Show Notes
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[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I are going to be talking about whether to sell your app, how to run a smoke test and a question about mobile game marketing. This is of Startups for the Rest of Us: Episode 123.
[00:13] Music
[00:20] Rob: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:29] Mike: And I’m Mike.
[00:30] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
[00:35] Mike: So, we have two new MicroConf sponsors we picked up PickFu and Tealeaf Academy. PickFu is a lightweight marketing polling software application for logo designs, marketing material, product ideas and the Tealeaf Academy is the online boot camp for learning how to develop web applications.
[00:52] Rob: Many thanks to PickFu and Tealeaf Academy. While we’re talking about MicroConf, we have a couple of speakers that had been on the works for a month or so have finally confirmed that Josh Kaufman who’s the author of bestselling book Personal MBA and he also runs a website personalmba.com, I really enjoy this book. It’s a long kind of compendium that covers a lot of topics and so some of the topics didn’t apply to me but a lot of them were very well-covered. So, we’re please to have Josh and he’s going to be covering like idea validation, vetting an idea and some processes for doing that. So, I’m super excited to hear from Josh and the other speaker is Joanna Wiebe from Copy Hackers. I bet a lot of people in the audience know her. She’s been on Tech Zing and Mixergy and Copy Hackers is a series of books that she wrote on copywriting for startups. So, excited to hear what she has to say as well.
[01:44] Mike: Very cool.
[01:44] Rob: What else is new?
[01:46] Mike: Well, I’ve got an early access customer scheduled for next week who is going to be going through some of the Linux auditing that I’ve got set up. I’d still need to implement SSH keys but over the past couple of days I’ve been working pretty hard on the Linux stuff and that stuff seems like it’s all working right now. So, I just need to implement the SSH keys that will allow them to essentially restrict how the application gets on to their machines and where it’s going to come in from because they have IP address restrictions as well. So, it will only be able to come in for my servers using these particular keys.
[02:20] I’ve had a couple of different conversations with two really large customers over the past two weeks who have auditing needs. One of them is a local municipal government which has 15,000 employees and the other one is a public company and both of them are having the exact same problem and it’s a long the lines of what AuditShark is intended to do. So, I hadn’t plan on implementing some of this functionality for a while but when giving customers demand you kind of do what needs to be done. So, I’ll be looking at how to add that functionality and pick up those guys as customers.
[02:51] Rob: And how do you hook up with those two big gorillas?
[02:53] Mike: One of them found the AuditShark through the podcast actually. So there was somebody who was working at the company and found it and kind of forwarded the information to his co-worker who said he definitely be interested in talking to me and then the other one I did some consulting work for them and they’d seem to be having this problem. I was just kind of talking to them in general about what sort of challenges and stuff they were running in to and the problem came up. I had a nice conversation about it but it turned out that after that one then this public company came and found me. So, yeah, it’d be interesting to see how that it turns out though.
[03:27] Rob: The early access going well, are you still looking at next week or so to end that? Have you gotten a feedback yet?
[03:34] Mike: I don’t think so. I’m still looking for more. I think that the Linux stuff is going to play in to it a lot more than I originally thought. There’s much more demand for the Linux side of things than there is on the Windows side. The Windows side is more of a take a second look at the machines but it’s not real clear what people are really looking for or what they’re interested in seeing whereas on the Linux side, there are a lot more distributions. There’s a lot more clean cut rules about what sorts of things you should be doing and should be looking at. So, I think that the Linux side is definitely going to be bring to light a lot more things.
[04:05] Rob: Very good. Yeah, on my end I have a couple of updates. One is that was originally hoping that I’d be able to launch Drip in early April but I knew that if it slip at all that I wouldn’t be able to launch it until after MicroConf because launching like the second week of April is just not possible given how much, you know, time is required and mental energy is required to put up MicroConf. So, over the last couple of months, we have either iterated on a few things or we have added enough features to kick it just over the edge. So, our code complete deadline like the early access deadline was April 1 for a while and it’s now April 10 and that’s just too far for me to be comfortable with it. So, we’re still going to start early access at that point. I’m probably going to have it installed on HitTail and HitTail is going to be using Drip within the next probably 7 to 10 days is the goal and then once we get through about a week, a week and a half of that and have all the kick sort out then we’ll start the first early access customer and then probably bring a few more on in April but the launch launch that where it goes public, goes live will be after MicroConf and – I struggled through this decision, you know, whether to push it off or not but it is absolutely the right decision now that I look at all the pros and cons of it.
[05:16] There are a very few reasons not to push it off. It gives us more time to handle things and we saw a very specific and spelled out project schedules so it’s not as if I’m saying, “Oh, we’re just going to push it off two months. It’s like we saw a milestones that we’re hitting every week and it’ll just be better for all of us involved because I was starting out to pull late nights and get stress out about things and I think like you I always underestimate how much time MicroConf is going to take. Third year you think I would learn by now but it just takes more time than, you know, than I think it’s going to prepare for it.
[05:46] Mike: Yeah, you and I were talking about it earlier and it’s only six weeks out at this point. So – [Laughter]
[05:50] Rob: Yeah, it’s crunch time.
[05:51] Mike: Definitely creeping up quick.
[05:52] Rob: Definitely. I also wanted to mention a correction and our editor actually caught this. She said two weeks in a row you had said that I was quoted in the Wall Street Journal and I corrected you and said, “No, it’s the New York Times.” Well, it is the Wall Street Journal. So, I shouldn’t have corrected you.
[06:07] Music
[06:10] Rob: This week, we are answering a bunch of listener questions. We had some really good listener questions in the queue. I’m excited about it. Our first question is from Dan Taylor and he says, “Hi, guys, a long-term fan here. Here’s a question for the show. My situation is that I along with the two minority partners developed Course Director which is a SaaS app for schools and colleges that integrates with Google apps and is sold via the Google apps marketplace. We’ve built it in to a respectable 5-figure income. We have a recurring revenue model charging a certain amount per use per year. The current reality is we have all now that too much going on with our main projects and the time we are taking to support our clients and add new features and in general it just getting to be too much.”
[06:53] “So, we’ve all looked at all our options and detail and decided we definitely like to sell our app which for someone currently in the education space that could easily be a 6-figure income. Someone based in the US pretty much easier – have much easier time with the business just for starters as a majority of customers are there. So, you’ve talked before about buying an app. I want to find out if you had any thoughts about selling an app. Cheers and love the show. Dan.” The thing I want to point out is that remember last episode we talked about one of the launch mistakes and it’s not growing your startup fast enough so that you lose interest. This is —
[07:22] Mike: Uh huh.
[07:22] Rob: …that’s basically what it looks like has happened to you, right? It’s like you have an app and it’s kind of successful and that actually sucks more than having an app is not successful at all because if you have an app that’s not successful at all, you can shut it down and move on and you don’t feel bad. You don’t feel bad letting customers down. You don’t feel bad about the all of the revenue you’re leaving on the table and Dan – so Dan is in a tough situation. It’s almost – almost worse to have some success than it is to have none because now he’s in a situation of like what to do with this app?
[07:50] So, I think before I tried to sell it, I would look at automating this as much as possible and whether that means writing some code or hiring like a product manager or a general manager, someone to help run the app depending on how much revenue is coming in and depending on how much time it actually takes. I would look at that first because selling an app is not trivial especially if this thing is making 5 figures a year and you want 1, 2, 3 times annual revenue, that’s a non-trivial purchase price. And so, it’s going to take a long time and you’re going to need to find the exact right buyer. You could always throw it up on Flippa and try to get 12 to 18 months revenue but in this price range, it’s not going to be an easy sell.
[08:31] So, that’s the first thing that I’d entertain. It’s always easier – it’s like an easy out to sell and I know people just want to cut ties and walk away and it would feel really good not to have to worry about it at all but that’s not always a right choice. I mean you really have to ask…ask yourself the question, “If I could find someone who was maintaining this and doing a really good job and it was kind of throwing off a dividend for me, would I prefer to do that rather than let this go at probably a bargain basement price.” Because to be honest apps are bought not sold. What I mean by that is if you go to sell an app, the odds of you getting more than 12 to 18 months of net profit are pretty low. It does happen but in general, it’s just going to be tough going cold in to a market especially if you need a high touch sales and I’m not sure if you do it or not with this app.
[09:18] And if you decide you do in fact want to sell, it’s just a matter of looking at some good Flippa auctions that have done a good job and maybe modeling your post after theirs providing a lot of information, very honest upfront and not having too high expectation, you know, for what you’re planning to get in terms of price. In addition, the last chapter of my book, Start Small, Stay Small covers this. It’s just, you know, maybe ten pages but it covers in detail how I would go about selling an app and it actually has a sample listing from Flippa.
[09:46] Mike: Part of the challenge is you’re running in to is the fact that it’s not just him but it’s him and two minority partners. So, there are these other people who are involved and they probably have some sort of decision making ability in to it and the problem is that as you said it, it seems like it’s more like burnout than anything else but there’s a big gap in the 5-figure annual income and if you look at the average player’s point here’s $1500 a year, well, it doesn’t take very many customers in order to hit $1500 a year and if you go look on Course Director, there are 28 verified reviews and 39 regular reviews. So, you could probably guesstimate and say, okay, well, it’s probably got 60 customers or something like that but still about 75,000 a year. It’s not enough for one person to live on but with some effort and work, it could be. You know, how do you shake off those other partners? I mean maybe that’s another option is to find a way to have one of the partners buy out the other two —
[10:43] Rob: Right and even potentially using revenue from the app if you’re motivated to do so.
[10:48] Mike: Right and that could get around the potential problem of dragging out a sale for six months to a year or two years trying to find a potential buyer who would be a good fit.
[11:00] Rob: Right, I quickly jump to the conclusion that he should post it on Flippa but that’s probably not the first thing I would do. If you do in fact decide to sell, I would find your strategic, right? Find the companies who would benefit the most from this and reach out to them and probably do cold e-mails or calling and say, “Hey, I have an app and it’s for sale on limited market, you know.” And try to sell it to them first before you just go to the broader market because the broader market really is a more of a wholesale price and if you can find someone who actually has strategic value for this app and they could do a lot better with it.
[11:31] Mike: Yeah and to find people like that too you could potentially approach and sell. There are publicly available list of approved vendors for each state. So, what you would do is you probably go find one of those approved vendors. They are allowed to sell typically through like a bulk purchasing. So, for example, I’m in Massachusetts and I’m sure that there’s a publicly available list where I can go there and say, okay, well can the state or federal agencies who were based here buy from such and such vendor because they have to be listed there in order to use some of their pre-arranged purchasing agreements and you could just go down the list and see which of those in one or multiple states kind of fits the criteria for company that you might want to sell CourseDirector to. That’s probably where I would start looking for that kind of thing.
[12:21] Rob: So, thanks for the question, Dan. I hope that helps. Our next question is on smoke testing and this is from Alex. He says, “I’m an indie consultant getting ready to experiment with MVPs for some products of my own. According to the lean methodology I should or could set up a landing page with a “Buy now for 99 cents” button and have that redirect not to a Shopping Cart since there’s really nothing to purchase at this time but to an e-mail sign-up form. But what do I tell my potential customer on that e-mail sign-up form? Do I, one, tell them they’re part of a product experiment which is the truth? Two, tell them that the product isn’t done quite just yet, a half truth? Or three, we’re overloaded with business right now and if you give us your e-mail, we’ll put you online, a lie? What are your feelings, thoughts and experiences with this dilemma?”
[13:05] Mike: I think my first thought is where is the fourth option that basically says that you’re trying to validate the idea and with enough interest? I mean because the first one is pretty close I think. It says, “Tell them they’re part of a product experiment.” But when you’re putting content like that on a website, I think that by saying exactly that you’re going to turn people away and you’re going to get a much lower conversion rate to begin with because people don’t like to be guinea pigs. So, even though they are on a daily basis, they don’t like being told flat out that they’re guinea pigs. So, what I would do is I would say, you know, you’re validating this product idea and assuming there’s enough interest, you’re going to move forward with it. You don’t want to come out and say, “Hey, you’re part of a product experiment. Please give us your e-mail address.”
[13:45] Rob: I also question how you’re going to sell a 99 cent product or how you’re going to vet a 99 cent product using a landing page because I have never heard of that being done. I think that the minimum price to really do this or to consider using the marketing kind of the funnel approach where you drive traffic to a page and you convert it either to e-mails at this stage or to purchases eventually, I mean there’s just a minimum purchase price where that works because otherwise you need absolute free traffic.
[14:13] So, I guess if you had a bunch of SEO and resending people to it and you could convert one out of a hundred, maybe, you know, then you’ll make a 99 cents per hundred visitors which is just a tiny, tiny amount. So, I think in the last year, your lifetime value of your customers is a lot higher than 99 cents. I just question the value of a smoke test at all. I haven’t seen it done with price points that are this low. So, Alex if you do this and you know, you find out that it does or doesn’t work, we’d love to hear back from you.
[14:39] Mike: If you had to guess, what would your price point, your minimum price point be?
[14:43] Rob: Yeah, I was going to say 19 bucks one-time or like between 5 and 10 bucks a month SaaS. I think anything less than either of those. Unless you have extenuating circumstances like you have in-app purchases that actually mean, you know, you have a higher lifetime value, I think the rule start bending on the edge cases, right? It’s like if you have a $3 one-time purchase product or you have a $10,000 one-time purchase product, it just I just don’t think this approach works as well because one is high touch and one is solo touch that you can’t even really afford to test it.
[15:16] Mike: Uh huh.
[15:17] Rob: So, thanks, Alex. I hope that helps. Our next question is from Joe Hopkins and it’s a question about whether mobile gaming follows our marketing rules. He says, “Hi, Rob and Mike. I love your show. I discovered it a few weeks ago and have since gone back and listen to most of the episodes. I left my job about a year ago to focus on my bootstrap mobile game business and I found your podcast to be very helpful and much more applicable than other podcast that focus on larger VC back startups with no revenue. What are your thoughts on how your podcast relates to mobile gaming? Does your marketing advice apply to casual gaming that generates revenue by selling one dollar games? Should I look in the marketing funnels and acquisitions on episode 112 or am playing in a different game? Currently my business generates most of its revenue from one hit game that generates a humble $100 a day. Thanks.” And Joe is from doubletapsoftware.com.
[16:01] Mike: I’d have to say that most of the stuff that we talked about is probably not applicable to the mobile gaming environment. I almost have to go so far to say that most of the stuff that we talked about is probably not applicable to the majority of the mobile environment to begin with. I mean I’d certainly don’t have any experience, you know, selling mobile games and I would have a hard time giving somebody advice to say, “Oh, this stuff is going to work for you in this environment.” I mean you could certainly try it and if it works, great. If it doesn’t, then you at least tried something new.
[16:32] Rob: Yeah, the tough part with giving advice and being focus, the more focus your advice gets, the fewer people that actually applies to. And I think overtime if you look back to our early episodes, we really did include a big – so other people will include mobile and we included web and probably even desktop. But as time is going on, the audience I think had shaped around web apps and a lot of SaaS apps and some one-time download stuff. But for the most part, a lot of questions that come in really specifically are about SaaS apps and web apps. And so, a lot of what we do talk about absolutely applies to that kind of app and as you break out of there and get past the edges like you said, mobile I think a good chunk of what we talked about works but probably not the funnel stuff, the funnel optimization because it’s just – it’s sold in such a different way because the app store model is different.
[17:19] But if you think of optimizing for iTunes like optimizing for Google in terms of just getting traffic in and then if you think of your listing in the iTunes App Store or the Android App Store as your marketing website, then the fundamental stuff that we discussed still applies there but maybe not the exact tactic that we talked about when we talk about, you know, including a video demo or whatever, you know, on your website. Obviously, you can’t do that in the iTunes App Store but if you go one step further than a lot of you competitors and instead of just having some basic screenshots in your app, you actually have kind of a marketing website that you build within that little iOS App Store frame, people who just do a better job of marketing their app, right?
[18:01] So, the bottom line is I think in general what we say applies to both to mobile and web and desktop but there certainly are some specifics that won’t and I think these things you called out like having a marketing funnel and being able to pay for ads and that kinds of stuff, it just doesn’t work with 99 cent lifetime values. Gaming is another, like another animal all together and almost none of what we say applies to gaming because gaming is a hit-based business. You’re going to hear more important information if you talk to like a record executive or someone building movies or TV shows because they’re not bought on value, right? And we talk mostly about things that are bought or sold on value. That means that they save someone time, make them money or save them money.
[18:45] Mike: Yeah, one of the problems that I’ve seen as you said it’s a hit-based business but even with some of the games that I bought for my phone I mean I’ve looked through with some of the other games that been developed by the same developer and a lot of them I just don’t like. So, they’ll come out with a great game and then I look to see what other things that they have and a lot of the other stuff just isn’t as good or isn’t something I’m interested in. I mean the only thing that I can think of a strategy would be to find a hit game that you’ve developed and then build related apps around it that do similar things or have a similar type of game play but are not exactly the same thing.
[19:20] I think Rovio did a really good job with expanding their Angry Birds franchise and making all these different variations of what is essentially the same game and that might work very well in the mobile space. I don’t know how well it would work in like a desktop game space but obviously, there’s a lot of games that come out where you have sequels to them and they take years to develop. But I think with the mobile space, you might do a lot better churning out some of those games that are very much related, share a lot of the same codebase.
[19:50] Rob: Yeah and Patrick Thompson from Inkstone Software who has a QuickReader that I mentioned last week, he has built a portfolio, a nice set of portfolio of related apps. Now, they’re not games but it is in the mobile space and he did a talk at Portland Mobile Users Group that was fascinating and it actually linked up pretty well with a lot of what you and I talked about on the podcast. There were one or two places where we diverse and that’s because mobile is different from the web. But for the most part, a lot of the stuff that we talked about here, he basically confirmed as, you know, is true and works well within the mobile space.
[20:24] Mike: And there’s a link to that talk on the last podcast episode.
[20:28] Rob: So, thanks for your question, Joe. Our next question is from Mike Nava [Phonetic] and he says, “Hey, guys. I wanted to drop you a note and tell you how nice to stumble across your podcast a few weeks ago.” He has a long e-mail so, I will summarize. He says, “My concern is as a startup within I think a cool idea that solves a problem, how much do I put out there? I do not want someone to take the idea and start their own before I have a chance to develop it fully. So, let say, I’m at MicroConf in April and I talk about what I’m developing. Is that safe? I guess everyone is there to help one another and learn but maybe you can understand the paranoia as who knows when I will have another idea as good as this one. Anyway, keep up the great podcast, I’ll be listening.”
[21:05] Mike: I have a couple of different thoughts on this. The first one is nobody is going to steal your idea and the second one is nobody cares about stealing your idea. The reason they don’t care about stealing your idea is because it’s not successful. The second you’re successful with it, everyone and their mother is going to want to steal it but until you’ve proven it, nobody is going to care. You can talk about it for months or years on end and nobody is going to bother because you haven’t proven it yet and you know, you can look all over the web and ask how much my idea is worth and everyone is going to tell you it’s worthless. It’s the implementation of that idea that’s worth money and until you’ve proven that the idea is viable and the people are willing to pay for it, I don’t think you have anything at all to worry about.
[21:44] Rob: And I also think there’s a fine line between talking to a few people at a conference or a few people maybe online versus projecting it on a podcast live to thousands of people or blogging about it and detailing your entire marketing approach, right? It’s like you definitely need to keep some stuff under your vest especially what you have as a competitive advantage. You should have something as a competitive advantage and so, you don’t want to give all of that away but talking about an idea and just getting more feedback on it, I’ve never heard of anyone stealing an idea like that. We’re all way too busy with our own ideas that we think are great.
[22:19] Mike: Yeah, I mean how long have I talk about AuditShark in this podcast and I have yet to see anyone out there who has come to me and said, “Hey, Mike, somebody stole your AuditShark idea.” I mean it’s just – I haven’t seen that yet and I think it’s, you know, partially because nobody wants to steal an idea that’s unproven.
[22:34] Rob: Right and the value that you’re going to get from discussing it with other founders or hopefully, even other potential customers because they’re the real important ones, right? It’s like discussing with founders might get you some good feedback but if we’re not the target market, then there’s not nearly as much value as actually going and talking about it with customers. So, I would even err on the side of looking for customers rather than just talking about it with other founders.
[22:56] Music
[22:59] Rob: Our next question is from Leonard Teo [Phonetic]. He says, “I’m a big fan of your blog and a micropreneur of sorts. My small consulting side business has grown in to a 3-person company of Ballistic.com [Phonetic]. My question for you that is been in my mind since starting, what is your advice for micropreneurs wanting to take a vacation? For example, I built an app in my spare time earlier this year and I’m afraid to actually launch it because I also became a father and I’ve had to take extended periods of time off work. When I’m actually around I can provide support within 48 to 72 hours but what about when you need to take a week or two off, what do you do? I have two other friends in the same boat. They bring their laptops on vacation and find themselves having to work and burned out and depressed. I really appreciate your thoughts. Thanks in advance.”
[23:39] Mike: It sounds to me like there’s not necessarily enough automation to make going on vacation viable and you know, just the comment about, “My friends are on the same boat. They bring their laptops on vacation and find themselves having to work and are burned out and depressed,” that just strikes me as a situation where there is not enough automation such that it could be handed off to somebody else to take care of I think is a problem. I mean that’s probably the start of the problem and that’s where you got to focus some resources because if you don’t have processes and procedures in place for other people to follow, then you’ll never be able to take a vacation and it won’t matter whether that vacation is something that you planned or something that, you know, just came out of the blue and is an emergency where you’ve got to go, you know, maybe somebody is in the hospital or maybe you end up in the hospital. I mean what happens at that point? Is there any way for you to hand off the business to somebody else and say, “Hey, I need you to run this on effectively autopilot for a little while, while I go deal with this other situation.”
[24:37] So, I would treat a vacation as really no different than that but you really need to focus some time and effort and energy in to automating enough stuff so that that’s possible. I mean if you’re taking your laptop on your vacation just because you’re afraid of what can happen, there’s probably not enough automation or you’re just too afraid to take that vacation. To kind of test this out, what you could do is not respond to e-mails for two days and it doesn’t have to be, you know, a week just make it for two days and I don’t mean or a weekend. I mean in like, you know, a Tuesday to Thursday or something like that and not answer e-mails and see what happens. And I can almost guarantee that the world is not going to end. I mean you’ll at least be able to come back to those on Thursday and the reality is even for business applications, a lot of people do not expect a turn around time of two hours and they appreciate it but at the same time, whether you’re going to live your life, why are you building this business. And if you’re not building the business for yourself, then what’s the point?
[25:34] Rob: Yeah, my thoughts are hire a VA like hire a VA as soon as you can because what you built is it sounds like you built a job rather than a business. And if you want a job, you know, you can probably go make more money working for someone else. It’s not having a business that you can step away from even for a week or two. It’s – I just — I don’t even think that’s really a business. There’s a book called Built to Sell that I highly recommend you read if you haven’t already. It’s a little bit cheesy. It’s told as like a fable but the concepts in it are sound and it’s about building a business that is more automated that it has processes and it’s something that you can step away from and the funny thing is once you build your business up to where it’s actually saleable and it really is a solid business, you probably won’t want to sell it because at that point, then it’s basically it’s throwing off cash and you’re going to enjoy working on it so much more because you’re able to work on it rather than…than in the business.
[26:25] I just think that hiring a VA or hiring someone to handle the stuff that you’re doing day to day, it has to be your first step. It reminds me of – I remember the old MicroISV Movement and there were so many people in that movement who were taking about, “Oh, it’s, you know, it’s so hard because I work 12-hour days and as soon I started hiring VAs that’s where like I realized that you didn’t have to do that same old thing, right?” You didn’t have to do that same old thing of doing everything even if you are a one-person software company. You don’t have to do everything yourself. You need to get help in there so that you can step away and I know a number of micropreneurs, myself included who take a lot of time off, we take way more time off than when we worked full time. And I’ve rarely if ever worry about the business having any type of misstep during that time. So, I hope that answers your question.
[27:14] Our next one is about whether or not to move to a SaaS and this is from Robert Longley and he says, “Love the show. I have a software application for social services that I’ve sold to a few different organizations. It’s installed on their servers but I would like to start offering it as a SaaS solution. Most smaller agencies don’t have the stuff or the infrastructure to host it themselves. They also want to customize it beyond their ability to pay for it. A SaaS solution would solve part of the problem but getting people to standardize it is a pain. There’s also the issue of liabilities since there’s a lot of personal data. Any suggestions on best direction given some of these challenges? Thanks. Rob.”
[27:50] I have a couple of thoughts to start. I do think that SaaS is probably the way to go here because as you said I’ve worked for the city of Pasadena and I did worked with the Health Department and some other departments that didn’t have a lot of funding and didn’t have a lot of technical expertise and their ability to host things was – it just wasn’t up to snuff. I will think that SaaS is a really good option for these guys and I also think that their data would be more secure with you rather than less secure because you’re going to worry about it and you’re going to do the right things in terms of securing their data, definitely a lot of personal information. So, you are absolutely going to need to have this high security and therefore, you’re going to need to have a price point that supports that, right? You can’t charge 9 bucks a month and have exceptional security. You do have to be able to pay for that security and that includes doing it yourself which is a lot of time or hiring someone to do it which involves money. You do need to make it work because obviously, you don’t want to get hack and lose people’s information.
[28:43] Second thing you mentioned is people wanting to customize it beyond their ability to pay for it. What I would think about is if there’s a way to allow them to customize it within the app, if there’s a way to build the module and allows them to do mostly the customizations that they’ve asked for in the past because obviously, if you move the SaaS, you’re not going to have separate codebases from all of these agencies and my guess is that you will be able to find some type of middle ground that allows people to either configure their account and set up custom feels – I’m assuming custom feels and custom work flows is what they want. You can look at an example like FogBugz or you know, something that allows people to set up those custom types of things and see how they’ve done it because obviously they are SaaS app and they don’t have separate codebases for everyone.
[29:28] Mike: Yeah, I think Rob’s got a lot of good points. I think one thing you definitely want to focus on is going to the people who are using the older versions of your software and trying to upsell them to a newer version that is hosted by you and you know, you can start off those discussions by asking them why they didn’t renew or how things are working for them and try and find out as much information from them before you start pitching them on a new system because you know, you want to use it for two different things. One, you want to use it to find out whether or not they’re still using it. You can essentially use those yearly maintenance fees to say, “Hey, well, if you [Audio Glitch] get onto to this new system, you’ll get the full version of the software, you get everything that you needed plus it’s going to be continually updated. You’re not going to have to worry about upgrades or security or all of these different things.” And then you price all of that stuff in there and you should be able to gradually move some people over.
[30:20] Now, there’s going to be this subset of people who are not going to move no matter what and there’s not going to be a lot you can do about them. I would actually draw a line in the sand and try to move completely away from those people who have a hosted version. I think you have said that this is – it’s got a sequel server back end and it say web application. But if you’re asking the smaller organizations to host that themselves, I mean it seems like that’s just a recipe for disaster when it comes to support cost because you’re going to spend a lot of time and effort with that support that these people are not going to have that expertise and chances are good that they’re going to have to hire somebody to come in anyway. So, you can use all of those as part of your sales pitch to tell them, “Hey, well, you don’t have to do this. You don’t have to do that. This is the one price that you’re going to have to pay and that’s it.” And so I think that there’s a lot of good sales opportunities there. You’d just really need to work out with some of those customers exactly how you’re going to migrate them from their existing system on to the new system.
[31:16] Rob: So, thanks for your question, Rob. I hope that was helpful.
[31:19] Music
[31:22] Mike: If you have a question for us, you can call in to our voicemail number at 1-888-801-9690 or you can e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can 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.
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