Episode 520 | Why a Million Dollar Agency Quit It All and Moved to SaaS

Rob: Welcome to this week’s episode of Startups For The Rest Of Us. This is episode 520 in which I have a lovely conversation with Keith Perhac, the founder of SegMetrics. SegMetrics allows you to get 100% clarity on where your leads come from, how they act, and how much your marketing is really worth. We dive into exactly the difference between SegMetrics and other options for attributing sales and revenue to traffic channels, advertising channels, and all that.

We’ll go through Keith’s background. You may have heard of him. He’s done at least one MicroConf attendee talk. He’s done a MicoConf mainstage talk. He used to host a podcast with Pat. Keith and I cover some really interesting ground today as he talks about why he shut down his million dollar marketing agency to build and double down on his SaaS.

Before we dive into that, I wanted to ask you a favor. If you’ve been listening to the TinySeed Tales episodes that are coming out on Thursday mornings, you have heard through episode seven that came out last week, there are two episodes left. Obviously, this Thursday and next Thursday. I’m curious to get your feedback on season two and frankly, just the whole concept of TinySeed Tales. Feel free to email me directly at questions@startupsfortherestofus.com. You can DM me on Twitter or you can mention me at @robwalling on Twitter.

Given the amount of time and money that they cost to produce, I’m curious to hear if you like the storytelling approach. Obviously, it’s a more produced form than really exists in our space. I enjoy doing them but I also want to make sure that they’re providing some type of value to you; whether it’s entertainment, motivation, inspiration, tactics—just anything that you’re getting out of it. I would appreciate hearing from you. Drop me a line and let me know what you think.

With that, let’s dive right into our conversation. Keith Perhac, thank you so much for joining me on the show today.

Keith: Thanks so much for having me, Rob.

Rob: Today, we’re here to talk about why a multi-million dollar agency owner decided to quit it all and move to SaaS. It’s a great topic.

Keith: It is. It sounds a lot more impressive when you say it.

Rob: Why in the world would you do that, sir? Now, we’re going to dig into that today. Just so folks have some context, you’re a software developer turned marketer—the dangerous combination. I love that combination whether it’s a marketer who learns how to code or a developer who learns how to market.

Keith: It’s like a superpower.

Rob: It really, really is. I don’t think people understand that enough. A lot of us developers, you do it for five years, you do it for seven years. You become senior and you’re like, man, I can do a lot of things. Then, you start over with marketing and it’s a grind. You don’t know any of it, you think it’s fluff. You get three, four, or five years into that and you pile those two on, it’s ridiculous. It’s like an epic, highlevel, multiclass in Dungeons and Dragons.

Keith: Yeah. Just to be able to understand how the internet and all that technology works makes you such a better marketer. People come to us and they’re like, why aren’t these things tracking right? Because you have no idea of how the internet works, why the scripts aren’t firing, and how URLs even work.

Once you understand that, it’s a superpower to get everything. That’s not even touching the automation you can do, it’s crazy.

Rob: Yeah. You were running a seven figure marketing agency. It was called Develop Your Marketing, focused on conversion rate optimization and building out funnels. You had marquee clients, big name clients folks I’ve likely heard of like Ramit Sethi and Eben Pagan.

You decided to build a SaaS on the side. I think you were using the same resources. You were kind of using the agency team to start building that out. That SaaS is called SegMetrics, segmetrics.io. I’m going to read a little bit about it so folks have a context of what you build, then we’re going to go back and kind of talk through your decision to build it, the highs and lows, the launching—just the whole story so folks can both be inspired by it and also feel the agony and the pain of what you felt in the early days. As well as takeaway some actionable stuff. Obviously, your story as a marketer and a developer, I think there’s going to be a lot of folks that can takeaway.

SegMetrics, your h1 is, “Get clarity on your true lead value in every step of the way.” The subtitle there is, “Get 100% clarity on where your leads come from, how they act, and how much your marketing is really worth. Get a handle on the Key Performance Indicators that matter most for your marketing funnels. Built by marketers, for marketers.”

When I think of analytics or attribution, I think of, okay, I have Google Analytics as this anonymous analytics and aggregated. I have a Mixpanel. There’s obviously those types of competitors for individual funnels and people walking through. Of course, I have Facebook Pixels, Google Pixels, and other things for conversions and dollar amounts. I think Mixpanel does that too. Where does SegMetrics fit into that mix?

Keith: The idea is kind of similar to Mixpanel in a way, which is we want to be able to see everything that anyone does in a customer journey. From what ad they landed on to how many times they viewed a page, to if they attended a webinar, to be able to understand who are the most valuable people who are going through your marketing funnel.

The problem with Mixpanel is that it has no native integration. It has no idea of revenue out of the box. It has a garbage in and garbage out problem. Unless you were really diligent about what data you’re sending into Mixpanel, you’re not going to get anything valuable out of it.

What SegMetrics does is we take that idea of like, okay, we want to see every event in an entire customer journey. Marketers are never going to be able to hook this up. What we need to do is integrate directly with all these tools to pull the data out of Google Analytics, out of Google Ads, Facebook Ads, your ESP, your CRM, your Stripe, your payment gateways—everything—and create an individual persona that we can then say this is this person from all this different sources brought together. This is their full customer journey.

Then, what we’re able to do is say, all right, we know that Facebook Ads, our lead value is $50 for each lead we bring in from Facebook. Within that, do we have actions that make people worth more money? Worth less money? Are there certain demographics that can make people more valuable? Is this idea of finding these segments of actions, or demographics, or people that are more valuable so you can then go after them more, be able to market to them better, and understand your audience better.

Rob: Yeah. That makes a lot of sense. It was certainly an issue that I’ve had marketing SaaS, as we were doing ad spend or even getting organic traffic of I had this aggregate numbers of, hey, this is what our churn is, for example. I couldn’t slice it based on demographics or oftentimes, even based on source unless I really have to finagle some stuff.

Keith: That’s why we built it. As a conversion rate optimization agency, that’s what we’re doing. We exported all of this data from all these tools, created a bunch of pivot tables. Five hours later, we had information.

Rob: Yeah. Inside SegMetrics, you can slice and dice it. You could look at churn. You could look at lifetime value based on all this stuff, right?

Keith: Exactly.

Rob: Okay, for me that paints a crystal clear picture. I think most SaaS founders who’ve gotten this far, who are doing $5000 or $10,000 a month or more, are trying to attribute stuff, know the limitations of having to build it custom.

We may have already answered my first question, then. My first question is why build a SaaS company if you’re running a seven figure agency? It’s obvious that over and over and over, you probably have to cobble this together with duct tape and baling wire.

Keith: Yeah. Essentially, we were working with an analytics agency—a friend—who did a lot of our analytics. We had a lot of our analytics done inhouse. We just spend so much time on it. We were spending probably 20%, 30%, of our week just pulling the numbers. That doesn’t even mean the analysis of what they’re doing but just pulling these numbers.

Okay, we have this webinar. What is the lead value of someone who attended the webinar? We pull all that data from whatever system we have then we pull it from all the tags. Then, we pull the revenue. Then, we match them together. Awesome. Then, we write up the report, the PDF, and everything. We take it to the client and they’re like, what about the people who came from organic versus paid? What’s that breakdown look like? I’m like, give us five more hours. We got to go through that whole thing all over again with these new things.

The analytics guy we were talking to and the guy on my team, we were talking about this, and he’s like, it’s just a database. It’s just a spreadsheet. Why can we not just slurp this data in and do this automatically? That’s where it kind of starts. Okay, could we do this? Could we scratch our own itch? Yeah, that’s where it kind of started from.

Rob: Today, you are a team of 10. As you said offline, “Growing very quickly.” Of course, I have your revenue graph here. You’re in batch two of TinySeed, I have access to your numbers. I will confirm that. Doing very well. In fact, your growth has accelerated. It really looks like at April, May, it starts kicking up which coincidentally—

Keith: I wonder what happened in April and May of this year? I have no idea.

Rob: I have no idea. Don’t think batch two started. We’ll get into that later on the interview. I want to do something chronological. You started working on this five years ago, back in 2015. You told me that you built it in two weeks, 2-3 weeks. That you had a customer the first week of launch. That sounds amazing. That is crazy, crazy fast—to build this whole that fast. Second, to get your first customer the first week of launch. Both of those things, how did those happen?

Keith: This is actually the second SaaS I built. The first one was Summit Evergreen which was a membership site platform for marketers. We had made some mistakes that time. We thought we knew what the customers wanted based on the consulting we have done. We built a very large, very complicated app that had a lot of features that turned out no one actually needed. It took us many months to get to market. Once we got to market, it was slow to get people in. It was very difficult.

With this, we built it to scratch our own itch. At the same time, we’re like, this is something that everyone needs. We’re not going to make the same mistake. What we did was we did a very hands-on, iterative process with our customers. We picked two or three customers—clients—that we were working with. We said, hey, we’re building this thing. Here’s the numbers that were looking to get this value. They would respond. We would say, awesome.

We did a raw dump of their data. We plugged in the engine. There’s no UI. There’s nothing at this point. There’s just me doing some math in a PHP file on the backend based off of the CSV. We get that in and we spit that out. We show it to the clients and we say, hey, for this webinar you just ran last week, this is the lead value. They’re like, oh my god, this is amazing. We’re like, okay, this probably has space.

Then, the team had a little bit of downtime. I think this was early February or late January. Right after a big launch. We knew we had two weeks of almost no client work. We decided, let’s put a challenge to ourselves. Let’s get the team together and we’re going to work on this fulltime for two weeks. We’re not going to do any client work because we don’t have much scheduled. We’re going to see how much of this we can build.

In two weeks, we pretty much had version one done. The engine was already built but the UI, the signup, everything around it, the creation of the reports, the spitting out the reports, the graphs, the everything we built around two weeks. Finally, we launched and it was the product of the day when we launched. Super excited about that.

Then, I found out that there was a space in our Stripe public key when I copy-pasted it into the site, no one was able to purchase. That was rough. It didn’t deter us. I think within a month, we were up to $1000 MRR.

Rob: Wow, that’s great. A lot of learnings from that. I think people think of an MVP as a limited version of a product. You really tripled down on that definition.

Keith: It was a text file. I actually have screenshots of me and Slack. Or not Slack, it was Skype. I just had a text file with six lines. I copy-pasted that. Again, is this valuable? I’m like, yes. That was it.

Rob: Yeah. I love that approach. I often talk about, in my first book, human automation of having VAs just do something on the backends and spit out a report. That’s really, in essence, kind of what you did there.

First customer in the first week of launch, you obviously solve a problem. 1000 MRR in the first month; were you getting those leads from clients, or were you actually doing marketing?

Keith: I don’t remember, to be honest. I know we had two clients that had decided to sign up as customers. A number of our clients we kept as just kind of free users. They weren’t interested in the numbers, but we needed it for our work so we did it internally. Then, the rest were people who found us either through Product Hunt or promotions that we did, tweets. That was five years ago. I don’t really remember who they were and where they came from.

Rob: Right. You mentioned to me as we were talking before the interview that you were at about $1000 MRR after the first six months. Is that right? Did growth plateau that much?

Keith: Yes. We didn’t hit $2000 until August of 2016.

Rob: That was more than a year later, because this was early 2015. What happened then? You basically rocketed to $1000 MRR, you solved the problem that people are obviously in a dire pain point. You flatlined, in essence, for a year. What happened there?

Keith: More than a year. More than a year, Rob.

Rob: You remember every minute of that. 15 months.

Keith: What happened was I had a day job. Not a day job like I was working for someone else, but we had the agency. The agency is pulling, like you said, $1 million+ a year. It’s really hard to take the team off of client work and put them on something that’s making $1000. We didn’t have any customers or any clients that paid us $1000, just $1000. That was inconceivable. I think our lowest contract was $10,000 a month.

It was very difficult for us to put the time into it. I think we language there—I’m looking at the graph—until mid-2018. Wow, you can actually see the spike. Mid-2018, I had decided that we were going to focus on SegMetrics. We always said, hey, we’re always the bride’s maid, never the bride. We’re helping our clients run these million dollar launches—multi-million dollar launches. We’re making good money but we want something that we control in our product, in our stuff. We had always thought this. We had SegMetrics there but we haven’t put any love and any energy into it.

That summer, I remember, I spent some time. We rewrote the UI. I said, we’re going to focus on this. Over the next six months, we’re going to transition out of consulting work, out of the agency work, and we’re going to start moving towards SegMetrics and something that we own.

I know it’s going to be slow because we make a lot from the agency and we need to wind that down slowly. That’s our goal. I was just so tired. I think the team was just tired of having this great resource that no one was using. We didn’t spend the time to make it worth it, to put it out there.

Rob: I remember having that same issue before I went full time in products. I was consulting. I had, basically, a micro-agency where it was either me or a few contractors that I markedup and billed out. It was software development. I remember billling $125 an hour, $150 an hour, somewhere in that range, for every hour. I was booked more than full time. 40+ hours a week I could work. I had these products on the side that were doing exactly that. I had a beach towel website that was doing $1000 a month. Net profit was $150 a month. I had DotNetInvoice which was doing a couple of grand a month, most of that profit.

When you compare those numbers, it’s like, I can make a couple grand in two days of work. It was such a struggle. I heard people call it an addiction. The cash agency work or consulting is this cash addiction. It’s amazing when you want to get to full time income or higher quickly but it’s really hard to move away from. As you said, the focus is constantly towards your high value, instant cash infusion, which of course, is working for clients.

It sounds like you got tired of it. You got fed up with it and you wanted to double down on something that you have built. You fired your whole team in order to do this in late December 2018. That must have been brutal.

Keith: It was rough. It was honestly rough. It wasn’t, hey, I decided to work on SegMetrics and I’m letting everyone go. The original plan was to bring everyone over and we’re going to slowly shift over. The team’s going to stay. There were a number of issues with that.

One of them was that same mental model that the company has of, hey, I can do work for clients and make a lot of money. Or, I can spend time and make no money with the SaaS, was also there with the employees, with my team. We actually had a number of conversations over six months. Essentially, what it came down to is, it was too hard of a mental shift to go from the client is asking something right now. I could spend an hour on that and the company makes X hundred dollars. Or, I can spend six hours working on SegMetrics and the company makes… There’s not a one-to-one translation.

At this point, I think we had done the agency for six years. Eight years, maybe? That was the challenge. We have an hour for dollar, time for money exchange with our clients right now. We do not have that for SegMetrics. We have time for literally nothing exchange. It was very hard for not only myself, but my team to prioritize that.

There are also other issues like when you only have less than 100 customers, you don’t need an account manager. Where do we take the account manager? We kept trying to find roles that didn’t fit for people. It was just very difficult. What I ended up doing at the end of 2018 was saying, hey, guys. You guys are incharge of SegMetrics. You guys work on SegMetrics. I’m going to handle all the client stuff so it gets it all of your plate.

The mistake I made was thinking that they understood SegMetrics as well as I do. I’ve been living it for a year at that point, mentally. Trying to think of, what are we doing next? What are we doing next? It was a mistake on my part. It was just a shift that couldn’t happen.

What happened in January, I said, guys, we can’t do this anymore. I helped find them new work, introduce them to clients. Honestly, it was heartbreaking. I worked with these guys for 6-7 years. It’s really rough. The good side of it—kind of the windside of it—is that because SegMetrics has been growing and because there’s very little of the agency side left, I’ve actually brought them back on in the last few months. I’ve brought the team back together and they’re now working in roles that I think run to their strength instead of the things I was trying to force them into, which is really wonderful. I love working with them and I’m glad that they’re back on the team.

Rob: That’s such a cool ending to that story. When you’re in the midst of that, it probably feels devastating. Yet, to circle back two years later and be like, hey, we have a product now that can afford all of us, that makes the salaries. It’s an incredible story. That’s cool.

As you’ve contacted people, I’m assuming you’re bringing them on one at a time, you email them like, hey, want to come back and work on SegMetrics? Are they stoked? Are they over the moon to do it?

Keith: I don’t know. Yes, they were. I was always very nervous about the whole thing because I let them go. I felt like I had failed them, in some way. It was very nerve-racking for me to reachout, to talk about that, and bring them back on. We had talked in the interim. It’s not like I had cut them out of my life completely. I hope there’s no ill will. I enjoy having them back on. Mentally and emotionally, it was a very rough time, I guess.

Rob: I imagine, it seems to me, if I were in your shoes, it would almost be a mix. You have to let these folks go, even working with them. At the same time, once that’s done, you were then full time on SegMetrics—focused, right? By January of 2019, this was a month or two later, you were, essentially, for the first time since you launched it, you’re all in on it. That had to feel good.

Keith: It felt good. It felt very good. It did come with some challenges, though. When there’s other people around, there’s blame to go around. I see this a lot with my family as well. It’s like, it’s noisy here, I can’t concentrate. Or, the kids kept me up last night. I can’t get my work done.

Then, when it’s just you, all those excuses go out the window. You’re like, crap. The reason I’m not being productive, the reason I’m not focusing on what I should be doing is not some external force on me. It’s because I’m an […]. I need to get in gear, get my mental state insync so that I can do my work, and focus on the things that are important.

Rob: Yeah, that’s such an interesting thing. You mentioned to me offline that your family actually left for six weeks and you weren’t able to go with them. They went to Japan, where you guys used to live. You were left alone at the house. Probably, your inner monologue is, finally, all the interruptions are going to stop. It’s going to be so quiet. I’m going to get so much done. That’s not what happened.

Keith: No. The first two days were great. After that, I just had to start wrestling with my own existence at that point. I’m like, why am I not being productive? I remember back when I was younger, I could pull those 14 hour days, it was great and I felt energized by that. Now, I’m almost 40, I’m going to be 40 this year. I don’t have that same energy. There’s a lot of mental stuff that went around that. I had to understand what are the things that make me productive, what are the things that don’t make me productive, and how can I get rid of the things that don’t make me productive.

Rob: Yeah. There’s so much about learning your own psychology, managing that, and learning yourself. Same thing for me, when I was in my 20s, I could do 12 hours a day plus, sometimes, 14 hours a day. That was the point where Sherry went to Africa for a month, I believe. During that time, I would come home from the day job and then I would kick on a season of Friends. I make dinner, just sit on the couch, and code. I was coding side projects. This was 18 years ago or something.

Man, I got so much done. I would basically work from 5-6 at night until 1 or 2 in the morning. I’d get up the next day and go to the day job. It was kind of exhilarating because I was building my own thing. Within a month, she came back and I had launched a product. I believe that was FeedChat, it was a really early one that I did that crashed and burned.

During that time, she came back and I started talking about Ross and Rachel as if they were my friends. I was like, oh, yeah, Ross was saying… She was like, you know they’re not real, right? You know that they’re not real people, right? That’s always been a funny joke.

It’s learning about your own psychology. Obviously, in my 30s and now early 40s, you have to know more about yourself, I think. Atleast, I have to learn more about myself, my ability to make myself focused, and make myself get stuff done. It sounds like you’ve gone through the same thing.

At the beginning of 2020, eight or nine months ago, you hired a project manager to manage you—to basically bust your chops. Tell me about that. It’s pretty smart. I know some people get executive coaches or business coaches who they meet once a week or twice a month or something. You hired someone who’s more in the business and almost they’re like driving tasks. They’re keeping you accountable.

Keith: Yeah. Even before I really had the team back, we were creating quarterly goals. We were creating, okay, this is what we’re going to be working on this month. It gave me two things. One, it kept me on task. If I went off rails too many times, sure, you’ve got something come up with whatever, she kept me on. Like, hey, if you don’t start on this stuff, we’re not going to finish it by the end of the month. We’re not going to finish it by the end of the quarter. Usually, the things that you said were important.

That was one thing that was highly valuable to me because I default the coding. I don’t default to launching or to marketing or to any of that. I default to sitting and building out new features because that’s what I enjoy doing. That’s not going to move the product. She was very good at keeping me on what needed to be done for the business.

The second part of that, which I thought was just as valuable, was that at the end of the month or at the end of the quarter, she’s like, here’s all the things you got done. It was mind blowing. I’m one of those people who no matter how much I get done, it never shows that I got anything done. I feel like I’m constantly busy but I’m not getting enough done in the time. To have her come and we go back over the last month or the last quarter and say, we got 80% of the key tasks you said that you’re going to get done. You got all these other small things that came up during the month that, maybe, didn’t get done. The key things you said needed to get done this month, got done. That was amazing. It was empowering to me.

Rob: Yeah. The accountability alone—to end that, it’s knowing yourself, right? Some folks I know, they can go to the gym, they want to do it on their own, or they get equipment at home and want to workout in their own garage and prefer not to be in the social setting. Other folks want a trainer so that they have to show up this many days a week and get their chops busted. I think that’s kind of a cool hack. Again, I’ve heard other folks hiring CEOs, coaches, or executive coaches but this was a little different take on that. I thought it was interesting.

Keith: It was actually Ramit Sethi who hired someone off Craigslist to slap him each time that he looked at Reddit or anything like that.

Rob: Oh, geez.

Keith: He did a whole blogpost about this. Essentially, he hired someone to sit next to him. Everytime he goofed off, looked at Facebook or something, she just slapped him.

Rob: That’s like a reality TV stunt.

Keith: That’s the value that having my project manager gives me. She’s not physically slapping me but that’s the value that I’m getting out of it. Like, hey, stay on task. You’ve got stuff to do.

Rob: Right. It sounds like you’ve kind of hacked your own psychology a bit with this project manager and fixed that weakness, I guess, for now. Switching gears a little bit, you talked about—I saw it in the TinySeed Slack—that one of the low points of your year was earlier this year. It was a technical snafoo with the database. I’m going to make you relive this. We’ve all been there, you’ve just got to tell the story, man. It’s going to be painful. Do it once. We’ll get it on tape.

Keith: Databases, they are my kryptonite, I guess. What happened was that there’s something in Maestro 57 or whatever you’re using that made the database fillup in about an hour. We went from 30% full to completely full in an hour. Of course, if it’s full, it’s not going to write new data. We’re f-up there. Trying to figure this out, freaking out, and there’s no way to compact it down. I think it’s like a 12-year bug in mySQL.

I finally gave up and said, okay, we’re just going to export the database, create a brand new one, and do it over. We did it. All right, we’re safe. Cool. Two weeks later, the exact same thing happened. This has taken a week of my life at this point. Just to migrate this thing, do it, and make sure everything’s done in this whole thing. Then, we have to do it again. I finally say, I can’t do this anymore.

We moved to a managed hosted solution through DigitalOcean who’s our providers. They have a hosted database setup. We migrate everything over there. Finally, we’re good. All the tests were perfect.

I go to sleep. I wake up to my phone buzzing again. I’m like, oh my god, what now? Apparently, there are some setting differences between how they have it setup and normal mySQL that was causing a bunch of imports to fail. All of our tests ran. I think it was four weeks or maybe six weeks of just screaming constantly about this database issue, throughput issues, and speed issues. It’s just miserable. Just absolutely miserable.

I don’t know what people are supposed to take out of this because it was just painful. The thing that I took out of this was that the reason I was running the local database in the first place, not to manage one, is because it was a fourth of the cost. I was like, I can do this better, I can have it customized, and I’m going to be paying a lot less. That was great until the database exploded. Then, exploded again. I lost 4-6 weeks of productivity because I didn’t want to pay, I don’t know how much. Maybe $100, $300, $200, extra per month for managed solutions.

Rob: Man, as a bootstrap, I would have done the same thing. It can be obvious, in retrospect, like, oh, I just paid a few hundred dollars because it made sense. There’s so many decisions you have to make as you’re growing. You can’t always do the Mercedes.

Keith: You can’t throw money at all. There’s just too many.

Rob: That was a big difference once we sold Drip to Leadpages. You could just throw money at it. They had raised $38 million in venture. I remember having strategic conversations with the senior leadership. I’d be like, man, that’s going to be tough. They’re like, what is the requirement? I’m like, we can just throw a bunch of servers at it. It’s going to be expensive. How expensive? For this event, $5000. Then, they laughed. I was like, bro, this is not even worth the conversation. We just wasted that much in dollars.

It was a nice luxury of having. Obviously, we weren’t flipping with money. You shouldn’t be and all that stuff. Frugality has its own reward. In the sense of having your database managed, I think there’s a lot of value there if you can swing it.

Keith: Yeah. It’s the core things of your business. If this goes down, what is the impact to the business? What’s the chance of it going down if someone else is managing it versus yourself? I don’t think doing a managed server from the beginning was the right move. Once we started having issues, we should have really looked at it instead of trying to do multiple migrations to other self-hosted stuff.

Rob: Yeah, I think that makes sense. As we transition to closing, as we’re getting to time, I did want to dig in, we teased it at the top of the show that your growth has really accelerated since April of this year. Just over the past five months, there’s a real noticeable uptick in your revenue graph. Of course, I’d attribute that to you starting TinySeed. I am curious, what have you done differently? Obviously, in TinySeed, one of the earliest things to talk about is pricing. A lot of the SaaS founders just don’t have pricing dialed in with the value metrics, whether it’s too low. You tweaked with your pricing. I’m curious if that had an impact or what else?

Keith: I think that there were two main events in SegMetrics’ five-year life that moved the needle. One was focusing on it full time. There’s a big jump in revenue starting when I decided to focus on it. The second one was TinySeed. The jump for TinySeed was much bigger than the first one.

The way we changed pricing, I think, had a lot to do with it. What we had originally with our pricing model was essentially large buckets. You were in the starter bucket until you hit 50,000 contacts. As soon as you had 50,001, you had to pay $100 extra. It was difficult because people try to keep their contacts low. People would always email us. Like, hey, I’m only one over. Can I have it cheaper for now? I was like, yeah, sure. Fine. Just one.

People, they upgrade processes with manuals. There’s always stress around it. It’s this whole thing. The pricing is actually pretty similar. I think for the majority of people, they’re paying around the same amount. What we changed was that pricing is now increasing based on the number of contacts you have but only $5 at a time.

The big difference is now not that you are going to hit a wall and suddenly be paying twice as much. It’s like boiling a frog, you’re slowly going up as you get more profitable. As you succeed in your business, you’re going to pay us just a little bit more. That, I think, has made it much easier for people to do that upgrade because people don’t really care about the extra $5 a month. They do care as soon as they hit that threshold of, okay, now, your bill has doubled.

Rob: That’s the thing with pricing. You didn’t really change your pricing. You kind of changed how it auto adjusts. That’s one of these things that is a challenge to foresee if it’s going to make a difference. I think there’s a lesson folks can takeaway. If you do have these big gaps, maybe have smaller tires in between the published tiers. We did this as well with Drip back in the day, where we would go based on subscriber count and have it go up every 1000 subscribers or every 2000 subscribers versus every 10 or 20, like we originally did. It did make a difference for us.

It’s almost closer to metered pricing. True metered would be like $0.5 per subscriber. For you, it would be absolutely per contact. You’re not doing that. It’s still in small tiers but I do think that there’s value in thinking about that.

Keith: Yeah. The other part of it, I think that’s the biggest one. Also, just deciding what integrations, kind of the Zapier model of, okay, if you’re using HubSpot, you’re not going to be a hobby user. Your base price is going to be higher. You have to start out in a higher tier if you are higher level. They require more support, they require more effort. We’re dealing with bigger companies. That, I think, also helped a lot. Before, it was just contact-based. Now, it’s contact plus features.

Rob: Sir, thanks again for joining me on the show. If folks want to keep up with SegMetrics on Twitter, it’s @segmetrics. Obviously, segmetrics.io. You, let me see if I can pronounce it right this time. Is it harisenbon?

Keith: That’s close enough.

Rob: How would you pronounce your Twitter handle?

Keith: Ha-ri-sen-bon.

Rob: Harisenbon, @harisenbon79. We’ll link it up because it’s kind of hard to spell.

Keith: I’m so bad at naming. I can’t believe I ever got into programming. It’s really what it comes down to.

Rob: The two hardest problems in programming are naming cache invalidation and off by one errors. Yeah. You’ve heard me tell that on MicroConf.

Keith: I love that joke.

Rob: Sir, thanks again for joining me on the show. I hope you had fun today.

Keith: I did, Rob. Thanks so much for having me.

Rob: Absolutely. Thank you so much for joining me today. I hope you enjoyed my conversation with Keith Perhac. If you have not headed to startupsfortherestofus.com and entered your email address to receive the two exclusive episodes and PDF guides, I would encourage you to do that. The first one is called 8 Things You Must Know When Launching Your SaaS. Second is 10 Things You Should Know As You Scale Your SaaS. These are two podcast episodes. They’re Rob solo adventures where I run through 8 things and 10 things respectively, that I think you should know as you launch, then as you scale a SaaS app. These are things that I have not released on the podcast. They’re not on my blog and really not available anywhere else.

Check it out, startupsfortherestofus.com. You can checkout the right message popup in the lower right or really go to any page and opt-in the right handside to join thousands of other startup founders who are bootstrapping and mostly bootstrapping ambitious SaaS apps.

That’s it for this week. I will talk to you again on Thursday morning on TinySeed Tales season two, episode eight. I will be here in your earbuds again, next Tuesday morning.