Episode 673 | Lifetime Plans vs Subscriptions, Testing an Idea With a Landing Page, and More Listener Questions

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

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

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

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

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

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

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

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

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

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

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

Rob Walling:
40,000?  

Ruben Gamez:
Yeah.  

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

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

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

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

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

Rob Walling:
Right. Your best customers.  

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Rob Walling:
Right.  

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

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

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

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

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

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

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

Ruben Gamez:
The answers are there already, yeah.  

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

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

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

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

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

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

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

Rob Walling:
What did you think about this one?  

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

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

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

Rob Walling:
Marketing.  

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

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

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

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

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

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

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

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

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

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

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

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

Rob Walling:
Ah.  

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

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

Ruben Gamez:
Yeah, right.  

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

Ruben Gamez:
Right.  

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Rob Walling:
Yeah, it was a good time. 

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

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