Show Notes
In this episode of Startups For The Rest Of Us, Laura Roeder joins the podcast to answer a number of listener questions on topics including managing annual subscriptions, being a non-developer founder, and more.
Items mentioned in this episode:
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome in building, launching, and growing software products. Whether you’ve built your fifth startup, or you’re thinking about your first. I’m Rob and today with Laura Roeder, we’re going to share our experiences to help you avoid the mistakes we’ve made.
Welcome back to the show. This is the show where we focus on indie-funded and self-funded startups, folks who want to do interesting things, are ambitious, and want to build themselves a better life, but also want to build companies that grow. Starting a company is hard. Having this community of people who are going through the same thing that you are, having that sense of belonging, knowing (a) that it’s possible but (b) that there’s a place where we can all hang out and just get each other, and where you don’t go in and explain what you do and everyone looks at you funny, there’s a tremendous amount of value to that. That was a big reason why we started this podcast almost 10 years ago, back in 2010.
Startups for the Rest of Us has many episode formats. Sometimes, I just have conversations with folks, do interviews. Now and again, we do founder hot seats. But one of my favorite episode formats is listener questions. We’ve answered a tremendous number of listener questions over the years. We’ve had a lot of episodes on this. It’s just the gift that keeps on giving, because it’s a time for listeners to participate, and to hear what other folks are going through, and to hear the thought process of a couple of founders typically who’ve been there and have done some things, and it’s not that we’ve been through everything that they asked about, but you can at least hear that thought process of how we would approach it. And over the years, we’ve always receive positive feedback about this episode format.
Before we dive in, I want to let you know that at MicroConf, we are making an announcement next week. It is by far the biggest announcement that we will have made since we launched the event nine years ago. It is coincidental that the 20th MicroConf is going to be on April 20th of 2020, so the 20th during the 20s or whatever, but that’s not the announcement. I’ve obviously already mentioned that MicroConf Growth and Starter are in Minneapolis in late April of 2020, but if you’re not on the MicroConf list, I encourage you to go to microconf.com, enter your email, and we’ll loop you in as soon as we have the info. It really is pretty spectacular and you probably know me well enough by now to know that I’m not trying to inflate the importance of it.
Today I answer questions with founder Laura Roeder. If you don’t remember Laura, I interviewed her in episode 451. She runs MeetEdgar which is a social media management SaaS app and in 451, we talked about stellar growth, platform risk, layoffs, and powering through roadblocks. It was a really, really good interview and Laura knows her stuff. I have a ton of respect for her. Honestly, I always love getting on the mic and just chatting with her. Super fun. I had a fun interview at 451 and I had a great time talking to her today and hearing her insights and her take on some of your questions. Without further ado, let’s dive in.
Laura Roeder, thank you so much for coming back on the show.
Laura: I love the Startups for the Rest of Us. I cannot stay away.
Rob: Awesome. I am so stoked to have you on to answer some questions. You’ve actually submitted questions in the past, so it’s cool to have you on the other side of the ear bud, so to speak. We have some good questions today. As always, voicemails go to the top of the stack. I curated some questions that I think you should have some unique insight on. Let’s just roll right into the first voicemail which is about being a nontechnical founder and how to make good technical decisions.
Mack: Hi Rob, this is Mack from the UK. I’ve got a question, I’m looking for advice for a nontechnical founder. How can I avoid getting called out by poor decisions from the technical team or just not knowing about the consequences of some of the technical revisions that gets made to create their software? Any advice would be great. Thanks.
Rob: This is an interesting question, Laura. As a nontechnical SaaS founder yourself, I’m curious what your initial take is on it.
Laura: I would first like to take umbrage with the phrase non technical founder. I mean obviously, I know what he’s referring to. Nontechnical founder means that you are not a developer and I’m not a developer. But I always think it’s a little funny because I’m like, “I run a software company.” It doesn’t seem quite right to call me nontechnical, but this is a very real problem for all of us who are running software companies and are not developers because obviously, you are not intimately familiar with a really core part of what your company does.
I guess the first blanket advice for this is that, you really need to have a person in that CTO role who you trust 100%. I think this goes for any leadership role in your business, but it’s especially important in this case, because you’re not going to be able to provide so much oversight. Anyone can look at a customer service email and say, “Okay, that was not how we want to answer,” but you really can’t read code if you’re not a coder. I think that’s just step one is, make sure that you’re willing to put 100% faith in the person in that dev leadership role.
Rob: That’s what I was going to say as well. Even if you aren’t at the place where you can have a CTO. The fact that he used the phrase, “How do I not get called out,” does your team not trust you or do you feel like you have to make decisions that are out of your league? That’s an interesting turn of phrase. It implies that the team calls him out for making technical decisions, but are you making decisions you shouldn’t be since you’re not a developer? I would dig into that. I think having a CTO, or the senior dev, or somebody that really is making decisions in the best interest of the company, is a huge deal.
Laura: I think it also brings up that you shouldn’t try to pretend to be anything you’re not. If people are calling you out, does it mean that you’re pretending you know things that you don’t know or maybe making decisions that would be better for other people in the company to make? I think it’s just important to be unafraid to ask really stupid, really basic questions until you understand some of these core concepts related to writing code.
You can decide how much you feel you need to know. For me, I feel like I’ve been through this process recently big time with our finance team, understanding all the financials of the business. I just asked our finance person over and over and over again. Sometimes I’ll literally read a book. I read a finance book recently. I just wrote down questions for her in the margins and then I’m like, “I want you to read this book too and we’re going to have a call together. I’m going to ask you all of my questions about the book.”
I think that’s a great thing to do for technical questions as well. You need to be open with your team about what you know and don’t know and I think it’s important for you to work with the type of person that is very patient and very understanding in explaining things to you. Within reason, you don’t need to understand every detail. There are a lot of concepts that are probably unfamiliar to you that you do need to understand at least the basics of how “the sausage gets made.”
Rob: I like your example because as a founder, you don’t need to know every single thing about bookkeeping, accounting, and finance, but you should probably know enough to be able to ask the right questions. I feel the same way running a software company. I don’t think you should be able to code everything in a SaaS app, but maybe it’s worth going through a code where the code camps or maybe it’s worth on the side taking you to make classes.
It’s easier than ever to learn and have just a really basic level of coding knowledge such that, yes, you’ll never be able to make architectural decisions, you won’t make the senior level things, but you can at least relate to, “Oh, this is what code is. This is how it works. This is what it’s like to write a bug,” and spend four hours and not realizing that it’s the semicolon. That’s a lot of what it is. I think having that cursory knowledge and being able to then ask the right questions is what you’re touching on and that’s what I like about it.
Laura: Yes.
Rob: You don’t like the term non technical founder. If you’re a developer and you’re writing the code, then you’re like a developer founder, is it a non-developer founder, is there a term that you prefer rather than nontechnical?
Laura: I guess maybe just say founder and then when you’re explaining later your side of the business, because you also don’t call like you just a developer founder, but I’ve never heard anyone actually say that.
Rob: I was just making up a new term to try not to say technical and non, because typically it’s technical and nontechnical are the two terms people use. I was just trying to think of a different way to say that because you’re right, running a SaaS app, yes, you may not write code but you are more technical than most people we know just because by nature of being in it. It is a misnomer.
But if someone wanted to differentiate between Derek and I when we started Drip, he was literally in a code every day and I was literally not in the code every day. I don’t know how else you differentiate that or what phrase we could come up. I don’t feel nontechnical founder as pejorative. I don’t feel like it’s a negative. Does it have a stigma? Do you feel like it does?
Laura: I actually think it does have a little bit of a stigma because I’ve heard developers use it in that way before. We’re not as cool of a founder if you’re not technical.
Rob: No, I think that’s lame.
Laura: That is lame.
Rob: That sucks. I don’t use it that way but if it gets that connotation then yeah, we need to figure out another phrase for it. Cool. Thanks for the question. I hope that was helpful.
We’re going to bounce into our second question which is also a voicemail. It’s about a founder who’s launching a second SaaS app. They’re nearing launch and he’s concerned about potential lawsuits.
Thomas: Hello, this is Thomas from Austria. I listened to the show for a long time and wanted to tell you that it’s really great content. I love following along your journeys and also hear stories of other people in similar situations.
To my question, I founded a SaaS company three years ago. It provides an invoicing solution for small independent car repair shops. It’s doing pretty okay. I can live off it and it’s slowly growing, so I’m happy with that. Half a year ago, I founded another company with a partner and we are building a software to compare prices for car parts.
Now that we want to go to market with the software to the suppliers, the […] of us are trying to fight us pretty hard. I think we have to go to court several times. There is not really a legal problem with fetching the prices because we do it locally on the customer’s computer and they’re not going through our systems, but still they can make our lives very miserable if they pulled us to court all the time.
Now, I’m not really sure how to go along. My partner really wants to push through that and he’s sure that it will work out. I’m also pretty sure that it will work out in the end, but I’m not sure if I am the right person to spend my next one, two, three years fighting big companies. I wanted to hear your thoughts on that and maybe what you would do in this situation. Thank you.
Rob: Thomas also wrote in and he said that he wanted to clarify that he hasn’t spent any money on the price comparison project, and have a small private investor, but in essence, he has only invested his time so far. I should preface this with we’re not legal experts, we don’t give legal advice, obviously, but it’s more of, “Hey, if I were in your shoes, how would I think through this?” This is an interesting situation. I’m not sure it’s one I’ve heard before. What do you think about this Laura?
Laura: The way I think of it is just, there are pros and cons with every business, every business model, and it’s really smart to go into a business with your eyes wide open about those pros and cons. From what I understood from his message, this is a likely threat, not a certain threat. He suspects that there is going to be lawsuits. He has a good reason to believe that’s going to happen or it could not happen at all. It makes me think of with my business MeetEdgar, we are entirely dependent on the social networks. You can listen to my interview on this podcast on Startups for the Rest of Us. I talked about a big problem we had because of that, but all businesses have upsides and downsides.
For me, I know that I’m in a space where I’m totally dependent on these partners that I have no relationship with and that can do whatever they want. That’s a big downside to my business. The big upside is that I’m building on Facebook, Twitter, and Instagram. Obviously, very popular tools, so lots of users. I think that he just needs to know this going in and maybe it’s something that you budget for.
It’s good not to be scared of it. It’s good to go in and say, “Okay, I know that this will likely happen. Maybe we have some money set aside for it. Maybe we’ve already figured out who our lawyer is so they can jump right in and we won’t be surprised,” spending a few months just trying to find a good counsel.
To me it doesn’t sound like a deal breaker, because it might not even happen at all. Like you said, you have to know that that is a battle that you could be fighting and you have to know that that’s something that you want to sign up for.
Rob: I like the way you’re thinking about it. I think these unknowns, like if you’ve never received a cease and desist, or you’ve never been sued, it’s super scary. You don’t you don’t know what that entails. I got sued by a patent troll about probably five years ago, but it was literally a blanket. It was about a troll. Someone who sued 100 people at once for having online invoicing software is what it was. It was just this crazy, he sued everybody that does online invoicing because it was a ridiculous patent. I got to be honest, I was super scared the day I got the email.
Then I quickly realized I could talk to a lawyer and someone was just like, “Yeah, this just isn’t that big of a deal,” and we have these stigmas against things. Lawsuits can be a big deal. They can be expensive, but your point of it’s almost like try to demystify, or de-risk, or just get more familiar with what this might look like. Typically, if you were to launch something like this, you’re not going to get five lawsuits the next day from five suppliers. It’s probably going to be weeks, months, and then they’re going to grumble and they’re going to have to call you or send you an email, and then you might get a cease and desist.
It would be a long process and maybe like you said, you set aside money to either have a lawyer, whether it’s to go to court or whether it’s to try to negotiate settlements. There’s a lot of options here and I think this comes back to expertise. As a nonlawyer, you should know how to ask the right questions, but you’re not the expert in how they should all go down. There’s folks who can give you advice if you find a good counsel.
I think the biggest question for me is, is this a big idea? Is this a seven-figure idea or an eight-figure idea that’s worth going through all of this for it or is it something that’s going to generate $5000 a month? In which case personally, it doesn’t sound like it would really be worth it. I mean maybe I would launch it and if it’s doing a couple thousand dollars a month or $5000 a month and you start getting cease and desist, well maybe that’s the point where you’re like, “Okay, I guess I’m going to pull the plug on this,” maybe that’s the best decision because it just doesn’t make enough money or maybe that is your defense of, it doesn’t make enough money. Go ahead and sue it. It’s not worth anything.
I think that’s really the question I’d be asking, not is it worth it, but is the idea big enough? Do you think the company can be big enough to make it worth fighting for?
Laura: I think it’s also worth a quick Google. I think he said he’s in Austria. He didn’t say if the business would also be dealing with Austrian suppliers. America is very litigious, most of Europe is not, you can’t just file random lawsuits about anything the way you can in America. If this were my business, you can figure out a pretty good amount just from educating yourself on the internet. Would the suppliers have any case? If they wouldn’t, that’s also just going to make the whole thing much more unlikely.
Rob: Yeah. Thanks for the question Thomas. I hope that was helpful. Depending on what happens, I’d love to hear an update on how you move forward.
Our next question is about pricing and whether to try to go for more customers with lower pricing or vice-versa. It’s from Winslow Moore and he says, “I’m a huge fan of your podcast and all you guys do. I found you guys at the end of last year when I was going through a bit of what I’m doing in my life and I’ve learned so much. I’ve wanted to reach out for a while, but haven’t because my current product under development isn’t SaaS, it’s just an app. A recipe book app to be precise.” I’m assuming it’s a mobile app.
“Development is nearing completion and I’m wanting to make a landing page to gain some interest. Before I do, I’d like to figure out some pricing scheme options and I’m hoping you can give some advice. Here are my main ideas. Number one, make the app free with ads,” he listed pros and cons, “Number two, make the app freemium with paying to unlock X recipe storage. The third is to make it cheap like $1, and the fourth is to make it a subscription like $1 a month or $5 a quarter. Again, I know this isn’t something you normally answer questions on, but if you feel adventurous, it would be appreciated.” What do you think?
Laura: I feel like I have some news that he’s not going to like to hear. I’m trying to let him down gently. This is one of the most crowded spaces you could possibly enter. There’s so much recipe content on the internet. So much of it is excellent and so much of it is free. None of the models that you outlined gave a compelling reason for someone to pay. You just said like a recipe app, maybe they’ll pay $1, maybe they’ll pay a subscription. I think you just need to rethink your starting assumptions or maybe there’s something you didn’t tell us, because there are reasons that people could pay for some recipe or cooking service.
I know a SaaS business that does meal plans for people. You put in all of your detailed dietary requirements and they spit out really specific meal plans, shopping lists, and there’s a whole app and a subscription around it. They have a business doing that because they’re meeting a specific need in the market that is related to recipes. There are businesses related to recipes and food, but just recipe app, I don’t think is really one of them.
Rob: I like the way you’re thinking about it because if you were to niche way down and, like you said, build custom meal plans, that’s something you can’t get for free, or it’s really hard to do at a good quality or vegan meal plans or Paleo meal plans. There are ways to think about it. I’m guessing everything I just named is already done to death. Even if he has, let’s say, he builds not just content and he builds an app that actually has functionality that people are interested in. A $1 a month, you need a thousand customers to make, and doesn’t Apple 30%, I think, so you’re really making $0.70 on that. You need a thousand customers to make $700 a month. That is a tough business.
Even with apps store distribution, you would really need to know apps store SEO. I mean you to rank in the top whatever, top five, four or whatever term that has enough volume to do it. This would be a pure search play in my opinion, because at $1 a month, even for lifetime value is $10, $20, $30, $40, you can’t run ads, you can’t hire sales, none of the standard models work. It’s purely a spray-and-pray and it’s, “I need to have enough free traffic,” so you need virality, or you need organic discovery through a search engine. Really, none of these pricing models are easy.
Laura: I’m going to go out and say they’re not viable. I think it’s polite to say that they’re not easy, but they’re really only viable if you have some way of getting that mass, which is possible. Maybe you’re like, “I’m going to raise a ton of funding and I’m going to be the number one recipe destination on the internet.” Someone has to be that. That’s not an impossible thing, but it’s going to take a ton of money to get there or you’re like. “I am the number one SEO ninja on the app store. No one can do apps store SEO better than me and I also probably have a bunch of money or some money to put behind it, so that’s how I’m going to get there.”
I just think you need to really look at how does mass work out to make this a viable business and what’s my strategy beyond just like, “Well, I hope a lot of people find my recipe app in the app store.”
Rob: And even if you’re building a SaaS app, let’s say, just in general, what’s the general rule? The lower your price point, the higher your churn, the harder it is to grow. This is not in every case, but it’s in 95% of cases. That’s why so many SaaS apps, the playbook is, you go out, you underprice yourself because you just don’t know any better or you don’t value what your built and over time everybody goes up market. It’s a very common playbook.
The reason is if those customers as you go up market tend to churn less, they tend to be more sophisticated, less support, there’s just a bunch of plusses with it, but you often can’t start out at those high price points because your product is not worth it at that point. It doesn’t provide the value and it takes you time to get product market fit with that audience. Then move it up market.
Laura: That’s all B2B stuff, also, everything you’re saying. We’re talking B2C, so I don’t think there’s really even a big market to go to for an app. There’s more expensive consumer services but, I’ve never heard of an expensive app. Maybe it’s a thing, people have done everything. Now I’m curious. Is there an app for consumers that cost $800 a month and is a lot more high-end looking than the other app? I don’t know.
Rob: I’ve never heard of one. I bought a $25 app the other day. It wasn’t a subscription, but it’s a teleprompter, that goes on my iPhone, that listens to my voice. It’s the only one that turns the microphone on and as I speak, it teleprompts automatically. To me that was worth $25, but really, am I a consumer? Because I bought it for business purposes. I bought it for these videos I’m recording. I’ve also bought $20 app a couple of years ago. It was before where you can pair an iPad as a second monitor to your Mac. It was software that did that. Again, there was only one or two of them and I did the best one. It wasn’t a subscription and I would’ve been less likely to pay a subscription for either those to be honest.
Laura: Yeah, those are really tough models, too, where they’re only making $20 one time.
Rob: Right. Thanks for your question, Winston. Sorry for the bad news, but I hope that was helpful. I’m curious, if you love recipes or somehow love that space, then dig in and figure out that maybe it’s not a $1 app, maybe it is a website that you acquire from someone to get a traffic source and you build just a web app into there. I mean, there are other options in the food and recipe space, that I’m sure there’s opportunity and I would say don’t get locked into trying to pick up pennies really is what $1 a month it’s like.
Laura: I didn’t actually say the name of the one I was talking about. It’s realplans.com if you want to check that out.
Rob: Awesome. Our next question is about recurring payments and it’s from Gavin Esplan. He says, “I’m in the planning stage of a small daycare management app. One of the main features will be setting up recurring payments between the daycare providers and their customers, who are parents or guardians of the kids. I also need recurring payments for the providers to pay me. I’m a professional web developer, but I’m not sure which system, like Stripe, would be best to accomplish this. I’m leaning toward Stripe, but it’s probably because it’s the one I’ve heard of most. I’m not sure what other good options would be out there. Do you guys have any recommendations?” What do you think, Laura?
Laura: Well, there’s an easy part and a hard part to his question. As far as him taking payments from customer, I say yeah, Stripe is great. We use it. We like it. Go for it. The other part where your customers take payments gets a lot trickier because your customers need to have something like Stripe or PayPal, but they need their own individual accounts and then are you helping then set that up? Then there’s your customer stuff that has to be complied with or do they already have their accounts? I just want to point out there’s a trickier question within the question.
Rob: Stripe Connect is for marketplaces. I think it’s for this instance. I’ve never used it, but I know folks who’ve set up market places and use it. This isn’t technically a market place, so that’s where I’m not sure if the terms of service would apply to him having 20 or 30 day cares using it and taking payments or if the Know Your Customer stuff would pass through to him. Do you have any interaction with Stripe Connect?
Laura: No, I’ve researched it a little bit for a different project and the hurdle that we came up with is that this similar model, they still have to have their own Stripe account which Stripe helps facilitate. We thought that might be confusing and challenging for this customer to set that up which I imagine daycare centers might have the same or they might have their own payment system already that they’re using.
Rob: Yes I would head to Stripe Connect and at least research it because that’s the one that I’ve heard the most about when you’re in this type of situation. Again, not saying it’s going to work but I think that’s where it starts. In my opinion, Stripe is number one in this game. They kill it. They make it easy and if you can make it work with them, great. To me, by my rules, if for some reason I couldn’t you Stripe, I would look at Braintree. I think they’re the number two in our space for doing this stuff.
Obviously, it doesn’t sound like he’s funded. I’m guessing he’s bootstrapped listening to this podcast. If you look at Gumroad, as an example, became a processor themselves. That is a possibility. There’s a lot of red tape and regulation. I’m guessing, one of the reasons I heard Gumroad raised their money was that they had to go to banks basically and have a bank say, “Okay, we’re cool with you being a processor.” If you’re some bootstrap person working at your garage, that’s unlikely to happen. It’s probably not an option for you now, but in the longer term hopefully, you don’t have to do that, but that would be a parachute option, I think. Thanks for the question, Gavin, hope that was helpful.
Our next question is from Ash Yadav, and he’s looking for thoughts on joining an early stage startup just after graduation. He said, “I just cover the podcast, I’m going through one episode at a time. They really informative and enjoyable. I recently graduated with a degree in EECS,” Electrical Engineering and Computer Science, I think, “then joined an early stage Internet of Things startup. I want to ask what are some tools, courses, workshops, et cetera, I can look into to get more comfortable with the industry lingo.
As I recently graduated, working in a two person team right now, there are times when I have to talk to clients or talk to people who are much more experienced than me and sometimes I feel left out. I don’t have industry project management experience, an MBA, or the entrepreneurial experience to be fluent in business lingo. For example, this might sound silly, but someone recently talked to me about beta sites and I had no clue what beta sites were. Luckily, I was able to figure it out while we chatted in made it out alive, but I fear I’ll be in a similar situation again.”
You almost certainly will. I remember my first job out of college and I didn’t understand anything. Thanks that’s a great question, Ash. Interested in your thoughts, Laura.
Laura: I think the first thing, Ash, is that someone asking questions is a huge sign of intelligence, not the opposite. Everyone knows that you’re young, everyone knows that you just graduated from college. When you ask those questions like, “What’s a beta site?” instead of pretending that you know and then maybe being way off base, it’s actually going to make you look much smarter, eager to learn, and capable than just pretending that you know stuff. Hopefully, most of the people around you feel the same way that I do. I don’t think you should be shy about asking questions. Even if it’s something that you feel is really basic, that you feel a bit embarrassed about.
We all we’re born knowing nothing. No one knew the term Internet of Things until the first time they heard it and then someone explain it to them. No one is born knowing any of those stuff. I think people should do this anytime in their career. We were talking about this earlier in the podcast about learning and asking questions, asking more questions. For me, the answer is less about courses and more of just having the attitude and the mindset that asking questions is a wonderful thing and that’s how you learn.
Rob: Yeah, when I graduate from college and had my first job, I thought I needed to know everything. I felt weird about asking questions and I thought it was a sign of weakness. I pretty quickly learned what fixed it for me is I worked with this one guy who is really smart and he was senior and he knew bunch stuff. In meetings, someone would say a concept and I remember being like, “Oh, I know what that is,” and he would say, “I don’t know what that is. Can you define out for the group?” and I was like, “Whoa.” Everybody respected him.
That showed me that it was okay to ask a question like that. It was such a good model for me and I think the thing to keep in mind is you’re going to ask a lot of questions up front, but it’s not going to be like that forever, because you’re just going to learn enough. First, you’re going to learn 20% and then 60% and then you’re going to get to the point where you’re 80 or 90% fluent in all the lingo. That may take three months, it may take six months, but at a certain point, you’re not going to ask as many questions.
You still want to ask questions, but you’re going to be seen as more of this mid-level or senior and you’ll get to the point where you don’t have to do it all the time. For me, if I was trying to learn about a new space, I don’t know much about IoT (Internet of Things), just what I’ve heard on Tech podcast, so if I got a job at one, I would probably be in a similar boat. I would dive deep in the IoT podcasts and some IoT audio books. For me, I do a lot of audio just because that’s my thing. For you, maybe it’s Kindle or maybe it’s paper or whatever I would use Google a lot. I will try to get the lingo from the podcast or the books in advance and then every time I heard something I didn’t understand I would Google it. You’ll be shocked, there’s only so many terms in any space.
In SaaS, it’s an app and there’s MRR and there’s LTV and it sounds like there is infinite, but if you listen to the show for probably 10 or 20 episodes, you’re going to hear 90% of the terms that we all use. If you’ve defined of those and committed them to memory, that’s great training for trying to get up to speed faster.
Laura: Yeah, I love that advice. I was thinking just the other day I actually Googled the term “test case.” It came up in my company flat, they’re talking about test cases and I was like, “You know, I’m assuming I know what that means, based on some context, but I’m actually not sure that I know what a test case is. I just Googled it and I read about it and I figured it out, right in front of a nontechnical founder thing.” This is a skill that you want to have throughout your career and like Rob said, luckily, it will get certainly easier and you’ll have to do less Googling as time goes on.
It’s something to embrace to make sure that you’re not making assumptions, make sure that you are on the same page which is why it can be good to ask things like, “Okay, this is this is what I mean when I say test case, is that what you mean,” because those types of miscommunications come up all the time.
Rob: That’s a really good point. Probably once a week, I Google an acronym. Oftentimes, it’s something someone posts on Twitter and it’s like a colloquialism that I just don’t know. I mean maybe a year ago it was TBH and I used TBH the other day. I was talking to my 13-year-old and in conversation out loud, I was like, “So TBH, blah, blah, blah.” He’s like, “What does that mean?” and I was like, “To be honest.” He’s like, “Oh my, you’re such a nerd.” But I find myself Googling this on what does this mean and then there’s like seven different definitions and you have to take it from context. Don’t feel like you’re in over your head, Ash. I think we all are. Just because someone has been doing this for a few years doesn’t mean that they know everything about it. Thanks for the question. I think it’s a good one.
Wrapping this up for the day, our final question is from Zee and it’s about managing subscriptions. He says, “Hello. Big fan. What recommendations do you have to manage subscriptions that come both via credit card and check? As the business is growing, I want to make sure I’m not missing out on things as people renew their subscriptions. For example, we make a credit card payments through Braintree.” I think it means they accept credit card payments through Braintree, but they also have people that pay via check annually and they handle stuff through PayPal.
To set the context, when I first read this, I thought he was saying, “We have a bunch of SaaS subscriptions, how do we keep track of those?” But he’s actually saying they accept payments in a bunch of different ways, some of which are annual. He says, “We then use QuickBooks for all the accounting. We want to be sure we don’t miss out on annual fees.” Laura, have you had to deal with this?
Laura: No, I haven’t.
Rob: Is it all credit card with EDGAR?
Laura: Yeah. I mean, we would just say, “No, thank you.” if someone wanted to buy with a check, but I know that in some industries, you can’t do that.
Rob: Yeah we did this with Drip. Let me think. After we get acquired by Leadpages, we were using Stripe, they were using Braintree. At a certain point, we started accepting PayPal and they were doing these larger annual contract values. You get you get a 12-month subscription that is $20,000 and really that’s an invoice check situation. Frankly, you don’t want to pay the $600 processing fee, the 3%, but also the companies, bigger companies as you said that’s the way it works
The way we did it, like the very first one, is it literally went into an Excel spreadsheet or maybe it was a Google Docs that we all had access to and we’re like, Okay, note to self, calendar reminder,” and it goes into a Google Doc. In the next month, we need to build some type of system. Then we just went into our existing billing code, and we tweak some things to say, “Oh, this is a check and so and so needs to be reminded.” It sends off an email to this AR (accounts receivable) at this certain thing. We hacked it together. That took one day or two days of development work, but in the moment we were able to accept the check.
We knew there was a calendar reminder in case everything went haywire. We went back and it was like this just in time MVP implementation of something. I’ve been gone from Drip for two years now. I’m guessing by now, hopefully they built even a better system. I think there are a bunch of ways to do this and that they’re trying to build a gold-plated version from V1 is not necessarily the best way to do it. If you only have one or two customers paying you that way, you just don’t need that much infrastructure.
Laura: Yeah, I don’t have anything on this one.
Rob: All right. Well Laura, thanks again for coming back on the show. It’s so good to chat with you. Folks who want to keep up with you, you are @lkr on Twitter, that’s a great three-letter Twitter handle, I’m so jealous. If folks want to know what you’re up to with Edgar, they can head to meetedgar.com. Anything else you’d like folks to check out?
Laura: I would just like to say that people used to be a lot more impressed by my Twitter handle, I feel like you can tell that Twitter’s on its way out because I used to get a much bigger reaction. You threw in a little comment which was very polite of you, but I missed out on having a cool Instagram handle. My Instagram is @laurakroeder, I can’t even get @lauraroeder, I had to throw my middle initial in there. I’m just like feeling a little old that I missed the Instagram thing and no one cares about my Twitter handle anymore. That’s my closing comment for the show.
Rob: That’s amazing. Thank you so much. I guess I should go register an Instagram handle, is what you’re saying. That’s how old I am.
Laura: Yeah. Get on that.
Rob: Thanks again, Laura. I hope you enjoyed today’s episode. Next week on the show, Mr. Brian Castle from Bootstrapped Web and Process Kit is coming on to talk about just the brutal year he had in 2016 and 2017, overcoming a 40% decline in MRR, and we walk through his trials and tribulations, dig into frankly some struggles, some victories and failures, and it’s a good interview. Also I hope you’ve been checking out TinySeed Tales on Thursday mornings. That season wraps up here in the next week or so.
I would love to hear your feedback or input on that. You can email me directly questions@startupsfortherestofus.com, you can Twitter DM me, or if you have great things to say, obviously, just go into Twitter and let me know. I appreciate it. Should we do it again? I’ve started working on season two doing some interviews, but if you like it, if you will listen, if it’s a good fit for you, please let me know. If it’s not, that’s cool, too.
It was definitely an experiment. As I’ve said when we announced that this is by far the most time and money I’ve ever invested into an audio project. It’s TinySeed tales, because TinySeed was able to make that happen. If it’s worth it and it’s providing value, then we’ll keep doing it. If not, we always have more good ideas we can implement, so I can obviously but my focus elsewhere.
You heard a bunch of questions answered today. If you have a question for the show, you can leave us a voicemail at 888-801-9690 or you can record an MP3 and WAV, an Ogg Vorbis, an AIFF, send us a Dropbox or a GDrive link to questions@startupsfortherestofus.com.
I tweeted something out a couple weeks ago and I said if I were starting a company today, these are the tools that I would use. I just listed it, it was a five-minute tweet tops. I just listed a bunch of things and look through them, made comments and spit it out. It’s like one of the most popular tweets I’ve ever done. These things are both fine and infuriating, where you spend 20 minutes trying to craft something and like six people care about it and then you do something like this that is just off-the-cuff-flippant and it gets all these traction. I think it has 150 retweets or something at this point.
The funny thing is just the opinions about Dropbox versus GDrive versus Box. It was like, “Why not that? “ It’s personal preference. There’s feature parity. These things are not so different from one another, it’s really a personal preference, unless there’s some individual, sneaky feature somewhere that somebody has that you really need. For the most part, these things are all equivalent, but I think a lot of preference comes into it as well as pricing and stuff.
Anyway, I digress. Our theme music on the show is an excerpt from a song called We’re Outta Control by a band named MoOt, it’s used under Creative Commons. You can subscribe to this podcast, and you should, by searching for startups in any pod catcher you have. To be honest, new subscribers is a big ranking factor in iTunes. If you’re listening to this and you’re not subscribed, even if you just listen to it on the web or you somehow download it through an FTP script that you coded up years ago, it would be super cool if you would open iTunes and just hit the subscribe button because it does help us rank higher. It helps us get more reach and it helps us reach more people.
If you haven’t been to startupsfortherestofus.com in a while, we have full transcripts of all of our episodes within a week or two after they air, we […] the audio live is that, number one thing in transcripts just take time to get done. We get a decent number of helpful comments on the site too, so if you have a comment on an episode, you can obviously tweet to me @robwalling or you can come to the website itself startupsfortherestofus.com. Check out the fancy new design we put in place a couple of months ago. Leave a comment, drop us an email through the contact form. Thank you so much for listening today. I’ll see you next time.
Episode 348 | Finding Product/Market Fit, Organizing Notes for Maximum Effect, Growing from $100k to $1M, and More Listener Questions
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions. The topics include finding product/market fit, organizing notes for maximum effect, and growing from $100k to $1M.
Items mentioned in this episode:
Transcript
Rob: In this episode of Startups for the Rest of Us, Mike and I talk about finding product market fit, organizing notes for maximum effect, growing from $100,000 of ARR to $1 million and more listener questions. This is Startups for the Rest of Us episode 348.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products whether you built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
Mike: As I said on the last episode, I kind of finished up almost the tech stuff that I’ve been working on and started switching over to working on the website marketing stuff and currently targeting a public launch date of August 1st. I’m kind of greasing the wheels of the marketing pipeline at the moment and doing everything that can possibly be done in the amount of time that I have.
Rob: Very nice. It’s about three and a half weeks from now.
Mike: Yeah, above three and a half weeks from when this episode goes live.
Rob: From whenever we record.
Mike: Yeah, whatever. Something along those lines.
Rob: It’s a few weeks. You must feel pretty good about it then. You must be pretty close to getting things out the door.
Mike: I do. There’s still a few things that need to be taken care of between now and then so I’ve realized that as I’m putting together the website itself to do some price turning, that there are certain things that need to be in place that are not there yet just so that I can charge different amounts based on different things. Maybe they’ll be there. Maybe they won’t when it goes live but if I need to toggle stuff on the backend, or do certain things, or just give people stuff that they normally shouldn’t have access to for the time being, then that’s probably not a big deal. I’m just finding those little edge cases here and there and reworking some things as necessary to make that happen.
One thing that I’ve realized over the past couple of weeks is that I added a customer, I think a week or two ago, and they had this massive mailbox that went back for years and years and had like almost 750,000 emails in their mailbox. The system generally held up pretty well. I’m pretty pleased with how that stuff is going right now.
Rob: That’s exciting. It’s nice to have some confidence going into a launch like this. You didn’t just up and build a product and have no one use it, not know if they get value, not know all the bugs that you have because you inevitably will until people use it. No app survives first contact with the real customer without having bugs.
You’ve taken this slow launch approach of trickling people in, getting your 20, 25 early customers in. That is obviously a more conservative way of doing it than the Silicon Valley pay $500,000 for some massive launch party. I realized that’s a strong argument. A lot of people don’t do that.
But even if you have a lot of funding, you want to move really fast that you staff up, and you build quickly, and then you just do this big splash launch. You’re like, “Alright, product hunt, man. Product hunt’s going to do it.” But then, if you product hunt and you haven’t already had 20, 30, 40 people touch this app, you just don’t know what’s going to happen.
As engineers, we know all the pitfalls and ways things can go wrong. While this is a slower, more calculated and more conservative way of doing it, this is obviously the approach that we espouse on the show. It’s that more careful, calculated, repeatable way to do it. It’s how I’ve launched a bunch of apps and how you’re launching Bluetick here.
Mike: I think the interesting thing is I’m looking at the app now and I see places where clearly things will start to break or slow down just because of performance and depending on what it is, sometimes, I just look at it and say, “I’m going to let this go.” Versus other times where like, and this mainly has to do with data sorting, paging, and making sure that you’re not returning too many things on the browser.
Those are few places where I’ve looked at and just said, “It can handle it. It’s not great. It’s not awesome user experience, but it works, so for the time being, I can just push it off and I’ll fix it later especially if customers start to run into it or it becomes a big deal. But it works, it’s not going to fall over. I’m not going to stop everything and put it on hold for another month or two to fix those things. I may as well just push it out there.”
Rob: You’re always going to have some part of your app that feels that way. There’s always a page or two that you’re embarrassed about, that you’re concerned it’s going to break, that’s too slow for large accounts. That will never stop.
Mike: I have a single-page application.
Rob: Oh Mike. Listeners can’t see me putting my head into my palm. For me, I’m actually working from Chicago this week. I’m with my son. We’re at his cello camp. We used to go to Oregon for this but now that we live in Minneapolis, it makes sense to come to Chicago. To be honest, it brings back memories, I was at the Oregon cello camp last year. I was signing life changing Drip acquisition documents on my iPhone with my finger from inside the halls of a music building on a small college campus that no one’s ever heard of in Central Oregon. It was just this.
I remember feeling overwhelmed and I couldn’t think straight. We’ve been talking about this for a year and doing negotiations for six months and then I keep thinking to myself shouldn’t I be calm, cool, and collected like at my home office with my laptop but no, I was running in and out. I dropped the kid off at cello, a lesson or a group thing, and then I ran outside and then I read on my phone, oh my gosh, this piece fell through. I’d get a thing to sign to override this and to sign over. It was exhilarating. It was also super stressful. But being here reminds me of that because it is the one year anniversary of the Drip acquisition just a couple of days ago.
Mike: Today, now you can sit there without the dirty looks from the other parents.
Rob: I know. That’s right. It’s Suzuki method of teaching cello and strings and so the parents were supposed to heavily participate and I actually had to talk to a couple of the teachers and I said, “Look, I have something going on right now. I’m in the process. My company’s being acquired. I need you to cut me some slack for a couple of days here.” That was fun.
Let’s kick off today’s episode with a voicemail question. Note to the listeners. If you want to get your question to the top of the stack, send a voicemail because we don’t get very many of them and it’s always cool to hear people’s actual voice. It’s just a better experience for everyone. It feels like The Collin Show. With that said, someone sent us a voicemail with a question for you, Mike, about Bluetick.
Andrew: Hi Mike and Rob, this is Andrew calling from Australia. Mike, I’ve got a question for you in relation to Bluetick. You talk a lot about product market fit. Have you found with Bluetick that you’ve had a general type of customer or have you found already that Bluetick has started to be suited for either a particular industry vertical, a particular customer type in terms of size of the company, or to some other characteristic in terms of the groupings of your customers? Love the show and hope to hear you guys answer this question on air. Thanks. Bye.
Mike: From the customers that I’m working with right now, they fall into a certain set of categories. I’m not saying that these categories of people, the customer profile that I currently have for the people that I’m working with right now is the long term ultimate customer base, I guess, of Bluetick. It’s just what I found so far and what seems to be successful.
They fall into a couple of different buckets. The first one is startup founders who are trying to validate an idea and most of them are trying to do cold outreach and get in front of customers or try and reach out to people that they think would be a good fit for their software. They plug people into Bluetick and it does essentially cold outbound outreach for those people and try to get those conversations started. That’s one group.
A second group is podcasters, to be honest. People who are running podcasts and are trying to get sponsorships for their podcast are using Bluetick to do that outreach to people they think would be a good fit and then start those conversations and then enter into the individual emails back and forth to try and get them to buy into a sponsorship for those podcasts.
A third category is small businesses who have an inbound lead funnel. Most of these are services based businesses where somebody will fill out a form on their website and the customer is approaching them and then they need to fill that request and probably ask for more information or try and get them to the next step. But what they’re finding is that a lot of people will fill out a form on their website or request information and then go dark or go silent.
What Bluetick does at that point is that because it’s a warm contact, it will help bring them back to the table. Very similar to Rob, you guys in Drip have this feature where you can send out a broadcast email and then several days later you can reschedule that same email to go out with a different headline if the person doesn’t open it. Bluetick, because of the way that it works, after the first attempt, if it doesn’t receive a response from the person, it will try again and again and again.
Those additional steps in the email sequence tend to aggregate together and give you a much higher response rate than if you just sent out one email, waited and if they didn’t respond, then you kind of walked away from the conversation. That’s the profile that I’m currently finding success with and people are comparing other products to Bluetick. There’s a lot of different cold outbound tools out there or tools that will remind you, “Hey, you sent an email to this person and they didn’t respond.” But Bluetick aggregates those things together, not just their features, but also the fact that it’s got a mini CRM built into it and helps you give a bigger picture of the whole thing.
That’s where I’m at right now. I don’t know if that completely answers the question but there’s a few different buckets that they fall into and I haven’t found one specifically that is better or substantially worse than the other.
Rob: Yeah, that’s cool. I go back and forth on this. As an entrepreneur, early on in your entrepreneurial journey, it’s like I stuck to apps that really had a tight vertical niche and I feel like that is a good way to keep things simple, you know where to find them. I like that approach. However, there are tools that in order to grow to a reasonable size, they’re in such a competitive space that I guess it could be argued that you could say that Bluetick is advanced follow up in sales for podcasters. You could start out that way and then expand. Land and expand is what it’s called and then go horizontal.
I think it’s too early to decide that right now. Podcasters may be too small of a niche, although it is growing.
Mike: It’s interesting that you say that that’s a small niche. I agree with you that it is but they talk to each other a lot. I get a lot of referral in that. I think that’s partly why I’m getting traction there. It’s because they talk to each other and they’re saying, “How do I solve this problem of getting sponsors for my podcast?” And then they say, “Hey, use this tool. It’s really helpful.”
Rob: That’s the thing. I say it’s a small niche but small is in quotes. If you would’ve build this to let’s say it tops out $30,000, $40,000, $50,000 a month, which I think there are enough podcasters to do that for sure. That’s small compared to a multimillion dollar app or some Silicon Valley exit. But that’s a heck of a lifestyle business if you want to keep it that way.
If you own the niche and you’re the name in doing and then you add things in that that really help podcasters find sponsorships, and then you could even branch out into, well, conferences need sponsorships. That’s the whole reason you built Bluetick, originally, was to help with getting sponsorships from MicroConf.
There are other things you could easily translate into so we’re definitely getting, I’m getting ahead of you on this or ahead of ourselves and I don’t think we need to make this decision or the distinction yet but I do think it’s an interesting conversation that you probably have or should have going in the back of your mind of do I need to go vertical because there’s so much competition. Because you have to be different somehow. You don’t just want to be one of many apps that’s doing the same thing.
You either want to go vertical with it and build the best one for that group of people or you want to have a feature or two that really make you stand out where they say, “Well how are you different with the five other apps that do this?” And you can say, “Well, it’s this and that and this is the approach we take. It’s the light way to CRM.” Or whatever it is that you’ve built in that’s different, that you at least have a talking point and aren’t just a commodity.
Thank you for the question. I like that one. I appreciate it. Our next question is from Aaron Cordova. He’s asking about notebook organization. He says, “How do you organize your notes? I’ve recently started note taking with an iPad Pro and a pencil. Do you have a page per day? Do you organize by topics?”
I used to use my notebooks both for longer term notes and thinking and things I was thinking through and I use it for to-dos. I tried so many to-do apps over the years and I finally switched to Trello. I can’t go back now because Trello keeps it on the cloud, have a record that never goes away. I can never lose it. I can access it from all my devices. I really like to-dos being in an app somewhere and Trello is finally the one that broke me with that.
Now, my notes are really just in a black, a Moleskine notebook and I do not do a page a day because I don’t write in my notebook everyday. I still use Evernote for some work things. I use Trello for to-do lists and I use my notebook when I am on an airplane, when I’m deep thinking, when I’m trying to hash through a problem because paper and pen is just I think so much better with that than sitting in front of a computer because there’s no distraction.
If I were to flip through my notebook, I definitely date my pages and I put a topic at the top. If I’m going to be thinking through one problem, or taking action notes from a book that I’m listening to, or trying to think of what else I’ve written on my notebook recently, I tend to put things in there I want to say for a long time. If I know that it’s just super scratch brainstorm-y stuff or it’s, I don’t even know, like a grocery list or something that I know I’m not going to care about in a month, then I don’t put it in my notebook. My notebooks, I keep them pretty much forever. I have notebooks going back ten years and I do flip through them and I have some fascinating insights that when I look back and think, “Man, your view of the world was so different back then.” Or maybe the world was genuinely so different. Just the founder community and the entrepreneurial community and my aspirations for it.
All that to say, I don’t organize by topics because I just flip to the next page, I put a date, and then I flip through. This means that I don’t particularly have a great organizational system. When I remember, “Oh, I remember Derek and I talked about this and I noted that down.” I have to think in my head. I bet that was about six months ago. And then I do, I flip through the notebook and I find the page.
While it’s not the most efficient way to get there, what I really like about it is the serendipity. Typically, when I’m flipping through that notebook, I’m reviewing like six, eight months worth of thoughts that I have forgotten about. Actually, the act of looking through them often will remind me of like, “Oh yeah, there was this feature we were totally going to build.” Or “Oh yeah, we never implemented that one thing.” Or “I never got back to that person.” It’s like all this stuff that isn’t urgent and doesn’t keep coming back on the radar, but it was a really good idea four, five months ago.
For me, my notebook is more of a time capsule. It’s for deep thinking and thought process. That was actually why I don’t like Evernote for it, because Evernote, I know it’s great if you want to search or any of these note taking apps. Great, if you want to search and you know what you’re looking for, but if you just want to kick back with a cold beer in one hand and a notebook on the other and you just want to flip through and read things almost like a dead tree or paperback book, that’s the experience that I relish and that’s what I love about my notebooks.
That was more information you probably ever want to hear about it and maybe a unique use case. I’m curious to hear what your take is on this.
Mike: I’ve tried Evernote and Trello. I still have my Evernote account. I just don’t ever use it and there’s things in there that I don’t go back and find or look at. The problem I found with both Evernote and Trello is that if I’m using it for any sort of to-do list or task management or anything like that, I end up with so many things in there that it just really falls apart. It’s too general purpose.
What I tend to do is it’s broken down based on what it is that I’m doing. Usually, what I’ll do is I’ll either start with index cards for a set of daily tasks that I need to do and get through and I can just mark them off as I’m getting through them. Occasionally, what will happen is that something will stay on an index card for too long and it will end up on the next day’s index card or the next week’s. If things end up there for too long, what I do is I essentially end up promoting it to some other place.
Sometimes, I’ll have a notebook where I will write down short term notes about something I’m working on, whether it’s really complicated or has a lot of things that I need to keep track of and I’ll write them down on paper. But at some point, like you’ve marked off a bunch of stuff and then you end up with 5 to 10 pages worth of stuff but half the pages are all crossed off, it doesn’t really make sense anymore and you can’t move them around.
At that point, I start moving things over into tools. For anything that is a bug or feature related, it tends to end up in FogBugz. Most of my general purpose tasks, or if it’s a marketing task, or related to a specific project, it usually ends up in my teamwork account. If it’s some sort of a thing that needs to go on a shared list that I use for home stuff, I use something called AnyList. I have a paid account that I share with my wife because it’s a family account so we’ll put our grocery list and things like that on it. It works really, really well for that.
Outside of that, I will also use Google Docs for taking long form notes about a particular problem that I’m working on where I don’t want to write it down if it’s not just a really quick thing or if I need to think about a lot of stuff, I’ll put it in Google Docs.
And then for mental brain dumps at the end of each day or at the end of each week, I have a journaling app that I have a subscription to called Penzu. That system works really well for me because each of those tools tend to be focused on a particular type of problem that it’s solving and it has the tools and the features and all the things that go with it that allow me to keep things organized within that context. Once I start crossing the borders between different context, the tools tend to fall apart. You can use FogBugz for marketing tasks but you don’t really necessarily want to be paying for a FogBugz account to give some contractor or somebody who is not going to touch any of your development stuff. Giving them a FogBugz account is kind of pointless so it’s easier to put that stuff in the teamwork.
I have a tendency to feel like this type of problem, it’s going to be different for everybody. That’s why there’s so many different to-do list apps and note taking apps because everybody works differently and you ultimately settle on something that works for you. The other 99 apps that you tried didn’t ultimately work out. I feel like this is a very context sensitive problem in terms of the type of person you are.
Rob: Yup. And the process you use and how you want to handle it. I agree. Thanks for the question, Aaron. I hope that was helpful. Our next couple of questions are from John. He says, “Hi Mike and Rob. I’ve been listening to your podcast for about a year and I get bummed when Stitcher doesn’t have your podcast ready to listen to every Tuesday before I ride to work. I have a couple of questions. First is what are your thoughts on pay what you want pricing? I’ve created a software called Breakneck Install which is a downloadable application that helps developers quickly create an installer for their application.
There are giants in the market and my product can’t compete with them. I don’t feel like I could charge near what they do which is more than $500 per license. I thought of trying to pay what you want model. One of the benefits I see is not having to worry about licensing issues such as maintaining and creating backend infrastructure to deal with licensing. My fear is that I try this and then decide to go a traditional pricing model which may make future customers unhappy. Do you have any thoughts on this?”
Mike: I think for a product like this where you’re trying to build an installer, it almost feels to me like what you’re going to run into is the market is going to be split between these people who are just starting out and they’re trying to build a product but they don’t have any money so you’re not going to get them to donate money to your cause.
It’s not going to be a viable source of income. If it’s something that you want to do because you have the money laying around and you want to put your effort into something like this, then that’s fine but I wouldn’t look at pay what you want pricing for something like that to really be able to make a dent in your bottom line and be able to let you go full time on it. I just don’t think that it’s going to happen.
There are also a lot of open source alternatives out there that would make something like this difficult. You’re absolutely right when it comes to installers, most of them tend to be very expensive and what you’ll find is that the people who don’t have the money will go for the free open source versions. And even if you give them a paid option that is a pay whatever you want, it seems to me like you’re probably not going to get very much money from that. They’re not necessarily going to be willing to pay software maintenance and things like that.
You’re going to spend a lot more time fixing bugs and addressing individual issues than you are trying to build the product where if you were just selling it to smaller businesses that had revenue and the capabilities to pay $500 to $1,000 per license, you’d be able to make a business out of it.
Rob: I have mixed feelings about this. I’ve never done it so I can’t speak from experience. I can only speak from the experience of entrepreneurs who I’ve seen done it and who I’ve talked to. It can work but you need a really large install base. You need a lot of people downloading so you can’t just say I have a few hundred downloads a month and expect that you’re going to be able to do pay as you go and make any kind of money from it.
The problem is that if you do pay as you go and someone pays you $10, how much support do you now owe them? If they start asking for feature requests, if there are bugs that they discovered, if they’re demanding, if stuff goes sideways, it becomes a challenge. I can see a lot of problems with this and my gut is that it’s not going to work unless you are getting, I don’t know what the number is, but it’s thousands and thousands of downloads per month, because a bunch of people are going to pay you nothing, and then a few are going to pay you a small amount.
When podcasters try this, when other small, downloadable WordPress plugins or whatever try it, they don’t tend to get a lot of money. I don’t know that I agree with your fear that if you were to have pay as you go for now, that you can’t undo that later without making future customers unhappy. I think what I would say is I’d rather call it a beta, or an early access, or put some moniker on it and I would say, “It’s pay as you go while it’s an early access.” Even if you already released it and it’s not an early access anymore, that’s what I would do so that if you decide that you don’t want to go pay as you go anymore, that it just doesn’t work out financially, you can always undo that and it’s a pretty easy thing.
I’ve seen apps go from free to paid before. If you grandfather people who already have it, I don’t really know what complaint future potential customers could have other than, “Oh, I should’ve downloaded it last month instead of waiting till now.” There’s a time where I tripled the pricing of DotNetInvoice from $100 to $300, and a couple of people emailed me and said, “Hey, I was in the process of thinking about buying it. Can I still get it for $95, or $98, or whatever it was?” I gave it to them. It was like two or three people.
One I later regretted, he actually turned out to be the worst customer, the first toxic customers that we had but that’s beside the point. I don’t know. It’s easy enough to try. I see your point. I think if you have something that can’t compete in the marketplace like going freemium or pay as you go is often not the right answer. The right answer is make something that can compete in the market place. Have a differentiator or just set a cheaper price.
If this thing really does do a good chunk of what developers need, they can only get it for $500 elsewhere, then what about charging $99 or $199. You don’t necessarily want to be the low price leader but is there a space in the market. You think about Infusionsoft, Eloqua, all these really expensive marketing automations and Drip came in at the beginning, a lighter weight product that was easier to use and less expensive. I do think that there’s an angle that could be added there as well.
Mike: I think the lower price point is definitely an angle that you can go at because there are certainly ways that you could charge a couple of hundred dollars for an installer. I do like your idea about letting people know, “Hey, this is pay as you go for the time being.” And then make it a point that it is something that you can undo later and move to some other one. Just be upfront and clear to people like, “Hey, this is the pricing for now and it’s going to change. We just don’t know what it is yet.”
Rob: Our next question is about growing from $100,000 of ARR to $1 million. This is from Pawel Brzeminski. He says, “Hi Rob and Mike. I’ve been listening to the podcast for years. I really respect what you’ve done and that you’re sharing all this knowledge with the rest of us. I found your podcast immensely helpful in launching my own SaaS app, which is called Snap Projections. How do you think about growing a self fronted SaaS past $100,000 ARR? So that’s about $8,000 or $9,000 a month. What do you specifically pay attention to in terms of marketing, sales, operations, hiring? Any specific tips on growing in a vertical niche versus horizontal? What would you do differently right now?” It says more of a question for Rob but it would be interesting Mike’s take as well. “Anything specific to watch out for?” His background on them is that they have two people on board, more than 120 clients/customers, relatively low churn, and they’re operating in a niche of financial services applicable to Canada only.
Mike: I’ll be honest. I don’t know how qualified I am to actually answer this question so Rob, why don’t you throw some things out there and maybe there’s something I can think of, I’ll just piggyback on it.
Rob: For sure. It’s a really broad question but I appreciate it. It’s almost like what are the things to watch out for because they’ve already had a decent amount of success obviously to get to even that $8,000, $9,000, or $10,000 mark. It’s like what’s the difference to get to seven figures or what has to change between then and now?
What my experience with this is that it’s going to depend on how big the market is that you are in. I’d bring up Drip because that’s the most recent thing I’ve done. We were in a position where we were in such a large space that we didn’t have to change anything in terms of our market. We didn’t have to go from vertical to horizontal or do any of that because there were enough people who wanted it that we needed to do it. We needed to execute on marketing and hiring in essence. Keeping developers going to build features but really, the product, once we had product-market fit, has always been really solid.
I think that’s the first question to ask. If you really are in a niche of financial services in Canada only, it’s like is the market even big enough to get you to a million or are you going to have to either go into another vertical or go more horizontal and serve a lot of vertical niches or just not even be vertical at all. That’s one thing to think about.
I think you can definitely get to seven figures with a very small number of employees or contractors, somewhere between 5 and 10. I think one thing to watch out for is hiring too quickly or trying to hire ahead of revenue because you want to get there faster. It’s a lesson that I learned. It doesn’t necessarily, especially hiring developers, it doesn’t necessarily make that revenue move faster. If you’re already at that $10,000 point, I always would try to look at what is my bottleneck? Why are we not growing faster? Is it because our product needs more features or is it because we’re not marketing or selling enough?
My next hire would be either a developer, or it would be a marketer, or a salesperson, or we’d start doing demos, or whatever. When we were in that $10,000 to $20,000 MRR range, maybe we just hit $25,000, that was when I realized that not having someone who could talk to people on the phone and essentially do customer success/sales, that was a limiting factor for us and that’s when we brought Anna on. That was a game changer for us. That was a bottleneck for us in that $20,000 to $30,000 range.
You may be there but then again, you may be that salesperson and that’s not a limiting factor and it’s more of your market’s too small and your development team is moving too slow or whatever and they need more help. That’s the thing I think that you need to think about at every point is whether you’re at $10,000 or you’re at $50,000, what is your limiting factor? What’s going to double your growth next month or add 50% of your growth to next month because you want growth. The bigger you get, you have to accelerate growth.
When you’re at $10,000, growing at $1,000 a month is actually a victory. At the time you get $20,000, $30,000, you want to start growing at $5,000 a month so you need to think differently about how am I going to 5x growth between those two points. That often means you’re either growing wider, building features faster or dumping more money in the marketing or getting into paid ads, finding a new channel, because that can be a big piece of it. You may just need more people on the top of the funnel. That may be a thing or you may need to close more people that are in the funnel.
That’s why I use all those rules of thumb that we’ve talked about in the past. If you’re already converting 40% to 60% of your trials to paid and you’re asking for credit card up front, then that’s fine. I would push that aside for now and I wouldn’t try to improve my on boarding and I would say, “How can we just get more people to the top of this funnel?” But if your churn is 10% per month, well then, “How are we going to cut churn by making a product better and by retaining more people?”
It’s looking at each of these things and just bouncing from one to the next and you improve one and then you put more people in top of the funnel and you realize, “Oh, now this other thing is broken.” And you just hop from thing to thing. That’s kind of a brain dump of how I thought about it but I hope that gives us some things to chew on.
Mike: I like everything that you just said there. It boils down to recognizing where the bottlenecks are going to be. One thing that comes to mind is you mentioned something about limiting yourself to just Canada for example, because that’s where the company is based right now and those are the people that they’re targeting. But does the customer profile need to change? Are you targeting one type of customer and you need to move to a different type of customer?
Let’s say small financial planning companies versus individual financial planners. Does your customer profile need to change in order to be able to get more revenue per customer in a way that’s going to help the business grow or are you going to max out? Again, that’s just a limiting factor. Not necessarily through geographical border but the customer base that you currently have and that you’re going after.
That all boils down to the same thing. Is there that limiting factor that you’re going to need to overcome? Whether it’s that or whether as you said, the bottlenecks in the marketing funnel, customer acquisition, all that stuff. It’s finding those bottlenecks.
Rob: Thanks for the question Pawel and apologies that it took us so long to answer it. He actually sent that to us last October. Our last question of the day comes from Matt Sencenbaugh. He says, “Hey Rob and Mike, I’m launching a SaaS app on April 1st,” sorry, Matt. It was a couple of months ago, “with two customers who have already signed on. My question boils down to what legal documents do I need at launch? Terms and service, privacy policy, sales agreement, etc? Do you guys have any recommendations for getting the required documents in a cost effective manner? Finally, just doing a sole proprietor affect this legal question at all?”
I will start off by prefacing that neither Mike nor I are lawyers, nor do we play them on TV so our advice is based on experience. It should not be considered legal advice. You should consult with an attorney to get real, legal advice. I have a quick answer to this one. I could say when we launched Drip and when I re-did HitTail and when I’ve done my other apps, terms and service, and privacy policy are the only two things that I really have and I use as a free plug for these guys, they used to advertise on This Week In Startups but it’s Snapterms, snapterm.com. I think it was $600 for privacy policy and terms. Those are not going to be the best. If you were to pay for a lawyer to do it from scratch, it might be $1,000 or $2,000 but they will work with you more to get tighter buttoned up language. But if you’re launching with two customers, it’s just how much time and money do you want to spend on this.
Mike: There’s a ton of privacy policy and terms of service generator tools out there. There’s even some that are licensed under Creative Commons and you can use any one of those. I think our general guidance, not necessarily, as Rob said, legal or financial advice on this particular thing is what we’ve seen people do is find something that seems reasonable for the time being and then once you get to a point where you can afford it and you have something to protect, then you go the route of having something custom built and custom designed for your situation. None of the tools out there that either generate these things for you or even the ones that you find on a website like Snapterms and you download something that is reasonably customized for you, they’re not going to encompass every single scenario.
Every lawyer, even my lawyer has done this before. He will look at legal agreements and he will take things from different legal agreements that he’s seen based on how they’ve been used in the past. If one of his customers got screwed over by a particular piece of legal jargon, he will sometimes take that and put it into his legal agreements to make sure that his customers and clients don’t get the short end of the stick when it comes to interpreting the documents that he’s put together.
Based on how experienced your attorney is, they’re going to have a wider wealth of knowledge, the longer they’ve been in business and the more agreements that they’ve seen and they’re going to be able to use those to craft the one for you. Maybe you get two or three different lawyers from different firms involved, it seems like it would be overkill but it’s always an option. I’m sure that larger businesses tend to have legal teams so that they can get that kind of experience and breadth and put together something that covers them from every possible angle.
Rob: The part about it’s a sole proprietorship has that impact. It just means that you have more exposure and more liability. I don’t know that it’s risk tolerance. Like we always say, you just have to figure out if you’re concerned about there being liability on your shoulders or in these early days, if you feel like you could get sued for something because the way to remove liability or to push it off is to form an LLC or an S Corp and then have really tight terms of service and privacy policy and all that stuff. Air tight, as they say.
That’s the way to ultimately get rid of it all. It costs a lot of money and it’s again, for me and my experiences, not something that I spend a lot of time or money thinking about in the early days of an app because there is less exposure at the time but you have to evaluate it for yourself.
Mike: An interesting hack for this to find out how much exposure you have is to go to an insurance company and ask them for a quote for liability insurance and find out how much that quote is and then use that to decide whether or not you need to go out and get something crafted from an attorney to help cover you. That seems to me like a pretty good way to get an independent gauge of how risky what you’re doing is.
For example, back when I was doing enterprise level consulting, we would be given admin access at the domain level on somebody’s network and some of these companies were like Johnson & Johnson, Pfizer, NASDAQ, those types of companies. Our insurance rates were outrageous. They were like $500 to $1,000 a month for insurance. It was only two or three of us. That was absurd but my wife’s got insurance for her business and it’s only, I forget, like $100 a month or something like that. It’s ridiculously low.
Depending on what you’re doing and how much risk and exposure you have, the insurance company will charge you more. Just getting a price quote from them would be a good way get an independent verification of how much risk there is without you having to sit down and do a ton of work on it. You’re going to have to provide them with paperwork and documentation and they’ll have an auditor review it but you could use that to help out.
Rob: Yup and if you’re going to do that and get a quote, I would recommend a company that I worked with before. They just made the process really easy. It’s foundershield.com. They themselves are a startup. It’s kind of just an insurance broker but they operate, like, I’m guessing they have some funding because they operate like you would want a startup to operate rather than some stodgy old business insurance company.
Mike: Matt, hope that helps. I think that’s probably the place to wrap it up for the day.
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