea of just really pushing yourself to create one more. When you’re tired and you don’t think you can have any more ideas, maybe just saying, “Okay, let me just do one more that just might be crazy and might not make any sense.” But then maybe there’s one little piece of it that you end up using in the final product. So, there’s a couple strategies, but most of them involve either pushing yourself or imposing some kind of constraints in order to stimulate your creativity.  

Tracy Osborn:
Right. So, rather than looking at a page saying, “I’m creating a landing page,” you’re asking yourself different questions as you’re going through this. Whether using a tool like Balsamiq or pen and paper, creating really quick sketches of boxes and lines and different ways of laying this information out in different ways of approaching this process, wireframing really allows someone to go through each of these ideas very quickly because you can imagine that mocking up every single one of these questions, how would this be for mobile, how would it be for mobile for people of low bandwidth, trying to do a full mockup on those would be quite difficult and very time-consuming. So, wireframing is really there, so you can iterate so quickly and just go through all these ideas and try to see if you can get to that nugget, that really special idea that you weren’t thinking of in the beginning.  

Leon Barnard:
Yeah, exactly. The cost of having bad ideas or ideas that don’t go anywhere is so low that there’s not really any penalty to creating an idea that you’re not sure about because it doesn’t cost you very much time.  

Tracy Osborn:
We’ve covered why wireframes should be low-fidelity and quick and easy and whatnot for ideation and the process of creating wireframes. Can we go a little bit more into the value of wireframes for communication? Again, for a founder who’s listening to this podcast, there’s probably a lot of situations where they have the ideas in their head or maybe some really basic wireframes of kind of the direction they want to go, and now they’re hiring a contract designer, maybe someone who has a lot of context about their company or they’re working with the developer to implement that vision. How can wireframing be used as a tool to aid in communication?  

Leon Barnard:
Yeah. Here’s where it’s a little bit tricky because the temptation is to build something that looks final and the assumption that if you make say, a mockup or a pixel perfect version of something that you can hand off to somebody, that they will understand it, and if you say, “Oh, if I create a wireframe, then there’s going to be a lot of things that they understand,” but what we don’t realize is what’s not communicated in even some of the high-fidelity things. So, it’s often better just to have something low-fidelity, and then have a conversation around it because you can hand off something that looks final and get something back that’s totally different because you didn’t specify how it should be on mobile or how it should resize, for example. So, they’re a really good tool to aid in communication, but not to be seen as a replacement for communication. So, kind of like “a picture is worth a thousand words,” but also you can talk about that picture. 

And then, also with wireframes, one of the key concepts to understand is that you can annotate them. Because they’re not going to be mistaken for the final design, you can put pictures. You can put words on them. You can put little sticky notes and arrows, and you can use say, bright red or pink or something to say, “Oh, when you click this, it should do this.” So, feel free to mix in words and instructions and sticky notes and all kinds of things to help them be easier to understand, but the best way to communicate is to sit down with somebody in front of that wireframe and talk them through it, so they can ask questions. They can even give you ideas and maybe in your session, you can make changes there on the fly that ultimately communication is best between people. And just because you can create something that looks final, don’t mistake that as a reason not to have a conversation with somebody because there’s so many nuances and so many details, and talking to somebody about something is such a rich forum for that.  

Tracy Osborn:
Right. In one situation, you might have this full design up for a landing page, and of course a designer’s going to take a look at it and just implement it. Maybe not the designer, but maybe the contractor or developer you hired. However, if you have a wireframe that has annotations with additional context of the things you want to do and the way that things are working, and then the wireframe itself being low-fidelity feels easier to have a conversation about because it’s not final. So, the other person on the other side of the screen can look at it and using their own imagination kind of go into different directions and have a better conversation or have an easier time having a conversation with you because they know that things are not in the final state. I think that’s a really interesting point that you make in this book as another one of the powers of the low-fidelity or maybe even medium-fidelity at this point. Maybe you’ve started to add in some of those headlines in order to have those conversations with other people.  

Leon Barnard:
Yeah. I mean, that word conversation is so important. Wireframes help you have a conversation and they help you get feedback, so if you show somebody something that isn’t final, you’re going to have a conversation. That’s where the value, that’s what you want. You want to have that conversation. So, that’s what’s really valuable I’d say about wireframes.  

Rob Walling:
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Tracy Osborn:
A founder, say, you’re listening to this and they’re interested about working with wireframes, are probably not starting from a completely blank slate. Usually, they’ll have a landing page already designed. Maybe they have their onboarding flow that’s already set, and they’re looking at that saying, “Okay, I want to change this. I know that there’s problems here and I want to change it.” And I think the urge there would be to just start moving things around within that live page or start working with their existing components that are right there. How can these folks use the process of wireframing instead of going from, say, high-fidelity to high-fidelity? Where does wireframing come into play here when you already have something that’s launched and out of the world and you’re not starting from scratch?  

Leon Barnard:
That’s a great question. I think it goes back to that idea of things being low-cost, so you can experiment with things much more easily. One of the things that we encourage in the book is, when you’re starting a wireframe, to start really low-fidelity, so start with some words. So, I would say if you’re doing a redesign for a landing page, just start by writing down some of the changes that you want to make, some of the things that you think are working and are not working, and start writing those down even on a wireframe and maybe just playing around with some of the words saying, “Oh, I want to have a call to action here. I want to do a better job of highlighting some of the features here.” And maybe even just laying out in sticky note or having box placeholders for where you think things should go to really take you out of being stuck on that current design. 

You’re going to get a lot more creative ideas if you just say, “Well, let me just focus on the content for a second and not get hung up on how it looks currently, and come up with five different variations of just having things in different places without really thinking about the appearance so much.” I think that’s just going to open you up to so many new and different ideas that are really centered around, “Okay, what is the content? What are people’s goals?” Rather than thinking about what visual elements might track people’s eye or even how should the navigation be, but just really not having to think about, “Oh, I’m building a user interface,” but think about, “I’m focused on the content, the information that’s going to be on here, and I can almost step outside of what I think of as the design, but the content, the information on there is the first step in design as well.” So, it allows you to work at different layers of abstraction or different layers of design, kind of the layer zero or something, which is just the non-visual level.  

Tracy Osborn:
I think that’s a really great point to jump into in terms of this design process because your book is Wireframing for Everyone, so the instinct when we’re reading that is specifically about wireframe, but I think this book, it’s a really succinct, easy to read 150-ish pages book is not just wireframing, or at least it explains why wireframing isn’t just the actual process of creating boxes and lines and doing this layout. A lot of it is around that customer research process and why that’s important and why that goes into it. The other parts of the book… We talked about communication already. There’s parts of the book that go onto visual hierarchy, which I think is really important. 

So, it’s all these design principles, these pieces that really help someone who’s a non-designer understand what the design process is and how it’s not just say, creating a layout, but it’s really understanding the goals behind the website and what you’re trying to build, and then having this tool so you can iterate on that. What went into the decision between you and your co-authors, Michael Angeles and Billy Carlson? What went into the decision to create a book where the focus wasn’t just on wireframing, or were there iterations that this book went into? Did you start just on wireframing and then realizing that the topic had to be broader? I’m kind of curious about the background there.  

Leon Barnard:
Yeah. Thanks for recognizing that and bringing that up. Yeah. I would say this book is not just about wireframing, and the reason we added for everyone to the title is to show that wireframing is a technique that everybody can use because it’s something that can apply to all parts of the process to many roles, and there’s this idea of there’s a wireframe as an artifact, but wireframing as an act is really a way of thinking about things that you want to invest time, into exploration and discovery, and answering fundamental questions early on. So, the other nice thing about the book is it all comes from real-world experience. 

I was a mentor for a bootcamp. I’ve seen a lot of educational resources for UX designers, and they talk about wireframing, wireframes, how to create them, but they don’t tell you how things work in the real world. So, the three of us authors, we all worked for different types of software companies in our lives and we saw what wireframes can do, the value that they can provide, and it’s really as a way of getting people engaged in having those design conversations, having more people have a seat at the table in the design process. So, as far as the three of us writing it, we all had slightly different backgrounds. None of us were authors, so we were really nervous about how are we actually going to write a book. So, A, it was nice that we had three people working on it, and B, it was really great that we worked with A Book Apart as editors to help us craft it into something that all worked together and helped us cut out a lot of fluff. 

Billy has a background in graphic design, so he really understands how that element of it can improve your wireframe I worked a lot with developers and PMs to try to understand the software development process and where design and different types of design can fit in. Michael Angeles is a great UI designer, big advocate for wireframes, and he’s really good at finding ways to give feedback and communicate with people to kind of come together on things. So, we all had different areas of expertise, but we all knew that the wireframe is just an artifact. It’s just a tool. It doesn’t add any value on its own because it’s not something that ships to the customer. So, it’s really what they can be used for that’s the most important thing. 

I mean, anybody can learn how to wireframe in half an hour, but that’s not going to help you necessarily be more successful at getting your design ideas into the final product because really, kind of a unifying theme in the book is that what matters is what ships and wireframes are a way to bring people on the team together to ship something that everybody’s happy with and works for the customer, as well as for the business and everything like that. So, it’s really just a piece of the puzzle.  

Tracy Osborn:
Other than your book, what two to three resources would you recommend for folks who are non-designers wanting to, say, jump into this area and feel a bit more confident in starting out with doing design and starting to create things from scratch?  

Leon Barnard:
Sure. I’m going to bring up the resources chapter or section right here, but one of the things that was fun was to dig into some of those resources and reread them. I think one of the biggest inspirations was a book called Sketching User Experiences by Bill Buxton. It’s very philosophical. It’s a fun read. It’s very abstract, but it really talks about the sketching process, and there’s so much emphasis on creativity, and just coming out of that, it’s hard to think of why you wouldn’t spend time upfront doing this and just what value it provides. We wanted kind of a condensed version of that, that was also more applicable to real software processes. So Sketching User Experiences is a great book. 

We love books like Don’t Make Me Think by Steve Krug, which is a great way of seeing how a UX designer sees the world, that it’s not about the layout. It’s not about the aesthetics. It’s about finding a way that your user can use your application in an intuitive way and trying to put yourself in their shoes. So, our book is kind of a summary of a lot of other books or topics from other books. But then also another book that we really like is UX for Lean Startups by Laura Klein, and she talks about wireframes in it. So, we kind of felt like our book would be inserted into the point where she talks about wireframes and it’s like, “Okay, now here’s a deeper dive into them but about how to work in a lean kind of agile way where you’re not spending a lot of time doing work that isn’t adding value to the product.” So, I love the ideas of lean UX and lean and kind of lean startup mentality, so I think it fits really nicely into those books as well.  

Tracy Osborn:
I’m also a huge fan of all the lean startup world, lean UX world because that’s something I think a lot of founders… It’s really useful for founders as we’re building our companies, as we are trying to avoid the tendencies to really expand how much work we have to do and figure out the ways that we can kind of tighten up our work. So, this is a great example of something that might look like we’re adding more work to our plate, as if we’re trying to cover all the aspects of building a startup, by adding the wireframing part. As you are working on your ideas for your landing page, it might feel like, “Oh, I could just cut this out and save myself more time.” And I think that we’ve really covered in this why that process, while it might take more time, saves you more time in the long run when you’re trying to be efficient with building your startup because you can land on a better idea faster due to these wireframes. Is that correct?  

Leon Barnard:
Yes. I mean, I think it absolutely fits in. I mean, lean is all about doing experiments and seeing what works and what doesn’t work, and in the same way, that can feel like a waste of time. Why am I going to do the work to come up with two different ideas for a landing page when I could just spend less time and build one? But it’s all about experiment and test and iterate, and that’s exactly what wireframes allow you to do is come up with 10 different ideas in the same amount of time that it would take you to come up with one more polished idea, and then test those, get feedback, put them in front of customers maybe. 

So, find out if you’re on the right track before you start coding because that’s when things get expensive. It’s once you start investing in code, once you ship a full-fledged product that’s out in the world, it’s harder to make changes to it, but it’s easy to make changes when you’re in the early phases when it’s mostly internal. So, it really, I think, is going to save you time in the long run.  

Tracy Osborn:
I love that point. I think that’s a really great way to start wrapping things up. So, to go through some of our points that we’ve put out here, wireframing is the process of creating these low-fidelity mockups of the things that you’re trying to design, and you can use those low-fidelity mockups to help in your ideation process and run for many different ideas and you can use those mockups in the communication process to work better with the designers and contractors and team members as you are building your product. Is there any other things that you want to leave us with as we wrap up?  

Leon Barnard:
Yeah. One of the messages that we want to get across, especially for startup founders, people who don’t have a designer, is that design work is not maybe what you think it is. Common mistake we see non-designers make is trying to act as a designer or do what they think a designer does, which is making something that looks cool, but a good designer is someone who asks a lot of questions. What is the use case? Who’s going to be using it? How often are they going to be using it? 

So, think about wireframes as a tool to help you answer those questions, help come up with ideas around those key important questions, and resist that temptation to try to make something that looks finished. So, use wireframes as just one tool, just the way that you would use the other tools in your toolbox. Don’t think about, “Okay, now I’m doing the design,” but just think of them as a tool at your disposal to help solve certain problems that you have. It’s just one of the tools among many, so don’t get stuck on these categories about, “Oh, now I’m a designer,” or, “Now, I’m designing.” Really, it’s all part of the same thing, which is helping you come up with the right solution for the problem that you’re trying to solve.  

Tracy Osborn:
That’s fantastic. I love it. Let’s end on that. Thank you so much, Leon. It’s been a joy to talk with you. If folks want to follow up with you, you can be found on LinkedIn under your name or at Twitter on Leon… Is it Barnard? I forgot to ask-  

Leon Barnard:
Yeah, Barnard.  

Tracy Osborn:
… at the beginning, Barnard. @leonbarnard. Your book can be found by searching for Wireframing for Everyone. It’s on Amazon. It’s also on your publisher’s website, A Book Apart. And if people want to jump into more about wireframing, Balsamiq, your employer has Wireframing Academy with tons of more content about wireframing for free, and that can be found at balsamiq.com/learn. We’ll make sure to add all these links into the show notes. Leon, anything else you want to point people to?  

Leon Barnard:
I don’t think so. I would love to get your feedback on it. I’d love to see some reviews. This is something that I love talking about, so I really appreciate having the opportunity.  

Tracy Osborn:
Appreciate you taking the time with us. Thank you so much for being here and giving us such a great overview of this often hidden part of the design process.  

Leon Barnard:
Thanks, Tracy.  

Rob Walling:
Thanks so much to Leon for coming on the show. Again, the book is Wireframing for Everyone published by A Book Apart. It’s available on Amazon or wherever greater books are sold. Thanks again to Tracy Osborn for putting in the work and interviewing Leon. If you want to keep up with her, you can follow her @tracymakes on Twitter or x.com wherever you get your social media fixed. Thank you for joining me this, and every week. Whether it’s been 10 episodes or 10 years, I appreciate you coming back. If you keep listening, I’ll keep recording. This is Rob Walling signing off from episode 677.

Rob Walling:
Okay, so I built an app. How do I market it? Or I have a landing page. You say build a landing page. How do I get people to it? And I don’t mean to poke fun at those questions, but that’s like saying, “I’m a startup founder. What should I know about being a startup founder?” Everything. 

I love the smell of startups in the morning. I’m your host, Rob Walling, and this is Startups for the Rest of Us. In this episode, I go through listener questions covering topics like current B2B SaaS valuations and why some people are holding out for those 2021 inflated valuations, how to pick one idea to start building, choosing between two ideas with pros and cons, whether to start a podcast to build an audience and more. 

Before we dive into the episode, I have two announcements for you. The first is that TinySeed applications for our fall 2023 accelerator batch will be open from September 4th to the 16th. We are funding companies in two batches. We have our Americas and our EMEA batch, that’s Europe, Middle East, and Africa. And if you have at least $500 in MRR and you are looking for the perfect amount of funding as well as world-class mentorship, you can’t get anywhere else, and a tight-knit community, unlike any you’ve been part of, head to tinyseed.com/apply. If it’s from September 4th to the 16th, applications will be open and you can apply there, usually takes about 10 minutes. If they’re not open, you can enter your email to be notified when we open the doors. I hope to see your application. 

And my second announcement is that while some of you might have spent the summer vacationing or spending time at the lake, our team at MicroConf has been gearing up for one of the biggest announcements we’ve ever made. The last time we made a major announcement was in 2019, so I don’t want to jinx it, but there are some pretty amazing things coming down the line to help you build, launch, and grow your SaaS business. If you want to be the first to hear about it, head over to futureofmicroconf.com and sign up for our announcement event, that’s going to happen on September 14th, 2023. You won’t want to miss it. And with that, let’s dive into our first question about B2B SaaS valuations.  

Patrick:
Hi Rob. I’m a non-technical bootstrap founder and acquisition entrepreneur. For the past two years, I have been looking to acquire a self-serve B2B SaaS. For the past year, I’ve been specifically looking for a company doing MRR in the neighborhood of 10K. There are two reasons I’ve specifically been targeting companies in this range. One, my hope with acquiring a 10K MRR company is that it’s cashflowing roughly $75,000 a year after cogs and I can use that to go into scale up mode, putting true automations, analytics, marketing in place. 

Second reason I’ve been targeting companies in this range is that debt is so ridiculously expensive right now and if I buy this company for cash, I can stop losing to all cash offers. 

Here’s the problem. During a pandemic, SaaS valuations went haywire. The latest Centurica data shows that multiples are finally coming back to Earth for large deals, but no one told the founders out there with companies in my range. I haven’t seen SaaS deals for less than 5X multiple of ARR in forever. Some founders are even engaging brokers and still looking at 10X or more. I’m getting burned out, man. Can you help me make sense of why founders think that their companies worth so much more than it really is? Yes, I might be able to pull some levers and grow this company, but you don’t get to price it based on what someone else might be able to do for it. Please help me understand and thanks for everything you do for the SaaS community. Oh, and can you also give an update on when the audiobook will be available on Google Play or Apple Books? Thanks.  

Rob Walling:
Yeah, this is tough Patrick, and this is not only happening with bootstrapped and mostly bootstrapped kind of lower end revenue SaaS companies, but this is happening with collectibles. This is happening with real estate in some places. This is happening with any type of asset where you set the price. It’s obviously not happening with stocks because that’s a liquid and an efficient market, but these inefficient markets where people can basically set their own sale price and say no to offers that are even 10% below it, they’re experiencing this across the board because we all got dollar signs in our eyes in 2021. And you can see it with venture-backed startups that raised at huge valuations when they really weren’t worth that much, but the market was so frothy that let’s say they raised at $100 million valuation when they had $2 million of ARR or $3 million. That was not unheard of. 

It was not every deal, but there were deals where the multiples were that high. There were even deals with multiples higher than that. These days, you just can’t do that. The market doesn’t support it. Maybe if you’re an AI startup and you’re growing really fast, but you get the idea, most companies are not going to get that. And so folks at some point have to come down to Earth and so the way I’d be thinking about it in your shoes is, I know you’ve been patient but you just have to be patient for this kind of thing. And if you get it on the way up, the interesting thing is as you see valuations increasing, it makes a lot of sense to buy because you know or expect that next month, next year, that company is going to be worth a bit more. The multiples are creeping their way up and you’re getting a good value.When they’re falling, makes it really hard to pay top dollar because you don’t know if next month it’ll be down 10% or next year it’ll be down a full 1X multiple below what you paid. 

I don’t know of an easy way around this except to generate your own deals. So I have acquired, it depends on how you count, but certainly north of a dozen and probably closer to 30 different apps, websites, info products, SaaS apps, downloadable software, even an e-commerce site, a couple of e-commerce sites over the course of many years, and I got them from three different places. One were forums just where I was involved. It was just communities where people would put something up for sale or they’d mentioned they need marketing help, needed a partner and I bought the app from them and decided to market it myself. 

The other option, which is pretty popular these days, and I would think about, is certainly through brokers and I’m sure you’re with all the main brokers. I would mention the Quiet Lights, the Empire Flippers, the FE Internationals. 

But the third was I did cold outreach and I sent probably close to 50 emails, not in the annoying way people do cold outreach today. But back in 2010 I sent 50, maybe even 75 emails to products that looked dated. They just weren’t being maintained anymore. They looked crufty, they looked long in the tooth, and I basically generated my own deal flow and that’s where I was then the single buyer and I was able to negotiate a price that made sense for me because there were no other buyers competing with me basically. So that would be the other thing I would consider if I were in your shoes. There could obviously be an entire podcast around how to source those deals, but if you give it some thought, put your mind to it, I’m sure you can think of some interesting criteria to use. 

But I do like the fact that you’re buying something for 10K a month. That’s like a nice revenue mark because that allows you to almost support yourself. I know you said 75K in profit after that, which depending on where you live may or may not support you, but I do like that price range. Now with that said, that price range is extremely competitive because a lot of people are trying to buy in that range. It’s the same thing, if you look at single family houses and houses from let’s say one to four units, the prices of those are a lot higher per unit or a lot higher per rental dollar than if you buy a big apartment building because there’s so many people trying to get into that space. There’s so many people doing it on the side or trying to make money in real estate. 

The same thing actually is true with high-end collectibles, whether it’s comic books, baseball cards, coins, it doesn’t matter. You’ll see on a really valued piece, something that everyone wants, let’s say the first appearance of Spider-Man and Amazing Fantasy 15. As you go in higher and higher grades where these things are literally six figures and ultimately seven figures. I think it’s a 9.6 that sold for several million dollars. But as you go down, the multiples compressed, so by the time you get down to a really ratty copy, a 1.0, 1.5, 1.8, there’s so many people that just want to own that book and the price for a 1.0 or a 1.5 can be really close to a 2.0 and a 2.5 because again, there’s just a lot of competition for it. That’s where buying in this price range of that 10K a month, it can be tough. There is just more competition there. Sounds like you’re putting in the work, sounds like you’re being patient and I have a feeling you will be successful eventually. 

Patrick’s second question was about whether the SaaS playbook audiobook would be available on Google Play or Apple Books and the good news is it is available, so I submit it through Audible’s ACX, which is like the author exchange and it’s available now on Audible. It’s available on Amazon as paperback, Kindle and an audiobook and it’s available, it says on iTunes. I believe that is Apple Books. I honestly don’t know. It’s not available on Google Play. You are literally the first person to ever have mentioned that. So if I get resounding requests for it, I will certainly have my project manager look into how difficult that is to do it and to manage. As of now, it’s not in Google Play but it is in electronic format, not audio, but like EPUB format on Apple Books. 

So again, you can get it on Amazon in all three formats. You can get it on Audible and you can get it on Apple Books, and EPUB as well as through iTunes/Apple Books as an audiobook. That’s the question mark. I would just think ACX would say Apple Books if that’s what it was on, but it says iTunes and I’m kind of at the mercy of their documentation to understand that. So thanks for the question, Patrick, and of course you can go to saasplaybook.com if you want to buy it directly from me. I’m trying to have cheaper prices than the Amazon audibles because it’s crazy the percentage that Audible specifically takes. Amazon actually doesn’t take an egregious percentage, but it is nice to go direct. Then we have a direct relationship and hopefully I can save you a few bucks, but wherever it works for you, love it if you would pick up the SaaS Playbook. Thanks for that question, Patrick. Our next question is from Anders. He’s trying to choose between two software ideas.  

Anders Gustafsson.:
Hi, Rob. My name’s Anders Gustafsson. I’m a non-technical individual with two separate ideas for a B2B SaaS. Both are drawn from problems that I experience daily as the owner of an automotive repair business, finding qualified technicians for my team and diagnosing and repairing vehicles correctly and efficiently. In both instances, I believe there’s an opportunity to leverage generative AI for new solutions. Based on my research talking to potential customers, the recruiting solution is more novel with limited competition, but the feedback is that a smaller portion of the market would consider purchasing. The repair solution is the opposite. A large portion of the market would purchase, but I would be going toe to toe with lots of well-funded competitors who are likely to pursue similar solutions. I would like your thoughts on how you might analyze these opportunities so I can throw my energy and time behind one. Thanks a lot, love your show.  

Rob Walling:
Thanks for that question, Anders. Questions like this are often hard to answer with limited information. It’s that balance of like, I really do appreciate the brevity of your voicemail because it means I don’t have to wade through three or four minutes of audio and a bunch of different factors, but it depends on a lot of things. And so I struggle to give a recommendation of, “Hey, you should do this.” The way I think about it is based on what you’ve said in your shoes, if I were trying to make this decision, I personally do not like creating new categories. As much as I’m a builder, I like making new things. I’m going to build this new tool that no one else has and there’s no competition is and it’s so cool. Aren’t I creative? And wasn’t that fun to build. Usually that’s a fool’s errand. It’s very, very hard to build that without a cajillion dollars in funding in many, many years in invested into creating that category. 

HubSpot did this with inbound marketing as an example, and I talked to Dharmesh at Business of Software and he said, “Yeah, I estimate it took us $5 million and I forget how … It was many years to drive home this category, to make this into its own category.” And then they branched into CRM and obviously the rest is history there. But if I’m going to go after a space these days, I personally want to go into a more competitive space, even with well-funded competitors where I can carve out a position. I want to carve out a corner of the market to where if I have this repair solution that we build, while it may compete with these more well-funded customers, it’s obvious who should use mine versus theirs and it’s obvious why you should use mine versus theirs and maybe that’s a focus, maybe that’s a feature set. 

Maybe that’s just the positioning of if you’re in the Pacific Northwest and the laws are different there, or the parts are different there, or maybe it’s only for shops less than 10 people and all the other software is really bad for them or vice versa. There’s some angle there that I would be looking for and trying to make it a durable advantage as well because it’s easy to get in to the idea of, “I’m going to build some features and that’s going to be my moat.” But the problem is features get replicated. Every feature I’ve ever built into software has been copied by someone. Even the awesome super cool ones that we knew were novel and we knew we went back to first principles and we built this incredible engine that did all this cool automation and just one by one, all that stuff over the course of the next few years was replicated. And so it was a temporary moat, but it was not one that lasted several years. 

Brand is a pretty strong moat, virality is a pretty strong moat, assuming you can get it going. And there are other SaaS moats, I actually talk about these in the SaaS Playbook, speak of the devil. But all that said, if you really have a passion to do the hiring solution, a smaller market, no competition, that actually scares me. But also is that a good step one business? If you haven’t been a software entrepreneur, shouldn’t you start small and go into a vertical? Yeah, not a bad idea. Usually though, if I’m going to start small, I want something where the traffic is built in, it’s the Shopify app store. I know SEO, and I know I can target these specific terms where I kind of eliminate a lot of the headache of SaaS by just having marketing built in or distribution just built in to the model. My concern with the hiring solution, is it a two-sided marketplace? If so, don’t build it, just don’t. 

So I’m actually putting a pause and maybe it’s a permanent ban on two types of questions. I’m no longer going to answer questions about two-sided marketplaces. My answer is going to be don’t, because I listened back to several of the episodes where I’ve answered listener questions and just too many people think that that’s a shortcut to not having to build this big feature set. Or I don’t know, I guess because what you see on TV, and that’s what you see when you read about Uber or whatever, but it’s a siren song and bootstrappers don’t make that work. The only time they make it work is when they have one side of the marketplace already. They have an audience like the Tropical MBA guys did when they started Dynamite Jobs. 

The other type of question I’m no longer going to answer is the one where it’s, okay, so I built an app, how do I market it? Or I have a landing page, you say build a landing page. How do I get people to it? And I don’t mean to poke fun at those questions, but that’s like saying I’m a startup founder. What should I know about being a startup founder? Everything. You should go back to all 675 episodes of this podcast and read all the books, educate yourself, do some work on your own, watch the YouTube videos. I know we put out a lot of content, but it’s pretty curated. You can zip through these YouTube videos at 2X and get an education. You can listen to episodes of this podcast while you drive, while you do the dishes, while you do yard work. Put them at 1.5X, put them in the background and absorb that information over time and then you’ll have more, I would say, specific questions that I think are more constructive for yourself and I think are more constructive for the listeners. 

So that’s a tangent. I didn’t mean to derail your question Anders, but I do appreciate the specificity of this one, and if I were in your shoes, I’d be looking to do the one with competitors. That part doesn’t turn me off. In fact, it’s intriguing to me. It shows that there is likely money in that space and as long as you go into it, not saying I’m just going to replicate it, I’m just going to build what they have and it’s going to be half price. Half price can be one advantage, but you need others as well. You don’t just want to be the cheapest one in the market. So thank you for that question. I hope it was helpful. 

M y next question is a text question. It is from almost a year ago, and so some of these text questions stick around for a while and eventually I just want to bring them in and answer them. This one is from Bavesh who has sent in several questions and I appreciate him sending them in. They’re always quite specific. His question in this one is, “I have a complicated question about the stair-step approach.” And then he sent me a video and I’m just going to summarize it. The video in summary says, if I have a step one product and it’s making some money and then I build or buy additional ones, I get to step two where I own all my time and then I’m going to move on to step three, which is a standalone SaaS product, do all of them have to be related? Should step three build on the same customer base or in the same market as steps one and two? Do they have to? Should they? 

My answer is they don’t have to, and in most stair-stepping that I see, they don’t, but if possible they should. That would be amazing. It’s just I haven’t really seen it work out very much. I’ve seen it work out in a couple cases. One example is Craig Hewitt, who right now runs Castos. He started off with a podcast editing productized service, used to be called Podcast Motor. Now it’s called Castos Productions, but he built that up to tens of thousands in MRR as he had a day job. Then since he was in the podcasting space, this is all about doing things in public, creating opportunity. Someone approached him, they said, “I have a WordPress plugin called Seriously Simple Podcasting. I will sell it to you for almost nothing.” And I think he’s been public about that purchase price. I will just say it’s less than $10,000. It was not a very expensive purchase. It was a great, great buy on his part. Then he built Castos a SaaS on top of that WordPress plugin. 

So he used productized service and a WordPress plugin to step into SaaS, and now he’s talked about Castos as a seven figure SaaS company. That’s where it works. That’s when it’s amazing. Everything’s going in one direction. I wish I had been able to do that. My step one, two and three ideas were all separate, all different customer bases, and it made it hard. It was not the ideal way, but it’s what happens with most people, especially if you’re acquiring because you just can’t dictate what’s available for sale at any time, and there could be a good opportunity that doesn’t kind of fit within your ecosystem that you buy and lever up. 

If you’re starting new ones, if you’re building all of them from scratch, which is perfectly acceptable, I would absolutely try to err on the side of having them all be related or building on top of one another or sharing the same customer base. It’s just going to make things easier in all the ways because you’re going to understand that customer base. You’re going to have shared customers, you’re going to be able to market to them just in every way imaginable. It’s going to make it much easier. So thanks for that question Bavesh. Hope that was helpful. 

As SaaS founders, we often look to our peers for inspiration, but what if your next big idea comes from where you least expect it? Imagine leveraging sales tactics from a $24 million jet chartering business or implementing SOPs from a franchiser. Suddenly you’ve got an edge that sets you apart. That’s essentially what my friends at the UpFlip Podcast do. They uncover lessons that are universal, unique and often unexpected by interviewing a broad spectrum of businesses. Take episode 27, for instance, where Ed Warren shares his journey of transforming a mobile card detailing business into SaaS from scratch. If you think about it, that’s a pretty unique approach. So if you’re ready to look beyond the conventional SaaS wisdom and stir up some innovation, check out the UpFlip Podcast. Just give it a search in Apple Podcasts, Spotify or wherever you get your pods. You never know where your next big idea will come from and it just might be a click away.  

Our next question is from Mike, and he’s wondering about co-founder equity splits and founder agreements. 

Mike:
Hey, Rob, my name’s Mike. I am a new startup founder for a potential legal software company for attorneys, but I don’t have any tech support, so I’ve been listening to as many of these 600 or so podcasts that I can. And what I’m running into is I’ve got tech people that want to be on board, not sure of the role of co-founder, CTO, fractional employee contractor, and so I’m wondering if you have a resource out there that’s good for this kind of thing for founders agreements and or setting the roles and responsibilities and pay and or equity for some guides for that. 

So hopefully that question makes sense. I’m glad I’m getting to that point to have to think about those things, but I kind of hadn’t thought about it until I got this far through with the business plan and the pitch deck and getting people interested and wanting to get an MVP. I want to get that stuff hammered out, and I also want to make sure that they’re not competing with me, they’re not disclosing things and everybody gets paid fairly. So with that, I will stop talking and look forward to your answer. Thanks, man. Bye.  

Rob Walling:
So I have a couple thoughts here. Obviously getting a lawyer involved is the right answer, but that can be expensive. It is expensive, especially at the early stage. So in the US, if I was just looking for documents, I’m not a lawyer, I can tell you what I used when I was cash strapped and I wanted agreements. There’s a bunch of places you can go and nolo.com is one, but I used rocketlawyer.com for many years for a lot of the early Drip stuff. Is it perfect? No. Is it inexpensive and convenient? Yes. So I used it and then as we got further along with revenue and things got more, I’ll say complicated, but also we had more money, I actually rewrote quite a few of these or had a lawyer rewrite them or update them so that I was more comfortable with them. 

Another option is a TinySeed company, Lexgo and they operate in South America and they are much like a Rocket Lawyer equivalent for South America, Lexgo.cl. 

And then in terms of dividing up equity or trying to figure out who gets what, I honestly have not seen much written on that. I, of course, I’ve given thoughts on that in the past, but it’s always a very specific question that I’m weighing in on where it’s kind of like, well, the business is at 20K MRR and you’ve done the whole thing and you’re bringing on kind of a “co-founder” which is really just a late added business partner. They should get X% based on things I’ve seen. It’s just rules of thumb and there’s no direct formula for it. 

But I will say that slicingpie.com started as an ebook, and it looks like they’ve now built it into a SaaS where I’m sure you could track the tasks they talk about. Basically you take a bunch of tasks or things to get done and you put a certain amount of equity attached to each one, or maybe you can do it hourly too. Haven’t read the eBooks probably since it first came out, which is eight or nine years ago, but it’s basically a method for doing what you’re thinking about. And there ar H1 at slicingpie.com is you’ve found the world’s only fair startup equity calculator. Slicing Pie is a universal one size fits all model that creates a perfectly fair equity split in early stage bootstraps startup companies. I will admit, I read it and I thought to myself, I probably wouldn’t use this. It just didn’t fit my way of thinking, but I have known a handful of startups that have used it and I really haven’t heard any complaints. So that’s about as much of an endorsement as I can give it, having never tried it myself. 

It’s always a struggle when you’re talking about equity and it probably should be because it’s one of those things that if you just hand wave early on and you say, “Oh, we’ll worry about it later,” it can get really ugly, especially if the business takes off as becomes a million, $2 million ARR business, that’s worth a lot of money. And then at that point, 1 percentage points, 2 percentage points becomes a substantial amount of money. So I am glad that you’re thinking about it and digging into it, and I hope my suggestions were helpful. And our last two questions of the day come from the same listener.  

Speaker 5:
Hi, Rob. When you were working on Drip, I noticed on your video representation on MicroConf, you had a few validations before going ahead with building Drip. How many people said “Yes, that’s what we need, and what was the tipping point for you to say, okay, enough, this is it, I’m building this?” Thank you for taking your time to answer this question.  

Rob Walling:
This feels like a pretty quick and easy answer for me. There’s a couple of different ways to validate things that I’ve become familiar with. One is to put up the landing page or put up the website and talk about the value proposition, see how many people are interested. That’s usually when it’s a marketing led startup, meaning you’re going to drive a lot of people into a funnel, get them to convert. 

The other way is to have a lot of conversations to potentially get buy-in or a yes, I would pay for that. And usually it’s like, “Hey, if I built this thing and it was $49 a month, would you pay for that? Would you at least try it out?” And then another level higher, which I haven’t done, is to actually take checks or to take prepayments and say, “I’ll refund you if we never get to it.” 

There are a bunch of different ways to do it, but the listener who asked this was asking how many people did I get to say yes? I talked to 17 people, I got 11 yeses. For me, the tipping point was at 10. I had modeled my approach after Steve Blank’s original customer development, but realistically more so after Jason Cohen’s validation or pre-validation of WP Engine. And he talked to a lot of people and he got 40 yeses. So I figured, hey, if he needs 40 and I’m building something much smaller than WP Engine, WP Engine was still pretty small at the time, to be honest. It was only a couple of years in, but I figured if I get to 10, this can definitely be a nice lifestyle business. 

Those are the only two case studies I’ve heard in detail of people telling this story and talking about getting to yeses and talking about how many they’ve had. And so I don’t know what the range is. I know that 5 people doesn’t feel like enough to me unless maybe you’re charging $100,000 a year and then maybe 5 companies is enough. I know that 40 feels like quite a few, and I know that a hundred would be a lot of conversations. So there’s some number in that range where I feel comfortable. And given that originally I was going to charge $99 a month, I felt like getting 10 people who would be willing to pay $99 a month was $1,000 of MRR. And I felt like if that many people needed it and paid that, that the rest of my audience would feasibly buy it in enough volume that it would be a 10 or $20,000 a month business. 

So do these numbers and ideas change over time? Absolutely. Do they change based on your price point, your audience, your network, the space you’re in, the industry, how many competitors there are? It absolutely does. There’s so many variables, but these are just anecdotes to help us gauge where we might want to be. Because without having heard Jason Cohen’s story and having heard my story with Drip, you kind of have no idea where to go next. And at least these guardrails can help you think, well, if I’m going to validate an idea that way, maybe I’ll follow in the footsteps of Rob and Jason. And our last question for the day is about whether to start a podcast.  

Speaker 5:
Hey, Rob and team, I have a question regarding building an audience. With AI, making it harder to publish and build an audience, do you think it would be worth working on a podcast or YouTube channel to build your audience in anticipation of releasing the product? Thank you. And I’m also looking forward to reading your new book.  

Rob Walling:
So I will admit, I don’t think AI necessarily makes it harder to publish and build an audience. I mean, I guess it means more people will crank out more crappy content, but I’ve never built an audience competing against crappy content. I’ve typically competed against pretty competent folks who are putting their all into writing ebooks or writing blogs or putting out podcasts or putting out video content. So while AI is that accelerant that can maybe help people get further, I don’t necessarily agree with the premise of the statement that AI is going to make it harder to build an audience because I think a lot of AI generated content will be mayonnaise, bland. Unless you really know how to write a good prompt, trying to captivate an audience with bland content, it doesn’t work. 

So then the second part of your question, I also, I guess I don’t agree with the premise of this, that you should build an audience at all in anticipation of releasing your product. I mean, if you’re building a B2C product, then of course build an audience of consumers, virality. This is where the B2C tools come into play. But if you’re selling a tool to businesses to solve a problem? I guess if you are exceptional at YouTube and or podcasting and you’ve done it before, you feel like you really want to do it and you’re going to do it in the specific vertical or the specific niche where you are going to serve customers and you really want to do it, then do it. But you’ve heard me say on this podcast many times for B2B SaaS, build your network, not your audience. 

Of all the companies we funded at TinySeed, 131 companies, it was a less than 5% that had an audience when they launched, or even as they grew. And I mean an audience that say followed the founder or followed the brand and was consuming all the content that they were putting out. By far, the vast majority of successful B2B SaaS companies are built on the top five, the big five, as I call them in my book: content, SEO, cold outreach, integrations partnerships, and ads. 

These are not as fun as starting a YouTube channel or podcast or starting a community of entrepreneurs or going on a podcast tour, which can also bring in people. There are marketing channels that you should do like eating spinach, and there are marketing channels that you want to do like eating ice cream. And I gave the example of someone, what was it, five, six episodes ago? About one entrepreneur who built a directory of freelancers and one entrepreneur who built a community of freelancers. And one of those was objectively a better choice. And you can go back and listen to that episode. It’s the most recent Rob solo adventure. But that’s where I have a podcast in a YouTube channel. But you shouldn’t necessarily do it because I do it because I’m not growing a B2B SaaS currently. 

Did I start a podcast or a YouTube channel for HitTail or Drip? No, neither of them. I happen to have this podcast going, but this has been a hobby now for 13 years. So if you want to, I guess, follow the indie hacker dream of, “Hey, I’m going to launch on Product Hunt, Hacker News Reddit, and then I’m going to have this audience on a podcast on YouTube channel, and I’m going to build a product that basically serves other indie hackers, and the churn’s going to be very high, so I need a really wide funnel. So I need to be one of the top two to five independent solo entrepreneurs.” Micropreneur is what I used to call this. I was doing this from 2005 to 2011. And if you want to be that individual, then yes, you should build an audience. 

But if that’s not going to be your approach, and you want to build a long-term sustainable, ambitious SaaS product that grows over time, and you can implement the stair step method of course, or you can build that B2B SaaS and then put to work the SaaS marketing approaches that I talk about in the SaaS Playbook or that you might find in a book like Traction or in Sean Ellis’s book Hacking Growth. 

So I guess to answer your question directly, do I think it would be worth working on a podcast or YouTube channel to build an audience in anticipation of releasing a new product? And if it’s an info product, then sure. And if it’s software, if it’s B2B SaaS, then no. I’m not saying it won’t move the needle at all. I’m saying there are so many other marketing approaches that you can invest time in that will create a flywheel and create a better opportunity for your SaaS to grow. I will admit the audience first approach I think is amazing for info products, for courses, for anything that relies on a personality. But we talk about audience first. What about SEO first? What about cold outreach first? What about pay-per-click advertising first? What about content first? What about partnerships and integrations first? 

These marketing approaches can be built in advance of building a product. I have a couple of founder friends who I mention on the show pretty regularly that built up flywheels, not of an audience, but of other marketing approaches before they even launched a product. And it gave them an incredible, basically, a slingshot effect when they actually brought the product to market. So thanks for those questions. I hope my thoughts were helpful. At the sound of the tone, this episode of Startups for the Rest of Us has come to a close. Thank you so much for joining me again this week and every week. I’m Rob Walling, signing off from episode 676.

Rob Walling:
It’s Startups for the Rest of Us and I’m Rob Walling. This week I have a great conversation with Stephen Steers. He’s the author of the new book, Superpower Storytelling: A Tactical Guide to Telling the Stories You Need to Lead, Sell, and Inspire. We get a lot of pitches from authors wanting to promote their book on startups for the rest of us, and frankly, we don’t interview almost all of them, but Stephen is someone that we sought out based on his resume, his experience, and frankly the quality of the book that he’s written. 

This is another one of those short and sweet manuscripts, 150 pages, so you can read it in an afternoon or on an airplane, and he really focuses on how to shape stories around selling, around positioning, around talking to prospects, getting customers excited to buy, and then even has some tips at the end of the book about how to be the most interesting person in a room, some thoughts on humor because as you’ll hear in the interview, one of Stephen’s hobbies is standup comedy. But what I like about Stephen’s experience is he has boots-on-the-ground experience selling and then as a consultant teaching startups how to sell better and he’s put that experience into the book. So with that, let’s dive into our conversation. 

Stephen, thanks so much for joining me on the show.  

Stephen Steers:
Thank you for having me, Rob. It’s a pleasure to finally meet you.  

Rob Walling:
Yeah, so we were talking offline and you mentioned that you had recognized my name vaguely and Start Small, Stay Small. That’s such a cool connection. You read it years ago?  

Stephen Steers:
Yeah, I don’t remember how I came up to it. I think it was 2016, 2017, something like this during my wantrepreneur stage, thinking about frameworks and everybody’s raising all this money in venture capital, and I was like, “I don’t have a good idea. I don’t know what to do. I don’t know how to start,” and somebody mentioned the book to me, I bought a copy, and it just really succinctly brought out how you could bootstrap, ways to think about accountability, goal setting, and just there was no fluff, which I really enjoyed, and I have to say, especially in the venture space and startups, everything’s sexy and fluffy and all this other stuff and this was like, “Nope, here’s how you do it. Here’s how it works, here’s why it’s going to work. Here’s what I’ve done,” and an incredible book, and just funnily, as we mentioned at the start, I actually did a book review of it on my YouTube channel in the very early days, and it’s one of my higher-rated views on my tiny YouTube channel, so thank you for writing it and it’s still singing out there in the universe.  

Rob Walling:
That’s great, man, and it’s such a trip how these things happen ’cause it’s purely we found you, I think producer Xander probably, or producer Ron, found a YouTube video of you doing some talks on sales, B2B sales, a lot in software, and anytime we, we being MicroConf and this podcast, can find just a new name, a new voice talking about these things. There are only so many of us and it does get old hearing from the same people, including me over time and anytime I can bring someone in who’s an expert on sales, who’s an expert on pricing, who’s an expert on branding, who’s an expert on positioning, marketing, whatever it may be, product, I love having that conversation, so I’m really glad to have you on the show today.  

Stephen Steers:
Thanks again for having me.  

Rob Walling:
Speaking of books, you just wrote your own, Superpower Storytelling, and it’s a book about how to learn… Well, I’m going to summarize it and you tell me what I miss. It’s about how to tell your story of your company, how to tell your story of your company’s mission and how that can help you sell both to prospects, sell your actual software, if you want to raise investment, how to sell to investors, how to sell to your internal team to keep them motivated, and how to sell to potential hires because to convince someone to leave their job and come work, “Hi, I’m a four-person company, come be employee number five,” right, it’s always a selling job. Did I do a decent job? What did I miss in terms of the manuscript?  

Stephen Steers:
Pretty much on it. The only thing I would add is it’s not just your company, it’s about you because the most interesting thing about what you do is who you are. So there’s plenty of developers who can code like the wind, but you and your specific story and why this problem and what you want to actually build is what enables the right people to be like, “You know what? Yeah, I’ll quit my corporate job and be employee number five because you’ve really outlaid this thing in the right way. I need to be a part of this.” So storytelling is one of the vehicles that really helps with that for sure.  

Rob Walling:
And so someone listening to this, let’s say a left-brain developer type who is cranking out code and getting some traction, maybe with a co-founder, 10K a month, 20K a month, they might be thinking, “Well, why do I need a story? Why can’t I just solve a problem? My software solves scheduling problems for hair salons and I’ve landed 50 hair salons,” and I really haven’t told them a story and I’m just here to fix it.  

Stephen Steers:
Why?  

Rob Walling:
So what’s the impetus? Yeah, why? What’s the why here?  

Stephen Steers:
Yeah, why the heck would I tell a story? I think that’s a great question and the main reason I think a story works really well is because this is something I’ve seen across the board with the hundreds, if not thousands of startups I’ve encountered or worked with, especially developers, so no shade on you guys. You guys are brilliant. You can do things that I can’t do yet. People who develop generally think that people care about the product, which they do, but not before they care about what problem it solves for them, so when you’re solving a problem for somebody, if I’m not a developer and I run a hair salon, my problems are probably I want more customers, I want a higher amount of money that I get from each customer, I want to be able to follow up with them and invite them in and enable them to tell other people about how well I cut their hair. 

Telling me, the salon owner, the story of how you met Sally, who had the worst time finding customers and keeping her bookkeeping straight and how when you met Sally, she was at X revenue and having this much stress, and now after of when you got your software and how Sally’s able to hire more people, get another franchise going or something, that’s an outcome that me as a listener, a story that I want to see myself in. 

So there’s a quote I really, really like. I mentioned this in the book. It’s by a guy named Horace in the ancient Greek times, he has a proper Greek name, I just don’t remember it off the top of my head, but it says, “You need only change the name and you are the subject of the story,” so if you’re selling anything, no matter how great your product is, I don’t care about it until you show me the outcome your product’s going to help me get to, and telling me a story about that outcome, that’s when you really start to resonate on a human level and you start to get someone into an emotional state, which is how 95% of purchasing decisions are made. So you can solve a problem, you’re great at it, tell me about how you did that for somebody else in the form of a story and you’re going to get not only more resonance with the market, but they’re going to be able to tell other people the same story and then get you referrals and put business in front of you and your company and your story does the work for you instead of just you making more product. That’s what I’ve seen happen,  

Rob Walling:
Right, and that’s the magic of stories, right? I read Made to Stick by the Heath brothers, Chip and Dan Heath, I believe. They talk about how stories are so memorable and so if I tell you a bunch of facts right now and you need to go convince someone else at your company because you need three people to buy in to buy the software.  

Stephen Steers:
Seven, usually.  

Rob Walling:
Seven, you’re not going to remember the facts. But if I tell you a story, they can at least halfway retell the story, right, in a reasonable way.  

Stephen Steers:
Exactly, yeah, and I think it’s 60 to 70% of information is retained when told through story. Hilarious to cite a factoid to tell that, but you get the point.  

Rob Walling:
Makes sense, yeah. And so folks listening to this, you’ve written a book on this topic. What’s your background that got you here? I know, I mean, you and I were talking offline, you’re a sales consultant, you help a lot of B2B companies grow and you obviously have a lot of experience in that, but I guess it’s like this is the question I often, my second slide of every presentation I do is, why should you listen to me? So teeing you up here.  

Stephen Steers:
Do you want the long version or of the fun version?  

Rob Walling:
Let’s do the fun version.  

Stephen Steers:
The fun version, okay. So I started in sales probably eight or nine years ago just doing an SDR, which is a sales development representative. I was the cold-calling guy, sending all the emails, sending all of the communications to set meetings for an account executive. I say it’s the equivalent of setting up somebody else for all the dates and they get to have all the fun on the dates and everybody else is getting laid but you. 

It was a very difficult job. I learned a lot and I didn’t have as much training as I wanted and I was vocal about not having training and eventually I got let go of the company and I got a note from the founder about how he saw I got the short end of the stick with management, with territory, and with verticals, but he hoped I had a great time at the company, and I laughed about this many years later because it’s like, “Man, you knew that this was going wrong. Why didn’t you do something about it?” 

So over that time, I got into other startups where I was selling software. I got into the consulting side, was running sales at a consulting company, and it was clear that lots of startups had the exact same issue. So my general mission, why should people trust me? I hope you do. But again, it comes from almost a decade’s worth of experience selling myself and failing at selling because I didn’t have the frameworks and scenarios that I now teach people to have. 

So in essence, I think a lot of people, one of the ways people start companies is to be the help they didn’t have and that’s very much why I do it because I work with developers every day. I’m a scrum master too, so I actually, like developers, I used to go and sit on the scrum meetings and just learn how you’re talking about the product. Are we building this the right way? What does a roadmap really mean? If I’m going to be selling this, somebody wants this feature, I can speak in a very educated way about, “Actually, that’s probably two years down the line and here’s why,” and that built a lot more trust for me in a sales perspective. 

So anyway, why should people trust me? I’ve made a lot of mistakes. I talk about some of them in the books, and I think it’s all in service of you being the best founder at whatever you can be based on leveraging who you are is the most interesting part about what it is you do.  

Rob Walling:
And if folks want to pick up the book, they can go to stephensteers.com. It’s S-T-E-P-H-E-N-S-T-E-E-R-S dot com / superpower storytelling book. We will link that up in the show notes, of course. I’ll mention that again towards the end, but I want folks to, if it’s, “Shut up and take my money already,” you should be able to get there. 

Stephen, you just mentioned frameworks, right, mental frameworks. I’m a huge fan of them. I love reading them because they allow me to understand things quicker. To me, it’s like a story that’s a little more technical. It’s like a shortcut to getting to an idea. I can see it in my head. You have a framework called the AREA framework and you talk about how powerful storytelling has clear structure, stories have arcs, ups and downs, et cetera. It always feels weird for someone to read your book to you. It’s good stuff.  

Stephen Steers:
I’ll take it.  

Rob Walling:
So you have A, R, E, and A. Do you want to talk us through what those mean and why they’re in that order, basically?  

Stephen Steers:
Yeah, absolutely. One of the things I often hear from lots of people who get on the phone or start selling or do presenting or go on podcasts is they don’t know what to say and then they may get stumped in a situation where they don’t actually know the answer or have to think. The AREA framework is named aptly because it covers all scenarios that you may be needing to communicate something and don’t want to sound silly. 

So A stands for “angle,” so you’re going to state your angle on an issue. Let’s say it’s bootstrapping a company is better than raising venture capital. That’s our angle. We then followed up with R, which stands for “reason,” and then you can offset a reason to anything to say, “The reason that bootstrapping a company is better than raising venture capital is it gives you a lot more freedom of your business model.” Then we’d followed up with E, which is an example. So an example, this is one of the best places to put in your stories or your situations and scenarios and make it real to you. 

So it would say something like, “A quick example of this would be my own company, so because of the fact that I didn’t have to actually take on venture funding, I was able to actually go out to the market, validate my idea using this start small stay small framework by actually talking to customers and pre-selling my ideas, and because I was able to pre-sells, actually to get able to get revenue into the door to then reinvest and build my company versus having to hope that somebody got it and bringing that over to a venture capitalist hoping that they would send me some money, and that’s why I believe that bootstrapping a company is better than getting venture capital.” So A again is restating your angle. 

So A-R-E-A, AREA, angle, reason, evidence, and restates your angle, that’ll give you a framework to make any point you want to make and you can also think while you’re speaking and you don’t sound like you’re thinking when you’re speaking and I made all of that up off the top of my head as we went.  

Rob Walling:
I was going to give you a clap on that ’cause yeah, it was just off the cuff. We did not prepare for this, folks, so that is, I think, you embracing your own storytelling framework ’cause you just told a story right off the cuff. It’s pretty impressive, man.  

Stephen Steers:
That’s it. That’s what it’ll teach you.  

Rob Walling:
Yeah. All right, so we have AREA, and obviously, you dive deep into that. You have almost a whole chapter on it in the book. There’s another section that caught my eye and it is about the problem stack. It’s a little later in the book. Can you talk us through that? ‘Cause I read it and I was like, “This is really…” It was that thing. You know when you read something you’re like, “Oh, of course,” but no one’s ever said it this way before? So you want to talk us through what the problem stack is? It’s during your sales process, right?  

Stephen Steers:
Yeah, absolutely. So first and foremost, it is not my model. I learned it from a guy named Taki Moore through one of my mentors, Scott Sambucci, so they helped me get that, but it’s super important, and it’s on three levels. So when we think about solving a problem, right, these developers, they build incredible software, they got it to 10 to 20K a month. They’re kind of figuring out, “Well, look, we could stay here, it’s lifestyle business, but if we want to grow this and move this and make this SaaS something that really changes our lives and our future generations and all this other stuff, we need to be thinking about problems in different ways.” 

So the problem stack outlines that and the three levels are the following. So it’s the known said problem. So for an example, it would be a salon owner has trouble retaining clients or getting clients back. It’s the problem that they’re going to talk about openly. It’s not a secret. Everybody knows this is a thing, no one’s hiding this. 

The second level of the problem is the known unsaid problem. This is the problem where maybe you as a developer would only talk to really trusted people about that problem because it’s something that maybe you’re a little ashamed of or you’re just not sure if it’s the right thing and you don’t want to put yourself out there that way. If you can in your marketing or in your storytelling unlock a problem like that, you’re getting people to be like, “Oh, you understand me,” so that’s the second level of the problem. 

And then the third, the most important and probably the most difficult one to find, especially if you’re in the software space, but if you can find this one you’re in for pay dirt is the unknown unsaid problem, and this is the problem that once you explain to people, to salon owners how this particular lack of software is causing them to not only lose clients, to lose good stylists, and to cause their rent to go up, once they see that problem and you’ve explained it to them, they can’t unsee it, so everything else in their business is now viewed through that lens. 

And again, if you can tell stories that unpack and help people go through this ascension ladder of understanding the problems that you can see because they can’t, you’re extremely valuable, and then everything is predicated on, “I need to solve this problem. Oh, my gosh, how did I not see this?” And I think storytelling is a nice, kind way to push people towards those outcomes, or rather invite people towards those outcomes with you as the logical person to solve those problems.  

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Stephen Steers:
So the problem stack I think is really analogous to your book, Start Small, Stay Small, because we talk about validating a problem before you build any software, right? A lot of folks will go into the basement and just start coding. It’s like, “Ah, I think this will work,” and then they hope people find it and buy it, which doesn’t really happen to most of us. 

But when you take the idea of validating and you actually get out and talk to people if you ask the right questions, right, this is kind of why I love sales, I’m curious, I love to ask questions, and when you can find a word or phrase, and pardon the word choice here, but pick at the scab, “Tell me a bit more about that, why that?”, you’ll start to have people just tell you about where those levels of the problem are and what’s really important about leveraging your framework to validate ideas is the more people you talk to is the more patterns you see in the market, the more of a pattern you see in the market is where you’re building something that people will use and want to solve their problem with. 

Not only that, if you actually talk to people, you build relationships with people, so when you do have a ready product, you already have buyers, not the other way around, so I think leveraging that and talking to people and hearing them speak about the problem the right way, it’ll give you all the stories you need to tell in your marketing and it will give you the right words to use that resonate with the people who will actually buy your product and tell other people about it.  

Rob Walling:
Yeah, like that. And what you’re talking about is not just, it’s not just sales, it’s a mix of sales and almost customer development, it sounds like, where you’re getting feedback that’s probably going to impact what you build, how you build it, and how you sell it. Would you say that’s accurate?  

Stephen Steers:
I would absolutely say that’s accurate.  

Rob Walling:
And so I can imagine as a founder, there’s a lot of founders listening to this who are in this space, in this state where they’re like, “Ooh, I just don’t know what to build next,” and they are having these conversations and let’s say they get to the point where they are a bootstrap founder and they’re making 10K, 20K a month, they’re doing pretty well for themselves and they think, “You know what? I don’t like sales. I want to delegate. I want to delegate sales.” Do you have a sense or an opinion on when the founder themselves can start handing this off?  

Stephen Steers:
I do, and I don’t think your audience will like what I have to say, but I’m going to tell you the truth, that’s my goal here. So the way I think about it and the way I was taught to think about it is it really depends on your revenue scale, all right? So these aren’t hard and fast rules, per se, but this is how I would think about it. If you are in the zero to 300K, the only things you should be outsourcing are tasks that don’t have to do with sales. This is you doing bookkeeping, automation stuff. You should be doing all of the selling if you’re at that level. The only exception to any of these levels I’ll mention is if you have a ton of leads and you as the founder can’t take care of the volume, then it makes sense to outsource and I’ll explain a little bit more about why in just a second. 

The second level is 300K to a million. This is when you start to potentially outsource some sales. This would be where you’re outsourcing the appointment setting depending on your ticket, of course, and then customer success, so the fulfillment side and the onboarding and that stuff. 

From a million to 3 million, you actually can hire full-on salespeople. You run the process tip to tail and then you would manage them and then 3 million plus is when you’d hire a VP of sales who runs the whole thing and they just pass reporting on to you. 

The reason I say it needs to kind of be in that general level of zero to 300K, again, depending on what you sell is most people make the mistake of hiring sales too early. People don’t like selling, they want to get rid of it and they’re just like, “All right, you come in here and you do it,” and the problem with that is usually how I’ve seen with many startup founders, especially SaaS folks, they don’t document what worked well and how an actual deal should go through, literally from first contact to signed contract. They don’t have scripts, they don’t have templates for follow-up, they don’t have their products properly outlined in descriptions, and that might not sound like a lot, but you have to think, when I’ve been a rep, I’ve been hired to get into companies to sell, right, and then they give me a quota and I got to go out here and do my thing. 

And then when we dive into it’s like, “Well, why did customers buy this?” “Oh, we’re not sure.” “Okay. Well, who’s the ideal client for us?” “Well, the ones that have money.” “Okay, where do I find more of those?” “Well, that’s your job.” “Okay, I’ll take it. Fine.” But that’s not a sales job. That’s a business development job. And I think a lot of founders hire salespeople, but they’re actually hiring business development people because business development, my definition here, is the person who figures out what is sellable in the market, how the market’s talking about it, and what will make this solution commercially viable to be purchased. 

Once that process is run at least 10 times and we have recorded systemized versions, it doesn’t have to be anything special or fancy, but once we’ve documented that, now we can hire someone into sales, not before, because I’ve been hired into roles like that before and I wasn’t set up for success. I had some level of success ’cause I was very hungry, but that took money out of my pocket and out of the company’s pocket because they didn’t do the pre-work of saying, “Hey, you’re now part of the team. Here’s how we do it. Take this, study it, and come back with questions,” and everything’s laid out. 

So I would say to any founder, if you’re thinking about hiring for sales, kudos, make sure you’ve met certain thresholds, but at least have done it yourself 10 times and have that documented from tip to tail as much as you can so that when you do bring someone in, they’re there to make what you’ve already done better, not make what you haven’t done.  

Rob Walling:
In the book, you talk about the four reasons why businesses buy, so this is B2B, and the first is make more money, second is save money, the third is increase efficiency, and the fourth is to mitigate risk, and you give examples of each of those. Have you found that one of those is the best or better than others?  

Stephen Steers:
No, not at all, and the reason for that is I also cite a stat in there, I think it’s about seven people need to agree to buy a software solution. Again, this is probably in the SMB and enterprise space. If you’re talking about growing your SaaS, you want to get up to that. But let’s just say multiple people, more than one person needs to say yes to buying your software solution, right, which means each person in a company is going to have a slightly different metric or KPI that they’re shooting for in their role. So the CEO certainly cares about making more money, right, increasing the bottom line, whatever, the CFO’s probably going to want to save more money because they get comped on that bonus. Someone in a different department who’s going to be using your software wants to make it more efficient. 

So your software solution can do all of those things, but the key is to be able to tell a story about how your solution does each of those things, depending on who you’re talking to, because at the end of the day, we’re humans solving human problems in a business context and if you can talk to me as a human about how your solution helps me in my role, I’m listening, and that’s the reason you’re going to want to have and understand how your business does all of those things, depending on who you talk to ’cause it’s not just one size fits all. And that’s the other thing, we could talk more about this, too, but a consultative sale is asking the questions first and then being able to talk about how your solution ties to the outcomes that that person has based on the questions you asked.  

Rob Walling:
Let’s continue with that. Some listeners may not have ever heard the term “consultative sale.” How is that different than I’m selling whatever? What does that mean?  

Stephen Steers:
Yeah. Oh, man. I love this one. Sales is a four-letter word to most people, right? They hate doing it, they just want to stay as far away from it, and salespeople are icky and annoying and pushy and gross and I agree and that’s part of why I do what I do ’cause I want to be a difference in that and help people enjoy selling again. But consultative selling is, I think the first part of being a good consultative seller is how you open your call, right? So if you’re on the phone, I’ll give you an exact example of how I would open it. “Hey, Rob. Great to be here with you today. I have a super light framework for how I want to run this call. I want to learn a little bit more about you, ask some questions about you and your company, want to share a little bit about us and what we’re up to, and if there is room for a conversation for us to have about working together on anything we talk about today, I’m here for that as well. Is that fair?”  

Rob Walling:
Sounds good.  

Stephen Steers:
Boom. So what did I do there? I set up my next steps with talking about, “Hey, we’re going to talk about if this is a fit, we’re going to have that conversation at the end.” I don’t have to rush into a sale. I’ve also given you the out by asking for your permission on that. So a consultative seller sets the agenda, as it were, and then you ask questions that invite pain, if you will. “What’s agitating you? What’s going well? What’s not going well? Where do you want to go?” Then painting a picture of what the overall goals are of the business, why the person doesn’t have those things. And then after you’ve got that information, you can now speak accurately with truthful information to how your solution or solutions help solve the problems the person had. So that is a consultative sale and you’re not pushing it on it. We talked about, “You mentioned that you had this problem with your salons. Here’s how our solution can help that be a thing of the past.”  

Rob Walling:
And is consultative selling, in your opinion, is that the best way to sell, let’s say B2B SaaS to SMBs or enterprise?  

Stephen Steers:
I’m going to give you a consulting answer here, Rob. I think it depends, so it depends on your ticket price. Some folks I talk to, they sell something that’s $25 a month, you’re not getting on the phone for that. That’s not worth it. That’s more marketing and great content with storytelling, I think.  

Rob Walling:
It’s a funnel.  

Stephen Steers:
Yeah, it’s a funnel, right? If you’re selling something over a thousand, $2,000, you’re probably going to have someone who’s going to get on the phone and talk to you about it. I think a consultative sale is the best kind of sale because it doesn’t force people into decisions, it logically walks them and also emotionally walks them through why this is the best way to go forward. It’s not pushy. 

And again, this is another thing to think about, too, if you do get on the phone with folks and you’re pushy, that’s also a story they’re going to tell the market about you. “Oh, don’t talk to this guy. He was really just trying to close me really too hard. He was not consultative, he didn’t ask about my problems, and was just trying to get me to buy today. I felt really uncomfortable. Don’t do business with this person.” 

So I think it’s the best. That’s how I sell, and again, I think it’s also predicated on I might not be able to help you. Let’s find that out first. And I think sales is all about know, like, and trust and building a long-term relationship, so, “Hey, actually you know what, Rob? Based on everything you said, I’m not the right person to solve these problems. I may know somebody, which I’m happy to introduce you to, but I wanted to be very upfront and direct about that.” And most people are like, “What? You’re not going to try to …? Really? What, are you serious?” And that’s how you build trust and you get people to be like, “You know what? I wasn’t a fit, but I know 10 people who would be a good fit for your business.” That’s a great way to get referrals if you could do it the right way.  

Rob Walling:
And it feels good. It makes sales feel legit and just like you’re being honest. I like that.  

Stephen Steers:
Yep.  

Rob Walling:
So as we wrap up, I want to talk about, I think it’s the last section of your book. It’s about humor. And you have in your bio and you told me offline that you do standup comedy, you’re a standup comedian, and so I imagine humor is a pretty important part of your life, but I’m curious in business context, in selling, have you used humor to your advantage? And the second part of that is do you think people can learn to be funny? Or what is the process there? ‘Cause I sometimes try to be funny and I find out that I’m not. So just talk me through that. Has it been an advantage to you and how can folks take advantage of that?  

Stephen Steers:
First thing to say is sometimes I try to be funny and I’m not either, so that’s what the world will tell you.  

Rob Walling:
Nice.  

Stephen Steers:
But it certainly has worked to my advantage in some ways, especially in workshop settings. You mentioned at the start of this, it’s really cool to get new perspectives from different types of people, right? You’ve heard the same thing over and over and over again. I don’t want to say a lot of the information I share or most people share is the same, but we can definitely change the recipe and so what I find is if I can give you the hard medicine of, “Hey, you’re not making enough money to outsource sales, but we can make it funny and interesting,” you take the lesson in a better and different way. It goes home with you in a positive way. So I think as far as humor is concerned, the way to leverage it is to, it helps people build relationships like, “Oh, that guy was funny.” It helps me get asked back for workshops like, “Oh, that was fun. I enjoyed that. Let’s come back again.” Right, so that’s the first, it’s inviting, humor is. 

As far as people who aren’t funny, that’s okay. There’s a difference between being funny and using humor. So being funny, right, you could think of your favorite standup comedian or your favorite sitcom or whatever it is and these people are just cutting up and you can’t hold it in, that’s a very different thing than telling jokes. So jokes are kind of a structured thing. I go into this a little bit in the book, and again, I’m still learning as well, but I think especially, I wrote one in there about SaaS founders, I think, for the joke. But if you use humor in a self-deprecating way, people love it. It’s like, “Oh, you don’t take yourself too seriously.” It’s a good way to bridge. 

So I think for people who aren’t funny, I go over a slight framework in there in the book. I think the acronym is the best and fastest way to turn something funny, even if you’re not funny, and you can use it in stride in your talks or in the way you sell to people because it’s an acronym they might know. Right, that’s the easiest way, and I think it’s the easiest way because there’s the innate idea of what they think it already means, and humor, good humor, good jokes, leverage, misdirection, so the fact that you’ve changed it automatically creates a dissonance where there’s room for a laugh and a chuckle. So I think everybody can use it. Again, if it’s off-brand for you to be funny, really think about how that works. But I find it is one of the coolest instruments to build good relationships with people, and at the end of the day, people smiling and enjoying whatever it is they’re doing with you, that’s what we look for.  

Rob Walling:
Yeah. Yeah, it raises the game of a conference talk of a workshop of a sales call. And for the record, I have your SaaS joke here. I love this. You have a whole explanation of how you construct the joke and why and you say, “Let’s make it self-deprecating,” specifically, and so the joke is, “I’m a computer nerd. I’ve built software since the age of 12. It’s hard to get a date. I live a SaaS founder lifestyle. To some, it means software as a service. But in my experience, SaaS means sometimes alone, always single,” and then what I love is you have this comment that says, “Not bad, not great, but it’s a start,” and it’s real self-reflective, so I appreciate that. That whole last chapter is about, right, or maybe it’s second to last, but it’s about how to think about and construct jokes when you walk through your process of, “Here are the facts. How do we try to make those funny?” Which I think it’s a pretty cool thing to have in a sales book.  

Stephen Steers:
And then adding one other level to that, you’re going to fail at it most of the time with jokes. It’s just how it works, unfortunately. But I’ll say this about it, I love standup comedy, I have for many years, but I think if you are a founder, it’s one of the things you should absolutely try and here’s why. As a founder, you’re mostly alone. You’ve got to figure out what information is important information and take it back and use it and you always have to stand on your square and own where you are, whether you’re winning or losing. And I think entrepreneurship is really a feedback game. If you’re having the right type of marketing, you’re making the right type of actions, the market will respond in kind. 

The fastest place you get a response in any performative art is standup comedy. If it’s funny, people are going to laugh. If it’s not funny, it’s going to be crickets, and I think taking those two dichotomies, you bring that back into your process and you say, “All right, no, I think that was funny. I need to try it another way.” Or, “This feature is really important to the market. I know it’s worth something. Maybe I need to ask a better question to the next customer to understand how they would use something like this.” So I think they’re very analogous to each other and it’s just fun, so I highly recommend it.  

Rob Walling:
It’s like finding your sales pitch is like audience testing and trying to find your tight five, right? That’s it.  

Stephen Steers:
That’s exactly it, yeah.  

Rob Walling:
Amazing. Stephen Steers, thank you so much for joining me on the show today. If folks want to buy your book, it’s at stephensteers.com/superpowerstorytellingbook, and we’ll link that up in the show notes, of course. And you’re on LinkedIn. You said if folks want to DM you on LinkedIn, that’s a good way to get ahold of you and to follow you?  

Stephen Steers:
That’s a great way, yep.  

Rob Walling:
Sounds great. Thanks again for coming on the show.  

Stephen Steers:
Thank you for having me, and thank you for doing what you do as well out here. Appreciate you.  

Rob Walling:
Thanks again to Stephen for coming on the show. As a reminder, you can head to stephensteers.com to learn more about him and thanks for coming back to this show this week and every week. This is Rob Walling, signing off from episode 675.

Rob Walling:
It’s another episode of Startups for the Rest of Us. I’m Rob Walling, and this is Hot Take Tuesday. That’s the show format where I invite Tracy Osborn and Elnar Vollset onto the podcast, and we discuss recent news stories that impact our bootstrapped and mostly bootstrapped SaaS community. In this episode, we talk about how SparkToro has paid back their investors. We discuss a piece that tries to talk through the pros and cons or really just the cons of raising venture capital. 

Then we look at a blog post from Fly.io where they talk about how they raised a bunch of money and why they did that. Finally, we talk a bit about Twitter and X.com or whatever we call it these days. Before we dive into that, my book, The SaaS Playbook, is now available in most places that greater books are sold at least online. SaaSplaybook.com is a place to go if you want to support me directly, and I’m selling PDF, EPUB, audio and paperback copies from the site. 

Paperback copies, unfortunately, I’m only able to ship in the United States, due to the unnecessary complexity and cost of our worldwide shipping and customs situation. But the book is also now available on amazon.com in Kindle and paperback, and it should be available on Audible as an audiobook. If you go to SaaSplaybook.com, buy directly from me, of course, that’s where I don’t give a 30% to 75% cut. You heard that right, 30% to 75% cut depending on the format. 

I actually did not know that on Audible, they take 75% of the royalties, even though I wrote the book, I own it, I recorded it, produced it and all that. But if I agreed to not sell it anywhere else, they only took 60%, so I get 40%. If I wanted to sell it somewhere else, such as on my own website for example, then they take 75%, but it is what it is. Buy it in whatever format suits you best. I really appreciate your support. 

This book distills all the stuff I’ve learned about building SaaS companies, where they’re bootstrapped, mostly bootstrapped. Or even I had a friend of mine who’s working at a venture-backed startup, and he said that if it’s SaaS, it applies to you. Another one of my friends is the CEO of a SaaS company with about 10 people, and he bought it for his entire team. He said, “I know you wrote this aimed at founders, but I actually think it can give everyone in an organization an idea of how your SaaS company runs.” 

Buy one, buy 10, hand them out to your team, SaaSplaybook.com or amazon.com. With that, let’s dive in to this week’s Hot Take Tuesday. Here we are back again, another Hot Take Tuesday. Tracy Osborn, @tracymakes on X.com, On Twitter. That is our first story. Thanks for coming back, hanging out on the pod with me.  

Tracy Osborn:
Yeah, happy to be here. Excited to rant and yell at Elnar and have Elnar and I yell, and you keep us on track as much as possible.  

Rob Walling:
Indeed.  

Tracy Osborn:
As per usual.  

Rob Walling:
That’s the wrangling job I have. Yep. Elnar Vollset, coming in live from Europe. How are things, sir?  

Einar Vollset:
Things are good. Thanks for having me. I’m excited to be back and ranting and raving as usual.  

Rob Walling:
Excellent. We have a good story docket today. First one is Elon Musk. We’ll see how well this ages. This episode goes live in a couple of weeks and knowing Elon, things will change from day-to-day. But as of right now, breaking news, Elon Musk replaces the Twitter bird logo with X, with an X that, I don’t know, it just looks like an X. 

Then X.com/robwalling leads to my Twitter account. Is it like a rename? I’m not actually sure what’s happening, but it’s rocking the world and people on Twitter are eye-rolling and looking to Threads. @tracymakes, what is your take on this story?  

Tracy Osborn:
I have some fun facts. A, the X that they’re using is literally, it’s one of the Unicode characters.  

Rob Walling:
Cool.  

Tracy Osborn:
It tells you some of the thoughtfulness that went into this start of a rebrand, very Elon Musky. It’s also interesting to note, that I don’t know the whole story on this. I just remember reading some thoughts on this, is that this is something that Elon wanted to do in PayPal days, so rename PayPal to X.com. That obviously didn’t happen. 

It’s clearly a dream of Elon to have a product that is under the X.com umbrella, and here is his opportunity to do it. There’s some implications here. Is it going to be are we going to be not calling it Twitter anymore? Is it going to be X.com? Is it going to be just X? Are we going to have tweets? Are we going to have X’s, which is what he said on his account recently?  

Rob Walling:
X’s, all my exes live in Texas though, don’t they? Sorry, might need to cut that. I love it, Elnar, just chuckling.  

Tracy Osborn:
I think you could cut it or you could leave it in.  

Rob Walling:
It’s off to a great start.  

Tracy Osborn:
Because it is a good point of how we have this vernacular we’ve been using for how many years has Twitter been around now? We’ve gotten these words, they’re in the dictionary, I want to say. Tweets are in the dictionary, the word tweet. For any company, that would be an absolute branding win. 

It’s really interesting to see this bull in a China shop approach continuing to happen, now with moving on of such a brand and such a part of our ecosystem in the tech world. Now making a lot of changes under the hood, and now making these very public faces’ changes that are going to make it more complicated for people to use it. 

That actually might be the point, I don’t know. This literally started happening last night for me, so I’m still wrapping my brain around it. It’s interesting, I’ll say.  

Rob Walling:
It’s a social media platform that we’re all familiar with. Sometimes when there is a rebrand, I’m like, “This makes sense. It needs a refresh.” It needs a new name is always a stretch, but new branding, new updated design or whatever. 

This obviously came out of nowhere for a lot of people, and I don’t tend to get emotional about these things. Remember when Figma sold to Adobe and people are like, “Oh my God, this is the worst, I’m so angry they sold this out”? I just don’t care, even as a Figma user.  

Tracy Osborn:
But were you an Adobe user? Because the whole point of Figma is people getting off. I say this as a designer, whereas everyone’s just like, “I want to get off Adobe,” and then Adobe pulls it back in.  

Rob Walling:
I’m just using it as an example of I tend to not be emotional about these things. I just don’t care that much. I haven’t been up in arms.  

Einar Vollset:
Unlike Tracy, clearly.  

Rob Walling:
I haven’t been upset about, I don’t really care what Elon’s doing. Twitter’s fine, but rebranding it to X, I think, is a (censored) terrible business decision. It doesn’t make any sense to me. Unless Elon’s playing 3D chess, which I don’t know, he hasn’t really shown us that he thinks too far ahead on these things. It seems like a genuine death knell, a shot in the foot of something to just rename it like this. 

When I saw it, I had to read it again and then I literally was like, “Is it April 1st?” This is a great April Fools joke, but it’s just crazy to think about this. The other thing, I want to kick it to Elnar in a second, but it reminded me, I have read the story of PayPal and stuff, and I knew X.com. X.com I believe was actually Elon ran a company called X.com and they merged with PayPal, because they were competing and they were flailing. 

It was like Peter Thiel and a couple other, the PayPal Mafia, a couple other folks were at PayPal, they were X and they merged. He has that X.com domain obviously, but it seems like it’s his hammer, that everything’s a nail when X.com is your hammer. But it reminds me of this story, Kevin Smith, he’s a film director, he told of this producer, John Peters. Kevin Smith was going to direct Superman Lives 15 plus years ago. 

John Peters says, “Well, you can do it.” I’m paraphrasing here but, “You can do it, but I really want a big, mechanical spider at the end of the film.” Kevin Smith’s like, “What? What are you talking about? This makes no sense. There is no spider in the Lord of Superman.” It’s this great story, you can Google it, see it on YouTube. Kevin Smith either decides not to do it or isn’t allowed to do it. 

Then two years later, he’s watching a movie produced by John Peters called Wild Wild West with Will Smith and Kevin Kline. He’s like, “I’m watching the movie, and at the end, there’s a huge, mechanical spider.” He’s like, “The dude just had one play.” He wanted that to be in a movie. This a little bit [inaudible].  

Tracy Osborn:
One play or one dream?  

Rob Walling:
Yeah.  

Tracy Osborn:
It could go for both this guy and Elon. He’s like, “This is the dream and we’re finally going to achieve it one way or another.”  

Rob Walling:
Super funny. Elnar, what are your thoughts before I move on to the next story?  

Einar Vollset:
Yeah. I obviously have the view that the vernacular is peculiar. What to the X? I don’t know that that works, but I do think on the flip side, I think Elon views Twitter as it was when he bought it as a stepping stone. Everyone I think is always currently, a lot of people anyway, are thinking of what happens to Twitter under Elon, as how much is he (censored) it up and how much money is he burning, and where did all the advertisers go and all this crap? 

But fundamentally, if you see how he talks about it, the reason why you might want to do a drastic rebranding like this, is if you want people to think of it as a different thing than what it was or something additional. I certainly think in the universe of messaging type apps, it’s no big secret that I was never a big fan of the previous CEO. I think he left a lot of things on the table and never really did much of anything with it, which is why it ended up getting acquired by Elon. 

But there is things like if you look to Asia, like the big messaging apps that are Asia and all the e-commerce that gets done there, inside the messaging apps in both China and India particularly, but also Japan. I think there’s an option here that if he’s really going aggressively after it being more than just Twitter and different than just mostly people shouting about things on Twitter, then a rebrand might make sense. 

That’s the other side of where I see it. I think it could go in two ways. Either this gets abandoned almost by the time this is published, or it’s a part of something that’s more towards making it ubiquitous, all day, everyday payment transactions, all that stuff, which I think is where he wants to go with Twitter in general.  

Rob Walling:
Right. The rebrand is to reposition. In essence, X is a generic name, which could be both good and bad, right?It’s bad because it’s generic, but it’s good in the sense that you can be anything you want it to be at that point.  

Tracy Osborn:
In this vacuum, well, in this ecosystem of people wanting Twitter to be as is, as it always has been and never to change. 

Now we have Threads and Bluesky, and all these services are trying to jump into that void, which I think that was going to be the next topic. I thought I’d just jump right over to it, which is interesting.  

Rob Walling:
Yeah. Our next topic is Threads, but Mastodon is not it. This is just not going to happen. There’s just no way.  

Tracy Osborn:
I’m sorry, Mastodon. I tried to and I had to change. I didn’t like the default server I was on, and I’m a techie person with a lot of experience with computers. I went through all the articles, was like, “This is how you can change your server from whatever they’re at.” 

I think I was the default one to more of a subgroup, and you can change servers, and supposedly bring all of your followers and everything over, and it just never worked for me. That was a death knell for me, because I was just like, “As a computer savvy person, I could not figure out how to change things on Mastodon.” Yeah. No, thank you.  

Rob Walling:
Mastodon is that story of snatching defeat from the jaws of victory, because when Twitter, if it actually had its act together in the way that maybe Bluesky or Threads does, I think. I’m on both of them, but I’m not really using them. But Mastodon was the one everyone flocked to, and it just fumbled the ball so badly with the user experience and the need to be a techie. Threads though, I’m curious to get both your takes on it. 

I, of course, have an Instagram handle only, so I can read my wife’s posts and some stuff about collecting comic books and this and that, but I don’t do anything. I literally have one or two posts total, but obviously I’ve been able to reserve my username on Threads. When I look at it, I’m like, “Well, this is pretty much what everyone’s posting on Instagram.” That’s what it looks like to me and most of them have pictures and it looks the same. 

I also am never an early adopter of social media. Frankly, I wish I was not an adopter at all, but eventually I do have to do it for work and such. I’m not the early adopter, so I’m probably not the right one to weigh in, but it doesn’t seem to have much there. Elnar, are you on Threads? What are your thoughts on it, in terms of it potentially replacing Twitter or becoming one of the big three or four social networks?  

Einar Vollset:
I think it has a chance. I don’t think it has a big chance. My view of it when it first came out was partly laziness. I’m like, “I’ve been on Twitter for long enough, that it could probably get a driver’s license in a number of states.” Already this year, we went through Mastodon and then Bluesky and then some other crap. I don’t know, I just am not willing to just futz around with all sorts of things. 

Then on top of that, I tend to very carefully segment my social media. On Twitter, I am basically the argumentative asshole shit posting at the intersection of AI and finance, but then I also have an Instagram account, but Instagram account is locked down. Basically, pretty much nobody is allowed to follow me. It’s like family and friends effectively. The content that I put on Instagram is very different than the stuff that I put on Twitter. 

Believe it or not, I’m not a complete psychopath among my friends and family in person, unlike on Twitter. I think that’s maybe the problem that Facebook name Meta has, which is this notion that people, particularly when it’s like you can’t delete your Threads account without also deleting your Instagram account. There’s some weird, conceptual segmentation of how to behave that, I think, people will struggle with. 

That’s probably the reason why I think it may not actually do very well. I think it’ll find a sub-niche in some way, shape or form. Just actually like I think I’m sure Mastodon, people who hate Elon more than they hate configuring servers, they will definitely stay on Mastodon. You know what I mean? It’s a big enough market that it’ll take some share. Do I think it’s likely to outcompete Twitter? No. I think Elon is more likely to ruin Twitter himself, than Threads is to outcompete him.  

Tracy Osborn:
Amen. I think it’s a little bit sad that we basically have old Twitter, which is now X or going to be X, or perhaps it’s going to be X. 

We have new Twitter or the new Twitters, so Bluesky, backed by Dorsey, who was what? He was the founder of Twitter, right? I’m remembering that correctly, Jack Dorsey?  

Einar Vollset:
One of the founders. Yeah.  

Rob Walling:
Kind of.  

Einar Vollset:
Kind of, yeah.  

Rob Walling:
If you read Hatching Twitter, and he’s a first engineer person who was later named, but anyways, for all intents.  

Tracy Osborn:
But basically it’s like old guard Twitter, creating new Twitter, and then we have new Meta, like Instagram and Facebook jumping in. It makes me sad that there isn’t, I don’t know, something else out there. Something from a non-established social media company, but I guess it’s impossible in this ecosystem we’re in right now. But I feel like this is going to create these separate communities that we didn’t have on Twitter. 

Or people were using Twitter and they were using Facebook, they’re generally using both. But if Twitter gets fragmented into the Elon stands with X and then we have the Instagram folks, which is a very huge community, especially I think around for women or business communities, or people doing products. One, they’re all using Instagram as their primary social media tool. 

Then they can be pushed into this Threads network. Then you have Bluesky, where it’s as of right now, it’s basically a one-to-one clone to Twitter. That one I feel like had some growing pains that they had those invites. For me, that invite system really just killed all motivation or any momentum I had for joining that network. But I feel like they’re going to attract a certain group of people, maybe people who wanted the old Twitter who are not on Instagram. Then you have these three separate social media, text-based updates platforms. 

Then for folks who are building businesses that need to get their information out to their customers, before they could just use Twitter. Or if things like, I don’t know, the accounts for volcano or earthquake detection or something like that, you could follow things being like, “There was an earthquake in so-and-so and there’s on Twitter,” and it’s like what network is it going to go on? I don’t know. Is it going to stay on X because of things going on? 

I don’t know. I feel like there’s this weird shakeup, this weird creating of different ecosystems, that people are going to stop posting on one and only on the other. I think we’re going to lose something in this medium-term period of time on easy access information and knowing where to go to places. That makes me a little bit [inaudible].  

Rob Walling:
It’s a shakeup.  

Tracy Osborn:
It’s a shakeup and it’s sad. It’s like we got so far in the internet, we had these ways of doing things and there’s going to be a shakeup. 

In the medium term is going to be really hard and weird and we’ll see what emerges in the future. We went from MySpace to Facebook, so who knows what the Facebook for RMA space is now.  

Einar Vollset:
Yeah. I don’t know that probably one of the problems with Jack Dorsey’s Twitter, was that I actually think probably more businesses make more money on Instagram and on Pinterest than on Twitter. 

I never think they managed to really in any meaningful way, monetize that. There are some kind of businesses that might thrive on Twitter, but I think it’s a very small sliver compared to anything else. Yeah, I don’t know.  

Rob Walling:
Yeah, their ad network’s not great. They’re so far behind.  

Tracy Osborn:
Prepare yourselves for a shakeup and it’s going to be a while. As business owners for people in SaaS, I think that it might be hard to figure out what social media platform you use for your business in the short term, to figure out how to find customers if you’re using social media. But hopefully something will come into place like a new industry leader at some point.  

Rob Walling:
I’m just going to hang out on the sidelines like I usually do and wait until all the desks settles and be like, “That’s who won, or there’s three now.” 

What TinySeed company hits all three APIs and allows me to post the same thing to all three? That’s essentially what it’s going to be.  

Tracy Osborn:
We had that before with Tumblr and Twitter and a few other things back in the day, too. There were other networks, other than Twitter, that people were posting in one place. They didn’t automatically share to all those things. Honestly, we need a tool like that now.  

Rob Walling:
Yeah, and it’ll get built. Maybe Postpone right now goes after Reddit. You can imagine Grant, a Chinese seed company, Postpone adding that functionality. There’s probably not a Threads API, it can’t be yet, right? I don’t think they would have it out yet. Anyways, let’s move onto our next story. Actually, our next couple stories are about funding. The first one I want to touch on, is a tweet that I sent out about three weeks ago. 

In it, I said, “It’s super impressive to watch Rand Fishkin and Casey Henry execute on their vision of SparkToro, not only their vision of the product, but of how they wanted to operate their company. They didn’t raise VC and opted instead to raise a small round from 35 investors. I’m one of them, whom they have just paid back in full. Future returns are expected to come through dividends.” Then I sarcastically say, “Profit, what a novel idea for a startup.” 

For what it’s worth, their investment terms served as the basis for how we invest via TinySeed. Huge congrats to them and their team. Just so folks are clear, basically Casey and Rand didn’t want to raise Venture and go on the venture track because Rand’s been down that road before. If you’ve read his book, Lost and Founder, he has pretty strong opinions on how that basically failed. They built a great business and venture ruined it, is the lesson from his experience there. 

When they came out with SparkToro, it’s like, “Well, let’s just sell equity in the company, and however much percentage of that you own, we’ll kick off dividends.” That became one component of TinySeed. Now, what we’ve actually found within TinySeed, a little known fact, it’s about 80/20. When TinySeed founders come in, I used to ask, “Do you want to grow as fast as possible, be the ambitious bootstrapper and sell for, usually it’s enough money you never have to work again? Or would you prefer to run your company for long-term, make it profitable and pull off dividends?” 

It’s about 80% that want to sell, might even be a little more than that now, but it is the option. That’s one of the advantages of a TinySeed. In Indie.vc, depending on which terms, I believe Indie uses different sets of terms in different versions and stuff. But really Rand and Casey wanted to grow this business on their own terms. Just because they paid investors back, someone approached me and said, “They bought you out.” It’s like, “No, no, no, no. We got our money back and now they can take raises and there’s a bunch of stuff in their terms.” 

He open sourced the terms. You can search for SparkToro investment terms and they are just on the internet, so you can check them out. I will say with TinySeed, one difference is we don’t have a 1X hurdle. They basically put a 1X hurdle in, meaning before they could take substantial dividends, they had to pay all investors back and then dividends start. We did away with that. Honestly, it felt very pro-investor, which was great when I was investing. But as TinySeed, I think it was just a little too generous for investors. 

All that said, Elnar Vollset, what are your thoughts on SparkToro making their model successful, kind of pioneering a new model and having this milestone?  

Einar Vollset:
Huge congrats to Rand and team. Obviously, Rand was very supportive of TinySeed early on and I’m eternally grateful. My view of it is I think it’s great for them. If I’m going to be critical, I feel like they’re probably underestimating their future desire to sell down the line. It’s probably optimized a little bit for dividends, which just because of the nature of SaaS companies and how they’re valued, it’s quite hard to basically an exit. 

Typically, once you get to a certain size past a couple million ARR, you’re typically selling on some kind of an ARR multiple. A typical free cashflow profit, something available for dividends, is obviously some subpercentage of the revenue. It’s not unusual for a pretty well-run, profitable, at-scale SaaS business to be doing 30-ish percent free cashflow that could be kicked out to dividends. 

Now, if you do the math on that, if that same business is growing well enough and is at a size, it probably is going to sell for at least five times ARR. If you do the math on that, that’s 15 years of dividends or a sale that returns the same amount of money probably with preferable tax treatment. That’s basically the reason why we didn’t adopt it immediately. That and also I think most founders, 80%, 90%, 95% probably, will not be in Rand’s and in Casey’s view of the world, and that they’re never going to sell. 

They’re going to run this forever and it’s just going to be a dividend machine. I think that’s probably the biggest, not objection exactly. It is more like a lifestyle choice. If that’s what they want to do, that’s fine. Their investors want to back him in that way, that’s also obviously totally fine. I think purely from maximizing return, there are probably different ways to do it, if nothing else, in terms of tax treatment and time value of money.  

Rob Walling:
Tracy, any thoughts from you?  

Tracy Osborn:
Rand’s blog post is super fascinating to read, because not only it goes into the thoughts around dividend model, but also the story of SparkToro and the lessons they learned. I thought it was interesting. Well, I am obviously a huge fan of this model, being that I work at here at TinySeed. There were some nuggets in there where it was good to note the influence that Rand had, but I’m happy that he was able to use his influence to create this new model, and inspire folks like us here at TinySeed. 

But his influence also made it more likely to be successful, because comparing his journey to TinySeed companies, they started SparkToro in March 2018. They closed their round in June, so that’s only a few months between launching a company and then closing a round. That’s probably built on the fact that people know Rand and how awesome he is, having that amazing network. If someone else is looking into doing the semi-bootstrap model, that’s probably not something that’s going to work for them, unless they already have that network that Rand had. 

Then they were able to work on SparkToro for about two years before launching. That’s one of those things that brought out to me a difference between how SparkToro does it with their terms, and the reason why TinySeed exists with our education. This is not meant to be an advertisement, but I was noting this is why we have the accelerator side of things. Because otherwise, someone trying to go through this semi-bootstrap model, wouldn’t be able to raise that amount of money immediately. 

Then be able to work on their company for a couple of years. Then start moving into being profitable and dividends and whatnot, after launching after two years, without having that existing network. I wanted to bring that out. That was a huge advantage to Rand, and one of the reasons why I think a lot of companies or a lot of folks who want to go through that semi-bootstrap route, needs to go through an accelerator.  

Rob Walling:
That’s knowing your unfair advantages. I often talk about the three unfair advantages when starting a SaaS company. One is being early. 

Second is having an amazing network. Third is having an audience, usually an engaged audience. Rand definitely has an incredible network and an audience. Doesn’t he have half a million X followers?  

Tracy Osborn:
Yeah.  

Rob Walling:
It’s X.com. Anyways, he knew that and he leaned into it, but for those who don’t, you can’t just make that appear out of thin air. He was leaning into his advantages.  

Tracy Osborn:
One more thing I thought that was really interesting from the blog post was that when they reached profitability, instead of starting doing their payback, they invested $1.2 million in a US treasury bond, with the intent of earning a little interest while they built up a cash cushion. 

Then let’s see, six months later they got that cash cushion with that continued profitability and the treasury bond payback, and then they were able to start doing that payback to the investors. I thought that was really interesting. 

I haven’t heard that from other profitable companies as an option for building up that cash cushion. I’m going to throw that question out there. What do you two think about that? Is that an option that people should look at if they’re profitable?  

Rob Walling:
It really depends. I think Rand and Casey were being pretty conservative with their money. They had the money to pay investors back, but if they wrote the checks, suddenly they have no cash in the bank. What if? You don’t know what’s going to happen. Is there another pandemic that happens and things go sideways? In fact, SparkToro is heavily based or was heavily based on the Twitter API. In fact, he talks about it in the blog post. 

I know obviously a little more as an investor, but they ran into a lot of platform issues there, and had to rewrite a bunch of it and stand still for a while. It didn’t do their growth any favors to have to do that. Was it the correct choice for them? Probably, because there was risk. I think if you’re being less conservative or if there isn’t a ton of risk, then the moment you have the money in the bank you can pull it out, so to speak, as long as you have enough breathing room.  

Tracy Osborn:
Overall, I feel like it’s a really good example of what I want to call the dream. The kind of company that people want to build where they keep control, but they do bring in just enough money so they can get over those initial hurdles, so that they become profitable. 

Then they can both be profitable in a reasonable period of time, but also have more control over their future. At the very least, I’m happy to hear more stories like this come to light, so folks know that os an option for them other than the black and white bootstrap only or full VC route only.  

Einar Vollset:
I think that’s true. That’s my view of it too. It highlights the fact that there are different ways of doing it than just raising money every 18 months and IPO or bust, which obviously, we’re huge believers in. 

I think it just showcases that you get to a certain size, which isn’t maybe as big as people think and you’re profitable, the world’s your oyster, you have options basically.  

Rob Walling:
Yeah. Even within bootstrapping, SparkToro is still mostly bootstrapped. It’s not like there is millions of venture, they’re not on the venture track and yet they raised a small amount of funding. That you can still keep incredible control over your own destiny and still raise this small amount. 

With that, we’ll move on to our next story. We’ll see if we get to the next two. They’re both about funding. The next one, I don’t want to rag on the person who wrote it, but this was published in the last couple of weeks and it’s called [inaudible].  

Einar Vollset:
Rag on them, Rob.  

Rob Walling:
Don’t take VC funding. It will destroy your company. Then proceeds to say, “VC funding is not a success, it’s a failure. VC funding means you will sell your company. Second order effects because your goal is to sell your company later, it has to grow. You’ll be spending much of your time finding the next investors. You have to focus on large markets with many or large customers. Profitability takes a backseat and this kills your company.” 

There are other ways to do it without raising venture. I agree with everything he says, but I’m like, “No (censored). Basecamp started talking about this 20 (censored) years ago. I started talking about this 18 years.” You know what I mean? I just don’t get, and this was at the top of Hacker News when I found it. It’s like this is not a new take and this is actually what bothers me a little bit. Maybe is it the internet or is it like the startup sphere?  

Tracy Osborn:
It’s just a rage bait thing.  

Rob Walling:
I will say things, I’ve said things in my book in 2010, and then every year or two, someone basically is like, “I just discovered this new thing. Oh my God, did you know you can bootstrap startups?” It’s like, “Where have you been? Do you not read anyone else’s stuff?” 

When I read this, I’m just like, “None of this is new. Is this new to anyone?” Is this new information to anyone, except for someone who’s not been on the internet their whole life and this is their first day on the internet? Am I being too angry about this, Elnar Vollset?  

Einar Vollset:
I think maybe you haven’t spent enough time on Twitter writing threads about bootstrapping and stuff.  

Tracy Osborn:
X.com.  

Einar Vollset:
That’s the main problem right here. Maybe it’ll be X rebrand. Finally, we’ll get the full Rob Walling experience. Yeah, I agree with this. I look at it, it’s like this is rage bait, reclick bait, whatever you want to call it. That’s fundamentally what it is to me. It is like, “How do you get people to talk about it, say on a podcast?” 

It’s like you make the most ridiculous, extreme views of your opinion. If you have the more balanced view, which is that, “You know what? Maybe in the last couple of years it’s been such that VC funding has been a little overblown and there is this other way. It gives you the opportunities and both have.” Just because I’m obviously pro-tenancy, it doesn’t mean that I think there aren’t situations where definitely you need to raise a bunch of money to do things. 

I don’t know, building rockets to go to Mars needs a bunch of capital. You’re not going to bootstrap a rocket company. That’s just not going to happen. I feel like a balanced article like this, just would never get picked up because it’s sort of obvious, that’s what I think.  

Rob Walling:
Tracy, anything to add?  

Tracy Osborn:
My notes for this when I was researching this, you already went through most of them where I’m just like, “Need citation, need citation, is a straw man. Not true, not true.” There was a quote. I think this goes really well with the story about Rand, in that we need to have more stories of people taking a middle route. Because the middle route is not obviously a path that people can take because all the stories in the past in the last 10 years, have been bootstrapped or VC. 

Then people are like, “You can’t do all VC.” It’s like but there’s this middle option. We need to have more success stories showing company that took just enough money, so they can get over those hurdles so that all the things that this article says are negatives, then they can navigate those hurdles by not going the full VC route. The article also has things, whereas is like every company can be bootstrapped, which is very not true. 

It has this anecdote about starting a medical software company, and then starting a one-person consultancy. Then you’ll learn about the problems and then maybe you hire, and then maybe you do this. It’s like this process would actually take years, years. Bootstrapping something for years is not possible for the average person, which is why this middle path needs to exist. You can take that multi-year process of finding product market fit. 

Getting the point where you understand the questions and you understand what you need to solve, and then you can start doing the hiring and get yourself to that level where you have that flywheel running. Take just enough money so that you can turn that multi-year process to hopefully a much shorter period of time by being able to throw money into it. They go hand in hand. 

It’s like this guy needs to, I think, take his rage against VC routes, and instead take his passion for startups and start advocating in this article, I think, to show people what they can do instead or what they can do to solve both those problems.  

Rob Walling:
I don’t read that he has rage and I don’t actually disagree with him, that’s the problem but it’s like, “But say something new.” I can go find basically what he said here in 20 other places, including Rand’s book, Lost and Founder. 

Including probably just going to ChatGPT and asking, including going to Google. There’s dozens of essays that basically said this and probably said it better. That’s where I’m like, “You have this feeling, that’s cool. Say something new.”  

Tracy Osborn:
Yeah. But he also got top of Hacker News, so it’s working.  

Einar Vollset:
Top of Hacker News, that’s the win. I think one of the interesting things, which we’re starting to see, is that I think a lot of companies will be forced into this realization because the funding drained up. I think a lot of companies that probably would never have been able to raise anywhere near the money that they did in ’20. 

Well, ’20 and ’21, they raised a crap ton of money and now they’re like, “We’re nowhere near the now much bigger hurdle for the round that we need next.” They basically have a choice. They have a choice, do they stay on the VC track and try to run of the world as fast as possible and hopefully figure it out? Or are they going to divert more towards this middle ground? 

I think obviously, there’ll be some successes that the people who run off the wall or run off the cliff or however you want to call it. But I think that in terms of success for founders, I think a lot more of those successes will come from the companies that are able to steer in a more sustainable path, get the breakeven at best, something like that, or maybe with a small bridge-through.  

Rob Walling:
For now until the cycle happens again. The cycle happened in the late ’90s with internet companies. It happened in 2005 to ’07 when money was cheap. 

It happened again in the late teens and we see it and so it’ll come back and everything old will be new again. We’ll hear people saying, “This is never going to stop.” Then we’ll say, “I’ve been through this a few times.”  

Tracy Osborn:
This is what it’s like aging, isn’t it?  

Rob Walling:
It is, you start seeing the same cycles over and over.  

Tracy Osborn:
Yep.  

Rob Walling:
Last story of the day really just piggybacks on this one. It’s from Fly.io and if you’re not familiar with them, their H1 is deploy app servers close to your users, run your full-stack apps and databases all over the world, no ops required. They’re essentially, they’re similar to a DigitalOcean or maybe like an Amazon EC2 type thing. I know they’re different, but it gives you an idea their infrastructure as a service. 

They released a blog post that is titled, “We Raised a Bunch of Money,” which actually appreciated the title. “This past July, we raised $25 million from a16z and our existing investors, including Intel Capital and Dell. Recently, we raised an additional $70 million led by EQT Ventures.” Then they go through to say, “Here’s why we did this.” Number one, a hardware fleet. Fly.io has always run on its own hardware. There are fun, technical control and destiny reasons to rack hardware. 

Number two, to hit all the regions. Number three, support and reliability. Then they talk about what’s not changing because funding cuts both ways. Now when people see you raise funding, they’re like, “Is it going to ruin the company?” I really brought this up. It was coincidental, this was also at the top of Hacker News. I don’t know if it was the same day or a few days later, but this to me is an example of probably a pretty good time to raise money. 

I remember talking to Dharma Shaw, co-founder of HubSpot, back in at Business Software in like 2008 or ’09. He and I had been the bootstrapper blogger types and they raised a bunch of money for HubSpot. I remember saying, “Why did you decide?” He wasn’t like super pro-bootstrapper but he was just a very sensible entrepreneur, who was building a real product for real customers to pay him real money. 

Not on that weird venture, we got a raise from day one and billion dollars and blah, blah blah, even though that’s what they eventually grew to become because they have IPO’d since then. But I remember him telling me, “Yeah, we would totally bootstrap, but at a certain point if you can put a dollar in the machine and take $3 out on the other side, don’t I want to raise like 20 million, 50 million of those dollars to put in the machine to make it grow faster?” 

It was a great, again, I’m three, four years into really owning software products at the time and I was like, “Ah, there really is a time when it’s probably even if you’re not building Facebook or you’re not building things that really are money intensive, where it probably does make sense to take on outside capital.” That was why in my first book, Start Small, Stay Small, I published in 2010. 

Within the first chapter I say, “I’m not anti-VC, I’m just anti the narrative that everybody all the time needs to raise it to start any tech company because that’s not correct.” That’s been my mission in life for the past 18 years since then is just saying there are multiple paths. But I do think there are companies that if I were to start them, I have a few ideas. I’m never going to start a SaaS company again, by the way, for the record. 

But if hypothetically, I were to do it thought experiment wise, I would go after a really big market. I would find a Haiti competitor in a massive space, and I would raise money right from the start. Not because I can’t do it as a bootstrapper, because I want to move fast. I want the resources, I know the value that it can provide.  

Tracy Osborn:
You have the network like Rand.  

Rob Walling:
Have the network, have the audience. Yeah. Tracy, any other thoughts on this Fly.io piece?  

Tracy Osborn:
Did you know we used Fly.io for TinySeed applications?  

Rob Walling:
No, I did not.  

Tracy Osborn:
Yeah, that’s where we’re hosted. I thought that was so funny we were talking about this. Yeah, that’s where I deployed the application.  

Rob Walling:
That’s cool.  

Tracy Osborn:
I am a fan. I needed something that was broke with different [inaudible].  

Einar Vollset:
Are they sponsors?  

Rob Walling:
They should be.  

Tracy Osborn:
They’re not sponsors.  

Rob Walling:
There’s several tiny companies that use them.  

Tracy Osborn:
We’re paying them money and they don’t know that we’re using them. Now they know that we’re using them for operations.  

Rob Walling:
But they raised money, Tracy. We need to get off and go to a hosting company that didn’t raise money.  

Tracy Osborn:
That goes into the note. I had that note in, well, that note in my notes where compared to the other guy that saying that, “Just start a medical consultancy company and start from scratch, and start really small.” This is a great example of something that could not start small, because they needed the capital so they can have these to support all regions. 

Imagine if they only had one region available for people to deploy to, that wouldn’t be tenable for most folks. Literally, this is a great example of a company that needs to have the investment so they can fulfill the promise that they have for their users of having this quick, easy deployment, that’s really fast and snappy. Yeah, it’s a great example of a company where bootstrapping slowly would not work.  

Rob Walling:
Elnar, closing thoughts on this piece?  

Einar Vollset:
Yeah. I’ve always been the opinion that capital’s a tool, and that’s partly why we started TinySeed in part. Because some of the early accelerator stuff were all optimized for this IPO or bus type scenario. Not everybody has wealth enough to not take a salary for a year or two while they figure it out. It made total sense to offer something like TinySeed, that was a hole in the market. 

That’s what capital is there to do. We also see with TinySeed companies, once they get to a certain size and it relates to everybody sells. It’s like once you get to a certain state, there’s certain things you may or may not want to do, and certain things that you want to go after. We see TinySeed companies, once they get to a million or two or three or four, take in private equity type growth round funding to get to the next step to build out the stuff that they want to do. 

I’m not for or against really anything, it’s just is it the appropriate tool? I think for Fly.io, it definitely is. I think for a lot of companies it can be at different stages. Just make sure you take the right kind of money basically.  

Rob Walling:
You know what you’re getting into.  

Einar Vollset:
Yeah. Don’t take money at the highest possible valuation you possibly can, just because that’s the highest possible valuation, unless you then really want to be on the IPO train or bust. Make sure that you understand what you’re doing when you’re taking capital.  

Rob Walling:
Yeah. I had a tweet I spit out a few months ago and then it’s actually a quote from my book, The SaaS Playbook, where I say being anti-funding is like being anti-hammer. Hammer is just a tool and it’s right sometimes and it’s not other times. These extreme views, while they get the clicks and they get to the top of the Hacker News, it’s irresponsible. 

It’s just dumb. Anytime I see someone say always and never in all caps, I’m like, “You are way too sure of yourself because it pretty much never applies.” I say that in all caps. Elnar Vollset, thanks so much for joining me today on this Hot Take Tuesday.  

Einar Vollset:
Thanks for having me.  

Rob Walling:
You are Elnar Vollset on X.com. We’re never going to not nose left, nose short.  

Tracy Osborn:
It sounds not safe for work, which is probably what Elon loves about it.  

Rob Walling:
Yeah, that’s interesting.  

Tracy Osborn:
Actually, they took down the twitter.com/Xvideos, is now a suspended account. A lot of people are supposing it’s because Xvideos is going to be the new video platform for Twitter, which is also not safe for work as a website URL. Anyway, sorry I derailed that. Fun facts.  

Rob Walling:
Tracy Osborn, you are @tracymakes on Twitter.  

Tracy Osborn:
And everywhere else.  

Rob Walling:
And Mastodon and Pinterest.  

Einar Vollset:
Bluesky.  

Tracy Osborn:
Wait, no. Is that true?  

Rob Walling:
Threads. No, you’re just everywhere. TinySeed applications open, well, it’s like six weeks from now, I believe.  

Tracy Osborn:
The beginning of September.  

Rob Walling:
Beginning of September.  

Tracy Osborn:
Right after Labor Day.  

Rob Walling:
For folks who are listening to this and are interested. I will be the first to say, if you don’t want funding, don’t raise funding. You know what I mean?  

Einar Vollset:
[inaudible].  

Tracy Osborn:
But if you want just enough funding, go find that.  

Rob Walling:
Right. If you want just enough funding with world-class mentorship and a cohort, and masterminds and all this stuff, then check us out, TinySeed.com. Let’s see, this is going to go live in, I don’t know, mid-August or something. Starting in September, each of us is going on the road for different reasons for TinySeed events and MicroConf. So we have several MicroConf locals if folks are interested, head to microconf.com. 

There’s an events tab at the top. We have MicroConf Europe in Lisbon, which is probably already sold out by the time this will air. But get on the wait list because tickets here and there do become available, as the venues sometimes open up a little more space, we could sell five or 10 more. Then, of course, MicroConf US in Atlanta next April, there are still some tickets available for that. 

Elnar and Tracy, thanks again for joining me and we’ll have you back on again in a few months.  

Tracy Osborn:
Woo-hoo.  

Einar Vollset:
Thanks for having me.  

Rob Walling:
Thanks to Elnar and Tracy for coming back on the show. Hope you enjoyed our takes on these news stories. We’ll be back with another Hot Take Tuesday here in a month or two. Thanks for listening this week and every week. This is Rob Walling signing off from episode 674.

Rob Walling:
Could it be another episode of Startups for the Rest of Us? I’m your host, Rob Walling. Today I welcome Ruben Gamez, founder of SignWell, back on the show. And by popular demand, we answer listener questions on lifetime plans versus subscriptions, testing an idea with a landing page, building copycat apps and more. If you want to get your question featured on the show, go to startupsfortherestofus.com and click Ask a Question in the top nav. As always, audio and video questions go to the top of the stack. 

Do you want to reach tens of thousands of potential customers between our MicroConf events, Startups for the Rest of Us, our YouTube channel, our email newsletter, and all the other ways we interact with our large and growing and loyal audience of startup founders? We have a lot of options for you to reach B2B SaaS founders with your product or service. Drop us an email at . And with that, let’s dive into listener questions with Ruben. 

Back by popular demand, Ruben Gamez. People have been asking me on Twitter to have you back on the show. Thanks for taking time to hang out with me today.  

Ruben Gamez:
Thanks for the invites. It’s fun, always fun.  

Rob Walling:
Yeah, it’s going to be good, man. We got some really interesting questions that I want to tackle today. Our first question went to the top of the stack because Ben Daley sent in a video. He actually went to startupsfortherestofus.com. He clicked Ask a Question in the top nav. And then if you record audio or video, which you can do on your phone or on your computer, then that goes to the top of the stack. Maybe by the end of the episode, we’ll get to one or two text questions. I don’t know. We brought in an assistant producer and he looked at the Trello board and he said, “This one all the way on the left where the text questions are, is that where questions go to die?” And I was like, “That’s sad. That’s not what happens.” It takes us a little longer to get through them. So send audio or video, we’ll get there. But we will get to as many questions today as possible. So let’s hear Ben’s question about lifetime plans.  

Ben Daley:
Hey Rob, Ben Daley with auction.io here. Just got done listening to Ben Orenstein and Adam Wathan on Hackers Incorporated talk about lifetime value pricing model as opposed to monthly recurring revenue. Just wondering if you’ve listened to that episode and what your thoughts are on that idea. Thanks for all the great episodes. Really appreciate all that you have taught.  

Rob Walling:
Thanks for that question, Ben. So neither Ruben nor I had listened to that episode, but I’m glad you called it out. And I’m glad I also went and listened. I listened to about the first 15, 20 minutes of it. I skipped around a bit because there were some clarifications in there. When I first heard lifetime deals, I thought, “Oh, someone’s selling SaaS for a lifetime price? Don’t do that.” There’s maybe one or two exceptions, Ruben, because you have done apps CMO deals, but I think don’t do that. But it turns out that Adam was talking specifically about Tailwind UI, which he was calling a content business, and so that’s kind of changes I think the framing of the conversation. 

Realistically, to summarize for listeners who didn’t hear it, the title of the episode is Episode 4 of Hackers Incorporated and it says Lifetime pricing is underrated. And Adam Wathan, who’s the founder of Tailwind CSS, has a great business selling Tailwind UI components for the open source CSS framework. He was talking about how selling this for $29 a month or $30 a month or 39 or whatever wouldn’t make sense because people get a lot of value upfront and so they’ve switched, I believe, switched to lifetime pricing. I actually don’t know if they were ever not lifetime, but… So another on this lifetime pricing. And they were talking about the pros and cons, but a lot of the pros, especially for content businesses of using lifetime pricing. 

So as I kick it over to Ruben, I want to say for SaaS, for software where you’re running servers and providing an ongoing service each month, this is the worst idea ever. It’s the worst idea since Greedo shooting first. Do not do it. It ruins your exit multiples if nothing else, but it also doesn’t allow you to create business over time. You can lose 80, 90% of your revenue in one month if people just decide not to buy. That actually happened to me back in ’08, ’09 in the recession. I had a business doing several thousand a month then I lost 80 to 90% of the revenue in 30 days. And you can just imagine that’s the downside of not subscription. But with that said and with the framing of, “Hey, it’s this episode,” Ruben, you want to dig in a little on your thoughts?  

Ruben Gamez:
Yeah, I actually don’t have too much to say on this other than I agree with you on the SaaS part. If it’s software, SaaS or anything like that, then it’s not a good idea. Don’t do that. Even for the short term lifetime deals with apps like you said, I tell people to be very, very careful when considering those and be very deliberate. Know exactly what you’re doing. We thought of those as paid freemium basically.  

Rob Walling:
That’s what I was going to ask, was you were saying don’t do lifetime deals, but you have done multiple, so you thought of it as paid freemium, meaning the users essentially are free. You happen to get this one time payment. And you’ve been public about it. I mean I think one of the deals you took in 32,000 in cash, right?  

Ruben Gamez:
Yeah. It was close to 40,000. I end up losing 40,000.  

Rob Walling:
40,000?  

Ruben Gamez:
Yeah.  

Rob Walling:
You’re bootstrapping. You get that one time influx, that’s great, but you thought of it as freemium, as paid freemium. Unpack that for us.  

Ruben Gamez:
Yeah, because they’re basically free users after that one payment, right? And the payment isn’t for each individual user, it’s just not that much. So we did it for a lot of other reasons. It was just a combination of reasons of helping with getting a little bit of word of mouth going in the earliest days, getting a really nice… We have a horizontal products, so getting into a lot of different industries, helping with a little bit of our SEO efforts, which it actually did okay for us. It doesn’t always work that way in combination with a certain type of feedback. There were several things we were considering where it just made sense. And then for us, free users can be valuable if they’re using the product because we have a viral component and exposes other people to the… So if you have a product where that’s happening, that could maybe be an okay way to go. And the costs to support those is not very high, right? 

The only other thing that I’d mentioned besides it not liking it for SaaS is the whole lifetime value conversation that they we’re having. I get the logic, it’s like, “Well, if you know how much people are going to pay you in the lifetime, why don’t you just get that money upfront? It’s just math. Get that money from each of the people and you’re ahead because you have that money first and then that’s it.” I would say that lifetime value is not static, so that changes. So it’s just a snapshot. It’s also an average, right? And it doesn’t account for upgrades and just a lot of opportunity there that you can have to move that number. So I get the thinking, but especially with software, it’s going to move and you’re going to improve that as you improve churn and all that, so…  

Rob Walling:
Yeah. You make a really good point and I wonder if a lot of the people who would have paid you your most lifetime value… Let’s just say for the sake of argument that your average lifetime value at snapshot right now is $300. But some people, some businesses would pay you 400 or 500 600, 800, $1,000 over the course of many years and others would’ve paid you a couple months worth. What if the people that would’ve paid you a thousand dollars are the ones that would’ve paid you a lot are the ones that buy? I don’t know. You’re kind of losing out on the ability to earn that, I think, is the way I’m thinking about it.  

Ruben Gamez:
Yeah, and identify those people, right?  

Rob Walling:
Right. Your best customers.  

Ruben Gamez:
Yeah, your best customers. As you upsell them or offer additional features and services that they can take advantage of, it becomes really hard if you just treat everybody the same and everyone just gives you the same amount of money. You’re just trying to average everything.  

Rob Walling:
Yeah. But I do see Adam’s point about a business. I think that the issue that I have is the false dichotomy where he says, “It’s either going to do lifetime or I’m going to charge $29 a month.” He brings that up four or five times in the piece that I heard. 

That’s not what I would do. I would never charge $29 a month for Tailwind UI. I would either charge what he’s charging. What is it? 300 and 800 I think are the two tiers and right now it’s lifetime. I would either charge that annually. That’s what you pay every year to continue to get access to new stuff. Or I would go with the old model. This is a solved problem, right? This is a proven pricing model that Microsoft and Oracle used back when you and I were running dev teams 20 years ago where before SQL Server was a subscription, you would pay this one time fee for it. And actually, it was based on the number of processors it ran on. 

I don’t remember what the license was, but let’s say I paid $5,000 for a lifetime license to SQL Server to run the database. Then in order to continue to get bug fixes and to be able to email support or whatever, I had to pay, we, the company, had to pay 20% to 25% a year as maintenance. Why did that exist? Why did that 20% exist? Well, because they need to fund some developers and some people to answer the emails. There was ongoing maintenance with it. 

So when I think about Tailwind UI, I think if there’s any ongoing work, you don’t want a Ponzi scheme it and fund it from future customers. You want the customers who pay you today to fund that such that if suddenly you had zero customers next month… I know it won’t happen, but just follow me on, it’s a thought experiment. If you had zero customers next month, you have zero revenue, do you have to lay off all your developers and you can’t support it anymore? Does that work? I guess if everyone has it and it’s lifetime and they still have it and can use it, maybe they’re okay with it. But I guess are there any updates? Is there any support that needs to be done? In which I guess I’m coming back on the same thing of I would probably charge this same fee annually or I would charge this fee plus an optional annual maintenance. And if people don’t pay it, then they don’t get the bug fixes, they don’t get the new templates and they can’t email us for any type of help or support.  

Ruben Gamez:
I like that way of describing it. And you’re right, this is a problem that’s already been figured out way back. In the day with software. They did it one time. Just charging one time, nothing. Then they moved to, “Oh, there’s maintenance and stuff, let’s charge for that.” And you see this in other spaces like WordPress. Everyone used to be in WordPress just one time, that’s it. And then they figured out the same thing that was already figured out and they moved over to like, “Oh, let’s charge a yearly maintenance or whatever.”  

Rob Walling:
We talk about SaaS, and SaaS is and should be subscription because there’s all these costs and stuff associated with building and maintaining it. Are there products that should be sold one time? Absolutely. 

I’m holding up a copy of my book, The SaaS Playbook. I’m not charging you a subscription for buying this book because it’s information. I don’t have to maintain this. I don’t have to answer support emails. I don’t have to run servers. I don’t have to update it every year. In fact, if I do update it to a second edition, I’m going to sell it to you again. So I get it. I mean, that’s content business feasibly. But what’s interesting is there are also some SaaS apps that while they’re SaaS and it’s software that you’re using in your browser, the way the customers want to consume it is not be a subscription. It’s kind of a one-time problem they’re solving. And I’ll give you an example of that. 

We have a TinySeed company called Loadstar, Loadstar.app. It’s load testing. Their H1 is amazing. It’s, “Find your website’s breaking point before your customers do.” I love that H1. But what he has found is certain people, let’s say you work at an agency and you’re a web dev agency and you have all these client projects, you want a subscription because you’re testing sites every month to make sure they don’t break. But let’s say you and I are building our SaaS app and we deploy four times a year, we don’t need to test all the time. Subscription doesn’t make any sense, right? It’s a different consumption pattern. And that’s where you do look at alternate models like pay-as-you-go, right? And if you look at Loadstar, he has Loadstar fuel, which is where you buy these credits. They’re way more expensive than the subscription version, but you buy credits one time and then they just stay in your account and you consume them over time. 

MailChimp also has a pay-as-you-go. I know they got a lot of, because think about it, they were around in 2000 or something, 2002. People are really not used to subscriptions. And so they had that pay-as-you-go feature early on. I usually shy away from that. I would tend to hesitate to invest in a company, for example, that was all pay-as-you-go because SaaS is the best business model in the world and you don’t have all the advantages of SaaS going up into the ride and of the exit multiples and of all the things that come with SaaS. But it’s not to say that’s not still a viable business model. There’ve been businesses using that model for how long? For centuries? I mean, that’s just a normal company.  

Ruben Gamez:
Postmark does that too, though funny enough, they’ve been moving more and more. They might already have gotten rid of it. I’m not sure the pay-as-you-go part, trying to push everybody towards subscription.  

Rob Walling:
It’s just better. It makes their revenue not… I mean, I see 150 revenue graphs every month and we absolutely have a certain number of those, 5%, 10% that either have subscription plus pay-as-you-go or have subscription plus a percent of revenue process or a cut off the top or subscription plus you pay per email sent or whatever it is, right? And I see the graphs and those graphs are way spikier. And they spike way up to 50K and then they drop back down to 25K that month. Is that still a business? Yes. Is it as good as an MRR business that is just bringing in 40K every month and growing and up into the right? No, it’s not, right? And so that’s what you have to think about. 

So what I like about this whole conversation, and I appreciate Ben’s question, and the conversation between Adam and Ben on the podcast, is we can get a little too locked into this, “Everything’s $29 a month or $99 a month,” right? It’s monthly. Everything should be monthly. And I think everything shouldn’t be. I think monthly or annual are the best business models in the world, but there are times when you need to go back to first principles and say, “Is this really the ideal way to price this product?” 

So thanks for that question, Ben. I hope the answer was helpful and I appreciate you inciting me into some ranting. Ruben, maybe I’ll let you talk a little more on the next question. Sorry, I just had a lot of-  

Ruben Gamez:
No, that was good [inaudible].  

Rob Walling:
I’ve given a lot of thoughts to this, right? So I had a lot to say. All right, so with that, let’s roll into our next question. This one is from Luke about testing a market with a landing page.  

Luke:
Hey Rob and team, I have a question regarding market testing. My understanding of basic market testing is putting together a landing page and collecting interest about a new SaaS that way, whether it be email signups or even better account creations. However, my confusion is how to create a landing page for a product that doesn’t exist. Do we talk about features that are going to be available or do we talk about the features in terms of them already being available? Do we talk about features that are definite selling points but they won’t be available in the initial launch? How do we show off the design of the app when the app isn’t yet built? Super keen to hear your thoughts on this seeming chicken and egg problem. Thanks. Luke.  

Rob Walling:
I’ll give you first crack at this. Ruben, you want to give your thoughts?  

Ruben Gamez:
Sure, yeah. So yeah, I have a couple thoughts on this. First, a landing page, especially pre-launch doesn’t have to be very specific. You don’t have to have a lot of screenshots and figure it out all the features or anything like that, especially the first version of it. So I would say a landing page isn’t static, or don’t think of it as just being a static thing that you have your one pre-launch landing page and then that’s it. That’s what you’re going to roll with. The very earliest stage, you could just have something as simple as just basically a headline and with a hook, something that will get people interested in, then just a way for people to sign up and be notified. It could be that simple. 

And as you learn more and talk to more people and stuff, you can add more things that are going to help get signups. It depends on where you’re going to post the landing page. Some places you’re just not going to be able to. When it’s per year early, they want to… Let’s say product hunt. Once you launch, they do have a place for you to do that pre-launch as well. 

The other thing that I would mention is that initially in the first part of the question was about testing, market testing with a landing page. So I think that’s a really important thing to not confuse it, not think of it as like, “I validated the market because I have this landing page and people signed up.” It’s just one data point. It could be a good signal, but you don’t know if they’ll buy. Anyone that’s done this before, we’ve all had landing pages to where we get people to sign up. And then a lot of those people don’t actually pay. Plus you learn as you’re building out the product and it changes a little bit and all that. So yeah, you still want to talk to people, have good conversations that will… Get other data points other than just the landing page.  

Rob Walling:
The term landing page smoke test became popular around, it was in the late 2000s. Tim Ferriss had it in The 4-Hour Workweek. I had it in Start Small, Stay Small. I believe Eric Reese had it in The Lean Startup. Back then the description is more similar to what Luke’s talking about, where it was like your landing page acted like the product already existed and you literally had a sign-up button that when people would sign up, you’d then say, “Oh, we’re almost ready to launch,” or “We’re in beta. We’re in early access. Give us your email and we’ll notify,” right? I was little bit and switchy, but you were trying to truly test how many people would actually click through and try to sign up. And maybe you even had a signup form, that way they put an email and a password and this and that. You could take it to a certain extent, right? I haven’t seen that done in forever.  

Ruben Gamez:
No. And even that, what you’re really testing is you’re testing your ability to acquire customers through a specific channel if you’re testing that through [inaudible]. It still is not a real validation of whether you have something that’s a product that you want to continue, right?  

Rob Walling:
Yeah. So if you today, Ruben, were working on your next product, would you do the smoke test that I just described? Or would you put a landing page like, “Here’s what we’re building. This is the value prop. This is the thing that this is going to fix”? And I would almost think of it if I were going to do it because I would want to go into a big market, I would think, “How do I position myself against the existing thing?” So I’d be like, “If you need a great CRM but hate Salesforce, we are revolutionizing blah, blah, blah.” 

If you think about even the last one of these that I did, this landing page opt-in thing was for TinySeed. And if you go back to that landing page, it was like, “Venture capital is broken for bootstrappers, it doesn’t work. And here’s why we’re going to fix it.” So I was positioning us as the not VC. If you think about Drip, it was the not whatever, Eloqua, Pardot, Infusionsoft or whatever. I didn’t actually know that when we did the landing page. So the landing page itself didn’t have that, but pretty quickly the homepage did. So with all that said, that’s how I would think about it. How would you proceed when we put up a landing page to gauge interest in this and that, how would you do it?  

Ruben Gamez:
Yeah, it would be not trying to test the specific channel and method of acquiring customers. It would just literally almost be trying to test the hook. You’re trying to get and see if that works for people. And it really depends also who are you putting that in front of? Even for the purposes of just getting the domain out there in a page going and having it start to be indexed, if you’re going to be doing any sort of content marketing, you want to have a little bit of age behind that. So yeah, I would think of in that way. And maybe I can get to a point of where we’re getting close to further along with the product and then we have a landing page that speaks about the features a little bit more and I want to run a test and see like, “I think I can acquire customers through Google Ads or Facebook or some other thing that we’re testing.” In that case, I’d know what I’m testing for basically. Know what the goal is and then have your landing page dedicated for that.  

Rob Walling:
Yeah, I could see that. Back in the day, 15, 18 years ago, whatever, I did run this smoke test thing that he’s talking about, I believe, for two software products, neither of which I ever built, and then for a handful of info products where I was actually doing what you’re saying, where I was using Google AdWords or Facebook ads or something driving, saying, “This is the book that I’m going to write about becoming a developer,” or whatever it was. It was this term. And I was trying to see if people… There was a buy now button and then if they click through, then I was testing stuff. I think I did wind up writing one of those. It’s an ebook about becoming a developer and it never did much. 

But since then I just stopped and I do it now more. Like you said, everything I’ve done since then, you think about, I’ve used landing pages to launch/get an early access list for a conference, MicroConf, for multiple books now. Start Small, Stay Small, and SaaS Playbook, for Startup accelerator, TinySeed, for SaaS product, Drip. You know what I mean? It’s like I’ve done it for a lot of different stuff and all of those have been what we’re describing here, which is what’s the pain I’m trying to solve? How am I going to position that? There’s a question Luke has about screenshots and this and that, and as you’re saying, it’s like, “You don’t need that yet.”  

Ruben Gamez:
No. Early on you don’t need that. I did that with SignWell as well. It was Docsketch at the time. Way back in the day, I did that with Bidsketch. I’ve done that with a couple product ideas that I’ve had and then put up a page and then after talking to people realized, “Eh, I’m not going to do this.” So I didn’t waste the time to try and create this page that looks like a homepage with all these screenshots and features and try to go, because there are things that you just need to figure out first before you even get to that point.  

Rob Walling:
And what you’ll know is that if you put this landing page up, the best part of getting people to opt in is not to say, “Oh, I have 100 email addresses.” It’s to say, “I’m going to email every one of these 100 people and I’m going to try to talk to them.” I mean, I would do a lot of it via email where I’d reach out and be like, “Hey, wondering why you opted in. Is it because you listen to podcasts and you’re just curious? Is it because this is a problem you have?” And then usually I would go back and forth via email because that’s my mode of choice. Every once in a while I’d get on a call. These days I tell people, “Get on a call. It’s just higher fidelity.” Now with jobs to be done… Again, 15 years ago, I don’t even know if it existed. I’d never heard that term. But these days it would be more about that, of like, try to get people on a Zoom call or some type of… Have them record a Loom, have questions. There’s a way, it’s a learning.  

Ruben Gamez:
Get better feedback, yeah. One thing that I did with SignWell was on the landing page, when they opted in, the next page was a survey. So it didn’t do a confirmation page. It didn’t say, “We’ll notify you” or whatever. It went to the survey and it just asked their name, the things that I wanted to know, why were they interested, how many documents a month did they send and all this stuff. And then after that, then it would be like, “Here’s your success page.” It cut down a little bit on the number of people that completed. But even after the first step, if they didn’t finish the survey, they got an email saying, “Hey, you’ve been notified. Here’s the survey.” Still prompting them again to try and get them to submit it. So getting some data when they’re the most engaged.  

Rob Walling:
That’s super smart. I like that approach. So thanks for the question, Luke. I hope that was helpful. 

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Next question is from Tim Leland on which strategies you would use to market a URL shortener.  

Tim:
Hey Rob, this is Tim Leland, the founder of T.LY URL Shortener. I wanted to ask you, what strategies would you use to market a URL shortener SaaS product? So just a little bit about T.LY, it’s a link management platform that allows you to track, brand, and share short URLs. And recently, I’ve been focusing my efforts on SEO and new features. I also have a link shortener browser extension that has close to 500,000 users and has been a great source of new customers. I’d love to hear your thoughts on where you would be focusing your marketing efforts if you were in my shoes. Thanks again for all your advice.  

Rob Walling:
What do you think, Ruben? These are always challenging because it’s specifically a URL shortener. It’s like, “They’re SEO for that?” But what do you think about how you would go about marketing this?  

Ruben Gamez:
Yeah, so this is tricky. Whenever I see something like this, I’m tempted to go into HREFs and start to look into like, I am sure I can generate all sorts of ideas and things to do that are specific because it’s just fun.  

Rob Walling:
Right.  

Ruben Gamez:
So what I found interesting was that he said they have close to 500,000 users from a Chrome extension looks like. So just based off of that, the first thing that comes to mind is just do more of what’s working, right? That’s worked. So I’m just thinking does engineering has marketing work? Is there opportunities for other Chrome extensions that are… So this is very broad and this is just a link shortener, but maybe specific to use cases that you’ve identified. Or are there other extensions for the other browsers if you don’t already have them? Stuff like that. So really it’s starting with that. 

I’ll try to generalize the thinking just so that’s useful for other people that have different types of products. The other thing would be this is a very horizontal sounding product in that it’s not specific to a niche, designers or whatever, marketers, but you probably have use cases that you’ve identified as being the most valuable. I would start… And I do this through all throughout from the early days. We’re talking about marketing, but you want to start to identify the most valuable use cases, the things that people will pay for, and then start to think about how you can market specifically for that. 

And don’t worry about the big numbers so much, like, good, yes, get the big numbers, get everybody in. That’s what we did with SignWell. But then once you start to have all this data, which is great, look at the data, look at those bright spots and identify like, “Oh, okay. This use case for marketers is super interesting. If we just focus on this, what can we do on the marketing side? Yes, the numbers are going to be smaller, but it doesn’t matter because these are more valuable. They’re going to pay us,” all this stuff. So I’d really start breaking it down in that sort of way, especially with something that’s a little bit more horizontal like this  

Rob Walling:
Super smart. Now all the listeners know why you’re where I steal most of my good ideas because you… Well, because if you think it through, it’s sounds very logical coming out of your mouth, but it’s like, “Oh yeah, no, that’s exactly what you should do. That’s a really good idea.” 

The other thing that I thought about was similar but different from a different angle is like, “Well, if you have a Chrome extension and it works, does Firefox have extensions and Safari? And what are all the other browsers that have extensions?” I don’t know. I would’ve to go look at it. I’d have to figure out how to then do the… What is their app store SEO or their extension store SEO because that’s the big thing, is you got to have to rank for it and you need the reviews and whatever else they factor in. But similar sentiment of double down on what’s working, just do… You were saying, more chrome extensions, which is perfectly viable and also more extensions in other browsers going both directions. 

The other thing I was thinking about was obviously you could get into HREFs and come up with SEO ideas and I think that that probably be an entire podcast on its own. But I’m wondering, we do see Bitly and these other URL shorteners, how did they get big? I would at least want to know. I would go look at podcast interviews with any of those founders or whatever information I could try to figure out. I was like, “What are they doing?” And I can go into, again, HREFs or Semrush or whatever, and, “Look, are they doing SEO or not? Are they running paid ads?” You can go to the, it used to be SpyFu, but their services now are, right? We can look at if they’re running paid ads. 

I’m guessing Bitly is not running ads to acquire their customers, but what’s their free thing? Is it extensions and you’re already doing that? Then can you double down on that? That’s kind of what I would think. And I’m not saying copy your competitor, but this is a bit of a product type that’s been around for what? 15 years now? And so, there are certain-  

Ruben Gamez:
The answers are there already, yeah.  

Rob Walling:
Yeah, and then it’s just do those better. That’s what I would be trying to do, right?  

Ruben Gamez:
Yeah. I use this a lot and I tell people to do this a lot when they’re in a category that’s established already. Things have already been figured out how people buy, why they buy. Not just that, but what to sell. On the surface it seems like, “Oh, okay, I go to their pricing page and then of alternate like Bitly or whatever, and then I see what they’re selling and it gives me an idea.” But you want to go deeper than that because there’s probably enterprise there. What does that look like? Talk to salespeople. Really dig in and understand how the market works. And then you start to build a picture of like, “Oh, these alternatives kind of go in this direction and this is how they make their money and this is how much they’re making.” Get a really full picture of how all of that works, so it helps you design your own offering and figure out an approach that’s going to work for you.  

Rob Walling:
I agree. And I’ve always done this with, I’ll grab a notebook or some type of Google Sheet or whatever and it’s like I want every competitor around me that’s viable and I want to know not only their listed pricing, but exactly what you said. It’s like you know there’s unlisted pricing when someone comes in and says, “I want to shorten 100,000 links a month via an API for my…” I don’t know what business, but there’s some businesses that needs to do, I guarantee it. And so what do they do? Well, they talk to enterprise. And how do they price that? I don’t know. Let’s figure it out. Let’s do some research. Let’s pose as a customer potentially. There’s a bunch of different ways that you can think about. Once you get your head around that, you start to see where the money’s at.  

Ruben Gamez:
Yeah. And who are their best customers? And then we did this, and then talk to those people and see what they want. It’s not enough to just say, “Oh, these are the best customers. We can go in this direction. Know what you’re getting yourself into. We looked at real estate and it’s like, “Okay, this is big obviously for a lot of e-sign companies.” We talked to a lot of them, interviewed them, and then found out, “Oh, there’s a lot more to build out for this. And then they have these things that we don’t like so much for starting point, let’s not do that.”  

Rob Walling:
I like what you said there of… What you really said is… Because realistically, Tim was kind of saying, “How do I get more people in the funnel?” And the first thing you said is, “Maybe you don’t want more people, you just want more of the right people. Even if it’s fewer, you want the ones that are going to pay you a lot of money,” right? The best customers. And best is maybe realtors are not it if they need all these special requirements. So they may pay you money, but they’re not the best because of X, Y, and Z. So that’s the thinking that it shows that you’ve been a successful entrepreneur for what? 14 years now, is that you’re thinking at that next level of how do we get this done in a way that’s not just widening the funnel. So thanks for the question, Tim. Hope that was helpful. 

Our next question is from Pedro about really it’s about building copycat apps. He’s tried the stair step approach, looking at Shopify apps and wondering, “Is there something to be done here with just copying existing apps?”  

Pedro:
My name is Pedro, I’m from Ukraine, currently living in Poland because of war. I found your video on YouTube about stair and step approach and decided to follow it this year. Few years ago, I built a Shopify app, but it failed mostly because there was no much need in product. However, I was able to make $1,000 in 10 months, but I shut it down because I thought it’s a waste of my time. I didn’t have original ideas. Currently, I’m building something that already exists. I would say it’s copycat of another app, but with more features and some ideas. I want to build multiple apps like that and to make 5 to 10 [inaudible] to quit my job. So my question is, what do you think about copycats in general? What do you think about this kind of approach to build something that already exists, add more features, try to come with some ideas maybe? Because I know for marketplaces like Shopify and others, it’s pretty common to see some apps like that. Thanks for your podcast.  

Rob Walling:
What did you think about this one?  

Ruben Gamez:
Yeah, this is a fun topic because I know it makes a lot of people unhappy when they’re thinking about copycats and all this stuff. And of course it’s super annoying, yes. If I put something out, I see somebody copying my stuff, and there are different ways of copying it, then I’m not the happiest person of course. But you kind of learn to ignore it, that’s when you know to expect it. Once you’ve been out there, it’s going to happen. 

There’s a really underrated MicroConf talk from back in the day that I like a lot from Heaton about… It was pirates and explorers. He talks about this whole whole thing about there are different types of founders. Some are pirates and some of them are explorers. Explorers sort of innovate and all that, and that’s where their strengths lie. And then pirates tend to be fast followers that kind of copy features and they understand their strengths. Once you understand that… And the context was a little bit different and it was more speaking about competitors and how to think of it and understand what’s going on there, but I like that framing because I think it is important to understand where your strengths lie. And if it’s on the innovation and you’re trying to work against that and try to take a strategy to where you’re just copying apps and all that stuff, then it’s maybe not the best approach for you. But if it is, then understand where your strengths lie. 

Speed is a big part of it. And then it’s not just like… When you say copying, that could mean a lot of things, right? It’s about always trying to improve. And maybe you’re not that good of a product person. So it’s where you’re not going to be improving the product that much. But if you’re not going to be doing that, then you better be good. You better be better at other things like distribution. You better be better at-  

Rob Walling:
Marketing.  

Ruben Gamez:
Yeah, at sales or whatever because it’s going to be really hard to make that work as a business if you’re not better somewhere.  

Rob Walling:
My two things, I’m in line with you. My two thoughts around “copying.” Now here, I have personally, since I am a product person and I tend to get really annoyed, my products have been copied and it’s super annoying to me, so I will not tell you and I cannot tell you, “Oh, go just do a carbon copy of someone else’s stuff” because that’s (beep) to me. Now, it’s capitalism. And so some other people may have a different opinion on that, of like, “Well, you can’t trademark or copyright your user interface and the features you have, so legally I can do that.” Me personally, it pisses me off so much because I’m a builder. But all that aside, if you just build the same thing, you have no advantage. That’s exactly what you said. You have to either build the product better in a way that is noticeable. You need a differentiator. Or you need to be way better at marketing or sales. 

And if you’re building Shopify apps, what does that mean? To me, that means I can build mostly a similar product to what exists. But if I outrank you in the app store, I’m probably going to pick up some customers. If I get to number one for this term, it’s just an SEO play, right? Or what do you call it? ASO, app store optimization when you’re trying to actually rank in an app store, but it’s basically just search engine optimization. 

I’ve absolutely seen folks build Shopify apps that weren’t differentiated, but they ranked high and so they got decent traction. Or I’ve seen folks build something that ranked the same, but it had this one key differentiator. It could hit an API and pull in a bunch of stuff that the other ones couldn’t. And so anyone who needed that had to go there, right? They had positioned themselves for this specific use case almost. That’s always how I feel about it. Because I don’t know, man. If you build the same product and you’re selling it the same way and you’re kind of not as you’re the innovator like them, exactly to your point, it’s like why would anyone use you?  

Ruben Gamez:
Yeah, I think there might be a situation to where you can build something and have something almost the same to where you can get customers and be in an okay position. That might be if you’re entering into space where people really are upset and not happy with the existing solutions for whatever reason, right? It might be like, “Oh, support’s bad and it’s bugging.” In that case, it’s like if you just kind of have the same thing but support’s good and it works, then people will be happy. It’s still different, right? There’s still a difference there. But it doesn’t have to be in the feature direction so much if there are other opportunities elsewhere.  

Rob Walling:
Yeah. It’s any type of advantage. Or it’s either an advantage you have or a weakness they have that you’re exploiting is really what it comes down to. So thanks for that question, Pedro. I hope that was helpful. 

Our first text question of the day is from Callum and they ask, “Hi, Rob. I’ve really enjoyed listening to your podcast. I’ve just started listening this year, but they’re inspiring and empowering for me in my attempts to become a startup founder one day. I’m a software engineer with around four years of industry experience. I’m working on my own early stage business outside of my job. My day job is as a software engineer at a medium-sized tech company, but I’m being forced to find a new one. I want to take this opportunity to make the right step to maximize my learning and my chances of building a successful bootstrap startup one day.” 

“My question is, should I try to find a startup company where I can get more responsibility or should I try to get a job in a big tech company? I’m leaning towards working at a startup and sacrificing my potential salary increase. I have no other dependence other than myself. I would do this in favor of maximizing my learnings on how to run a successful business. On the other hand, I believe I could still learn a lot of engineering skills from a big tech company and build up more savings if I work for them since the salary’s larger, then that could help support me if I chose to go full-time on my startup at some point.” What do you think about this, Ruben?  

Ruben Gamez:
So I think a lot of it depends on the person and how they get energy, what their strengths are, all that stuff. Personally, I prefer to learn by doing and I’d want to just start doing the thing. There’s only so much you’re going to learn by having a job. Learn about doing your own business and having your own software product. Even if you’re working for a startup, it’s still not… There’s just so much that you’re not going to learn. That said, yes, you’ll learn more with the startup if that’s your goal. And if you just feel like that’s what you need to build the confidence or whatever, that’s cool. There’s nothing wrong with that. 

There are a couple ways of thinking about it. Sometimes startups can be more time-consuming. And if you’re thinking at some point, “I wanted to do this on the side, start my own thing on the side now,” and you might not have the ability to do that because you’re so tired, there’s not enough time in the day or whatever, and it might make sense to… Like, I had a bigger, boring corporate job and I did stuff on the side because it didn’t take all of my time like some startups can, and it left me with a lot of energy and time and kind of motivation to do my own thing. So yeah, I just think it’s largely personal, but yeah, you will learn more stuff in a startup that applies, but not as much as you think. You’re going to learn the most when you actually do the thing.  

Rob Walling:
And I think the reason he’s not just doing the thing full-time is money. He needs a salary to live on.  

Ruben Gamez:
Yeah. Yeah. And I just mean on the side, right?  

Rob Walling:
Ah.  

Ruben Gamez:
Nights and weekends or whatever. Some people have trouble with that, I get it. I didn’t. It was always a thing that I could do.  

Rob Walling:
That’s what I had to do.  

Ruben Gamez:
Yeah, right.  

Rob Walling:
“I didn’t have a problem because I couldn’t have her. If I had a problem with it, then I was not going to be an entrepreneur. It was my only option.” So I get it. I had a problem with it. I didn’t give a (beep) that I had a problem because I wanted to out own my own business, you know?  

Ruben Gamez:
Right.  

Rob Walling:
I get the feeling with you. That was a similar thing. So what you’re saying is you’re going to learn the most working on your own thing on the side, on nights and weekends, and you will learn some from the startup and less from the bigger one is basically that’s your sentiment?  

Ruben Gamez:
Yeah, pretty much. Yeah. But I think a big part of it is if you are going to be doing some stuff on nights and weekends, really, really consider… I say this because I’ve had friends that have made this mistake. They’ve taken like, “Yes, you do a startup job.” It’s fun, it’s exciting, [inaudible], it’s challenging and you still want to do something on the side, consider the environment that you’re going into and if it’s going to leave room for that.  

Rob Walling:
Yeah. This is similar to a question I answered in the last couple months where it was kind of deciding between a startup job that didn’t pay as much and a big company job where it was super political. And I think he was already at that job. He worked the day job and he was going to take a pay cut to go to a startup, and that was something I brought up was, A, it depends on you, your personality because as I said, working nights and weekends, I just ground through it. I could never grind through politics. That (beep) drove me nuts, absolutely that (beep) crazy. I couldn’t handle it. So that was just one of the things that I wouldn’t do myself. But I know some people who navigate it really well and they would put up with it. 

So I think we’re on the same page here. You’re going to learn more from the startup day job, than the big company day job for sure. But are they going to make you work 50, 60 hour weeks? Is that the culture there? And so then it would pull away from your nights and weekends. Yeah, it’s always a tough choice. I think I know what I’d be doing. I’d be doing nights and weekends, me personally, plus the startup as long as I could ensure that they weren’t going to grind me, grind me down to a nub. So thanks for that question, Callum. I hope it was helpful. 

Last question of the day. “How do we balance customer needs with our strategic roadmap?” This is from Nate, and he says, “Listening to Startups for the Rest of Us has been a part of my weekly routine for a couple years. You’ve been able to find topics that are always relevant for me on my startup journey. So thanks for the consistent support. I’m the CEO and co-founder of a bootstrapped identity business focused on the enterprise. We started as pure services and we saw big companies trying to solve the same problem with identity platforms over and over. So we’ve reinvested profits back into the business to build our SaaS product” 

Congratulations, because a tough switch to make. I see so many services companies try to do this and there’s a headwind to doing it. Back to Nate’s email. “Since we had developed trust and a great relationship with one of our customers who is a major global enterprise, we were able to sell them our first license. So we have a grand total of one customer using our product to date. Granted, it is enterprise, so the license is a few hundred thousand dollars, but that’s another conversation.” 

“My question is, as you can imagine, we are now balancing trying to build features based on our strategic roadmap and we’re trying to balance that with catering to what our one SaaS customer wants us to build. They make up almost 75% of our revenue, so we want to keep them happy, but we also need to diversify and get more customers. I’m constantly faced with whether I stick to my guns and forge ahead with this strategic roadmap at any cost to find product market fit or continue to try and balance our roadmap with building customer feature requests. These two have been very challenging. We only build features that are generic enough that anyone can use them and the problems that customer is trying to solve are great ones, but that doesn’t necessarily put us closer to product market fit. So what do you think is the better long-term strategy for the business?” 

Man, that’s a tough situation. What do you think?  

Ruben Gamez:
So it’s great that they have a customer that’s paying that much and they have other customers, I guess, that are also paying for the product because… Is that right? Because it says 75% of the revenue.  

Rob Walling:
Yeah, that’s what I was confused by. He said they have one customer but then said it’s 75% of the revenue, but maybe it’s 75% and the other 25% is services revenue.  

Ruben Gamez:
Services. Oh, okay. That could be [inaudible].  

Rob Walling:
Let’s assume that. Yeah, so they literally have zero other SaaS customers. Let’s assume that.  

Ruben Gamez:
Okay, so yeah, this is dangerous. It’s tricky because it’s kind of good, you’re like, “Oh, somebody will pay for this.” But then it’s the danger zone of you have this one customer and they may be dictating too much of your product development. And it’s good, I like that he mentions, “We’re building features that they want but are generic enough in a way to where it applies to other people that are going to want to use the product and it’s going to improve the price.” So it’s kind of killing two birds with one stone. But you’re right, he calls it out like, “This isn’t getting us closer to product market fit.” It’s just building these maybe retention features or something like that, that they’re kind of necessary, but not the ones that are going to get people to buy the product. 

So it sounds to me, and I may be wrong here, this is one of the things that I think is dangerous, that you may be trying to build something that’s maybe a little bit more self-serve. So you’re building out features that anyone can use and you’re doing it for a customer segment that you have zero customers for and you don’t know anything. So it’s like you’re not even working towards product market fit yet in that case. 

I would say first make a decision. And if you feel good about the type of customer that you have now at a few hundred thousand dollars, that’s truly enterprise. Go in that direction, get more of those. They’re going to take longer to get in, but if you can sell one, maybe you can sell another one or a couple more and build for that type of customer. Don’t mix them up, especially if you’re going to really keep this one customer on board and try to make them happy. With limited resources, it’s really, really, really tough to build out something for the lower than the market and also build out for enterprise. Decide and just do it that way.  

Rob Walling:
I don’t think I have anything to add to that. I think that was a really good summary of it. You’re obviously in a pickle having to make a hard decision, but your point about it doesn’t necessarily feel like you’re moving towards product market fit, because kind of guessing at what that is if you don’t have other customers that you’re building for, right? And if you do, let’s just, for sake of argument, assume they have three other prospects that are hot to trot and really want to use this product, but they can’t until you build X, Y, and Z. Well, then that kind of answers the question, doesn’t it? Like I would build X, Y, and Z and I would feasibly lose. Even if you lose your biggest customer, if their product market fit is different than the product market fit of the next three, that’s not SaaS, right? That’s consulting work. And that’s just a different… You’re building custom solutions for people. 

So that’s the hard part. I guess I want to say I know we’re all scared of losing a customer, and especially a customer is paying you hundreds of thousands of dollars funding this, and obviously you don’t want to lose it now in the near term when they’re funding development. But this first customer may not turn out to be a good long-term customer for you if product market fit is quite different than what you are building for them.  

Ruben Gamez:
Than the ideal customer. Yeah, that’s a really good point. That’s another dangerous thing about this. When you have a customer like that that’s just contributing so much of revenue, how representative are they of other customers that you’re going to get? And if not, you’re right, lose them. I mean, sometimes they can hurt and sometimes you can’t until you get some new customers in there and all that stuff figure it out. But yeah, don’t let them dictate too much of what you’re doing.  

Rob Walling:
So thanks for that question, Nate. I hope it was helpful. Ruben Gamez, you are @earthlingworks on Twitter, and @SignWellApp on Twitter, and of course, SignWell.com if folks want to use the best electronic signature platform on the internet. Thanks for joining me, man.  

Ruben Gamez:
Thanks. This was fun. Thank you.  

Rob Walling:
Yeah, it was a good time. 

I really enjoy these listener question episodes because they get me thinking outside of my own box, outside of my own head, right? I have mental models of how startups should be built and grow, and those have been refined over 15, 17 years of doing it and investing in all the companies and advising. But it’s so interesting to hear unique questions that I’ve just never thought of before, and that’s what these episodes allow me to do, and me with a guest sometimes as well. And so I really appreciate you sending them in. And I hope that these episodes are helpful not only for you if you’re asking a question, but even for those of you who listen to this show week in, week out, and whether you’ve listened for six weeks or six years. I hope that you can get insight into specific issues and struggles that other founders are experiencing, that I think is the real value of hearing from others in the community so that each of us doesn’t feel alone and isolated as we sit at our standing desk in our extra bedroom eight hours a day, not communicating with other founders. 

My hope is that this show and the listener questions that we get can be some semblance of connection for you, to the rest of this podcast and MicroConf family. This is Rob Walling signing off from episode 673.

Rob Walling:
Whether it’s your first or your 600th episode, welcome to Startups For the Rest of Us. I’m your host, Rob Walling, and on this show, we talk about entrepreneurship and diving into bootstrapping and mostly bootstrapping. Sometimes we raise a little money. What we do know is that we seek freedom, purpose, and relationships, in relation to our companies and our products and the businesses that we build and put out into this world. Today, I talk with Jon Hainstock. Jon bootstrapped and exited ZoomShift. He’s currently building ChatterDocs.ai, and he’s an M&A advisor, helping entrepreneurs exit well at Quiet Light Brokerage. I’ve known Jon for several years. He’s come to several MicroConfs, and you probably know him from Twitter. But if not, it’s a great story hearing how Jon bootstrapped his company and then, immediately after the sale, tried to dive right back in. 

He’s acquired a few things since then, but really has found joy in helping other people do that hard task of exiting, of deciding when to sell their company. And towards the end of the conversation, we talk about pitfalls to avoid when you are looking to acquire a company. And while we’re on the topic of exits, this is the first announcement of MicroConf’s Exit Event. This is an invitation only, premium all inclusive retreat for SaaS founders looking to sell their companies for eight or more figures. So that’s 10 million or more dollars. We’re in the early stages of planning a transcendent, an amazing experience. 

It’s going to be in partnership with Quiet Light Brokerage. It’s going to be co-hosted by myself and Dr. Sherry Walling. And we’re going to talk about all things selling SaaS. This event’s going to have super limited capacity, probably only have maybe 20 founders. It’s for high performing SaaS companies, that are growing quickly, and it’s going to be a mix of work and play. It’s called the Exit Event. You can head to microcomf.com/exit if you’re interested. This is one that’s going to sell out fast. So if this is something you’ve been thinking about, I would suggest head to microconf.com/exit. And with that, let’s dive into my conversation with Jon Hainstock. Jon Hainstock, welcome to Startups For the Rest of Us.  

Jon Hainstock:
Hello. Thanks for having me.  

Rob Walling:
Yeah, man, I feel like you’ve been around MicroConf for quite a while. I’ve seen you on Twitter. I’ve known each other for several years. I was thinking as we were chatting today that somehow you had been on the show before, but you haven’t. You just kind of been in the zeitgeist. So I’m really kind of happy to introduce you to the listeners. And so folks get an idea, you built and sold a SaaS company called ZoomShift. And do you want to give us just a brief kind of timeline of how that happened, when you started, and when you exited? And then, we can talk briefly about that decision around that.  

Jon Hainstock:
Yeah, absolutely. So ZoomShift was started by my business partner, Ben, and he had created it kind of as a portfolio project to kind of showcase his development skills. He was learning development essentially in programming, and he built that when he was in college. And he won this business competition at the Marquette School of Business. And we ended up partnering up together through an accelerator program. I was doing some marketing for that accelerator program, and we ended up joining forces when that whole thing kind of shut down.  

Rob Walling:
What year was that?  

Jon Hainstock:
I believe this would’ve been 2000 and… Let’s see here, 8, maybe. 2009.  

Rob Walling:
Oh, wow. So it was a long time ago.  

Jon Hainstock:
Yeah, yeah, yeah. So I’m trying to think of the exact timeline. I’m going to have to go back and think about that for a second. But yeah, it was a while ago.  

Rob Walling:
Yeah. Yeah, that’s crazy. And was it SaaS from the start? And to give people an idea, I probably should have said the H1 of ZoomShift is a work schedule maker designed for hourly employees, build your work schedule in minutes, track time off, reduce labor costs, and have confidence your team will show up on time. So back in, we’re talking, if it’s ’08, you’re talking 15 years ago, and whether it was 13 or 14 or 15, doesn’t really matter. It’s just that it was a long time ago. Was it SaaS from the start?  

Jon Hainstock:
Yeah, it was. So actually, I’m going to have to reverse back on this answer. So I think, when I think back to the timeline, I believe it was 2011 is when we first started building into what would become ZoomShift, so different timeline, for sure. Still a long time.  

Rob Walling:
Yeah, it’s still 12 years. Yeah. It’s a long time ago. So it was SaaS from the start, and you partner up with your co-founder. So did he come up with the idea then? He was already working on it?  

Jon Hainstock:
Yeah. And there was a couple incumbents in the space at that time. It was still very early. This is before things were really starting to take off. It was still very early. And he had built the prototype kind of based on some of the things that he was seeing happening in the competitive space. So it wasn’t this, “Hey, this is an original idea. There’s already some other solutions out there. Let’s try to create something similar and ride the wave.”  

Rob Walling:
As everything’s being SaaSified. We’re still in the golden age of SaaS, but it’s definitely more competitive today than it’s ever been. And so, when did you sell it?  

Jon Hainstock:
So that was in 2020 that we sold, was going right into COVID, which nobody had any idea what was going on at the time. ZoomShift serves retail, hospitality, or restaurants. So they took a pretty big hit during that period of time.  

Rob Walling:
Yeah.  

Jon Hainstock:
But we had sold right before all that happened, actually.  

Rob Walling:
Without any knowledge it was coming, right? None of us knew it was coming. That’s crazy. Okay, so can you give us an idea of maybe where the business was at when you sold?  

Jon Hainstock:
Yeah, so we were profitable. We were both working full-time on it. We had a full-time customer support person doing six figures in revenue, and things were really pretty stable overall. Churn was low, growth was slow, but steady.  

Rob Walling:
That’s cool. And why did you decide to sell?  

Jon Hainstock:
There were a number of reasons. I think the biggest reason for us was realizing we were kind of at a fork in the road, in terms of, if we wanted to take the business to the next level and to try to grow and maybe potentially exit to a private equity company or something along those lines, strategic in the future, it would really require a massive shift in how we were operating the business. We were operating primarily around profits, lifestyle, kind of on a saver’s mentality versus a growth mentality. We realized that, as the competition increased, we would have to put a lot of energy and resource into building the team, pouring the gas on marketing, investing capital into the business, whether that’s raising debt or maybe some sort of equity. And so, we were kind of at a fork in the road when we were approached by this private equity company, and we realized it was just a good period for us to take some chips off the table. Because we had also been working on the business for seven, eight years part-time, two full-time. 

It was kind of a teeter-totter in between other things. So it’s enough time to be working on a project for somebody who’s more of a builder, to start to get to an itch to say, “Look, is there something else I could be doing? Do I really feel like getting into a manager role, where I’m trying to be more of a resource allocator than an actual builder of product?” And obviously, there was a lot more involved in the emotional side of this decision process making, but a lot of it had to do with just where we were as a business. And I find a lot of other folks that I speak with now, getting to that point, where it’s either double down on what we’re doing and what’s working and invest a lot more resource into it, take less profit, build the team, invest, and kind of assume that risk yourself, or look to divest some of that either through a partial or a full exit. And so, it just happened that, when somebody reached out to us, we were kind of at that inflection point, that fork in the road.  

Rob Walling:
Yeah, I talk a lot on this show about there being, there’s the venture track, which we kind of know what that means, go big or kind of go home, in essence. And then, we used to say it’s bootstrapping and venture track, and now, we know there’s a lot of nuance in between those things. And even within bootstrapping, and now, I say mostly bootstrapping, which is raising small rounds, there is there are lifestyle bootstrappers and there’s I call it the more ambitious bootstrapper track or growth bootstrapper. And lifestyle bootstrapping is amazing. I had an awesome business doing 30K a month with 2K in expenses, and I work 12 hours a week. And that is, it’s like super cash flow, great lifestyle. But that business was, for reasons, for bunch of reasons, platform risk and churn and such, was never going to be something I ran for 10 years and it was never going to be a million dollar business unless, to your point, I completely changed the way I did things. Because I had a bunch of contractors. 

Everybody was part-time. I was the hub of the hub and spoke. And that has its pros and cons. At a certain point, I decided “I want to do the growth track, the growth bootstrapper, ambitious bootstrapper,” and that’s where you think, “I want to get to one, 10, 20 million.” And I probably, if you’re going to do that, you want to exit at a certain point. But going down that path, as you said, completely different. It’s like you do start grinding a bit. It’s not as bad as venture, I would say, but it certainly comes with hiring, managing, really going after growth. 

That becomes your number one, and suddenly, you have no profit, you run a break even, or even you lose money, if you’re able to pull money out of your personal stuff, as I did. And so, I could see being at that inflection point, I can imagine, in your shoes, thinking, “Do I want to go down this road?” And I bet you struggled with that decision for a while. It wasn’t like one week, you thought about that. I bet you thought about it for months, if not a year or two, thinking, “What are we doing with this business?” Because you’ve been doing it a decade, right? That’s a long time to run this same company.  

Jon Hainstock:
I actually remember attending a MicroConf in Las Vegas with my business partner and being in the hallways with him and just chatting and having this exact conversation, which is, “What are we doing with the business? Where are we going? Where are we headed? Do we want to double down? And do we want to keep focusing on this project? Is this even really what we feel passionate about doing?” Because at that period of time too, I was really a lot more driven by what excited me, less just the practicalities of building a SaaS business. And so, it was a conversation we were having for probably multiple years in there, where it would come up, we would talk about it, “Should we raise? Should we sell? Should we do this or that?” And we kind of just pushed it to the side as we continued doing what we were always doing. And when the opportunity came to sell, that’s really where it brought all of those conversations to the forefront. You had to deal with them, you had to think about them, because there was an actual offer on the table.  

Rob Walling:
So you exit this business and you and your co-founder walk away. If you’re doing six figures, you walk away with a pretty nice, what I call life-changing money. Even putting half a million dollars in a bank account, for almost all of us, is life-changing, because it gives you that comfort and a little bit of freedom. Maybe it’s “I can take a year or two to do stuff,” and I use half a million dollars as just an example. So you exit, you put money in the bank, and then, what do you do next? And I ask this question, it’s almost a trick question, because here’s what most founders say, “I went on to do my next thing right away.” 

And here’s what I tell anyone who asks me these days, when they say “I’m going to exit,” I say, “Take three months off, maybe six. Don’t do anything. You can write. You can write in a notebook of all the ideas you have. You can maybe buy domains if you give yourself a 48 hour cooling off period. Do not start another company.” That’s assuming you… If you sell something for 30 grand or a hundred grand or whatever, maybe you don’t take a bunch of time off, but when you have a more sizable exit, especially after working on something for a decade, there should be some time to just let it still. So with that ask Jon, I almost know what your answer’s going to be. What did you do after you sold ZoomShift?  

Jon Hainstock:
Oh, I did the opposite of that.  

Rob Walling:
All right.  

Jon Hainstock:
No, I wish I could say that I was very methodical about my next steps. I was not. I really kind of floundered for a bit, because I didn’t know what I wanted to do and I wasn’t in a position to just not do anything for the rest of my life either. And even if I was, I don’t think that that was really the question I was trying to answer in that period of time. The question I was really trying to figure out is , “What do you really want to do? So take all this away. Now, what do you really want to do with your time? Do you want to do this again? Do you want to start something else or get totally out of software?” 

And so, for me, I kind of took a little bit of time off, but then, quickly after that, I was talking with friends who are also feeling what I call the itch to create again, to build again. And I was kind of chasing down some ideas. Nothing really amounted to anything, because I was floundering. I was really not sure if this was even what I wanted. And I think there was a pretty big conflict inside me emotionally as to, “Should I do this? Should I do that?” And having my foot in multiple things, not really going all in on anything. So that was a difficult period of time, for sure, before I landed at Quiet Light.  

Rob Walling:
And that’s pretty common. There’s a book called Finish Big by Bo Burlingham, that talks about finishing big. It talks about selling a company and a little bit more of the psychological aspect of it or the mental health side of “This is going to be hard.” And in that book, they talk a lot about it’s manufacturing companies and storage companies. It’s not necessarily tech, but I think the sentiments, if you worked on any company for a decade and it’s kind of been a mostly full-time focus, I think anyone’s going to feel that. It’s this feeling of being a little lost maybe. And I think, to your point, if you have enough money that you never have to work again, then there’s no pressure. You can get bored, you can take six months off. So after I left Drip, I took six months off, and I got pretty bored and I got restless. 

I wasn’t like, “Oh my God, I have to make money.” I didn’t have that feeling. It was a luxury of selling for what I did. But if you’re not there yet, then of course, that pressure has to be lingering in your mind of, “I need to start something. I need to start revenue. I’m drawing down on my bank balance every month.” And as bootstrappers, that never feels good. We’re not used to that. That’s something that the funded folks get pretty good at is watching a bank balance drop and being runway and being okay with it. But was that a factor? Were you kind of freaking out a little bit, a little panic attack every time the bank balance dropped 10K?  

Jon Hainstock:
Yeah, definitely. That weighs into it, for sure. And it wasn’t like an immediate, “Hey, we have to fix this problem immediately.” But what really ate at me more than anything was the emotional side, like you mentioned. And it wasn’t really as much around the financial aspect of it, because we’d be fine. We could go for a while without really feeling a major hurt there. But it was really the psychological aspect of answering the question for myself, “Well, now what? What’s next?” And so, that really weighed on me more than the financial aspect of it. Yeah, the financial aspect of it never feels good to see that money going out and no money coming in, which is kind of what drew me into eventually buying a couple smaller assets as well, small software businesses. But that was secondary to the feeling of restlessness, aimlessness, that was really just there from the exit onward, just trying to figure out, “Well, now what? Well, who am I, to a certain degree? And if I’m not a founder anymore, what does that look like?”  

Rob Walling:
Yeah, it messes with identity. I talk a lot about my three kind of north stars, freedom, purpose, and relationships. And most of my adult life, I was seeking freedom. And then, you achieve it. You achieved freedom, where it’s like you may have to work years down the line, but you certainly don’t have to work this year or next year or whatever the number is. You have a certain freedom, and you really can call your shots on what to work on next. But what you were lacking was purpose. You achieved the first one and hopefully, had the third one, relationships. But when you don’t have all three of them, it’s disorienting. And it’s fine for a week, it’s fine for two weeks. For months, it’s not. It’s not okay. We lose a part of ourselves, I think, or a part of our humanity perhaps when we don’t have… Especially as entrepreneurs, because we’re so ambitious in wanting to have an impact. 

So you said it earlier, now, you’re an advisor with Quiet Light. Folks who listen to this show know Quiet Light as a broker that’s been around for what, 15 years or something, sells. It helps people buy and sell SaaS, e-commerce, content sites, WordPress plugin software, just pretty much the gamut. And I want to talk about your experience, your decision to make that leap into it, and then, how that’s been. Also get some tips on buying businesses, right? Buying and/or selling, whatever you want to offer, because folks are always interested in that. Before we get there though, I want to cover this piece you just teased, which was, “Before I went to Quiet Light, I acquired a couple small assets.” I’m assuming websites or web properties of some kind. So how did those go? Were they successful? And I guess, why didn’t you keep going with them? What made you decide to become an advisor at Quiet Light, instead of running more with that path?  

Jon Hainstock:
So again, as I was trying to work through what would be the next thing, couldn’t sit still and started looking at, at the time, this was MicroAcquire, kind of following the playbook of buy then build. And found a couple interesting small ones that were under $50,000, which is very reasonable for somebody getting started and somebody who’s listening to this, I think it’s a great way to test out entrepreneurship through acquisition. It’s kind of in that 20, 30, 40K range is a great sweet spot to find something. And so, I connected with a few folks there that I felt like were good fits from either a partnership or a full acquisition standpoint. And one I bought was in the trucking space. That one ended up getting to a few thousand in MRR, and we ended up selling it because the partner on that deal just wanted to not do it anymore. 

And I didn’t really have a strong opinion either way. And so, I’m actually still receiving payments on that one, which is kind of fun to get mailbox money on that one. And so, we sold that one, and then, I bought another one around the 50K mark. And it was just at a multiple and at a price point that just like it was a low risk situation. And so, I ended up buying that, and it’s paid itself back and cash flows every month and makes a few thousand dollars every month, which is great. And then, there’s a couple other ones that I own now, that are kind of similar story. Some of those are partnerships, some of those are owned solely. And why didn’t I focus on this? I think, for me, the main reason is because when I was exposed to Quiet Light and the work there, it checked off the purpose box for me more than this other kind of portfolio of software companies did. 

It really checked off that box for me, because I was able to help entrepreneurs sell their business. I was able to help them during a period of time, which is very challenging to navigate,, practically speaking emotionally, all those things, and try to give them the advice that I wish I had when I was going through that not too long ago. And so, it was super rewarding going through that cycle. And I had kind of acquired some of these assets along the way, and they help and serve as a way to offset some of the ebbs and flows of advising and brokering, which is deals come and go. And lots of times, they fall apart, because that’s what deals do. And this kind of gives us stability of revenue and income through these smaller assets. And so, that’s what appeals to me about them. I really enjoy them, but I don’t have any desire to make those my full-time thing at this point. Because I really am enjoying the advising side of things.  

Rob Walling:
What you’re saying is triggering this memory of mine of the one thing that I think Robert Kiyosaki who wrote Rich Dad Poor Dad and now, this huge empire of info products. I don’t particularly like most of his stuff. I think his first book, there’s Rich Dad Poor Dad for Teens, and I’ve had my oldest child read that. And I think it’s super cool. A lot of the other stuff, I think he just repeats himself in different ways. But there’s one framework that I’ve always loved of his, which is he has it as four quadrants, but let’s just say bottom to top. At the bottom is where most of us start as an employee. And then, many of us become self-employed. And this is when you’re a freelancer or a contractor where you say, “I’m an entrepreneur,” but realistically, I did this for years, dollars for hours. 

“I’m really just employed for myself and I can decide who to work for, but it’s dollars for hours.” And then, the next step up is an entrepreneur, which is where you’re running ZoomShift. You’re leveraging assets like software and employees, other people’s labor, where you’re paying them and then, you’re making money on that and don’t necessarily have to work 40 hours a week to make a full-time salary at that point. And then, the level above that is investor, and that’s where you are potentially acquiring assets, that are just much more passive. Either someone else runs them or in this day and age, Kiyosaki didn’t write about this back in the day 20 years ago when he wrote the book, but these days, it’s like you can get some passive investments, where they kind of go along with minimal involvement. And it sounds like you’re entrepreneur with ZoomShift, and then, as you acquired these other business, I’m guessing you worked on them and in them for a while, but have almost stepped back to the point of being an investor, where it’s more passive income. 

I’m careful with this phrase “passive income,” because really, there’s no SaaS company, for example, that’s on permanent autopilot. It just doesn’t happen. They always decline, because Google smacks you, because a competitor comes along. It just happens. I’ve never seen one that’s like, “Oh man, I had this SaaS company 10 years, and it was just passive the whole time.” It’s like, nah, let’s be real. But with that said, you can still be an investor in companies and need to invest periodically to hire to replace someone or to beef up the SEO or whatever. And being an investor is fun, but it can be boring too. And as you said, if that’s not a big interest of yours, then trying to find something else to give you purpose, I could imagine wanting to do that. And at Quiet Light, you’re able to work with a team of other people, which oftentimes gives us purpose, because we’re communal beings as humans. So I’m curious then, leading us into that piece of it, why Quiet Light? And how did that happen? Did you approach Quiet Light? Did they approach you?  

Jon Hainstock:
Yeah, they approached me. I was actually on the Quiet Light Podcast telling the story of selling Zoomshift shortly after it happened. And it was through a friend of a friend that knew the co-founder there, Mark. And so, I didn’t really know anything about Quiet Light, except for one interaction I’d had with a broker, when I was thinking about selling Zoomshift and we were going through that process. So I didn’t know much about the industry, didn’t know much about even how they thought about brokering. And I had a chat with the founder there. And what I realized was fundamentally different about the way that they approach things versus some of the other folks that I’d spoken with in the industry is that they kind of come at it from the perspective of working with advisors who have been there and done that. There are other entrepreneurs who have already gone through this process and been on the sell side and sat in that seat and actually have gone through the ups and downs of growing a business and then, eventually exiting it, sometimes multiple businesses. 

And so, I liked that approach. It was different from what I had seen before, which was a little bit more mechanical or investment bank. It just felt different, almost like shuffling along inventory through a real estate kind of process or something. And so, I really liked their approach. And meeting some of the team there solidified kind of what I felt about the business, in terms of its values and the people involved. Just stellar people, every single one of the folks that I spoke with before coming on just very real and very eager to help, even though they didn’t know if I was coming on or not. There was a spirit of collaboration, not just competition among the team members there. So that was a big part of it. 

And then, I wanted to try something different. I wanted to get out of, even the last year of experimenting with some of these other ideas and trying little projects, I wanted to try to put on a different hat completely and see what it felt like to be in a different role, in an advising role, a role where you’re not in the active operating seat at all times. And I just wanted to see what that was like. And I came to realize it was something that I could really enjoy, I was decent at, I felt like I could really connect with entrepreneurs. And that, to me, was a huge bonus of the job is just being able to talk with folks. Even if they didn’t decide to work with me, it was just great to connect with them, because you have that human element, like you mentioned before, the relational side. And so, to me, it was a great opportunity to try something different, to stretch and learn some new skills. And it’s been great so far. I’ve really enjoyed it.  

Rob Walling:
Yeah, I find that learning is a huge part of entrepreneurial purpose. Most of us, as entrepreneurs, if we’re not learning or growing, just don’t have that, right? And so, stepping into something new, I think, is super interesting. And to your point of being generous with your advice, there’s no string attached, if someone were to DM you on Twitter, by the way, you’re Jon, J-O-N, Hainstock, H-A-I-N-S-T-O-C-K, on Twitter, your DMs are open, and if folks want to ping you and ask you your advice or ask you whether it’s about your experience or how they should think it through or whatever, you’ve never been the person to say, “Oh, well now I want to sell you something. Now you should come work with me. Well, now you owe me.” 

It’s like, you’re not that type of person, right? I’ve known you long enough to know that. So I have an interesting question for you, and I’m curious to get your take on this, broker versus advisor? It’s terminology. Quiet Light calls their folks who advise and help people buy or sell companies, they call them advisors. I typically say Quiet light is a brokerage. So some people might think, “Well, people who work there are brokers,” but I don’t know enough to know how you think about this or how the industry thinks about it.  

Jon Hainstock:
Yeah, so the actual company name, I believe, is Quiet Light Brokerage Incorporated. So from outside appearances and when trying to communicate, comparing us to other organizations, it’s definitely what we position as. We are a brokerage. We have a marketplace of businesses that we help sell. I think, for me, there was a stigma around the term being a broker, because of what I imagined that person to be. I imagined it to be kind of like used car sales person, whatever it was, try to finagle you into doing business, so that they could take a commission or whatever it was. And so, I think that part of it was difficult for me, psychologically, to overcome and identify with. It’s like, yeah, no, I’m an advisor. You can call me a broker. But ultimately, from my position, the goal is to help you maximize your exit and to help you through that process, which is very difficult. 

I want to help make sure that you get what you’re looking for out of this process. You can call me a broker. You can call me an advisor. The stigma around the broker term, I think, is just due to some of the either tactics or the types of ways that people have tried to engage with entrepreneurs and to try to get their business and take commissions and this and that. And so, I think, for me, it was hard, because as a founder entrepreneur, in that seat, I had a hard time with that outside opinion of that role. And so, accepting that as an identity, it was a little difficult at first, but they’re one and the same. We are primarily sell side focused, and so, we advocate for the seller at Quiet Light. But a lot of sellers go on to be buyers. 

And a lot of the buyers that we work with keep coming back to us, because they trust what we do. And so, it is, yeah, we do sit in the middle here and we do try to help broker the deal, but there’s a lot of things that go into that, that do look more like an advisor, trying to prepare your business for sale before you sell, not just at the moment that you are going to market, but six months, a year in advance, what should you be thinking about? And all those types of things. So yeah, we’ve moved more into the terminology of advising and the advisors, instead of brokers. But ultimately, yeah, we’re a brokerage. We help facilitate the sale of businesses.  

Rob Walling:
Makes a lot of sense. And so, I want to get your advice. You’ve bought companies, you’ve sold companies. I’m sure you have some advice on maybe pitfalls to avoid when if someone wants to buy a business. I know there’s a lot of different things that people think about, and I know there’s some it depends as well, but as we kind of move towards wrapping up, if someone’s in the audience, I get this question every once in a while, so I’m a huge proponent of buying businesses. And in fact, I’ve tried to think back recently of all the companies that I’ve had or all the kind of revenue generating products I’ve had, I think I may have bought slightly more than I’ve started myself. If I can skip product market fit, if I can skip 18 months, and I have the money to do it, I was doing it all day and all night from 2006 till, I guess the last one I bought was 2011. 

So there’s about five years there, where I acquired literally dozens of web properties. A lot was software, there was like two SaaS, and then, there was all the other things, eBooks, and just anything, content sites, whatever. So I’ve always been a proponent of it. I’ve found that most people who listen to this podcast, they want to build their own thing, and that’s fine. But in the early days, when I was really coming in starting to teach, “Hey, if you’re a technical person trying to be a software entrepreneur, don’t go the venture track, do this,” I would say, “Try to buy a business.” I bought the businesses. That’s been the fastest way to get there. And yet, most people don’t want to, which is fine. But I know that there are folks listening to this, because I get a question every few months about this topic of, “I’m thinking about acquisition entrepreneurship.” And I’ve run through the pros and cons of it here, but you, as, I would say, an expert in this space, what should someone be thinking about? What are some common pitfalls to avoid when they’re going to be buying a business?  

Jon Hainstock:
So I think, first, it gets down to your expectations and the motivations, the things that you’re trying to accomplish by doing this. I think you do get to skip some of the product market fit aspect of it, if you’re able to find something that has some traction, that has some net profit. I think one of the big benefits too, that a lot of people may miss, is that you are essentially buying cash flows. And so, you’re getting the code, you’re getting the product, the marketing kind of base of it for free in a sense, because you’re buying a multiple on the cash flows typically, kind of at the smaller level, not on revenues, or if the revenues are matched, really close to the cash flows, it’s very similar. But you’re kind of getting a lot of what has been already built for free in a way, because you’re, like I said, you’re buying these cash flows that won’t dry up most likely in the next year or two. 

And so, with that in mind, I would say the biggest thing is to look out for downside protection. Everything is about mitigating risk. And so, understanding that there’s various aspects of the business that are going to expose you to risk, whether that’s on the channel side, how people are acquiring customers, whether that’s on the technology side, being in a very antiquated tech that will be difficult for you to find contractors or to be able to resell someday, every single deal you see will have risk associated with it. And so, to assume and look for the risks as you go through that process, and this is pre-due diligence, trying to understand the history of the business, both from the financial side, as well as the technical side. And then, once you’re under offer, not rushing through due diligence, making sure that you’re actually checking and verifying that the information that they provided is accurate and correct. 

So not rushing that process and making sure that you have built into your model the way that you’re kind of considering this to be a good or bad investment, that you’re willing to walk away from it when it doesn’t look right, you’re willing to take the loss, if it’s a calculated risk. And in the case of the one that I bought earlier, that I was telling you about, it was very low multiple, so it was a high risk in one sense, but low risk in a cash sense. And so, I think just having an understanding of those things as you’re looking at the business. Happy to provide more specific guidance as you get into the nitty gritty of a deal or something. But those are the things to really think about, in terms of the buckets of risk. You have your financial, your technical, the team, if you’re buying things like that, and acquisition on the marketing end. 

And so, seeing it through that frame is really useful. And then, from there, I think one of the best things you can do, if you’re really deal hunting, is to come up with your own criteria. Come up with something that really matches your strengths and plays to those things. So if you are really good at, let’s just say, SEO, and you’ve done this before in another business, look for businesses where you’ve examined them in Ahrefs and they’re not doing a good job there. And you know that, if you put five, six months into building some high quality articles, that you’ll be able to start ranking and getting traffic that way. So look for the angles that are specific to your skillset. Don’t just look for a great deal necessarily. Look for things that actually you can provide some extra value add, because those are the investments that always do the best is when you can provide some extra value to the deal or you have some knowledge that can actually provide some insight that they might be missing. 

Maybe it’s around pricing strategy, maybe it’s around product and product development, some key things that they’re missing. And you look at their competitors, and it’s like, “Hey, they have all these people are requesting this feature, and I know if I add this feature, I can start grabbing those customers.” So I think it’s both strategic and practical to think through that lens of what is your criteria, and then, try not to deviate from that. So if your background, let’s say you’re a Ruby on Rails shop and you start looking at all these deals and you start seeing deals that are Laravel or you have another deal that’s in Next.js or something, try to be disciplined to find the deals where you can really provide the most value. And I know this is probably common sense, but I think it can be difficult when you see something pop up and you’re like, “Oh, this is it. This is the one,” be patient and really kind of make sure that you’re doing your homework before pulling the trigger, even on a 20, $30,000 website.  

Rob Walling:
Patience is so huge. Patience when you’re buying a house and you’re buying commercial real estate, I buy collectibles, and I find, when I’m in a hurry and I’m like, “Oh, I really need to get this,” I just pay too much or I make bad decisions. Like you said, your Rail shop and you buy a Laravel app, that’s not the end of the world, but it’s like, ugh, that’s a lot to deal with. It’s like, “Am I going to hire someone? Are they going to be full-time? Do I vet them?” What do you do with that? I like the way you said, if you have an expertise, especially a marketing expertise, that you see they’re doing very poorly and you can feel like you can optimize, use that as kind of a superpower. That’s exactly what I did for that five, six year stint is the first thing that I learned was SEO. 

And I kind of taught myself/learned it/then acquired something that had halfway decent SEO. So then, by the time I was getting that into a flywheel, I was like, “Oh, I kind of know more than most people, especially most developers about SEO.” So then, I would just gobble up these little projects, that were, at the time, they cost, let’s say, five, 10K each, but the multiples were way low back then. This is kind of pre… It’s pre the Quiet Lights almost. And so, the multiples, I would get stuff for 12 to 18 months of net profit, which is bananas when you say that today. But the risk was huge. It was me dealing with a seller, and I had someone basically forge revenue stuff that I couldn’t verify. It was shenanigans, right? But you had to buy it a low multiple, such that you could get around that. 

But through that, then I would just look at something and exactly what you said, I’d go and be like, “Oh, they’re not doing any SEO and there’s a ton of traffic for these terms.” So then, I’d buy it, SEO it, autopilot it, and then, move on. And through that, I learned, this is where I built my marketing tool belt. So much of what I learned about marketing was from reading info marketing books, internet marketing books back in the day. And then, doing this SEO, I learned AdWords. I learned how to do display ads at a certain point, online display ads and Facebook ads, and then, messing with pricing, all the touchpoints here. 

You just said SEO and pricing. But these are things that you can learn on the job, so to speak. Once you own and have skin in the game, it’s super interesting how quickly you learn. And you go from the theory of listening to this podcast and watching Hacker News or reading a book to, suddenly, you have to make the hard decisions with maybe incomplete information around it. But if you can develop that tool belt one at a time, it makes you so much more capable of running your own show. And whether you acquire in the long term or whether you build something later, you still have that skillset that you can use.  

Jon Hainstock:
Yeah. And ultimately, if the goal is to scale up and do this at a larger level, maybe some of these take off and your goal is a little bit to be more ambitious and to get to a mid eight figure exit or something like that, if you don’t have the skills and the understanding around some of what it takes to run the SaaS business, this is a great way to get started with pretty low stakes, but having skin in the game, it’s not theory. You’re in it. And then, you can kind of move out of being an operator and all that stuff to finding the whos, that are going to help you take it to the next level, which I think is really where you need to graduate to scale the business. But I think, in the early stages, it can be so rewarding to get your hands on something, get your hands dirty, and try to make some improvements and see those actually work. 

And you’re not spending all of your time in a basement coding out your MVP and wondering if anybody’s going to use it. You have maybe a thousand dollars a month, $500 a month that’s coming in, that you get to see every single day when you wake up. You see something new in Stripe, which is just a huge motivator when you open up the app and you see money coming in, and you are sleeping. So I think everybody should really look at this as a way to invest. Because if you have the skills, if you’re listening to this, you probably have some of those skills already developed. And to put them into action, think about how much it would cost to go to grad school, think about how much it would cost to level up your education, you can do that by buying something small and taking a ton from that. 

And the marketplaces are very mature now, so that worst case scenario, you can sell at a low multiple and probably still not lose money. So I think it’s a lot lower risk than people do see it sometimes. Obviously, there’s risks around platforms and things changing. We’ve seen some of these Twitter based apps going away or Reddit based apps and stuff, and that’s super sad. But I think that, in general, the risks are not necessarily as high as you might imagine them to be, especially kind of in this lower, call it, 10 to 50K range.  

Rob Walling:
I like that you mentioned kind of learning things and then, stair stepping up into larger SaaS, because honestly, so little known facts, similar stair step approach or stair step method of entrepreneurship that I have, it used to say step one and two were build or buy. Build or buy. And I just pulled out the buy, because no one was listening to me, Jon. But that’s why I like, every once in a while, just calling it out like, “Hey, I get it. It’s not for everyone. Everyone doesn’t have 10 to $50,000 in their bank account.” We get it. But it is something people should think about. It is a path that you traveled. It’s a path that I traveled. It’s a path… Honestly, if you go read the stair step blog post, the essay I wrote about it, I think about half of the entrepreneurs I mentioned actually bought their thing, bought their WordPress plugin, or bought the… It’s just the way it wound up. 

So everyone thinks about building, and that’s an okay way to go too. But I think it’s a lesser talked about avenue to buy. Jon Hainstock, thanks so much for joining me on the show. Again, on Twitter, you are J-O-N-H-A-I-N-S-T-O-C-K. Your DMs are open. And of course, quietlight.com is what you’re working on today. And the Quiet Light Podcast, you gave it a brief shout out earlier, but I’ve been on there once or twice as well. And it’s a good show. Mark does a good job with that show. So Quiet Light Podcast, wherever greater podcasts are served. Thanks again, Jon.  

Jon Hainstock:
Thanks for having me.  

Rob Walling:
Thanks again to Jon for coming on the show. And thank you for coming back every week. If you keep listening, I will keep recording. This is Rob Walling, signing off from episode 672.