Episode 118 | Anti-piracy methods, HitTail, AuditShark and other madness

Startups For the Rest of Us

Episode 118 | Anti-piracy methods, HitTail, AuditShark and other madness

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Show Notes

• Protecting against software pirates
• Actions to take when a software pirate steals your software
• WPEngine
• Micropreneur Academy
• WishList Member
• YSlow
• DotNetInvoice
• Mike’s Twitter handle: @SingleFounder
• Rob’s Twitter handle: @RobWalling
• AuditShark’s Twitter handle: @AuditShark
• HitTail
• GoDaddy
• TheSSLStore.com
• Comodo
• GeoTrust
• Trello
• thestartupkids.com

Transcript

[00:00] Mike: This is Startups for the Rest of Us: Episode 118.

[00:02] Music

[00:11] Mike: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.

[00:19] Rob: And I’m Rob.

[00:20] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Rob?

[00:24] Rob: I’m doing good, Mike, aside from the fact that I don’t like anti-piracy code in DRM. Yesterday morning I wake up and I have an e-mail from our virtual assistant Andy who’s trying to log in to the Academy, micropreneur.com. He’s doing a little admin work and the WishList plug-in that manages our membership just keeps telling him, “You need to validate your product code. You need to click this button and validate the product code.” We’ve had this thing installed for four years, right? And although we’ve moved servers a few times, I mean we’ve never had to go through the step again. And it turns out that if you try to log in, it wouldn’t let us do anything in the WishList admin and then if you log in as a user to the Academy, it was deathly slow. It was like 20-second page load times.

[01:04] And so I’ve e-mailed WP Engine. I’m trying to run YSlow. I eventually e-mail WishList and as it turns out, they have piece of anti-piracy stuff in their plug-in that calls back to their server and if it can’t validate it by hitting their server, then it slows your site down. And their server was down. They told me the next morning that it had been hacked but that’s new to hearing there [Phonetic]. It was, you know, I tried to hit their server. I couldn’t hit it and so, I figure that that was the issue. And sure enough, when they come back up, everything worked again but it was just, ugh, it was like slap to the forehead, you know, like who does that? I mean honestly, I’ve heard of maybe one or two other vendors doing this and to me it’s such a single point of failure. It’s such a way to piss off thousands of your customers.

[01:50] Mike: I understand the mentality but it’s – I don’t want to say it’s the amateur mentality but it’s the mentality of people who feel like they’re probably not necessarily offering enough value or they’re too scared of pirates to understand that the people who are building real businesses are actually going to buy licenses for it.

[02:08] Rob: Right and actually you’re one of the first people who I had heard say that. This is like maybe 2005, 2006, you had a couple of blogs post on it and we’ll link those up in the show notes but you basically said because I always of the mindset, you know, like in the Shareware world, the MicroISP world, people would always have the license code and you know, in order to use it, you needed the specific license thing and you basically came out and said I don’t think that’s the right way to go and I think that hurts your customers, your paying customers more than it stops the people who are trying to pirate your software.

[02:35] And that was where we’re at the decision for our DotNetInvoice and we were looking at doing some type of registration code anti-piracy thing and we decided not to after reading your post and doing a little more research. But everytime I run in to this now and when I’m the customer and it causes me a great deal of pain and or a lot of angry e-mails from users, I totally think back to that argument of if you’re really a small vendor, the anti-piracy stuff is typically not worth it.

[03:02] Mike: That’s totally correct. I mean even the other way to look at it is how much time are you – and effort are you going to spend as the vendor supporting those people who are legitimate customers who really did buy your product and all you’re doing is you’re…you’re pissing them off and you’re making their lives miserable. And on top of that because they’re talking to you for a support help because your anti-piracy mechanisms aren’t working or there are something, you know, going on that’s making things slow or your server got hacked, it doesn’t really matter what the issue is. Every minute that you’re spending time working with those customers is a minute that they’re pissed off at you and a minute that you’re not getting worked done. So, you’re basically killing time on multiple people because you want to implement stuff that will theoretically help you but at the end of the day, it really doesn’t.

[03:48] Rob: Right and I think your argument in the blog post if you want to defeat pirates, keep releasing new versions of your software because nothing discourages someone from pirating your software more than seeing that they have an old version of it and that they can’t get the new version.

[04:01] Mike: That kind of came about because I had some software that I was publishing back in probably 2002, 2003 and I was selling it and I had put copy protection software on it and it gotten cracked and then we released a new version and then that got cracked and then we released a new version and then that one didn’t get cracked. And I don’t think that it was because somebody couldn’t crack it because it was the exact same encryption code, it was just the new version. I think that whoever was doing it, they just got bored and they said, “Ugh, I’m not going to bother.”

[04:28] Rob: So, I started the day off with a rant, you’re going to start it off with some positive news. Did you get an e-mail from someone?

[04:33] Mike: Yes, I did. So, last Thursday, I was having an absolutely horrendous day. There were tons of stuff that was just going right. And I got an e-mail from Bob Ropp [Phonetic] who said, “Just want to let you guys know that I really love the show. I found it searching through tech podcast about six months ago and I’ve been a loyal listener ever since. Thanks, guys and give up at the good work.” And as I always said, you know, it’s just kind of made my day.

[04:52] Rob: Very nice. I realized we haven’t mentioned our Twitter handles in quite some time. So, if you are a listener to the show and you’re not following Mike and I on Twitter, check us out. Mike is Single Founder and I am Rob Walling.

[05:05] Music

[05:08] Rob: Have an update on AuditShark? So, what’s the news?

[05:11] Mike: Based on your previous comment about Twitter, I started working on the AuditShark Twitter account and following a bunch of different people and just trying to get a small following there and I’ve got it up to around 40 or 50 people in three days or something like that, four days. I haven’t put it any extra time in to it since then but I’m starting to work on the process that I can hand to somebody and say, “Hey, I want you to start tweeting out links and stories and news articles to help grow that following a little bit.” And then in terms of the website itself, I roughly doubled traffics since November and December levels. So, I’ve been doing some content marketing and SEO that is kind of starting to pay off at this point. I got to go back and take a look at some of the inbound links and some of the different keywords that I was looking at as potential targets to go after for SEO but it’s a matter of kind of prioritizing those and putting up some new articles.

[05:59] Rob: And what’s the AuditShark Twitter account?

[06:01] Mike: Oh, it’s just AuditShark, @AuditShark.

[06:04] Rob: So, people who are interested in hearing about security world, is that what you’re going to be posting links about?

[06:09] Mike: Yeah. So, I haven’t kind of fully fleshed out my strategy for it yet but what I’m thinking about doing is kind of going to a bunch of new sources and trying to figure out what links would be relevant to the people who would be following the account and what sort of security things are happening in the world. So, for example, recently, there’s been a lot of problems in the Rails community because there’s been some pretty significant, I don’t want to say backdoors but security vulnerabilities that have kind of come out where you can take control of a server and basically run arbitrary code on that server even if the application is designed in a secure way because it has a problem to do with the framework itself, not necessarily the way that people are using it.

[06:49] And of course, it’s a problem because if your Rail server gets compromised, it means that they can get access to anything that’s on that server including the database and, you know, your customer data and then they can use that to go in to other servers. And just by doing a little bit of matching between different Rails applications, you could start whittling down to figure out, okay, well who between these two applications is using the same password on pretty much all their accounts. And then you could use that to launch massive attacks against some pretty major sites on the internet, you know, anything from Amazon or you know, Microsoft, Oracle, et cetera.

[07:21] I mean if these people are truly using the same e-mail addresses and passwords on all those websites, it would be very easy to go in to them and do different things and especially when it comes in to the things like banking. I mean because people use — if you’re reusing those usernames and passwords or the e-mail addresses, it can be a huge problem. So, I’ve been looking at that a little bit and trying to decide. I’ll say in how far in to that rabbit hole I want to go and I’ve actually reached out to a couple of people in the Rails community and see if they would want to use AuditShark to audit their servers to help monitor for changes of any critical system files. So, for example if the new user show up or a new software gets installed or if some of the code libraries are out of date, et cetera and I’ve gotten some responses from that [0:08:00] so I’m looking at those right now.

[08:02] Rob: Nice. So, if folks are interested in that kind of stuff, I see that’s what you’ll be talking about on your Twitter account.

[08:07] Mike: Yup.

[08:08] Rob: So, on Sunday morning [Laughter] I got an e-mail from both you and my HitTail product manager saying, “Your SSL cert is expired.” And what it have – this is totally me dropping the ball. When I acquired HitTail, it was maybe 18, 19 months ago, the previous owner had a 2-year SSL cert and she had bought it on February whatever two years ago and I don’t know if you can transfer ownership. I should had just bought a new one to be honest but it was on the server I’m working and I was able to export and re-import it when I moved servers and just never thought about it and so bam, right in the middle of – it was probably early Sunday afternoon Pacific Time, the thing just stops working. So, at least the website was up, the marketing site worked but you just wouldn’t, you know, when you click to register that’s SSL because they ask for credit card number and I wasn’t getting any trial.

[08:56] So, the kicker is I went in – I knew it was a GoDaddy SSL cert and of course, I go to GoDaddy to try to just renew the cert and I realize – that’s when I realized, I don’t actually own the cert so there’s no way that I can just renew it. So, I generated a new request on the server and I go to GoDaddy to try to fulfill the request and they say, “You can’t take out a cert for – a Wildcard cert for this domain name because one already exists in our system and it hasn’t been purge, doesn’t get purged for weeks after that.”

[09:23] So, I had to then call GoDaddy and I have to tip my hat to GoDaddy. I’m shocked at how good their customer service was over the phone on a Sunday afternoon and they – the guy I got on with their SSL Department and they purged the old one. I sent in the request and they turned it around in like 10 minutes. For a Wildcard cert, I was really impressed and oh, total time taking was about an hour from the time I heard, you know, from you and my product manager but it was a little stressful for sure. I didn’t know because I kept imagining back in the day, you’d wait 24 hours to get an SSL cert back and I was really hoping it didn’t laying in to Monday.

[09:57] Mike: It depends of what type of SSL cert is you’re getting. So there’s [0:10:00] this thing called an EV cert which is Extended Validation which gives you the – it’s not just the little lock icon in your browser bar but it also gives you the name of the company itself. So, if you like go to PayPal or Bank of America, they tend to have those Extended Validation certificates and it’s supposed to signify to the end user that, “Oh, we have done an extended background check on this company and that will take you several days or even a couple of weeks to get through.” But with yours, I mean it’s not an Extended Validation. So, you don’t have to worry about it and they can generally turn those around pretty quick. I get most of mine through either the SSL Store Comodo or GeoTrust and their turnaround time on most of them is, you know, minutes. It does not take fairly long at all.

[10:43] Rob: Yeah. So, that was good news. It was just a minor…little minor hiccup for Sunday afternoon. Luckily, it got resolved quickly. But Derek is my product manager for HitTail and I just start calling him by his first name. He e-mailed and then texted me and that’s what I needed was the text because I hadn’t check the e-mail that day.

[10:58] Mike: Cool. I just finished up writing an e-course. It’s an introduction to how to use Altiris for my Altiris training site and I’m working on building a landing page for it but I’m also touching base with some of the Altiris sales engineers to see if they’d be willing to tell people about it because they’re in the field all the time and they are talking to customers. So, these customers are obviously asking…going to ask them questions about where can we get resources and they will tell them but at the same time, if they knew about my site and they will probably tell them about my site and get more publicity for the site just because the sales engineers tend to have a lot of clout when they’re talking directly to the customers. They take their thoughts and opinions on whether or not a site is a good resource. They treat it as if they have some authority.

[11:38] So, I think that if just by touching base with some of my old contacts through that network, I can definitely get some more people to the website because the traffic is pretty much kind of leveled off back to where I had originally thought it would be. I don’t see it going significantly back up without some extreme measures [Laughter] just because the site doesn’t give very much traffic for the keywords that I’m targeting and there’s not much else I can target [0:12:00] for those keywords.

[12:01] Rob: Right, small organic SEO market which makes sense. What’s the e-course for? Is it to get SEO traffic? Is it going to rank for keywords or is it to give away and exchange for an e-mail?

[12:11] Mike: Yes, it’s to give away and exchange for an e-mail address and that because I’m getting a lot of people to the site or I’m getting, you know, enough people to the site but my conversation rate isn’t as high as I would like it to be. So, what I’m trying to do is first I want to get e-mail addresses from those people. Send them some valuable relevant content that they’re going to read hopefully on a daily basis and then try to draw them back to the sites who in an effort to get them to buy or to maybe sign up for other e-courses or something along those lines.

[12:36] Rob: Got it. Yeah, in terms of getting e-mail addresses, our landing page at GetDrip.com, I started sending some my paid traffic to that purely as a test of a couple of things, I’m split testing some different headlines and body text of the landing page. And that’s worked out well. There’s already one variation of the test that had just completely flopped and so that tells me that that particular, you know, that verbiage that I was using is suboptimal for this market. And what I like about the paid acquisition is it’s not that I’m trying to actually make money out of it, it’s just that it’s just so easy to send a bunch of traffic to it really quick and kind of see how it behaves.

[13:11] At this point, I’m getting around 20% of the traffic that I’m sending from these two niches to provide their e-mail address. So, I’m fairly happy with that. It’s not like outstanding but it’s definitely, you know, these are cold e-mails, people who’ve never heard of me or heard of the app or anything. So, the fact that they’re willing to type an e-mail in to our landing page is a good sign at this point.

[13:33] Mike: Yeah, that’s cool.

[13:34] Rob: I want to go back and update folks on my Trello versus paper competition, right? I’ve always use paper for to-do list and I moved to Trello a couple of months ago and although I’m still using – I have a Moleskine notebook, the black notebooks that I use for all my long-term items in my big thinking and you know, anything that’s like goals and such. But I got to be honest, man, I have not going back to paper for the to-do list since I wet to Trello and I have the iPhone app [0:14:00] and I have it on the iPad and I have it on my desktop and I loved that it’s all synced and then I can just pull it up anywhere and add stuff, move it around. It’s just – it really is someone finally cracked that nut. You know, Fog Creek finally cracked it and I really – I have not found a reason not to use Trello still. It’s pretty crazy.

[14:17] Mike: Yeah, it is. You know, it’s funny because…it’s funny that you bring up Trello because I was trying to think of how to move some of the UI for AuditShark in to the Cloud just because I was talking to the developer that I have working on AuditShark and we were trying to hash out where would be the best place to host all the stuff because right now everything is kind of split between the Cloud and then you have to have this policy builder and it gets kind of complicated for the user and it’s like well the easiest thing to do would just be have everything in the Cloud.

[14:44] So, we were discussing how to kind of rework the UI and make it easier to use and one of the things that I thought of was the way that Trello allows you to kind of drag and drop things between the different columns and I was thinking that will actually might make a very good UI for putting the policy builder in to the Cloud because I was trying to figure out how to do that, you know, using like grids and tables and adding things back and forth between different columns and within the policies and control points. And it gets…it gets a little bit complicated and hard to explain unless you’re kind of familiar with some of the different terms and how the policy builder works but basically the idea of being able to drag and drop objects on the screen, that right there would solve like 95% of those issues.

[15:26] Rob: Very nice and I wonder if…if Fog Creek use the framework or somebody you could piggyback on and say you don’t have to build it from scratch. You know, I imagine that you use jQuery or something that makes that easier.

[15:35] Mike: Actually, they…they posted a couple of links on their blog that tell you specifically what the Trello stack is. So, it started out – let’s see here, they say that they’ve got CoffeeScript, Backbone.js, HTML5. They have this thing called Mustache which is a templating language and then they also have Socket.IO and WebSocket, Ajax Polling. They’ve got MongoDB, Redis and a couple of other different [0:16:00] things in here. And I probably wouldn’t necessarily need all of these things but the fact is that they tell you basically what the use for that. So, if I wanted to build something that was similar that was specifically designed for AuditShark, then I could probably do it. It would be significantly better than putting much any other security product that is out there on the market right now. So, you know, it’s definitely something for me to think about. I just don’t know how much effort it would take to build something like that.

[16:26] Rob: Yeah and if you haven’t build something like that before, the learning curve will certainly be steep on the initial implementation. It’s nice that they – that’s why I like about software companies. There’s a lot of them will just say, “Here’s how we did this.” You know that Fog Creek published that so that other people can go build cool stuff is really neat and that’s not done in a lot of industries. You don’t see manufacturer showing you their process as a rule. I mean that’s pretty cool.

[16:48] Mike: You know, with software – I mean anybody can make it. It doesn’t matter whether you tell everyone about your idea or tell nobody. I mean the fact is as soon as you launch it, everybody is going to take a look at it and say, “Oh, well, I could build that and you know, this is probably how you did it.” And you can kind of reverse engineer most things. It’s just you kind of to have to put any effort and do the work in order to rebuild something like that. It’s not exactly a big secret.

[17:09] Rob: Oh, I have a couple last updates and then maybe we’ll dive in to a few listener questions. Regarding HitTail, January was the best month ever. It actually had – not only that but I had more trials than any month in the past and previously, June of last year had the most trials because it was the year or the month that the AppSumo deal ran and it sent a bunch of traffic. So, it’s a good kickoff to 2013 and what’s nice is since it’s a 21-day trial, February should actually look good too. We got an unexpected write-up in Search Engine Watch. The head editor had seen a HitTail ad and had been familiar with HitTail from years ago and so, he wrote us up and then invited me on their Search Engine Watch Podcast and obviously, that traffic would convert really well.

[17:50] And I guess the thing I realized, man is it’s like the more you’re out there, the more you have ads running, the more you’re just being written about, the more we’re getting contacted by joint venture partners, people who say, “Hey, we want to e-mail our list, you e-mail your list, you know.” Search Engine Watch finding us – I mean it – it just increased that, you know, that lock surface area like Justin and Jason talk about. I mean just being out there creates more exposure and more area free to expand your business. So, it’s definitely working out or at least it did work out in the month through January for us. So, trying maintain that growth and hit our growth goal of 2013 and on track for that so far.

[18:25] Last two update, one is I watch a movie on Netflix streaming. It’s called Indie Game: The Movie. I highly recommend it. It’s about some software developers who are building indie games and it’s – Indie Game is like it’s just one or two developers. So, they’re not associated with a studio. It is really cool. It captures the emotion, the struggles, the anxiety, how long it takes, how the internet can be really cruel if you put out a game and people don’t like it. I mean it’s very closely parallels what we do as developers also theirs world is a little more subjective, right, where people can just say your game is cool or not. At least with software, if we try to sell on value, we have a bit of, you know, a different measuring stick but if you’re all in to the software development stuff, I really recommend Indie Game. It’s nice because it’s free on Netflix if you have a subscription.

[19:11] Mike: The other problem with selling game is either people like it or they don’t and if people don’t like it, there’s not a lot you can do to save it. It’s not like a business application where it doesn’t meet somebody’s needs and you can tweak it until it does. But with the game, it’s really hard to tweak a game so that people like it if it was just a complete dot or bust from day one.

[19:33] Rob: Right. It’s much more hit-based. It’s like writing popular music or making a movie rather than building software for businesses.

[19:40] Mike: Yup.

[19:41] Rob: All right, last thing is our editor had a comment about last episode. Someone wrote in they were talking about the organic delivery idea in New York and she said that she – there is a grocery delivery service in New York City that delivers organic as well as other fresh food and it’s called FreshDirect. She said it’s a huge operation and it’s hard to imagine one person being able to coordinate that. She said FreshDirect is been around for a number of years and she sure they started out small but now they have a giant warehouse, thousands of trucks and drivers and deliver thousands of items within 24 hours of ordering them. There’s no subscription fee. There is a delivery fee at a minimal amount you can spend.

[20:18] You know, we touched on that a little bit just because there’s competition doesn’t mean that you shouldn’t do something if you can figure out a better way to do it. But if you are going to go head-to-head with a big incumbent player, you do need to figure out how are you going to be better or different than they are and obviously, the logistical aspects of handling all the perishable food is quite a big thing to bite off, if you’re wiling to do that and that’s the kind of thing that interest you, by all means.

[20:40] Mike: The problem with fruits and vegetables and things like that is you run in to a lot of what’s called shrink in the retail industry and shrink generally refers to any goods that are lost but when you’re talking about produce, what you’re generally talking about there is stuff that just could not be sold because it wasn’t any good. So, whether the…the apples have bruises on them or something just went bad, you know, the milk expired, things like that, there’s a lot more shrink in the produce industry than there is in the…the general retail but general retail does have shrink as well. I mean if clothes or something like that get ripped or if a TV set – nobody wants the TV set where the box is kind of destroyed a little bit or mashed in on the side. I mean that’s why in…in the past grocery stores used to take can goods and if the cans had dents in them, they would sell it to you at a discount. And now, they don’t do that anymore because people would take the cans and they just drop a whole case of them and say, “Oh, well, I get 50 cents off of each of this.” So – but shrink is definitely a big concern in an industry like that.

[21:39] Music

[21:42] Rob: Let’s answer a few listener questions.

[21:44] Mike: So, the first one comes from Glen Lawson [Phonetic] and he says, “Hi, Rob and Mike. Once again, thanks for continuing to produce the podcast. It’s been my favorite for several years now. Rob, I have a question for you. You’ve mentioned that you brought on a friend to be product manager for HitTail with the hope that he’ll one day take up more responsibility with allowing you to focus on new products. Once you’ve launched or acquired a product and built it up to a stage where others can manage it with little direction from yourself, how do you maintain growth and encourage your staff to be passionate about the business and have a desire to grow it? Would love to hear your thoughts. Regards, Glen.”

[22:12] Rob: There’s a couple of ways to do this for sure. First thing is you need to hire the right people, right? You need to hire someone who is generally going to be passionate and excited about whatever they work on because if they don’t have that, if you just hire someone who’s kind of ho-hum about any job they do, then you’re not going to be able to instill that in them. The second thing to think about is you want to hire someone who’s specifically excited about startups or about growing startups or about being a startup founder. It’s not something that I think can really be taught but if someone is naturally excited about this concept of being a software entrepreneur, then it’s awesome for them to learn on the job and that’s…that’s what I found with Derek is just that he has such a thirst for knowledge and had such a desire to learn all the [Audio Glitch] of the business that I mean I remember, you know, being this back in the day, right? It’s like you’re a kid in a candy store because you’re doing what you really enjoy everyday and you’re getting paid for it and you’re just learning all these awesome stuff.

[23:05] And so, those are the first few things that I think will carry you a long way and then at some point, I think if you’re looking at long term, you do have to think about putting your motivations alongside the person that you hire. In other words, if you make out really well in the businesses well, then you guys should both do well. And so that product manager should ultimately either get a share of profits or equity. And that’s again, may not be the first year or two that they work but if you’re thinking long term, that has to be something in the back of your mind because someone is not going to work forever just to put a bunch of money in your pocket and they are always going to work harder if there is some more motivation to do that either again make more money in terms of equity or a profit sharing?

[23:46] Mike: Well, I mean I think a lot of what you said rings through for most people but the other…the other side of the coin is I used to think this exact same way as well. You know, what’s in it for the people that you’re hiring? And the fact is not everyone wants to run their own business. I mean some people just want [0:24:00] to be able to go to a job and do that job and it doesn’t mean that they’re not passionate about it. It just means that they don’t want to have to think about it when they’re not working. So, those are the type of people who are perfectly content to work for you. They’re not going to actively be looking for the next ride to catch, you know, the next business to jump on to. I mean they want a job. They want a steady income and they want to be able to enjoy their career and as long as you’re providing them with an environment where they are actually enjoying what they do, then you don’t necessarily have to worry about that too much. And again, it depends on what type of person you hire and what they’re interested in. But you can definitely run in to those people who are more entrepreneurial in nature and want to go on and do their own thing. But there’s definitely contingent of people who don’t want that.

[24:48] Rob: Yeah, that’s a good point. And I think I have a…I have a hard time giving advice in this area because my end is one, right? I have only done this once and I found a certain type of person who works in a certain situation and at this point, I don’t know if I could replicate it yet. With a lot of the stuff that I give people advice about, I have done it many, many times in a repeated fashion, all the marketing, the starting, a company they’re growing, you know, the product revenue and all of that stuff, it’s something that I feel confident that I have done it enough times that I do have, you know, an end of 10 or an end 20. My sample size is just larger and so with this one, I have thoughts on it about how I would proceed, but to be honest with, you know, really I only experience to one person. I have lesson I like [Phonetic] to stand on in terms of giving others advice in my opinion.

[25:31]Mike: The next one is from Brian and he says, “I’m currently struggling with the decision whether or when to hire employee number one. My dilemma is I don’t quite have the revenue yet to support this but I’m also very bogged down in task that I’d like to hand off. So, it’s the chicken or the egg thing. An employee will help free me up to focus on growing revenue but without the revenue, I can’t afford an employee. Should I grind it out as I’ve been doing mostly solo with study but slow growth and hire someone later on when I can afford it or should I hire someone sooner and think of it as an investment just for a faster growth? Thanks, Brian.”

[25:59] I think that the thing that you have to do here is take a look at the tasks that you have that you are spending a lot of time on and try to figure out which one is you’re spending the most time on and which of those tasks could be outsource to somebody at a part-time rate. I don’t know as I would go down the path of hiring somebody fulltime yet but you can definitely find people who are looking for part-time work and especially if you’re doing things like support tasks where those types of things can be scripted and you can give somebody some general guidelines and say, “This is my general blanket policy. If somebody asks for a refund, give it to them. If somebody wants you to help them out, go ahead and help them out.” And you’re paying them on an hourly basis. You can kind of have them touch base with you if they have any questions about that stuff but what you’re really looking to do is free up some of your time without having to pay for them to do it fulltime for you.

[26:47] And that allows you to kind of slowly get in to it and the one thing I would caution against for most people in general is if you’ve never been a manager before, it’s very hard to jump in and just take on somebody as a fulltime responsibility and have to manage their workload at all times. If you’re having problems trying to makes end meet and pay their salary, the best suggestion that I would have is don’t do that. What you need to do is take them on a part-time basis and gradually move in to that role and if it doesn’t work out, then that’s fine. I mean you’ve only taken them on as a part-time employee as a opposed to a fulltime employee because once you start taking someone on as a fulltime employee, that’s a huge responsibility because especially if they’ve left another job to work for you and if it doesn’t work out and a lot of these situations do not work out the first time because you – people are notoriously terrible at hiring people.

[27:38] So, you’re better off hiring somebody on a part-time basis kind of testing the water and see how things go and then move on from there if things work out. But if they don’t then, you know, cut the cord. Move on to the next person and at that point, you’re not really torpedoing somebody’s career or taking them away from a job that they realistically could have stuck around in for a while.

[27:59] Rob: That’s exactly what what I was going to say. That’s why we talk so much and we have done this over and over. We did it with support and in the Academy, with support with HitTail. I could go on and on literally, five, ten times I’ve done this, hiring someone who starts off maybe only at 2 hours a week and they’re purely on as needed basis and that’s where nice project management tool like oDesk that actually tracks their time. There’s things that can really track someone’s time accurately and then like you said, you’re only on the hook for the time they work. They can linearly scale up as the time expands and in fact at this point, I now have multiple people working over 20 hours a week and I have one person working 40 hours a week but none of them started at that point. They all started working a couple of hours a week and allowed me to have the free cash flow to then go invested in other things in marketing approaches or in development cost. There’s no reason to tie up a bunch of money in a fulltime employee. I really don’t see any reason to do that.

[28:57] Music

[29:00] Rob: Our next e-mail is actually not a question. It was…it has a subject cool stuff found. It’s from Carl and he says, “A film is in the making that I thought might interest you and your listeners.” And so if you visit startupkids.com, you can see a trailer for a movie, that’s a documentary about young web entrepreneurs in the U.S. and Europe. Did give them my e-mail address because I’d love to hear when it comes out but it has interviews with the founders of Vimeo, SoundCloud, Kippt, inDinero, Dropbox, Foodspotting and several others. So, he said it should be out in March of 2013. I’m in to this type of thing, right? You know, I love movies that observe, you know, all the stuff that we go through and to see other people talk through it is just fascinating. So, thestartupkids.com.

[29:40] Mike: And I think our last question for today comes from Ricardo and he says, “Hi, Rob and Mike. Thanks for the show. We’re a small SaaS company from Brazil with nearly 250 customers. Obviously, we love to get new customers and hate it and I really mean hate it to lose them. I hate it to the point that I’m disappointed with the whole business and mad with anyone who crosses my path for a few hours after each cancelation. I know I should be doing more marketing to get more customers more quickly. What I want to hear from you is what is your strategy for when you lose subscribers from the moment someone request a cancelation to subscription to the moment you actually let them go, how do you deal with it? What sort of metrics do you think? At what point does it start to concern you and more personally, how did it affect your mood in the way you treat your products? Thanks very much, Ricardo.”

[30:19] Rob: First thing to think about is to look at your product and figure out are you past the point of product market fit meaning have you built something that people want to use, that solves a problem that they have and that you are marketing to the right market that really needs it. So, if you are at 250 customers and they are happy and they love what you’re doing and you are able to find new customers and bring them in to your app, then the answer to that would be yes. You know, if your churn rates relatively low, you know, typically when your growth starts going up, your churn goes down, then you know that you “hit” product market fit, okay? If you’re before that, then every cancelation is an opportunity to talk to that customer, find out why they canceled, find out if they just are never going to use your app or if you’re missing a single feature, if you’re marketing to the wrong people. You know, there’s a bunch of stuff that you can find out for them and that’s a whole another conversation but that’s the kind of pre-product market fit discussion.

[31:10] Once you’re scaling and you’re marketing and bringing new people in, churn is a fact of life, period. You’re going to have people that cancel every month and with 250 customers, I hope that number is not a lot of people but in fact in early days of a SaaS app while you’re trying to hone your funnel and hone retention and get all your features in to keep people happy, you can easily have churn of 10 or 20% a month. Now, you can’t have that for very long. You’re obviously losing a lot of customers. 20% churn with 250 customers is 50 customers a month and you’ll essentially be at zero in five months. So, realize that but no matter how well you hone that and how good you get that number, how low you get it, you are always going to have a few people that cancel.

[31:51] So, I think there’s kind of the mental aspect of it. You said you get, you know, angry when people cancel, I would take yourself out of that loop so that you are no longer  receiving that e-mail and having to cancel them. If it really does impact you and impacts your productivity in the way that you’re working with other people, I would say give that to an assistant or a tier 1 support or something and let them handle that because you don’t need to know about every single cancelation if they’re comments given in the cancelation which you should always ask why are you canceling and require, you know, at least X characters. If their comments given in that, then yes, maybe you should see all of those every week and be able to read through them but in terms of you getting angry everytime they cancel, then you should probably remove yourself from that process.

[32:32] Second thing I think is you have to look at them in aggregate and that actually takes away a little bit of the emotion from it and what I mean by in aggregate is look at the percentage. So, tracking churn percent which is the number of customers who canceled in a month divided by the number of customers you have at the beginning of that month is, you know, an absolute key SaaS metric. So, you need churn. You want to calculate the lifetime value and of course, the monthly average revenue per customer. But in terms of churn, you also want to break it up in to multiple durations because with SaaS or with any kind of subscription, you’re going to have higher churn in the first period that there are customers. So, for some businesses, it’s the first 30 days has really high churn and that can be 20 or 30% and then after that, it’ll settle way down and by down, I mean it can be 2% or 5% like really low areas. In other businesses, your first 60 days have high churn and in other’s first 90 days.

[33:28] So, you’d just have to calculate yours and you see, you watch and look when that churn drops off and then I would look at your first X days, So, for you it’ll be 30, 60, 90, probably. So, I’d say, you know, look at your first 60 days churn and then look at your post 60-day churn. And those are really the numbers you want to track on an ongoing basis and you want to either have a graph of those that you can look at so you can easily see the change in churn or you want to have a table, you know, worst case, you have a table of your current month plus all your previous months so that you can eyeball it and see is my churn going up or down. When your churn is too high [0:34:00], then you have to implement a bunch of stuff to try to bring it down and again, that’s probably an entire podcast or maybe a MicroConf talk that needs to happen, talk about specific ways to bring churn down. There are a lot of different ways to do it. Those are my initial thoughts on it. Mike, do you have anything to add?

[34:16] Mike: I like a lot of the things that you said regarding what metrics to take and you know, when it should start to concern you. Those are good things. I think the number one point that you said was to kind of remove yourself from that feedback loop if it’s really affecting the way that you work and the things that you’re getting done. That I would say is probably the single most important thing to do.

[34:36] The one other thing that I would point out is that this is definitely a situation where it seems like you’re taking these cancelations personally and the one thing that I would point out is that while you’re getting these e-mails and somebody is actively telling you, “Hey, I’m really not interested in your product anymore,” it’s not a lot different than somebody coming to your website and looking at your products and saying, “I’m not interested.” And that 98% of those people who come to your website are not interested and they leave. But for some reason, those people are not irritating you, it’s these people who have actually gone through that extra stuff, have looked at your product, have probably made a couple of payments and at that point, that’s where, you know, you’re getting these feelings of anger from these people who are saying, “Well, you know what? I’ve tried it out. I really don’t like it. It’s not for me. It’s not going to fit for what my needs are.”

[35:24] And my point is that there is not a lot of difference between those two and there’s this much larger group of people who are telling you no and the only reason you’re taking it personally is because you don’t get that feedback loop. So, again, just kind of going back to what Rob said, definitely take yourself out of that, have somebody else e-mail them back, ask them why they’re canceling. Get the information that you need and then just give it to you and aggregate.

[35:45] Music

[35:48] Rob: That wraps us up for today. If you have a question for us, call our voicemail number at 888-801-9690 or e-mail us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt [0:36:00], used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.