Episode 255 | Moving on From AuditShark

Startups For the Rest of Us

Episode 255 | Moving on From AuditShark

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Show Notes

In this episode of Startups For The Rest Of Us, Rob and Mike talk about Mike’s decision to move on from AuditShark. They discuss events and reasons leading up to Mike’s decision as well as lessons learned along the way.

Items mentioned in this episode:

• AuditShark
• Big Snow Tiny Conf
• Big Snow Tiny Conf West

Transcript

Mike [00:00]: In this episode of Startups For the Rest of Us, Rob and I are going to be talking about me moving on from AuditShark. This is Startups For the Rest of Us, episode 255.

Welcome to Startups For the Rest of Us, the podcast 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.

Rob [00:23]: And I’m Rob.

Mike [00:24]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?

Rob [00:29]: Well, I’ve been diving pretty heavy into paid acquisition for the past few days. Just spending the money to look at different approaches to it, trying different images, headlines, optimizations, all kinds of stuff. And since I’m dipping my toe back in the water after having not done it for quite some time, there’s almost like infinite possibilities. So I feel like I have to rule them out one by one again because so many of the ad networks change over time. And so if you look at AdWords or Facebook, even from last year to this year, there are so many new options. And without knowing which one’s going to work, I just have to plug some money in, run some ads, figure out how it’s going to work and then switch the approach to see which works better. So that’s probably the next week or two of my workweek.

Mike [01:12]: Do you have a budget in mind for how much you’re spending?

Rob [01:14]: A lot.

Mike [01:18]: I always think the exact same thing when I look at paid advertising. It’s just like, I hate doing this.

Rob [01:23]: The optimization, especially, is painful because you don’t have the ROI yet. So last time I did this it took me about five grand to figure it out. And from then on, I had a positive ROI, I was with HitTail. This time, I don’t know how much it will take, but I spent between $1500 and $2000 yesterday testing things, and I’ll probably spend a similar amount today. The thing is as if you have a smaller budget, you can do this over a longer period of time. You don’t have to spend that much every day. But you learn so, so much faster if you have budget that you can work through because you learn very quickly what’s working and what’s not. And you’re able to leave it running for longer and get larger numbers, more impressions, more clicks, and it just gives you a more solid feeling for the data you have. It will definitely be a chunk of money but I absolutely look at it as an investment. Last time I was able to make it work. It [channeled that scales?] so well. It’s not cheap, but once it works, it’s pretty crazy how many trials you can drive using this approach.

Mike [02:26]: It’s basically printing money at that point, once you’ve got it working.

Rob [02:29]: Yeah, it really is. Yeah, it’s pretty insane.

Mike [02:31]: Cool.

Rob [02:33]: How about you? What’s going on?

Mike [02:34]: Well, a quick announcement to anyone who’s interested in going to, essentially [?] to a mastermind group and a ski vacation rolled into a business trip, you can head over to bigsnowtinyconf.com or to bigsnowtinyconfwest.com. The first one is going to be up in Vermont. It’s going to be in the winter sometime. I forget whether it’s January or February. But basically, they’re going to be selling tickets in the next couple of days and they have a mailing list put together. And then the other one is in Colorado, which is put together by a friend of MicroConf, Dave Rodenbaugh. The first one is put together by Brian Castle. He also has a hand in the bigsnowtinyconfwest with Dave.

Rob [03:09]: All right. So what are we talking about today?

Mike [03:12]: Well, I think today you’re going to be walking us through me moving on from AuditShark. So I’ll kind of let you drive the show today and we’ll see where it ends up.

Rob [03:21]: This is a big decision, man. I realize the magnitude and the gravity with which you’ve treated this decision. So there’s a lot to discuss, all the way from reasons to end results, to some of the marketing challenges you faced. I think I want to kick it off with giving some type of timeline. And it’s a pretty loose timeline that we tried to put together right before the show, to give folks an idea of what AuditShark is and where you’ve taken the turns over the past several years. So AuditShark is basically software, it’s a service and it is auditing software for servers and networks and client machines.

Mike [03:59]: Quick correction. It’s not actually software as a service. It was downloadable at the end of it. It started out as SaaS, but not –

Rob [04:05]: Okay. This is good to know. Yeah, you’re right. So it started out as Saas and then it was downloadable. You’re right. You started coding in 2010, you had a full-time consulting gig, and from what I recall, you had the idea and were starting to build it but it was a huge effort, like it was going to take a long time. And we, at some point, talked about how long you thought it was going to take and it was like a year or more of coding. I think you got kind of an alpha or enough to show your initial audience, which was banks, small banks. That was around 2011 at some point. And there was some mixed stuff that happened [right there?]. There was a mixed understanding. You had talked to a few banks and then when you actually revisited it there was like a misunderstanding in the discussion and, if I recall, some of the banks didn’t get back to you and then other ones said, “We didn’t really need this tool,” or there was a word that was defined differently, or something like that. That didn’t work. So then you started, in 2012, looking for other markets. You looked at SaaS. Eventually moved onto more looking at enterprise stuff. So it was 2012. And then in 2013 is when you were having the health issues and you had a big motivation block where you had months, if not quarters at a time, when you said you just weren’t really making progress. And in 2014 you finally quit consulting. You went full-time on AuditShark and you set yourself a deadline. You said by some point in 2015 you wanted to have revenue and you wanted this thing to be working, otherwise you were going to pull the plug. And obviously, that time has come.

Mike [05:33]: Yeah, that’s a pretty accurate depiction of what the timeline looked like. Early on I was actually, essentially taking the product and cloning existing functionality from other products that were out in the market. I’ll be honest, I feel like in some ways that held me back very early on because I was very scared or very hesitant to, essentially, show my work to other people or to go out and piggyback on those products. Even though they were being end-of-life, it didn’t matter to me. The reality is that I can be sued 10 years down the road and it doesn’t really matter whether those products were end-of-life or not. But there was that underlying fear in my head that I didn’t necessarily want to run into any sort of legal entanglements. I think that early on that affected me more. I think I kind of ignored it as time went on but it was definitely a factor early.

Rob [06:18]: Right. And my memory of the early days, again, this was like five years ago, was that you wanted to build it but that you didn’t have a lot of time. And I questioned how serious you were about it at that time. I didn’t feel like you were putting in 20, 25 hours a week at night, coding until two in the morning. It kind of seemed like you coded on it when you had time and that it was going to take a really long time at that pace.

Mike [06:43]: Yeah. That’s right. And I also hired some contractors to help me out with some of the coding. Some of them worked out and some of them didn’t. I think that the fact that there was a programming language built into it, that really threw some of the developers for a loop. They didn’t know what to make of it. They didn’t know how to use it. It was confusing to them because they had to not only know C# programming, but they also had to know how to deal with databases and they also had to know how to deal with a lot of the front end stuff and then the back end code. And in addition to all of that, they had to understand this programming language that was kind of like LISP. I think that that skill set was just really difficult to find and the people that I was finding couldn’t handle it. But I couldn’t necessarily afford to hire much more skilled people because of budgetary constraints.

Rob [07:31]: In retrospect, do you feel like you managed them well and delegated well or do you think you made mistakes there, too?

Mike [07:36]: Oh, I definitely made mistakes there. I’m probably not different than other people where you think that you’re good at most things. And I will kind of be blunt about it. I’m probably not the greatest manager in the world. I’d like to think that I am, and I’d like to think that I’m very well organized. But when it comes to assigning tasks, there are definitely places where I’ll write something down or tell somebody to do something and it’s difficult to get the idea across to somebody, especially if it’s a difficult concept. So that’s where things like the screencast and things like that come in. And they’re helpful, but I didn’t necessarily always do them either. And even sometimes when I did them, there were times when somebody would come back with something that was just blatantly incorrect and I was like, “I don’t understand how you could of misinterpreted this because I was very clear here.” So there were certainly cases where the fault was definitely on me and then there were cases where, for whatever reason, they just didn’t understand or didn’t figure out what it is that I wanted them to do.

Rob [08:30]: Let’s dive in here because we have a pretty extensive outline of kind of every angle of this decision to move on. And I think listeners will be interested to hear you’re reasoning, the roadblocks you hit along the way, who you’ve used as sounding boards, just all kinds of angles of this. Let’s start with the reasons that you’ve decided to move on from AuditShark. Obviously, it’s a huge decision. You have five years, on and off, invested in this as well as a chunk of money. This is not a decision that you’ve taken lightly. So talk us through what made you finally decide to move on?

Mike [09:03]: Well, last year, I kind of set a deadline for myself and I said, “Okay, in order for AuditShark to really do something substantial, I really need to dedicate more time to it.” Essentially, at that point, what I decided to do was, “Okay, if this is going to happen, I need to be able to just dedicate the time to it.” So I ended up quitting consulting and that was last June. So from June until now, I’ve basically been full-time on my own business and mostly working on AuditShark. Now one of the big problems that I was having while I was doing consulting, and essentially funding the development of the product, was that I couldn’t effectively do the sales and marketing. So like if I needed to be on a phone call, it was very difficult for me to arrange that because of my travel schedule. And I think that on our 200th episode, my wife had mentioned how there were some years where I was on the road 45 weeks a year. So that was definitely a problem for me in being able to carve out that time. Because if I’m on site with a customer, I can’t exactly step out to accept a phone call or step out every couple of hours to start making an hour’s worth of phone calls. It’s just not easy to do that. So quitting consulting allowed me to make those phone calls myself. I could have hired somebody, but at the same time, had I hired somebody, I wouldn’t necessarily have been the one learning how to do all that stuff or learning the subtle nuances of what people were saying. And that would have been difficult to get from a sales rep back to me. And in addition, I didn’t necessarily have the money to hire a full-time sales rep. And I’m really not comfortable hiring somebody on like a commission-based, especially for product that isn’t established and doesn’t have a solid revenue stream that’s coming in. I just don’t feel good about that.

Rob [10:43]: Right. I would agree. You never got to product market [?], so you as the founder/CEO really needs to be the first salesperson. So it was obvious that the sales approach wasn’t going to work. But at that point when you realized that, did you ever think, “Boy, this product is just not something that I can do as a single founder and I should pull the plug now?”

Mike [11:01]: The thought crossed my mind a bunch of times. It’s not to say that I didn’t think about it or it didn’t weigh on me but when you’re in the middle of it, it’s like what do you do? What are your options at that point? If you’re looking at that saying, well, this isn’t flying right now, it’s not going anywhere, what can I do about it? So I would say that it’s one of those situations where it’s the analysis paralysis, where you’ve got so many options you don’t necessarily know what to do so you don’t do anything. I’ll be honest, I just didn’t know what to do. So in many of those cases, I just didn’t do anything. I didn’t make a decision one way or the other, I just kind of let things ride the way the way that they were going and kept doing motion but not necessarily any forward progress.

Rob [11:39]: And I can imagine that with, essentially, the [?] costs that you had of a few years of work, because when you made this switch, and I think when you realized that it was going to be phone calls during the day and one-on-one sales, this might have been what 2012, 2013? So you were already two or three years into it. You were already tens of thousands of dollars into it. I imagine the sunk costs had to have entered your mind at that point, of like, I could just shut this thing down because this is going to be hard to sell or this is just a hurdle, a roadblock, and I can figure out how to get over it. Is that kind of your thought process?

Mike [12:12]: Yeah, but I mean, something else that factors into it is how do you know whether or not it’s going to be something you can get through unless you try it. If you look at the Dip from Seth Godin’s books, how do you know you’re there? Unless you try to push through it, I mean, if you give up right then, clearly you’ve failed it or whatever it is that you’re doing. But if you at least give it a shot and try and push through it, then you have a chance at making it through. And you won’t know until you try that. So it made it difficult to kind of make a decision one way or the other.

Rob [12:41]: Yeah. It’s hard because there’s the school of thought of you should get something out there in seven days and then let it fail really quickly. And there’s Lean Startup with just iterating and iterating and pivoting and pivoting. And then there’s the opposite school of thought that you need to sit there and hammer on things for six months or a year before you’re going to see if it works. And I think part of that is personality driven. Folks listening to this, I think if you tend to flit around and move from place to place, from project to project, you should probably stick with things longer than you feel comfortable with. And I think if you’re listening and you tend to be more bullheaded about it and you stick with things too long, then you should think about cutting your losses sooner. And having known you, Mike, for what- we’ve known each other for ten years, but known you pretty well for five or six, I would say you [?] on the side of pushing with things, of being more stubborn with it. And that is like a great strength in certain cases, but I feel like in AuditShark’s case it may not have been. It may have kept you doing it past the point where it made sense.

Mike [13:42]: I would definitely agree with that. And it’s hard to know, necessarily, in advance whether or not the stubbornness can be a pro or a con until it’s too late.

Rob [13:52]: That’s right. And if you’re company becomes a $100 million company and you were stubborn, then you’re a visionary and a genius. And if your company tanks, then you were an idiot. You know what I’m saying? It’s like it’s all in the outcome.

Mike [14:03]: Well, I appreciate that.

Rob [14:05]: Yeah. [?]

Mike [14:06]: That’s okay. No, I understand. I knew what you were saying. I knew what you were saying.

Rob [14:12]: So somewhere around late 2013, 2014, you kind of made the switch and moved into this enterprise market and you started talking to more enterprises and the sales cycle got long and challenging. So that was another factor, I think, in your decision to shut it down. Is that right?

Mike [14:26]:Yeah. The enterprise sales is just really hard. And I think that there are definitely cases where it could work and there are some people who are built for that kind of thing. I don’t know that I really am. I prefer things to move a little bit quicker. I’ve still got a customer in my sales pipeline who’s been there, going on 20 months now. And it’s an enterprise deal they’ve got between 35,000 and 70,000 end points. But the reality is that, even if that deal came in tomorrow, I don’t ultimately believe that it would change the long-term outlook or the sales cycles. So it would bring in probably $300,000 in revenue but I don’t necessarily have a good scalable way to get in front of a lot of other people like that. So that makes it difficult. And in addition, I had somebody who was basically asking me for information about AuditShark and we went back and forth a little bit and they’re like, “Check back with me in three months.” And then, “Check back with me in six months.” So I started doing some research, come to find out that this person was actually project manager for a product inside their company that basically does what AuditShark does. Of course that’s heavily depressing. It’s very demoralizing at that point. You feel like you’ve been strung along.

Rob [15:37]: Yeah, that’s tough. We had several offline conversations over the past kind of year, I think, as you’ve pushed into this enterprise market. And there have been stops and starts. There has been progress. There was a light at the end of the tunnel at a certain point where you thought that you were going to be able to make this work. To be honest, as an outsider looking in, the past 12 months has been your most focused and, I’d say, productive period of time, working on AuditShark, in my opinion. Because you actually sat down and you made the sales calls and you were doing demos and you were doing webinars and doing marketing and that stuff. It’s like the first three or four years you were working on the product and trying to figure out what to built and trying to- it was more product focused. A lot less marketing focused. But you really were dug in and executing this past nine to 12 months. But this enterprise sale cycle, and just enterprise sales in general, has really been an uphill battle, I think.

Mike [16:31]: Yeah, and just for some of the listeners who haven’t listened to some of the earlier podcast episodes or heard what AuditShark really was for or what it was built on, I was essentially taking an enterprise level product that had sold recently well in the market and creating a smaller version of it that would have a lower price point and would address the same types of needs but for smaller businesses. I wasn’t necessarily looking to go to the enterprise market. I was going to say, hey let me take this enterprise solution and re-work it a bit for small and medium sized businesses. And when the banks didn’t work out, and then as a SaaS offering for small businesses it didn’t work out, then I said, okay, well that worked before in the enterprise market. That’s probably where I should go with it. And ultimately, it seems like the enterprise market is just really not a good fit for me personally. And the last reason I have for walking away from this is that I feel that some of the people that I’ve been targeting and talking to, who are in positions where they are tasked with solving this problem, don’t necessarily care about the problem themselves. And that’s really hard to take. As a developer, as an entrepreneur, you’re trying to solve problems for people and make their lives better. But if they don’t care about the problem, then why should you? It makes it really hard to care about their outcomes when they don’t care about it either.

Rob [17:52]: And we’ll talk a little later about some lessons learned from that, right? Because I think trying to get more validation up front could have had you learn that before spending the time to build the product. Maybe it could have. I think it’s arguable. But it’s definitely possible. So what’s the end result really? What are your sunk costs?

Mike [18:13]: Neglecting the time that I’ve spent on it, and if you kind of add in profit versus the money that I spent, I’m probably down about $50,000 in sunk costs. There’s about a third of that that I paid to a contractor who kept promising to deliver and updated version of the product for, it was probably close to four months. And that was complete mismanagement on my part. And I talked to my mastermind group kind of at length about that because it had been going on and on. And finally, it just got to a point where I was like, look, I need something from you. I need to see something and what I got was not what I expected. And I was just like, all right, I’m done with this. This whole contract is done.

Rob [18:49]: Right. That’s a bummer.

Mike [18:51]: Yeah. Probably a third of that $50,000 was spent on that.

Rob [18:55]: Right. You mentioned your mastermind group. I know you’ve had a bunch of sounding boards, folks you’ve talked to about this. Especially over the past year or two as you’ve been trying to make a decision about it. Who are folks who you’ve relied on for that?

Mike [00:19:09]: Yeah, so Dave Rodenbaugh and [?] are in my mastermind group. So I talked to them pretty frequently about it every couple of weeks. And then at Microconf Europe, I had a number of conversations with different people. Like Steven [?] and Patrick McKenzie. Even as far back as Microconf in Vegas, I talked to Steli Efti for quite a while about it because, obviously, as CEO of Close.io, he has a lot of insight into sales cycles. So I felt like talking to him would, at least, help me understand whether or not I was going in the right direction or the things that I was doing or not doing that I should be. And the end result of that was that if you’ve lost motivation and the needle isn’t moving then it’s going to be an uphill slog. And somebody specifically said, “You’re a reasonably smart guy and there’s a near-infinite problems you could be solving. You should probably be working on something that you enjoy rather than something you don’t.” And it stung, but at the same time I needed to hear it.

Rob [20:04]: Yeah. It all depends on what state of mind you’re in. If you’re in the first couple months and you’re all fired up about something being a good business and someone tells you that, you’re going to tend to ignore it. All of us would tend to ignore that if you’re fired up about it. If you’re at the end of your rope and you’re frustrated and you’ve been working on it for multiple years and it’s not working, when you hear that it’s going to sting, but I think it’s good feedback to hear because it makes you reconsider continuing to invest in this product that just doesn’t have legs.

Mike [20:29]: Right. And obviously there’s all the mental challenges that go with it, but it’s something that I’ve talked about on this podcast before and there’s a certain amount of obligation to succeed, I’ll say. And not to say that everything I touch is going to turn to gold, because I certainly don’t expect that, but I really felt like I had the insight into this particular problem and how to solve it to be able to push my way through and solve the marketing challenges. And I felt like a lot of the marketing challenges that I ran into, especially in enterprise space. The enterprise space is really very much relationship driven. I do not like the mode of operation. I do not like that mode of sales.

Rob [21:10]: So with all the feedback in mind from folks you’ve spoken to and given your reasons above, I know that you had in essence, set a deadline for yourself at a certain point last year. Can you talk us through really the final straw or the final deadline and how that worked out? You gave yourself the freedom to really decide to move on. How did that all work?

Mike [21:29]: Yeah. I had this initial deadline that I had set up, which was a year from going full-time on it. And I got near the end of that deadline and I was kind of worried about it because obviously, things were still not going very well and I was trying different things. And one of the things that I had tried was the AuditShark lock down service. That allowed me to kind of push things out a little bit because as soon as I started doing that, I got some immediate sales from it and I was able and go out and do some security reviews for a couple of people. And I sold two of them very, very quickly, and then there was a third one that was supposed to come it and ultimately, they ended up backing out. But I sold several thousands of dollars of those services very, very quickly. So I looked at that and said, well, maybe this is the part that has legs. Maybe this is where the product is destined to go. So I gave myself a little bit of extra time. My mastermind group members were on board with that. They said, “Look, this got some revenue very, very quickly. You should probably spend a little bit more time on it, even it takes an extra month or too,” because a lot of the other things you haven’t tried so far have worked. And it’s like you’re at the end of that timeline and suddenly, boom, something changes. And it didn’t feel right to just pull the plug at that point. So I extended the deadline by a little bit. But ultimately, it didn’t seem like that really made much of a difference. And also, the initial traction that I got from that was from warm leads, not necessarily cold leads. And I don’t know how long it would take some of those people to invest in the lock down service. But at the end of the day, I don’t think that the lock down service is something that I would want to do long-term anyway.

Rob [23:00]: Right. Yeah. So the combination of it, it’s like if you go with enterprise you didn’t really have a passion for doing enterprise sales. And if you did the lock down, you could probably sell it to more smaller, medium sized businesses but didn’t turn into something that you wanted to do. And, like you said, you didn’t know how to repeat that and you didn’t want to spend another six months trying to find cold leads and convert them with lock down. Your time had come, your deadline had passed.

Mike [23:24]: Right. I mean, you can only pivot some many times before. You can technically pivot forever but at some point you got to call it quits.

Rob [23:32]: Yeah, there’s always more suggestions. We could sit here and say, “Okay, so lock down had a little bit of traction, Mike. How are we going to plan to get more people to the website? And then you can do webinars and you can do this and do that” but it’s like you’re done. When you’re done, you’re done. So what are your plans with AuditShark, what are you going to do with it?

Mike [23:46]: Well, I think, for the time being, I’m just going to leave the website up and leave things on “Autopilot.” I’ll probably add a pricing page in there with just some sort of [low ball?] price and some sort of upper limit on the number of machines that you can use it on. But the reality is I’m not going to do very much with it at all. I did talk to a broker who said that he thought that I could definitely find a buyer for it because there’s definitely people who would be interested in this type of product. But the other suggestion that I heard was that the site definitely gets reasonable traffic on some of the pages that are super competitive. So for example if you search Google for SOX Compliance, I actually rank higher than Wikipedia for SOX Compliance. And if you look in the Google keywords tool, it shows that it’s a highly competitive term. So I’m getting like more than half of all internet searches for SOX Compliance. And that page is generating between 15 and 20 leads a week right now, for me. So I think that there’s definitely value in terms of advertising. But again, it kind of goes back to this situation of like in a way I’m kind of done and I don’t want to put a lot of time of effort into it, so I’m going to leave the site up for the time being but I’m not going to do a whole heck of a lot with it at this point.

Rob [24:54]: Yeah. It’s tough, man, because, I think my opinion on this is that leaving it up, if you make one sale magically or two sales for a few hundred bucks, it’s probably not going to be worth your time to support them. And I think that if someone downloads it and uses it and runs into any bugs, then you’re now on the hook for fixing that. If they run into support issues getting set up, you’re going to have to help them. And since you’re not planning on building this business, I’d be kind of hesitant to keep it for sale, to be honest. Even if you leave the site up for now until you’re really done with it, you may just want to remove the buy it now button and either have just a “contact us” button or like no way to purchase on the site. Just to avoid having to get your code, which has not been heavily production tested on hundreds of installs. So it probably still has some bugs to avoid a customer buying that and putting it on their stuff and then having to support it. Because, you know, what’s worse than selling zero copies of a piece of software, selling two copies of a piece of software. Because then you’re on the hook to support it and it’s a lot harder to just shut it down and walk away at that point.

Mike [25:54]: Yeah. For me, I think, there’s this mental barrier to going into [IS?] and clicking stop on the website. I feel like that’s really what it is. There’s two sides of this. There’s the logical side which says, “Look, this is done. This isn’t going anywhere and all the paths that you have to success are paths that you don’t necessarily want to do.” So there’s really no point. But then there’s the emotional side of it which is like, “I’ve put all this time and effort into it and to go in and hit that stop button” so that website no longer shows up, it’s kind of painful.

Rob [00:26:26]: It’s too soon.

Mike [26:28]: Yeah, kind of too soon. Mentally, I feel like it’s there but at the same time, it’s hard to just do that.

Rob [26:35]: I think that will ease up over time. I think now that you’ve made this decision, it still hurts and then, in a few months, I bet it will be a lot easier to do that.

Mike [26:43]: Yeah. And that’s what I think as well. I’m just going to kind of let the website ride for the time being and for the most part ignore it.

Rob [26:50]: So let’s talk about lessons learned. I think you’ve learned a lot during this process. I think other folks listening to the podcast have too. There’s been a lot of heartfelt discussions and the comments over the past several of years as we’ve had episodes that have focused on your building and launching and decision points around AuditShark. Talk us through some of the things that you feel like you’ve taken away from this experience.

Mike [27:09]: Well, I think that I’ve definitely realized that there are certain cases where the answers are not so cut and dry. So, for example, when we talked before about the timeline a little bit, and in 2013 there were some heath issues that I ran into. But I almost feel like those obscured my motivation issues or maybe compounded them because I don’t think that, kind of looking back in retrospect, at the time I was like, oh yeah, my health issues. I’ve got these under control now and now I can get to work and I can actually get things done. And I feel like because of maybe underlying motivation issues were obscured by the health issues. I think that it was not necessarily as clear to me that there’s two different things going on here, not just one. And it’s not obvious until much later. I was talking to Patrick McKenzie and he said the exact same thing happened to him on Appointment Reminder, where the product wasn’t necessarily getting very much traction and he ran into health issues. And then even after some of those cleared up, it still took him a good year and a half or two years of a very difficult grind to get the product to where he wanted it to be. And he’s the one who actually told me that the heath issues very much obscure the motivation issues. I think at Microconf Europe he called this the [Peldi?] test.

Rob [28:22]: Right. Like do you really want to work on this thing?

Mike [28:24]: Right.

Rob [28:25]: Are you going to be happy working with this group of customers and working on this product for the next 10 years? That’s really his question. I think there’s also a big question around validation. You’ve made some calls and you had a couple of banks that you had spoken to, but talk us through something that you would do differently these days regarding the early validation of AuditShark’s need.

Mike [28:25]: I would talk to a lot more of them. I talked to five and I felt like because I walked in the door and sat right in front of the person who was running the IT and talked to them directly, that I had a good handle on it. And then in addition, all my background and experience at the startup a long time ago, building exactly this type of product. Because I knew all the subtle nuances and I did all the consulting around it, but at the end of the day, I did not understand the needs of the small banks. Because what I was trying to do was I was trying to take a large enterprise product and put it down into a very small niche market with banks. And I didn’t do enough validation around that piece of it. I still feel like the product itself and this particular problem needs to be solved in the enterprise space, but clearly, as I said, that’s not a place that I’m going to go or able to go. But I definitely could have done a much better job validating those banks before I went off and built code for 12 to 18 months. And I think that had I done a better job of that, I might have realized much sooner that the banks were not going to be a good fit for the product. And ultimately, I wouldn’t have had to pivot because I would have never built to begin with.

Rob [29:53]: Right. Yeah, and then something I’ll add, that we talked about offline is that, you took too long between the idea and talking to the banks and getting to beta, right? It was like 18 months or more and that’s a long time. There were reasons for it. You have contractors that fell through. You had traveling. And you had all of that stuff, but it just becomes too long and it makes the journey too long so that it’s not fun anymore. It’s hard to keep motivation up over the course of 18 months or two years working on a product with no real validation.

Mike [30:22]: Yeah. And it’s interesting. I’ve talked to some people where they’ve heard about some of the inter details and inter-workings of how everything has happened and they’re shocked that I was able to maintain, I guess, stay on course for as long as I have.

Rob [30:37]: Yeah. And that comes back to that strength of being stubborn. I think you have that strength of being able to continue plugging away at something for a very long time and I think that’s why you stuck with it, and it’s both a strength and a weakness depending on the context.

Mike [30:51]: Yeah, the other thing that I think really was a big deal was when the banks, I was initially targeting, did a 180 on me. That should have been a gigantic red flag for me to reevaluate the entire thing instead of just simply pivoting. Because I had this product that I had built, I took it to them and they said, “Oh yeah, we must have misunderstood” or there was miscommunication. This is how we’re solving that. We don’t really need this. It’s an interesting thing but we don’t need it. And I think at that point, I probably should have done a complete reevaluation rather than simply trying to pivot. And I think that was big mistake that I don’t think I realized until recently. I can’t really remember ever hearing that lesson from anyone else before, but I think if you get to the point where you need to pivot, you need to evaluate everything at that point instead of just is this going to work or what’s going to be the most likely place for this, because it’s entirely possible that all the research and everything else that you’ve done before that point is essentially irrelevant at that point.

Rob [31:48]: Right. And you were in problem solving mode of like, “I’ve run into a problem, the banks didn’t pan out. How do I fix this problem in the context of this product? So how do I find different customers? How do I find customers for this app?”Whereas, maybe you shouldn’t have been evaluating how do I fix the problem but should I fix the problem and should I even continue with this product at all?

Mike [32:09]: Yeah. That’s a very subtle distinction, but extremely important, too.

Rob [32:13]: Yeah.

Mike [32:14]: I think there was also a certain amount of obligation that I felt because I had talked about AuditShark on the podcast. I almost felt obligated to continue. And I feel like looking back on it, that was also a mistake that I made. Sometimes the right decision is to call it quits and move on.

Rob [32:28]: Right. And I think that obligation probably extended beyond that and maybe even tied into the amount of money you invested and certainly the amount of time you’d invested. It just comes back to the sunk cost.

Mike [32:40]: One other thing I want to bring up is that I think when you’re looking for a channel for your product, and I think that on this podcast we tend to err on the side of telling people go for SEO or paid advertising, all these online mechanisms, and I think that once it gets to offline stuff you have to do a little bit more research on it. Because what I didn’t realize in going after the enterprise market was that the enterprise market is much more relationship driven than it is anything else. And I didn’t realize that up front and I should have. Because I’ve done enterprise sales before but probably not to the extent that an enterprise sales rep would have. I’ve been in the capacity as like a sales engineer and working through problems with people and doing proof of concepts and things like that, but when it gets into the part where you’re actually selling the software and getting to the point of purchase orders and things like that, it’s very, very relationship driven. And sometimes people will just ask you for proof of concept or a demo for the sole reason that they want to pit you against another vendor. And I’ve run into that. It’s a hard position to be in but those relationships that those larger businesses have, they’re there for a reason. So when I big business runs into a problem, they’re going to call up their large value [added?] reseller and say, hey, we have this problem, what do you have for us? What tools do you know of that can solve this particular problem? And they’re going to rattle off two of three and usually the top one that they come out with is going to be the one that gives them the best margin that they’re reselling. And I don’t have those relationships and I don’t really want to sell a product that is more sold on relationships than it is sold on technical merit.

Rob [34:15]: I think there’s a roadblock or a pretty big uphill battle if you’re a single founder bootstrapping a company and you’re trying to enter this market. I don’t know of any single founders who are bootstrapping, selling into the enterprise. I’m sure there’s one or two. There’s probably a counter example. But for the most part, the folks we know are not doing that because of the amount of time investment that it takes, the amount of cost, the lead time, and the sales cycles. There’s just all these reasons. So, I think when you initially launched or were going to start building back in 2010, you weren’t planning on going after enterprise. But there was a point in 2013, 2014, when you said this is what I have to do, and I think that if you had known what you know now about the enterprise sale cycle, that would have probably caused you to, hopefully, rethink the decision.

Mike [35:02]: Well, that’s another pivot point where I should have reevaluated much more than just where is this going to work. When I pivoted from banks to small businesses I should have reevaluated a heck of a lot more than I did. And then when going from there to the enterprise, I should have evaluated whether the enterprise is a good place for me to be in. I didn’t do it in either of those cases. And I think both of those were mistakes.

Rob [35:02]: So what’s next for you? You’re moving on, but what are you moving on to?

Mike [35:28]: I’ve kind of talked about this offline, but there’s a ton of stuff that needs to be done on the Micropreneur Academy and Founder Cafe, so I think I’m going to take some time to revamp some of the guts of that stuff over the next couple of months. And then right now I’m also testing out a couple of different ideas to see if they have any legs. Two ideas I’m testing right now. One of them is more of a one-on-one email follow-up. Because one of the issues I ran into when I was trying to do the enterprise sales was there were people who I would email them or I would call them and they just would not get back to me. And it would take a number of emails or contact attempts to try and get them either on the phone or get some sort of response. There was one, I think I talked about it were it was eight emails over the course of 16 weeks, or 16 emails over 16 weeks or something like that. It was a very long period of time. It was a very high number of emails to me and phone calls. And finally I got a response on the 16th one. I forget the details of that but it was a lot. And it was all with no response of any kind and then suddenly, kind of out of the blue, they’re like, “Oh, yeah. By the way. We’d love to set up a meeting for Tuesday.” It was weird the way that that works. And I’ve talked to a couple of people about this. There’s definitely some opportunities there where they want some sort of automated sequence for people who, not fall off the bandwagon, but fall off the radar or kind of move away from the negotiating table, to just help bring them back. So I’ve got an idea that I’m testing for that and I’ve talked to a few people about it, but I’m not so sure I want to go in that direction. And then the other one, this one’s a little bit fuzzier. It’s sort of an idea around spreadsheet automation. So there’s lots of people out there who build reports from spreadsheets or take data from different sources, kind of aggregated together, or imported into databases. And I think that some sort of spreadsheet manipulation product or something that builds reports from multiple spreadsheets and splices things together, or even just something very, very dead simple that takes spreadsheets and imports them into a database might be something that people would be interested in. Again, I’m still working out details on those things. I haven’t started writing code or anything like that, beyond some very, very brief prototypes that’s about it. But I’m kind of sifting through about 5,000 keywords right now to see if there’s an SEO play for that and then talking to people about that. I’ve already had a few conversations. One of them didn’t. So, we’ll see how it goes. But I’m not going to do anything until I get to probably 20 or 30 people.

Rob [37:49]: Well it’s been a long journey, sir. I know this is a big decision for you. So it’s cool that you’re willing to come on the show and kind of detail all the decision points and what’s gone on over the past several years so folks can get a better idea of what was going on at what point. And frankly, so we can all learn from the mistakes that we’d made, like we say in out intro.

Mike [38:10]: Yeah, I’ll be honest. This is a fairly painful set of mistakes. It’s not even just one mistake, it’s a bunch of them, not necessarily sequential. There’s definitely some things that went well and there’s some things that didn’t. I learned a lot along the way. Ultimately, it didn’t necessarily turn out the way I wanted it to. But not everything does. But at the end of the day I want to be doing something that I enjoy and have fun doing and am helping people who legitimately want to be helped. And there were a lot of things that just didn’t necessarily fall into place along the way. So, as I said, it’s kind of painful. I know logically that it’s the right move, emotionally it’s still a little painful, but hopefully that will go away over time.

Rob [38:51]: I imagine there’s also a bit of a weight lifted off your shoulders.

Mike [38:55]: Yes and no. There is and there isn’t, I guess. I’ve got all the technical cruft left around that it’s going to be there for a while. It’s almost like you break up with somebody and their stuff is still in your house.

Rob [39:07]: Yeah. You just can’t get away from it.

Mike [39:10]: I don’t know how else to put it other than that.

Rob [39:12]: Yeah. Well, I think that probably wraps us up for today. So if you have a question for us, whether about this episode or another one, call our voicemail number at 888-801-9690. You can e-mail us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Out of Control,” by MoOt, used under Creative Commons. You can subscribe to us in iTunes by searching for startups, and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.