Show Notes
In this episode of Startups For The Rest Of Us, Rob interviews growth marketer Andy Baldacci about how he got his start, his early days at Hubstaff, marketing for Groove, and he gives some practical tips/advice for the listeners.
Items mentioned in this episode:
Episode 441 | Revisiting 2019 Goals, Why Remote Companies Grow Slower, and A Couple Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike revisit their 2019 goals. The guys check in to see if they are on pace with their 2019 goals as well as discuss some other topics including why remote companies grow slower.
Items mentioned in this episode:
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’ve 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. Where this week, sir?
Mike: I know that we’re only a couple of weeks out from MicroConf in Vegas. We are just in the process of selling MicroConf Europe tickets. That will be in the 20th to 22nd of October and it will be in Dubrovnik, Croatia again. Looking forward to that. It’ll be awesome and it’ll be back in the same location and one that has a fantastic view of the ocean.
Rob: Yup. I loved that hotel last year. I’m very much looking forward to that, October 22nd, 23rd, and 24th, is that right?
Mike: I believe so, yes. I have to look at the calendar.
Rob: Yeah.
Mike: That’s hard.
Rob: Go to Eventbrite and they’ll be on sale soon. That’s good. I’ve got to start looking for speakers for that here, soon.
One thing I wanted to throw out that I’ve been thinking about, there’s this book called Mindset. I believe it’s by Carol Dweck. Is that right? I wish there was some device that I could type a name of a book into and figure out who wrote it. But anyway, it’s about having a growth mindset versus a fixed mindset. It’s about expanding your thinking and not being caught up with the same beliefs you had your whole life, as well as just believing that you can get better, and that you can change and do more.
I loved this book when I read it. When trying to instill growth mindsets into our children so they don’t go through life thinking, “Well, this is what I have. I’m like this the whole time and I can’t learn new things. Whatever I believed when I was 10 or whatever was instilled in me can’t change.” I really think that this runs true and there’s a parallel here with successful founders. Successful founders I know have growth mindset. They’re always trying to learn, they’re always trying to get better, and they’re always questioning their beliefs.
There are certain moral beliefs implicit that you probably never shared. There are beliefs that you shouldn’t. There are these other ones like, I remember talking about Split Testing in 2008. People were telling me like, “Oh, that’s tricking people. You’re tricking people.” That’s what internet marketers do and we don’t do that in Startups.
Let’s try and talk about email marketing in 2009–2010. It’s like, “Oh, you’re a spammer.” I’m talking about SEO to market a business. It’s like, “Yeah, it’s just gaming and Google. You should just write great content and you’ll rank.” I feel like those are fixed mindsets. Things like, “Well, this is bad and what I believe is going to hold true forever.” But the folks who are able to embrace those new things, if you’re able to do it quickly, and if you’re able to implement these things and take advantage of them, these are the founders that I see succeeding.
The reason I bring this up is there’s a constant ongoing flux of new ideas coming in and trends that come in and out of the whole startup scene. Part of my talk at MicroConf was about trends that I have observed over the past 14 years of being involved in the scene. One of which, of course, is the changing nature of funding, that being bootstrapped and venture-funded used to be this binary thing and then self-funding is introduced where [00:03:33] bank. That’s a little different than being bootstrapped. There’s taking a $100,000 from friends and family. You don’t have an institutional investor. How different is that?
Then, there’s obviously TinySeed, there’s a [00:03:45], and there’s other players. Technically, yes you took a dollar, so you have now taken funding but it’s not the same as the VC funding of 10, 15, and 20 years ago. It doesn’t come with the same negative things.
Some thoughts I’ve been doing and really going back to first principles of what is bootstrapping about? Is it bootstrapping? The reason that I bootstrap—I would assume for most of us—is we want the freedom to run our own company and we want to have purpose working on something interesting. We want to have healthy relationships with our families, not get a divorce, not never be around our kids. If we could do that, whether we take a little bit of money, don’t take any money, which is totally a viable thing, or take a lot of money or whatever, I guess I’ve always had those three goals, that freedom, purpose, and relationship. I think that funding has traditionally been at odds with those—10–15 years ago it would have been—but in my head, there are more shades of gray than perhaps has been the case in the past.
Mike: Part of those things that you just talked about are the change in definitions or understanding of specific pieces. For example, bootstrapping. What does bootstrapping mean? I think that question has come up a lot more recently because of things like TinySeed and [00:04:57]. What does it mean to be a bootstrapper? If you have a very specific or fixed view of that in your head, then it’s going to impact how you view taking money for your company or somebody else taking money for their company. I don’t think that a lot of those definitions are necessarily static because bootstrapping itself is relatively new. It’s really only become a household word in our circles in the last 10 or 15 years. Our circles didn’t even really exist 10 or 15 years ago.
The landscape itself is changing and those definitions are changing at the same time. It makes it difficult to not adjust with it. You’re going to be left behind if you can’t adjust your definitions or mindset along the way.
Rob: Yeah and that’s the thing. This is something that I’ve struggled with. I’m an engineer. I wrote code for decades. I do think in very binary and I used to think in very black and white terms. I used to be more opinionated, more fixed in my thoughts. The older I get and the more experienced I get, the more I realized that that has been a detriment to me in my career and the things that held me back early on were holding on to these ideals that I truly believed and later found out were not as black and white and not as “true” as I thought they were.
Anyway, that’s it. I’ve been thinking a lot about that and how to continue. It’s all up for me to continue to grow. I ask myself the question, “What things do I believe today that I will look back on five years and think that wasn’t correct or that was holding me back then?”
On a lighter note, did you know you can get a refund for audible books that you don’t like?
Mike: I did not know that.
Rob: This is crazy. Remember how I talked about how I’ve backed 185 kickstarters? The only thing worse than Kickstarter for me is Audible. I believe—I would have to look at the library—we have close to 500 audio books.
Mike: Wow.
Rob: I’ve been a member for nine years. It’s nuts. Granted my kids listen to audio books. Sherry listens to them. We all share the same account. Hundreds and hundreds. That’s how I read. I don’t buy physical books. I really don’t buy books on Kindle. I have a lot of them. But I also will go and just try a book and if I don’t like it—I get two, three, or four chapters in—if it’s not doing for me what I thought it was doing, or if it’s too way academic, or just a crappy book, I bail on it. I’ve always, at least for the past 10 years, valued my time more than the cost of an audio book which runs around, let’s say, $10 with a membership.
I have a bunch of audio books that I haven’t listen to. If they’re good, I listen all the way through, I take notes, and I do all that stuff, but if they’re not, I bail on them. I’ve always hate that cost and I realized the other day, you can go back and just say, “Hey, I didn’t like the book.” I’m sure if you abuse this, they have some repercussions or something if you listen on every book and then return it or whatever, but it’s interesting. It’s buried to find it but I definitely went back. I looked to about a year. I went back and refund maybe seven or eight books that I only got a little bit into. I remember specifically why they were crappy. I got some extra credits and you know what I do with those credits?
Mike: You got more books?
Rob: I even [00:08:10] bought more books. Of course I did, Mike. It’s got a voice, I love the information, and learning new things. I’m listening to books everywhere, on topics anywhere from growing your business to negotiation. I have a book on Leonardo Da Vinci, one on World War II, one about dungeons and dragons, two about dungeons and dragons, I listen to Profit First based on a recommendation from Patrick Folly, and I have something about dealing with challenges mentally and blah-blah-blah. All of those won’t stand up to the scrutiny but I do like having a very plethora of books to be able to listen to based on the mood and goals I have at that time.
Mike: The only thing that shocks me about any of that is that you waited until you got the credit before going and buying more books.
Rob: No. It’s true. I didn’t actually spend all the credit.
Mike: You lied. You lied to thousands of people.
Rob: I did spend several of credits but yeah, I’m kind of backed up. I don’t have a big wish list, but I don’t tend to buy a lot of books until I’m ready. Right when I’m ready to listen to it then I’ll buy one or two more and then go into it. Right now, I’m a little overbought because of this credit glut that I experienced after the refund.
All that said, let’s talk about some 2019 goals. You and I make goals each year. I know they’re varied opinions on goals. I’ve always been a goal-driven person. I find that goals help me focus for the year. Not get shiny object syndrome, not wander off and do other crap because there are always more opportunities that are super interesting than I can ever do. The goals help keep me focused.
I sometimes do re-evaluate goals and say, “You know what? I screwed up when I made that goal in the last year. I shouldn’t do that this year. I should pivot the goal.” These are things that I spend a lot of time thinking about. I’ll try to do it on a retreat to make sure that I spend a day or two thinking about it and I really want to accomplish that in the next year. That’s a high-level thing that I then try to focus on the next 12 months.
With that said, we set some goals back in December. It is now second week of April. We kind of just passed the first quarter of our goals. You had two goals with a bunch of subpoints under that. It might be five or six. I had four goals. Why don’t you talk through your first one and let us know how you’re doing? This is either going to be the walk of shame or a celebratory episode where we can high five each other.
Mike: I think it’s going to be a walk between them because I didn’t exactly have a lot of heads-up on the particular piece of this podcast episode. I did not go back and take a look to see what exactly all these numbers looked like. I can give you a ballpark idea but probably not exact.
In terms of exercise, I know that at least halfway through the first quarter I was ahead, and then it really dropped off the end of the quarter as MicroConf got closer. I think that I’m close to what it should’ve been but I’m not absolutely sure.
Rob: You’re saying that you’re not sure if you’re on track for two times a week?
Mike: I think that it’s close. I mean they’re still a little ahead or a little behind but I’m not too far off. Twice a week would’ve been 25 times by the end of the quarter. I know that I was at least 15 or 20 at one point. There is one point where I was six or eight weeks ahead or something like that. I was doing very well but then as MicroConf got closer, I got busy and I stopped going to the gym. Now that MicroConf is over, I can start going back. I haven’t gone back and actually looked at the numbers. I think I’m on track, but I could be a little ahead or a little behind it. I’m not sure.
Rob: Yeah, give or take. You’re on track, it sounds like. I’m way behind. The winter decimated me. I’ve talked about this in the past. It started getting warm here a couple weeks ago. I actually started exercising. My first goal is three days of exercise a week. We’ve got six or seven inches of snow yesterday. It’s like halfway through April. It’s a train wreck for me so far. This is a good reminder. If I didn’t have this goal, I would just not care. I care because I have this goal. It is something that I need to change and is something that I want to be doing. I don’t enjoy exercises. It’s not something I’ve ever really want to on purpose, but they did something that I need to get motivated for. This is a friendly reminder that I’m walk of shaming with the exercise one and I need to figure out a way to do better with this.
Mike: The second one for my getting my health back on track was having a normal sleep schedule. Part of that involved using my CPAP machine at least five times a week and average usage of at least 6½ hours at night. I can say with absolute certainty that I am actually beating that if not exceeding it in a number of different ways. The app that I use for this only goes back, I think, about 30 days or so. I can get more data then, that if I needed to. But even over the last 30 days, the lowest I have on here is 5½ hours and that’s actually a lower one. Most of the rest of them are six plus. Some of them were highest. One of them on here is 9½. We got 10 hours and 40 minutes on here for one of them. I’m doing well on that one.
Rob: Very nice. My second one is about TinySeed. It’s to build it into the de facto brand when bootstrappers look for early-stage funding. The subpoint for that was first batch of founders chosen and they have a good chance of success, good progress, growth, and all that stuff. That’s by the end of the year.
Yes, I would say I’m on track for these. I think the de facto brand thing comes over time. Maybe it’s not a year but it’s kind of a long-term goal. The first batch of founders are on track. We wanted to have everybody chosen by MicroConf. We didn’t get that done but we are most of the way there. To be honest, the biggest hang up as per usual is legal rather than any actual conversations or phone calls or any of that. It’s just getting everything in, bullet points and the legal docs. I’m feeling good about this. This is my main thing that I’m working on. I would say on track for that.
Mike: My next one was to lose 15 pounds. Do we cue the audience’s laughter here now?
Rob: Not there.
Mike: No. I think after MicroConf, I actually gained eight pounds but then the day after or two days after, I was back down to a normal weight or whatever. I hadn’t really lost. I think this is all water weight. I really haven’t lost any measurable amount of weight at this point. I’ve got to work on that. I think that’ll go back to the exercise thing.
Rob: My third goal is to not panic when the stock market crashes. I don’t really think that’s happened. I mean it’s been a little up and down but there hasn’t been a crash. I don’t know yet, we’ll see. This one’s a little bit out of my hands but it’s just something nice to be in the back of my mind.
Mike: You can go out and buy a bottle of whiskey so that when it does crash then you can drink the whiskey and hopefully forget about the stock market.
Rob: Yup, indeed.
Mike: My next one was to have more regular and in-person social contact. I would say that I’m actually succeeding there. Still meeting up with a bunch of people once a week. Obviously, there is a massive injection of social contact at MicroConf, but yeah, I’m still meeting up with people. I wouldn’t say that this is in-person social contact, but I’m also meeting up with a group of people online, usually on Saturday evenings. But we’re going to take a break for a couple of weeks, then startup back again in May. It should be good.
Rob: Very nice. My fourth and final goal is to write or rewrite a book. I have not started on this nor I thought about it. It’s been because of MicroConf and TinySeed all happening here at the first of the year. I’m not on track to do this because I haven’t started it and it hasn’t been on my radar. I want to see once we get the batch chosen, we get things rolling, I want to see how my time works out and if I’m able to do this. As I said when we set this for the first time, writing another book aligns with the main thing I’m doing because writing another book about startups didn’t align with growing Drip. It didn’t align with growing HitTail but it does align with TinySeed. I have more of a reason or an excuse because I really want to do it. There’s more of an excuse to do it. I just got to figure out if I can carve out the time.
One thing that’ll hopefully help with that is, we actually just announced that we hired a program manager with TinySeed who’s going to help in the accelerator because there’s so much work to do. We hired Tracy Osborne formerly of Wedding Lovely. She’s spoke at MicroConf in 2016, did really good talk there. I’ve been a longtime fan and we’ve kept in touch. It just worked out really well for her to come and join us. She’s a developer, a designer, she’s written several books on design, and I believe in some development as well. She’s a public speaker. She’s got a lot of chops. I’m stoked to be working with her on this. That should help achieve, hopefully, a few of the goals on this list in terms of freeing up time, hopefully, for me to do something with the book as well as helping us grow TinySeed into that brand I was talking about.
Mike: Congratulations. It’ll be great to have her around.
Rob: Indeed.
Mike: My last one on here was for Bluetick. It was to establish attraction and move on to something else. The comments I had on here was that it’s fuzzy, not exactly what it should been, whether it should be revenue-target or customer-based. For this, I would say it has meandered the past couple of months. It’s probably largely for the same reasons that you have not gotten around to writing a book was because of MicroConf.
It was about a week or two before MicroConf. I was sitting down and working on stuff. I realized that basically the first three months of this year were basically taken up by MicroConf. I did very little else. It got me thinking about how much of my time is actually spent working Bluetick. My current estimate is between 30% and 40% of my time throughout the course of the year is spent working on Bluetick, whereas I previously thought it was closer to 100%. That’s totally not the case. It changes things in my mind more than anything else, but it’s just a perception or a recognition, I’ll say that I’m not really working on it full time. I’m working on it about a third of the time. That would probably explain how it meanders a little bit and how I’m not getting as much done on it sometimes than I feel like I should be.
Rob: That makes it tough. It’s hard to not have that focus. It’s almost like you’re basically working almost nights and weekends on it. You’re kind of doing it as a side project.
Mike: Yeah. That’s really what it is which in part explains why it can meander along if I’m not paying attention to it. It grows when I am. But if I’m only paying attention to it 30% of the time, it’s really not enough to offset turn out of it, to be perfectly honest. I don’t know. I have to give some more thought to that at exactly how to address that particular problem, but I’ll figure something out.
Rob: Indeed. We’ll there were a couple of other things that I want to talk about. We do have a couple of listener questions but something I thought was interesting from Patrick Campbell from ProfitWell spoke at MicroConf a few weeks ago. A couple of the things or slides that he put up that, I believe challenged people’s thinking, were from some research they have done. They have a lot recurring [00:19:44] SaaS companies using ProfitWell and he posted up two different slides. He posted several that agreed with our mindset of, like this one agrees with your internal monologue of how you believe the world to be.
But how about this one? This is from data. This is from 1800 respondents. The slide said, “Remote companies have considerably worst growth and retention than collocated companies.” The room went silent. He’s like, “I know. None of us want to hear this because we’re building remote companies. We want to build remote companies.” How does that make you feel? You instantly question the data. Whereas, seven of these different slides that had statements like this, some were totally in the MicroConf wheelhouse and totally agreed with bootstrapping and all that stuff, others were like this and they’ve challenged our thinking. This one in particular, he had 1800 respondents. The growth was between 21% and 29% slower for remote companies than it was for companies located in the same location.
The other one was companies with founders with a hobby grow slower. This is when the hobby takes 10 hours a week and the study was done four years in a row. It was 2014, 2015, 2016, and 2017. Each year, the growth was 10% or 12% slower with founders with a hobby.
It’s interesting. I want to back these around really quick. I don’t want to dispute the number because he asked these questions. They’re pretty rigorous company, I believe, in terms of data and research. What do you make of them? What are your thoughts on this?
Mike: I thought that the way he positioned these was to let people think about them and understand their default position on what their beliefs were about the data, whether it conflicted with their worldview. I found that more interesting than the actual data itself because I don’t have access to this data directly. It’s not stuff that I look at or actively thinking about. The data itself makes sense to me, but I don’t have anything to dispute it either way.
Remote companies have a worst growth of retention or founders with a hobby grow slower. That intuitively makes sense. The first one, remote companies having a worst growth rate and worst retention rate, I don’t know what he meant by collocated. Does that mean they have an office?
Rob: Just local companies having an office that are not remote.
Mike: I could see that because I think a lot of people have issues working remotely. Some people are just not wired that way. They can’t do it.
Rob: Yeah. I can see that the retention part of it makes a little bit of sense to me. When you’re working remotely, you don’t have as much of a connection to the people whereas if you cut to lunch with folks every day, there is more of that team or family depending on how you couch it. There’s that feel that really is different. I could see that one being causation because obviously, correlation is not causation. That’s where I look at. The fact that remote companies have considerably worst growth, it doesn’t mean that being remote causes worst growth.
Again, I’m not trying to challenge these numbers but I always thinking, most venture-funded companies, the VCs, do not want them to be remote. They frown on remote. I would hypothesize that most remote companies, the majority, are actually bootstrap companies—bootstrap, self-funded, whatever—not venture-backed, anything but venture-backed.
As a guess, I would also say that venture-backed companies tend to grow faster overall than bootstrap or self-funded companies. One, because that’s the mandate. For better or worse, it’s growth at all cost a lot of times. That’s the number one KPI, it’s growth, and that’s not necessarily with folks in our community. Number two, venture-funded companies tend to have just more money at their disposal. They can goose the growth almost; they can force the growth.
That was something that has gone through my head. Perhaps growth is not caused by them being remote but it’s one factor in that.
Mike: It seems to me like you’re trying to justify what those numbers are and kind of fit them into your mental model. I think that was one of the things that I took away from the talk is if there’s data, there’s two ways to approach it. One is this is factual and how do I relate to it? Or you trying to either pick it apart or trying to make sure that it doesn’t conflict with your worldview. I can see both ways on both of them. I think you can as well. But you’re trying to map these things to your mental model of why these things could be true even though you don’t necessarily want to go out and get funding, for example.
Rob: Totally. That’s the thing. Companies with founders with a hobby grow slower. Remote companies grow slower. It’s like, “So what?” When I come back to my values of freedom, purpose, and relationship, the growth is not one of those three core values. I did like having companies that grew in revenue because it led to a certain amount of success. It lends a bunch of things. I can impact more people; I can make more money. It led to more purpose and I can have more impact. There was just a bunch of stuff with it.
But frankly, if I’m going to have a hobby and I’m going to play my guitar, or I’m going to play tabletop games, or my hobby is hanging out with my kids, but I grow slower by 10%, 12%, or 15% a year, I’m actually okay with that. That’s a personal thing of mine.
While these things might say, “Oh my gosh,” it might make you rethink everything. It’s like we’re not in the venture-funded space, so, can we just have profitable businesses? Isn’t it that what Startups for The Rest Of Us and MicroConf our movement, or community, or whatever you want to call it, it’s kind of about it? Is it growth at all cost? It’s nothing we’ve ever espouse.
Frankly, just growth in general is good, it feels good, and it’s a goal. It should be a goal somewhere in your radar but it’s not the number one, end-all-be-all for me or for a lot of people, I think.
Mike: Yeah. Just growing headcount is not the major goal for most people that I know. Whereas you said, if for a VC or a funded company, it kind of is, to be honest. It would make sense that those types of companies would do that. Again, I think that even in just saying that or kind of going that part of the conversation, we’re really drawing attention to the fact that now we’re starting to try to pick apart the data and question, “Is this data accurate?” or, “How good is the data?” That’s exactly what I took away from Patrick’s talk, which was when you see data that conflicts with what you think, consider why that is.
Rob: Yeah. I don’t think it’s what we’re doing here. I wasn’t saying that data’s not correct. I was saying, let’s say this is correct. Am I okay with that? Am I okay with growing a business? Am I okay having a hobby? Yeah. That’s the beauty of being in control of my business is that I can make these decisions.
Mike: Yup. Totally.
Rob: Cool. Listener questions. Let’s dive-in. We have a voicemail from Josh Doody. It’s about metrics rules of thumb for B2C products.
Josh: Hey, Rob and Mike. It’s Josh Doody here, MicroConf attendee frequently. Also, I run my business at fearlesssalarynegotiation.com. I have a question that might be a little bit outside your wheelhouse, but I’d really love to get your perspective on some metrics and things for my business, as people who think about SaaS a lot.
I run a B2C business that has two sides. One side is coaching. That side’s great, I’ve done marketing, it works really well, that’s where I make most of my living. But then, I have a product side of my business that, again, is B2C mostly driven by organic search traffic on Google.
Really, what I’m struggling with is trying to figure out what are good metrics for my business? How do I know if I’m doing well in terms of converting email subscribers to customers, primarily, but even top-of-funnel, converting visitors to email subscribers? I use a sort of typical nurture campaign sales sequence-type funnel in my business.
I’m just curious if you could point me to some resources or other examples of folks who do B2C organic search-driven businesses online? I’m in the career space, salary negotiation, getting rated, and that sort of thing. We’re just really curious if you have any ideas from a SaaS perspective of what a good funnel from search visitors to converted customer at an info product would be? My products range from about $47 for some email templates going up to about $240 for the complete bundle, is what I call it.
Thanks so much for all you do for the Startups for the Rest of Us. Love the podcast, been listening since the beginning, and looking forward to what you guys think. Thanks for your time. Bye.
Rob: Mike, for a question like this, I’d like to take us out to our remote correspondent. He’s a growth expert. He does some B2B, but he does even more B2C. MicroConf speaker, TinySeed mentor, Taylor Hendricksen. Taylor, what are your thoughts for Josh?
Taylor: Hey, Rob and Mike. Thanks for having me on. Josh, thanks for submitting your question.
Before we jump in to the rule of the metrics on B2C products, I’d like to note that it really does differ greatly from business to business and product to product, depending on the few things. The two of the biggest ones being the purchase price, that you’re obviously selling the products for, and what kind of hunger towards the offer there is. Some things that are solved here [00:29:05] would generate much better returns in these metrics than other ones that really don’t have that.
Jumping in, there’s three of the rules of thumbs I’d like to go for in general B2C offers. For onsite opt-in rate for a website visitor using organic to an email opt-in, we like to see conversion rate of about 2%-3%. We see this as low; you could have nothing. Or as high is anywhere from 6%-7% if you have a really great offer dialed-in into that content.
After they are on your email list, a list-to-sale rate, we’ll purchase any of your products, let’s assume you have a 60-90 day sale cycle that you could go to. But a list-to-sale rate we would generally see about 1%-2% rate in there.
Lastly, the value per email subscriber. How much each email subscriber’s worth is around $3-$5 in the first 60-90 day period. That’s the one that differs the most. Depending on this, the financial niches can go up even higher and some of the more hobby niches can go lower.
A way to improve some of those metrics for your current setup, first off, for the opt-in rate, looking through some of your content, some of the content upgrades can definitely be improved, brought to attention more, maybe some more standout design around it. Specifically, it feels like the sour negotiation guide. I thought it was one of the best phrases you ranked for. It could be a tremendous opportunity to send people into that opt-in funnel. The current opt-ins you have were kind of just gray and not really that eye-catching.
How to improve the list of sale? This is something where it sounds like you already got a lot of the core pieces in place with the nurture sequence, the sales sequences, and stuff like that. I haven’t gone through your funnel yet but I’m sure those are pretty good. A way to boost that is to flash sales. It’s something I like to do and hopefully you can generate custom coupons with your setup. I’m not sure SendOwl can, which is the platform you’re using. Other platforms like Ontraport, ActiveCampaign, WooCommerce can do hacks to basically allow you to generate custom coupons for that user that expire in, let’s say, 24 hours. We like to push those. We’ve seen people have engaged maybe the business sales page, but they haven’t purchase yet. That’s one way to cheaply get them over the hump to make a purchase.
Last way to improve your value per email subscriber is after you gone to your main sales sequences, really link that out as long as you can. A good long-term content and an affiliate marketing sequence. After you pitch your products, go through all the good, relevant ones that you’d actually recommend to your audience just to increase that visitor value over time.
Another easy thing to add on that I didn’t see you have, is a push notification list. That’s a really easy thing to plug in. We’re seeing great opt-in rates that are really low friction ways to get that audience out and then you can actually set those automated campaigns to go out over time. Drip out the same content you normally would. Mix it with sales stuff.
In terms of resources to look for, these metrics as well as learning more how to improve those, the biggest one that comes to mind is just DigitalMarketer. Their Customer Value Ascension Journey is a good way to map that. Some of their tactics are a little bit more aggressive in terms of the rule of thumbs. They’ll say $1 per email subscriber per month, especially if you plan financial world, they can achieve this. They’re mailing pretty often and have very aggressive sales tactics within those emails.
I hope this was helpful. Back to you, Rob and Mike.
Rob: Thanks, Taylor, for your onsite commentary. Mike, anything to add?
Mike: No. That was fantastic. That was a great addition.
Rob: I know. This comes back to the whole thing of you and I have certain wheelhouses and experiences, but it’s so cool when we’re able to call on other people in the community.
Mike: Because this isn’t one of them.
Rob: Exactly. I would have had to go and research this. I had some B2C stuff way back in the day, but it was over a decade ago. It’s just not something that we would have. That was awesome for someone who, day-to-day, is doing a lot of B2C stuff. He also does some B2B but he’s one of the folks I know who’s really knee-deep in these stuff. Thanks for the question, Josh. I hope that was helpful. Thanks, Taylor, for chiming in on that.
Other question for the day comes to us from Justin Wolfe from positionhealth.co. He says, “Hey, guys. First off, thanks for the show. Very informative. I have a question about some case studies that we’ve produced for my company, Position Health, which provide real-time notifications whenever people enter or exit medical facilities. Right now, I’ve got a webpage where interested people can fill out a form to request to download the case study by entering their contact info. When people make this request, we sent it to them and add that person as a sales prospect.”
“My question is around indexing for the content in the case study. Right now, the case study isn’t published on our website, but it has lots of good content, and would probably help with making our website more findable in search engines. How would we go about making the case study’s content count towards our website in the SEO sense while still making it available by request only via our email opt-in? Thanks, and keep up the good work.”
What do you think, Mike?
Mike: There’s two things I can think of off the top of my head. The first one would be more related to SEO. I’ll say the second one first which is you could do paid ads for the content. That way, you’re essentially driving people to a landing page and you’re getting their email address. That’s not quite what you’re looking for. I think what you’re looking for is something along the lines of publishing some of the contents or a partial excerpt of it and then providing it as a download if you enter in your email address. Maybe give the title or maybe a brief synopsis of it, and then first couple of paragraphs of it or something like that, or maybe some images from it. They’re a little bit blurred out, so to speak. You can entice people using something like that. You can use excerpts from that content or from that case study around on your website in various places even in other content, use it as a content upgrade, and help capture email addresses using that.
Otherwise, if you are looking to expanding the amount of information that’s on your website, you could post it there as well. I get what you’re trying to do in terms of forcing people to download it. I didn’t mention it on our last podcast except where we talked specifically about case studies. But it’s possible you could get away with posting it for free and publicly to your website, and then also make it available in different places as something that people can just download. You put the content on the site and if you want the downloadable version of it you could say, “Okay, enter in your email address over here.” I don’t know. I have mixed feelings on how that’ll actually even work.
Rob: The last one that you said was the last one I was thinking about was basically if you have a blog or an article section or an essay section, then you put this in there as a text case study. When people land on that, then you say, “Hey, opt-in and get this epically formatted, amazing downloadable PDF thing of this. Plus, an audio version.” Frankly, that’s recording an audio version or something like that is super-fast and easy to do.
If you have just a landing page, whether it’s your homepage, or it’s a squeeze page, or it’s something you’re sending your ads to, and you’re saying, “Hey, I have this great case study and it has great content. Enter your email and download it here,” the odds of someone wandering over and digging through archives of your essays to find this one post that is the same content, is not that likely. That was my initial thought about it. Just offer it in two places as long as it’s not linked to from your header by the same name or linked to in your footer by the same name. It’s more of a section someone has to go to and search from. That’s what Google’s going to want to crawl. If you have these collections of things, then you have this group of content.
If your website is literally a homepage with an opt-in to get the case study, then just this one article off of it, that’s a little weird then. I don’t really know an easy way around that. Frankly, two pages is a thin side anyway. Google is probably not going to rank you for anything. You have to have more built out of that.
Once you get more built out, when you’re at 20, 30, 40 different pages on the site, that becomes easier to put it in the section, then Google index it—assuming they’re indexing your site—and then you rank accordingly.
I wouldn’t be too hung-up since it’s behind an email gate through this route that I can never publish it on my site to this other route because people will find it and then they won’t opt-in their email. It’s such a 5% use case that it wouldn’t be something I’d be particularly concerned about.
Mike: Well, Rob. I think that about wraps this up for today. If you have a question for us, you can call into our voicemail number at 888-801-9690. Or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt, used under Creative Commons. Subscribe to us in iTunes by searching for ‘startups’ and visit startupsfortherestofus.com for full transcript to each episode. Thanks for listening and we’ll see you next time.
Episode 393 | Marketing and Growth Questions Answered
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer marketing and growth questions as well as give advice on starting a new venture.
Items mentioned in this episode:
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 Mike.
Rob: I’m Rob.
Mike: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob: You know man, I appreciated that you and Zander pulled the joke on me and put unemployed on my badge at MicroConf. It was hilarious. Everybody was commenting about it. It was super fun.
The big question people were asking me was like, “How’s unemployment/retirement treating you?” Now that I’m a couple weeks into it, it’s everything you imagine it would be in a good way. I haven’t felt this relaxed and focused almost, it sounds like an odd thing but for me, it’s like having the headspace to dive deep into topics that I just have the time to do.
It’s the freedom to not need to generate a result next day or next week based on what I do today but realizing that long term, yeah, probably we’re going to do something again, something interesting, but to have the freedom to just float from one thing to the next and do it, I haven’t felt like this since before HitTail, which was the 2010-2011 timeframe, we had our second son and I spent about 10 months where I worked 10-15 hours a week and it felt amazing.
It wasn’t until I got 4-6 months into that before I really started getting bored and anxious and wanting to do the next thing. That’s my first report of how it’s going, it’s I’m definitely not bored yet and I will, at a time when I think I will get bored, but I’m certainly feeling my days at this point.
One example of this, man, is, since we have a live in nanny a year or two ago and she was here for about six or eight months then her mom had a health issue and she moved away. Ever since then we’ve just struggled to have stable child care. It’s been a real problem because Sherry is trying to work, I was going to the office a few days a week and it was always a struggle.
Today, Sherry’s out of town speaking at a conference and one of our kids is sick, one of our 7 year olds. She stayed here at the house, but it wasn’t a big deal.
Obviously, I’d prefer during the day to do my stuff, but I don’t have to. It wasn’t this big scramble of, “Oh no! I need to tell my team that I can’t make these meetings,” or, “I had deliverable that now I can’t get done because I’m hanging out with a kid.” It’s that kind of flexibility that I hope that I relish and enjoy in the coming months.
Mike: I can definitely see that. When I’m out of town, my wife owns her own business, it’s
a fitness studio. She’s got things going on at the studio pretty much all week, so when I’m out of town for MicroConf for example, it’s makes it a lot more difficult for her to manage things and then there’s always stuff that comes up where somebody’s going to have to deal with it.
The other day, one of our kids fell in the driveway, literally just before school. That’s going to be dealt with as well. You can’t just say, “Oh well. I’ll deal with it this afternoon.” You’ve got to deal with it at that point and push other things around in order to work through whatever the issue is.
Two people having their own business in the same household is actually really, really hard.
Rob: Totally. Two businesses and kids. All of that. There’s just too many unknowns and there are too many surprises and there’s too many–schools get cancelled because of snow or some other thing, they have problem with busses, or one kid gets sick, or parent-teacher conference–there’s always something going on that is screwing with your schedule and your focus.
Mike: That’s why the general advice on kids is to get a fish instead.
Rob: A fish instead, indeed. How about you, what’s going on this week?
Mike: Now that MicroConf is winding down, I’m starting ramp up the marketing efforts for BlueTick again and I don’t have to worry about things from MicroConf interjecting in into that. Although, things with MicroConf Europe are going to probably interfere a little bit moving forward, but I don’t think that it’s going to be nearly as bad as with MicroConf in Vegas just because there were the two conferences and the sheer number of speakers that we had to work with but there’s just a lot less going on just because it’s only one conference.
But with the marketing efforts like I’m starting to get into the point where I’m focusing on doing things like webinars and the onboarding emails are getting better, there’s a few product updates that are going to go out there, are going to make things a lot easier for customers to do what they need to do in the app and guide them through it a little bit better because right now, I typically do on-boarding for people manually, which is helpful, but it’s not necessarily scalable.
There’s all these low hanging fruit that I still have not done yet because there were pieces of the app that I knew had issues and most of those have been cleared up, but I was waiting until after MicroConf was over in order to do the big marketing push again.
There’s been a couple of times in the past where I felt like things were ready to start pushing on the marketing and then I started to go down that path and then find something wrong. I’m hoping that that doesn’t happen again, but we’ll see how that works out. Nothing goes as planned but I feel reasonably confident again.
Rob: On my end, I found a couple of new podcasts I wanted to mention that are in the bootstrap
software space or the product space, because I have a Google alert for MicroConf, so if you review MicroConf on your podcast, I will tend to listen to at least that episode. It just so happened that there were a handful of podcast that mentioned it. One of which, I already listened to, but I wanted to call them out here and announce them for folks who were looking for other folks like us. It’s the Micropreneur, Startups For The Rest Of Us, MicroConf Crowd, and who are talking about the things that we’re doing.
First one is called Hooked On Products and this is from Phil Derksen and John Turner. Phil and I have known each other from Fresno for years and then John Turner is the co-founder of SeedProd. He’s been on the podcast.
The next one is Build Your SaaS. It’s Justin Jackson’s podcast. He co-host with his co-founder of transistor.fm, and then of course The Art of Product which is Derrick Reimer, my co-founder’s podcast with Ben Orenstein.
We will link those up in the show notes: Hooked On Products, Build Your SaaS and The Art of
Product, but definitely, if you’re looking for some new podcasts along these lines, those are the early 2018 winners at this point.
We have listener questions. First set of questions, it looks like three questions in the same email. It’s from Michael Palteon, and he says, “I have a couple questions. The first is, I’m working on a SaaS app in a server management/scaling. I have a large LinkedIn network and I’ve started posted the progress of the development on a weekly basis. I know Rob did something once with Derrick when he was building Drip, but I feels like the post or the content only stay on LinkedIn. What’s your view on posting the same content on possibly multiple channels? Like Medium, a blog, or maybe even a podcast versus focusing on LinkedIn.
Mike: I think the danger of focusing on just one place to post them like LinkedIn is that that stuff doesn’t tend to work it’s way out into other areas. By posting it on your blog and on Medium and on LinkedIn, then you start to cast a wider net, but I think that I would also be careful of posting them all on the exact same day, you space them out, so let’s say that you post an article on LinkedIn and then the next week, you post the same article on Medium, and then the next week after that, you post the same article on your blog. That’s going to cast a bit of a wider net because then you’re not only reaching more people in different channels, but you’re spacing it out such that you’re probably going to catch the people who would have caught it on LinkedIn on your blog, or on Medium in other ways.
There’s got to be some overlap between them, but by spacing them out a little bit, you get the advantage of getting it in front of people more than once, but you’re going to have to look into what’s going to be an appropriate schedule for that, and I don’t know off the top of my head what that would be. Obviously, it depends on a lot of different factors.
That’s how I would think about it. I don’t think I would just say, “Oh, just post it here.” Unless you have a newsletter or something like that where you’re telling them flat out, “We’re going to be posting exclusive stuff and it’s only going to be in our blog,” for example, and “You’re only going to get it if you’re on this newsletter.”
If you’re going to do that, do not also post it in other places because then you’re essentially lying to the people who are signing up for your mailing list, they’re not going to appreciate it.
Rob: This is a tough one. I think syndicating to multiple platforms tends to be a good idea. Back in the day, it was the duplicate content penalty from Google. I know that kind of exists these days and Google will pick a canonical version, but it’s this balance of trying to digital share crop on other people’s land which is the LinkedIn or Medium, or build your own following on a blog.
These days, it’s just so hard to do it on your own and to try to get people to come read it because you have to get those traffic sources and it’s harder to share on all these things.
I would probably lean towards doing both that if you do have something long form to put it on your blog, post it on LinkedIn and link back. You can say, “This was originally published on blank,” and link back to your blog. You could do the same thing on Medium.
The thing that I wonder is whether it’s going to help at all, whether you’re going to notice it. That’s something to test. When we did this with Drip, at a certain point, we were building the blog up, then we switched to where we were posting first on Medium just to try to see if we could gain critical mass there. We never did.
We switched back to doing both and it was fine. Posting to both was not a big time investment and so we kept doing it and it had a nominal return, but it was not some mind blowing growth engine or anything like that.
I think you’d either reeling to discover a clever hack or perhaps that time has passed for things like the Medium and the LinkedIn. You’ve got to get in early and get traction and be an early person and get a lot of followers, then you can do it.
You should try it for 60 days and just see what happens, but I have question if it’s going to move the needle at all, and then in terms of maybe doing a podcast, to me that’s a different question altogether, because if you’re going to write it and put it out, that’s one thing.
If you’re planning on just reading them on a podcast, you could certainly try it. Hopefully it’d be interesting, but like podcasting is such a different game than blogging. I think there’s a whole
different question you want to ask yourself is, “Can I make this entertaining? Will people want to listen to it?” That kind of thing versus writing one of articles, people will just stumble upon it.
Michael’s second question is, “I’ve been thinking about starting my own podcast for some time. But I like shows with two hosts. My question is how would you go about finding a co-host for a podcast? I don’t think I’ve heard you guys met and decided to start the podcast. It would also be interesting to hear that as well.”
Mike: Do you want me to take that one?
Rob: Yeah. I think we both know the story. Take it up.
Mike: The way Rob and I met was back in 2005. I had left the startup company that I was working for, went off on my own. I think Rob, you’ve talked a little bit about how you were doing independent consulting around that time.
Working from home alone is isolating and back at those days, there were not very many blogs and there were no communities for people who were a single founder working out of their living room or their kitchen or the basement. I looked around and the closest I ever found was the Joel on Software Blog.
Obviously, a lot of people were reading that, but I looked at that and said, “Well, I would like to blog about my own experiences.” I started doing that and I was looking around for people who are doing the same thing and I came across Rob’s blog.
I didn’t realize it at the time, but Rob was also doing the same exact thing and had come across my blog. We were peripherally aware of each other, but didn’t know each other, knew who we were. I think fast forward a little bit, Rob had ran through a bunch of different products and one of them he sold, he was selling from his blog. I looked at it and said, “Hey. I’d be interested in buying that.” We got in a conversation, I bought it from Rob.
I think it was for the next year or so, you and I traded blogpost back and forth before we posted them just because we weren’t real comfortable blogging on our own yet and just went through it like an iterative editing process and then once we got comfortable, we just went on our separate ways and that was around 2007, I think.
Fast forward a couple of years, you had started the MicroConf Academy and that was based on building a course around all the stuff that you had learned and you are just basically busy or too busy to turn out all the content with it and you looked through your Rolodex and I showed up
on the shortlist somehow and we got to talk and worked something out, and I basically joined you as you the co-founder of the MicroConf Academy. That was 2009; 2010, we started the podcast. Is that right?
Rob: I think so. 2010 podcast and 2011 MicroConf.
Mike: That’s how things worked out. I don’t if there’s a good lesson there in terms of finding a co-host for the podcast, but there was at least some level of familiarity there between us from editing each other’s blogpost and stuff before we got on to the podcast.
I don’t think that you need that. I don’t think you need to go into a business relationship with somebody before that part, but you have to at least be able to get along and know that I think that your general values and ethos are aligned. That’s our story. Rob, are there specific lessons that you can think of for that?
Rob: He’s asking how would you go about finding a co-host and I’m wondering, do you really want to start your own or do you want to find a podcast for the single host and try to get on an existing one.
Jordan Gal and Brian Casel did this. Brian had the podcast Bootstrapped Web first and then Jordan joined him later and made the podcast a lot better. I think you could consider doing that. If someone else is already doing it and they’re delivering and you get a little bit of an advantage of coming on late. That’s probably the first thing I would consider.
The other thing is if you’re starting it to talk about fun stuff like entrepreneurship or hobbies or whatever, then just go ahead and do it and start it and you’ll find people. If you’re starting around your business and you really wanted to be this super professional thing up front, then yeah, I do think you need to spend more time thinking about the concept and looking around.
There are podcasting forums, there are podcasts about podcasting and those that have communities. I think probably getting that intersection of people who listen to those podcast and listen to Startups For The Rest Of Us or go to MicroConf, if you’re going to talk about bootstrapping, then that’s going to be it.
You have to find that Venn Diagram, an intersection of someone who is interested in the topic and able to talk about it and also wanting to do it in a podcast form because it is no small commitment to do this. Ask anybody who podcasts. There’s an amount of time that you have to set aside and an amount of time that you have to that you have to have.
Podcasting is different than blogging where if you blog once a month, nobody really cares. It’s fine. Hey, it’s a good article and I got up on Hacker News or Product Hunt or whatever. If you podcast once a month, you might as well not. Unless you’re Dan Carlin’s Hardcore History which is a four hour thing. That’s an exemption. But for the most part, you need to ship fairly frequently, it is a commitment from that start that I would say if you don’t think you can keep that up, do not waste your time.
Mike: I think that commitment is something that people overlook and you really have to have an episode at least every week in order to start building an audience. I remember back when we started Startups For The Rest Of Us, we were doing it every week and then we decided, “Let’s change this up and let’s do every other week.” We did every other week for three or four months. It was very obvious that the growth slowed down. Once we went back to every week, it went right back up again. You have to be mindful of that.
I know that there’s articles all over the place that say, “How many times you should post? How many times you should create a new podcast and how long they should be?” And all these different things. It really boils down to the function of how much time and effort you have, and what it is that you’re going to do with it, what’s your goal for that? There’s just a lot of different factors, that’s all.
Rob: He’s third question. He says, “It’d be great if you guys could do another run down of the podcast you listen to or recommend.” I’m going to table that one for now because maybe in the next few episodes, we’ll do that. I’d like to revisit, it changes so frequently with me that I think it’d be worth doing.
He asks, “What equipment and recording devices do you use? Many other great podcast that
I used to listen to are no longer publishing new episodes as often and I’m also not sure why this happens to most podcasts.” That’s exactly what we were just saying. It’s because it just takes time and if you don’t have some type of something that you get out of it, whether it’s a personal brand or whether you’re selling conference tickets or whether you’re promoting an application where you’re getting some type of feedback loop, it is too much work to justify just doing a podcast for the sake of doing a podcast.
That’s why I’m sure a lot of these fade is they just figured the ROI isn’t there given the amount of work there is. Aside from that, what equipment and recording devices do we use, Mike? What complex, intricate system do we use?
Mike: Are you mocking me? We’re mocking ourselves.
Rob: We use USB headsets that we have for 10 years. I know sometimes now when I listen to podcasts I hear the plastic in the headsets jangling around. I’ve tried the Blue Yeti, and I’ve tried the Snowball and I don’t like the sound quality nearly as much in the finished product as these Plantronics (DSP) Digital Signal Processing headsets. I’m not going to name the exact model because they’re discontinued and whenever they come up on eBay, I buy them.
I have about 8 or 10 in the drawer in my house because I burn through them because they break. The mute button stops working, they get to janky, their cords are broken. I’ve probably gone through five or six in the past 10 years and I have another stock in this drawer here that Sherry and I share.
But what I would say is if you’re going to do this, you can get the Yeti or the Snowball, those are the recommended ones. You just have to have sound baffling, you have to have a very quiet environment. If you have kids five rooms away, it will totally pick that up.
If you want to do the USB headset where you can move your head a lot, definitely go USB and don’t go the audio auxiliary and then test several out. That’s what I did. I bought six or eight of them at the start and tested them all out. It was a noticeable difference in the sound quality.
Mike: Just some general advice when looking for headsets, you probably want something that’s relatively light. You don’t want something that’s massive and bulky. You definitely want something that has a boom or a microphone that is stable and is going to sit in front of your face.
As Rob had just said, the problems with the Blue Yeti and microphones like that is you really have to be speaking directly at them and hold your head at about the same distance the entire time. It can really be uncomfortable, especially if you’re the type of person that fidgets. I know Rob tends to walk around sometimes when he’s podcasting, I sit at my desk, but I also look around the room. I’m not always looking in the same direction. That screws with the sound quality.
I think that’s what most podcasters who are much more visible about what equipment they use, they talk about these things, “Oh, the sound quality for this and that.” The USB headset works fine. It doesn’t matter that much. You don’t have to go all out on all of these equipment.
I think the USB headsets that we use, I think they cost $40 or $50. It’s not very expensive. I have seen versions of the ones that you are not willing to talk about or disclose like $200 or $300 at this point because they are much newer versions. I’m using one right now that I can find for $60 or so and it’s a slightly different version than you use. It works fantastic.
Rob: Again, that’s Plantronics headsets. It’s not the super lightweight one. You want the one with the bigger mic with the pop filter and all that. Several of them will work for you, I don’t think you have to get so detailed and know exactly which models or whatever we’re using.
Mike: We used to just record over Skype and use either call recorder or Pamela. Pamela was on Windows that would hook into Skype and then Call Recorder is on the Mac. It worked reasonably well, but the problem is they record at both sides, so if your connection drops from Skype or it was not a great connection which happens frequently and feels like it happens more and more frequently these days with Skype, then you may end up recording the podcast again.
I’ve had entire podcast where we’ve had to dump it, not with ours, but with other people’s where Skype just dropped everything. There’s nothing you can do at that point.
We use a service called Zencastr right now. zencastr.com. It records the audio on both sides through the browser, there’s no additional software needed. You hop on it, records on both sides, uploads. I have to send it into Dropbox. It works out well.
Rob: I think the switch to Zencastr was definitely a good move for us. A lot less headaches. I don’t go on to Skype at all anymore. I do all my meetings through Zoom and then recordings through Zencastr. When someone asks to Skype me now, I’ll groan, I get figure out how to make a call because they redo the interface every four months and you don’t even know how to do it. It’s kind of a mess.
Mike: Your response should be, “Do you still have a yellow corded phone?”
Rob: Thanks for the questions Michael. I hope our answers were helpful. Next question is from Alex and he says, “Hello. I am interested in creating my own ecommerce website that will host new entrepreneurs’ products on my site for a subscription fee. Ideally, this will be for those who want cheaper advertising and not at the level of having their products on Amazon yet. My niche is American businesses and my goal is the support of small business. I’m still working out all the details. This is a new business platform but I’d love to hear some feedback.”
What do you think Mike?
Mike: I’m not sure what he’s selling.
Rob: I think this is a tough one. He’s trying to setup a website that can host ecommerce like physical products for people who don’t want to put their products on Amazon yet or on at the level. I just don’t know of any product that’s like that. It’s a theoretical of like they want cheaper advertising, but have you run into anyone in your life who fits this bill?
Mike: No.
Rob: Yeah, and I haven’t either. That’s the first thing I would do, Alex. I think it’s good that you asked. First thing I would do is you need to go out and find 10, 20, 30 people who have this exact need because I don’t believe that there are that many people. If there are, and if they’re not at the level where they want to have their product on Amazon, which is not a very high bar. I’m guessing that they’re not going to have enough money to want to pay a subscription fee to host it on your site.
Mike: Yeah. This is a classic case of saying, “It’s too expensive for me. So it must be too expensive for other people,” and you’re trying to squeeze blood from a stone at that point. It’s not a good business model.
I recognize and empathize with the desire to help the people who have no money, but you can’t do it by charging them, like you have to go up market, charge people who do have money and then turn around and use that to invest in products and services and things like that that can help that people at the bottom.
Honestly, that’s one of the things that we’ve done with the scholarship program this year with MicroConf. We got MicroConf to a certain point and it was growing and scaled up and we got enough people there now that it’s like, “How can we help those people at the bottom who could use that help to get up to our level? How do you bring other people up?” To do that, you need money. You can’t charge the people who don’t have any money. It’s not going to work.
Rob: I’m glad you asked the question because I’m guessing that if you don’t go out and validate this, you can spend a lot time either building it or hiring someone to build it or whatever. The first step that I would do is just figure out if this is viable at all because I think red flyers are going out for both you and I about the idea at least the way that he’s described it here.
All right, our next set of questions are from Linton Ye and he is with jimulabs.com. He says, “Thanks for another tremendously useful MicroConf. As I mentioned to Mike, I started building a course right after last year, 2017 MicroConf. I’ve been trying to follow the formulas I learned at the conference and I’m seeing some good signs. I’d really appreciate it if you could help me with some questions. Background: The product is a video course built for UI designers teaching them React, which is a JavaScript framework. The goal is not to convert them into developers but to help them work with developers more efficiently. As of now, I have 1300 subscribers in my list.” Assuming that’s an email list. “I’m still building the course, but there are around 30 people who have bought the first module for $79 or preordered the entire bundle at $169. About two-thirds preordered the whole thing, about one-tenth of all subscribers replied to my quick question email.”
He has a decent amount of engagement. “The majority of my subscribers came from a few post on Designer News, which is like Hacker News for designers. The post brought almost 800 subscribers last May and June, but the growth of the list has slowed down since then. I’m also doing blogging and guest blogging. I didn’t do much SEO intentionally, but many told me that they found the site by Googling. I have attached a chart of the history of my list with explanation of key events. Let me know if you need more data.” And he has a bar graph for us.
He has questions for us. It looks like maybe three or four. He says, “Does this product feel like something that will work?” That’s an interesting way to phrase that. I’m not sure what work means. It just depends on your goals. Do I think you’re going to sell copies of it? Absolutely. Do I think you’re going to make six figures from it? No. The list is too small. It’s not too small. The list is too small to make six figures from is what I’m going to say. You’ve got to start somewhere.
If you haven’t engaged with these subscribers and that’s the part I don’t know. I would be keeping them warm and then I would be taking other approaches that are probably free marketing at this point. If you watch the talk this year from Adam, that we talked about Adam Wathan. We talked about in the last episode, that was the blueprint of how to do this. It’s a lot of social media stuff and it’s a lot of getting into that community and having a reach in there.
Mike: I was going to mention as well. He talked to me about this product because he attended Growth edition and Adam spoken as Starter edition and Adam’s talk, go over to the MicroConf recap website and look up Adam Wathan’s talk, there’s all the notes there from the Christian Genco took and there’s a lot of detail there that you won’t get the full context of the talk but there’s a lot of stuff there that you’ll be able to take away.
I think that that will really help you figure out how to make certain things work and how to scale them up. But obviously, with your questions, there’s a lot of–it depends in there. How far do you want to take this? How much time do you have to dedicate to it? Do you want to grow into this massive business or do you just want to keep it small and put something out there that you can use a resume builder, but something to point at and say, “Hey, I’ve done this, so I have experience in this area.” It depends on what the purpose of it is.
If it’s a build a business, then yeah, you’re probably making into a business but as Rob said, not with just 1300 subscribers. That’s a great start, but you need to find other channels and I think, as he had mentioned in this email that most of those came from a Hacker News post. You need to find what those other channels are and whether that’s Twitter or Facebook or doing paid ads.
I think the difficult position you’re in is one, the product is not finished and two, you’ve already presold some of it. Preselling an unfinished product, especially with tiers is something that Adam had actually advised against.
Rob: What’s interesting is we’re talking about this list of 1300 people and that’s a great start, and can you make $5000 from this or $6000 or $7000 from that list? Yeah, I think so, if they’re engaged. I don’t think that’s an issue at all. But this is not anything that’s going to replace your income so it does depend on your goals.
His next questions is, “That is priority right now is to finish the course or should I work on growing the list at the same time? Most people have told me that it would be better to spend half of my time on both.” I agree with that. If you are just hammering the course out and not doing any list growth, I feel like you should be partitioning your time. Because keeping that list warm and keeping it going is how you’re going to build this business.
If you go through fits and starts where you’re going to try to grow the list for six months and then you’re going to build a course for four months, and you’re going to stop building a list, unless you’re at critical mass where you do have that 10,000; 20,000; 30,000-person list, that’s when you can start thinking about backing off growing it.
Do you agree with that Mike or what do you think?
Mike: I totally agree, but I think that there’s a little tactic that you can throw in there whereas you’re building the course, as you’re finishing it, you can take little snippets of that and post it on social media in order to help augment your existing list. Whether that is specific post on Twitter or on Facebook or you put something out on Medium that says, “Hey, I’m working on
this and this is what I’ve learned so far.”
Educating people about how to do something and talking about the struggles that you’re going through as you’re going through that process, that has a tendency to resonate with a lot of people. It’s not to say that everyone who joins your list is going to become a customer, but if they’re interested in the stuff that you’re teaching, not just the process but the content itself, those people will eventually turn into customers.
It also gives you the ability to take those things and email them out to your existing list and say, “Hey, just an inside view of what this looks like and where it’s at.” That will help keep the list warm as well, because the last thing you want to do is spend 80%, 90%, or even 100% of your time just finishing the product and then four months from now, you haven’t send a single email to your list and you drop an email on them that says, “Hey, this thing is now available, please buy it.” You and I have seen people do that for SaaS applications and software and it doesn’t work.
The reason it doesn’t work is because they’re like, “Oh, I totally forgotten you even existed.” They’re not excited about it.
Rob: Right. His next question is, “What else could I do to grow my list. Blogging and a free email course seems to work okay, but it takes a lot of time to create the content. I have seen others using ads. What you recommend?” My thoughts on this are the way that you typically do this is through social media, through blogging, through podcasting, through getting out there and doing a bunch of free marketing. That’s because most people don’t have a ton of money to spend
in the early days.
If you have money and you’re interested in running ads and that’s something that excites you then go run ads. Go run ads on Facebook or buy ads on Designer News, he talked about sponsor email newsletters and test that stuff. That stuff is always fun for me.
I’m some type of twisted individual that I enjoyed paying to see if I could get a sustainable flywheel. Other people hate that. If that is their business, they don’t want to do it. You look at how Rob and Mike built their list? How has Justin Jackson built his list? Through being out there and recording a podcast every week. Justin Jackson, he’s got a bunch. That’s how he built his list. It took him a few years, but it’s figuring out what it is that interests you that you think you can do long term and that you’re actually going to double down on.
Do I think ads could work? I absolutely do. But you have to ask yourself, is that something that you’re interested in doing? I know Brennan Dunn started with ebooks and courses and blogging and tweeting. It’s was a big social media thing, and then he got it to the point where it’s making enough money and he knew that for every person that gets on his list he gets X dollars back. Then he started running ads.
He doesn’t even need to be that good at running the ads because he had such a high LTV on list subscribers. You could take that approach, too. You build up the social following, you build up the brand, and then later you run the ads, you could do ads from the start. I think any of these will work, it’s a question of what am I really excited to do and to get up every morning and do. If it’s like, “I love the blogging and the rush of trying to get to the top of Hacker News, Product Hunt, and Designer News,” then go all in on that and blog three times a week.
If you prefer to podcast, then go all in on that. If you prefer to do ads like I was saying, which some people get more excitement out of, certainly, I think you could invest time in that.
Mike: His next question is, “Is it realistic to have a goal of 10,000 subscribers in the next year?” He says he spoken to some people who have 5000 subscribers, all of them have been writing and building their list for 3-5 years. “Have you see anyone who was able to grow a high quality list quickly?”
This is a hard question because it depends so much on what you do. Is it possible? Absolutely. It depends so much on the things that you do. These people who’ve been writing and building their list for 3-5 years, what tactics and techniques have they done? Have they systemized it? Have they created processes that are things that are repeatable and scalable and can be done without their input and toggling the different switches? Because if you’re relying out of process that depends on you doing something every single week, it’s less likely that you’re going do it.
It’s not to say that it is impossible and there’s definitely people who do it. We pump up this podcast every single week, almost without fail at this point. But it takes time and commitment and do you have the commitment to do whatever to toggle that switch or pull that lever every single week? If you don’t, it’s not going to happen, therefore it’s going to be pushed out.
Honestly, in a way, it ties back to email follow ups, that’s why I built Bluetick. I don’t have the mental capacity to sit there and write all of those follow up emails every single time because it’s hard to do, it’s hard to make yourself do it if you don’t want to. You need to find those things that you’re going to be able to do on a repeated basis or to automate in such a way that you don’t need to be directly involved in it. It’s still going to create Rob’s flywheel effect.
Rob: Yes. 10,000 subscribers in a year, absolutely possible. I have known many people
that do this. It’s not easy and it’s not just going to happen just by throwing things out, you have to be deliberate about it, you’ve got to be focused, you’ve got to ship either some type of content or some type of thing on a really recurring basis.
Product launches also help. If you do a big product launch, it will help you build the list, joint ventures would be a huge one. If you find anyone else that you could promote their product, they could promote your product, that is going to build the list because even if people don’t buy your product, they will sign up to hear from you about future stuff that you’re doing. Doing a podcast tour, there are a lot of ways to do this and if you really focus, yes, I think you can do it.
I think building a 5000 subscribers in 3-5 years sounds like a nice even keel side business pays where it’s like, “Yeah, I’m going to blog about this this week.” Which is fine, but it’s not. If you’re really aggressive about this and you want to get to 10K, I think you can absolutely do it.
Thanks for the question Linton, I hope our answers are helpful.
If you have a question for us, call our voicemail number at 888-801-9690 or email at us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control, it’s by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 257 | Mistakes Founders Make in Getting Traction
/
Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Gabriel Weinberg, founder of DuckDuckGo, about the mistakes founders make in getting traction. They also discuss Gabriel’s new book “Traction: How Any Startup Can Achieve Exposlive Customer Growth”.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of Startups For the Rest of Us, I’m going to be talking with Gabriel Weinberg about the mistakes founders make in getting traction. This is Starups For the Rest of Us, Episode 257.
Mike [00:17]: Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products. Whether you built your first product or you’re just thinking about it. I’m Mike.
Gabriel [00:25]: Hey, I’m Gabriel.
Mike [00:26]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Gabriel?
Gabriel [00:30]: Great. Thank you for having me come back.
Mike [00:33]: Yeah, no problem. So to give the audience a little bit of preview here, we’re going to be talking to Gabriel Weinberg about the mistakes that founders make in getting traction. We talked to Gabriel back in Episode 199 about a year ago, and for those of you who don’t remember or didn’t listen to that episode, Gabriel was the co-founder and CEO of Opobox which sold for ten million dollars back in 2006. In 2008, he started DuckDuckGo which is an internet search engine that emphasizes protecting searchers’ privacy and avoiding the filter bubble that is offered by personalized search that you would be most familiar with from Google. So you’ve co-wrote the book ‘Traction’ with Justin Mares and people can find that at either tractionbook.com or Amazon or Barnes and Noble. The new version comes out today. In that book you talk mostly about the bullseye framework that people can apply to help them get traction. Because the second edition of the book is hitting shelves today, can you give us a little bit of a refresher for those people who didn’t catch that episode about the bullseye framework and what the book itself is about?
Gabriel [01:32]: Yeah, sure. I actually started working on this book a long time ago, back in 2009, when DuckDuckGo was just starting to get traction itself. I was trying to figure out how do I get more traction, which is obviously what almost every business sets out to do once they launch their product. How do I get this thing traction? I found out that there was no great framework for getting traction. There was nothing like a procedure you could do to really think about how to pick the best marketing channel for your business at the time. So I went out just to investigate that myself. Then after interviewing lots and lots of people, really hit upon this framework, and extracted it from their successes and called it the bullseye framework because of all the channels that you can use, and we identify 19 in the book, you’re really trying to hit that bullseye, the right channel for you to grow your startup and meet your traction goal. So once I had the framework, I realized there’s really a need in the market for this book just so that startups can use this. That’s when I got my co-author, Justin Mares, to help really flesh out the book. From then, I thought I was 70 percent done, but I was really 20 percent done and I had to really write the book, edit it, and put it out last year. People started using it right off the get go and it starting working really well for people. We sold 35,000 copies, sold out our three printings. Then I started talking to people, doing events, and all sorts of things and really understood where people were getting it wrong and where people were getting it right. From that, I wanted to do a re-write that more crisply helped people get traction and that is what this second edition is. In that context, the bullseye framework in the first edition was a five step process and we simplified it in the second to a three step process. That three step process is simpler and it is the following: the first step is to go through all the 19 channels, these are all the different ways you can get traction, SEO, search engine marketing, trade shows, etc., there’s 19 of them, and really brainstorm a test in each channel where you could possibly get traction from that channel. Then the second step, and we’re talking about this, but the visualization of this framework is a bullseye, like a target, with three rings. So that outer ring is these 19 channels. Then the middle ring is you pick three that seem the most promising tests to run then you run those tests. Those tests are meant to be very small, simple tests, take less than a month and $1,000 to figure out how many customers you can really get through that channel, how much it would cost to acquire the customers, and are those the right customers you need right now to achieve your traction goal. So you run those tests in the middle ring. Then hopefully we assume one of those middle tests look really promising. One of those channels seems like it could be the channel to move the needle for your business. Then you go down to the inner ring, the bullseye, and you double down on that channel and focus on it and try to achieve your traction goal through it by running additional sets of tests within the channel to discover the best strategies to do that. So that’s why it’s called the bullseye framework is because you’re trying to hit that bullseye and find that one channel of the 19 that is going to make you hit your traction goal.
Mike [04:49]: When you went about this new edition of the Traction book, what areas were you seeing where people were making mistakes in implementing it? Was it a result of the fact that it was a five step process and it needed to be cut down to the three step process or were they just kind of misinterpreting different things? Is it the difference between optimization or understanding?
Gabriel [05:07]: The three step process really simplified it and people were a little confused by some of the steps that we had cut out. They were things that you needed to do, like ranking the channels and prioritizing them; really we combined into just one step. There was a little confusion around that, but the bigger issue was in each of these now three steps there are ways that people routinely messed them up. We tried to reorganize those parts to really make it clear to not mess it up in those ways. They’re non-intuitive ways and I can go through each of those. Besides, that’s all in the intro, the first five chapters. Then the last 19 chapters are a chapter for each of the channels. For those, we updated them and we really tried to edit down the parts that were kind of too fluffy. We just did better editing. We ended cutting out about 50 pages of the book even though we added two additional sections, a preface which explains kind of my history of getting traction and some of the mistakes I made, and then a testing addendum at the end which is one of the things people really wanted and were messing up of how to do cheap tests in each of the channels. We have a list of all the channels and we give you a way to do cheap tests in each of them.
Mike [06:20]: I think those extra tests are extremely helpful just because it may not necessarily be clear for some people, for example, offline ads or viral marketing and things like that. You kind of have a conceptual idea of what it is, but you don’t necessarily know how to go about doing it because you’ve never done it before or you’ve never considered it before. I think the addition of those things can certainly help a lot of people. What are some of the broad non-intuitive mistakes that you were seeing people make over the last year of talking to people that are pretty common?
Gabriel [06:52]: Right. There’s four of them. Three of them relate to each step in the new process. The first one is over-arching before that and it’s not starting traction early enough. People think that they need to, and we did say this in the book, but you know now it’s says a lot more crisply, people think that you really need to launch a product before you start going to get traction. The reason is the ‘Leaky bucket’ metaphor. We reuse that in the book and try to use that to explain it. The ‘Leaky bucket’ metaphor is when you start your product it has a lot of holes in it, right? It’s essentially a leaky bucket and if you pour customers on the top, and you can think of customers as money because it costs to acquire customers, then that money is leaking out. So the intuitive answer is I should not spend money on traction efforts until my bucket holds water. The problem with that is that what people do instead is they get beta customers and they get these beta panels and they iterate on the product just off these beta customers. Those beta customers, they’re too close to you. Not only do you become friends with them and you kind of know them, but they are not getting first impressions of your product at any time. They are seeing this evolution of the product and they are primed with what they previously know whereas if you have a steady stream of cold customers coming through, through some traction efforts then you’re constantly seeing real market feedback and whether your product is really going to resonate in the market. You want that so you can really figure out where the holes in your bucket are or else what happens is, this is what usually happens, you then launch your product, start to get traction, try to get traction, and realize, “Oh, I thought my bucket wasn’t leaky from my beta customers but it really is still leaky.” So you really want to start that traction effort right away, right at the beginning of product development. We try to argue strongly in the book that you should spend 50 percent of your time on it. Just to make it even more clear of why you should do this is you think that you might be getting a lot of this information from your product development methodology from your beta customers, but what you’re getting in addition to finding the holes is when you’re testing these traction efforts, you don’t have to spend a lot of money on it just to get a few customers coming through cold, you’re figuring out what messaging is best. You’re figuring out what niche to focus on when you launch. So when you do launch you can figure out the right channel to launch with, the messaging, the niche to focus on, and you can really hit the ground running with a real useful product launch.
Mike [09:27]: Yeah, as you were talking, and I’m not sure this is a good analogy to make, but the whole leaky bucket, I think that people have this whole conceptual idea of like all the holes are exactly the same size and I just need to put a patch over each of them, but the reality is that depending on your product those holes can be different sizes. They can be different shapes and the solution to patching each of those holes can be completely different. You need the customers going through that bucket in order to get the information you need to figure out what the patch is for that. So whether it’s a new feature or whether it’s a new marketing message, every single patch is going to be different. You can’t just take a blanket approach of, “Oh, let me create this product and implement all these features because I think that’s what people want.” Those customers coming through and leaking out of the bucket is where you’re going to get the information you need in order to patch those holes. You can’t do it in advance. If you try to, your patch is not probably going to be the right size or shape and you’re going to end up doing too much work or not enough work. In either case you’ve either wasted effort or not done the things that need to be done and you’re still going to be leaking things out the bottom.
Gabriel [10:31]: That’s exactly right. I think the real known intuitive piece is that you have a false sense of security with beta customers. That’s been the product development methodology for a long time and it’s a good one. You should have beta customers, but it’s just not enough.
Mike [10:46]: What are some of the mistakes that people make in terms of the different channels? Because obviously there’s 19 different channels that you can choose from but there’s going to be certain ones that people are much more familiar with. Shouldn’t people be focusing on those?
Gabriel [11:00]: Right. That’s the number one mistake in the first step. When you’re brainstorming all these channels, people navigate towards the ones they’re already familiar with. That’s just availability bias. We saw more and more that people just wanted to ask us and say, “Okay, which of the channels are great for my type of business. Which are good for SaaS businesses, which are good for this offline retail business. That’s the wrong question to ask because you almost want to ask the opposite question. This is the non-intuitive piece of which are the most underutilized channels for my industry or business. Often those are the ones that are greenfield that you can have huge traction opportunities in. Unfortunately, the piece that people mess up is they often ignore these underutilized channels because they’re not familiar with them because they’re from that industry. Say everyone in that industry is using search engine marketing so therefore they need to use search engine marketing. That’s usually a bad idea because that channel is very competitive because all your competitors are using it. If you could find something better to do, even offline, that would be a good choice. A good example of this is WP Engine, the Word Press and hosting company which we profile in the book. They are an online hosting company for word press. A very competitive industry. They ended up going for two very underutilized channels through different parts of their growth. One was offline ads. So they ended up a lot in magazines which no one else was really doing. Then two, they built a side product, a speed tester for word press which we call as a channel engineer and as marketing where you build this other tool that’s completely free on another website that’s complementary to your product. Then everyone started using their speed tester and then they could capture their e-mail and upsell them on the hosting product. If they had just focused on the regular channels, search engine marketing is what people mainly use and SEO, they would have had a much harder time growing.
Mike [12:53]: Now isn’t the risk of doing that also that you are choosing channels that your existing competitors have tried to make work and were unsuccessful doing? That would be my natural inclination. My fear would be, “Oh well, I’m not sure about doing offline ads because there must be a reason that my competitors aren’t doing it.” Is that a fear that people should be concerned about? Is that a real fear or is that more imagined than anything else?
Gabriel [13:19]: I think that’s a fear that people really have. It’s an imagined fear in the sense that almost everyone has the same availability bias and so, quite honestly, no one is really testing these under utilized channels for the most part. But, you make a really good point which is it’s almost the highest leverage tactic you can do. Go talk to other founders, not currently competitors, but failed competitors in your space who are very willing to talk to people usually. They’ll go tell you about all the things they tried and why they failed. It may be the case that they did try something five years ago that didn’t work for x, y, or z reason that may work now or you may discover they tried a bunch of things that for good reason won’t work now. This is kind of the other broad area where people fail in this first step of brainstorming is that they don’t really brainstorm deep enough. You really want to have a good sense of your competitive landscape, whatever you think, marketing channels everyone’s tried, go talk to people of things they haven’t tried, go talk to complementary industries to see what they’re trying. There may be some overlap there. Really spend a lot of time thinking about each channel and how it could be used whereas what mostly happens is people say, “Oh, I don’t know much about that. I guess maybe I could use that for something,” and they give it maybe a minute of thought. The problem with that is that underutilized, overlooked channel may be the one that could just jump you to success.
Mike [14:46]: But I guess how would you know? That kind of comes back to the question of how to test these different things. If you’re looking at a particular channel and you’re not entirely sure how to go about testing that channel, there’s, I think, this bias towards not spending a heck of a lot of money or time doing it because you don’t know what you’re doing. How do you come and get past that? How do you scope the tests that you’re doing such that you’re not wasting time and money, but you’re still doing what would essentially be a definitive test to find out whether or not that channel is going to work for you?
Gabriel [15:18]: Right. That’s exactly why in the second edition we added this testing addendum where we’re giving you suggestions of how to test these channels. In the scope of these tests, you’re trying to answer three things again. You’re trying to answer how many customers could I get through this channel and how scalable it is; how cost effective it is, how much does it cost to acquire customers through the channel; and are these the right type of customers that I want right now because each channel can bring in slightly different demographics and types of customers. You’re measuring those against your traction goal which is also a hard number, which in the beginning is often how much traction do I need to get to profitability or financing. Say I need 1000 customers and I run a test and this channel we only think it’s going to give 100 then that’s probably not going to be a good one to focus on whereas one of these that say, “Oh, it seems like I can get 10,000 if I really blew this out.” That might be a good one to focus on. So what you’re doing in that first step is really identifying tests you can run in each of these channels and then you look at them and you say, “Okay, based on my guesstimates of these tests, I think these three tests are the most promising to run.” Then you literally run them in the second step. The part that people mess up in that second step is trying to optimize too early, premature optimization there, and if Facebook ads are the channel you’re going to test, you run 40 ads. You really shouldn’t be doing that. You should be running four ads and what we say in the book now is don’t run a test longer than a month or more than $1000 except in extenuating circumstances. Then from those tests you can have data to dump to the next step. So to really answer your question is you need a good way to run a cheap test in these channels and if it’s cheap and short then it’s really easy to test these underutilized channels because you have a good sense of what you can do that doesn’t take a lot of time or money to really bear out whether that’s going to work or not.
Mike [17:12]: Now are there any guiding principles around that $1000 versus the month of time? Is that just an arbitrary cap or is that something that is helpful for a founder who is trying to boost up a company and they have much more time than money versus somebody who says, “Hey, I really need to find this out fast, let me just blow $1000 in a week to try to test out say paid advertising or something like that.” Are there guiding principles around striking that balance or is it more just kind of what resources are available to the founder?
Gabriel [17:42]: Well we look at all, we try to come up with good cheap tests for all the channels. We looked at them and we said, “Okay, that cutoff seemed appropriate and it encompassed all these test ideas.” Then where we saw people messing up was they were spending either too much money or too much time on these tests and not cutting them off sooner when they had the information they needed. So, yeah, it is a guiding principle. I think that particularly is guiding for early founders trying to initially find their traction channel. The caveat there is like DuckDuckGo or I Am Now, we’re running tests of much greater magnitude because our traction goal is so much higher and we want to get the error bars down on our estimates so much lower. So we’ll run bigger tests that take longer and take more money. When you’re first starting out or just going into a channel for the first time, I think you should keep it really small, even if you had a lot more money and time. There’s no more reason because you reach diminishing returns very quickly on these tests.
Mike [18:43]: Got it. So the purpose of those principles of $1000 or no more than one month of time are really for newer businesses that are just going into a channel and those limits can fluctuate between the different types of channels that you’re going into. So when you’re targeting blogs, for example, you wouldn’t probably be spending $1000 but it might take you several weeks of back and forth with the relevant blog owners in order to get your product mentioned on their site or to kind of get through their process of doing guest posts versus something like paid advertising where you may very well spend up to $1000 and you can do it within a couple of days, but those bounds are really to encompass all of the different channels that you might try.
Gabriel [19:27]: That’s right. Exactly. A lot of the tests will be free. Some of them you can do very quickly. Yeah, they’re more like guidelines of limits. If you see yourself going over these limits early on, you might be doing something wrong.
Mike [19:39]: Right. That totally makes sense. I just wanted to make sure that we clarified it for the listeners. So are there any other mistakes that people are making when they’re going into specific channels? If you’re testing a specific channel, what sorts of things should you be focused on? Obviously there’s also the potential to focus on multiple channels. Why wouldn’t you try to do more than one at a time?
Gabriel [20:00]: Right. So in the testing phase, the things that people really messed up are the premature optimization, going too deep while you’re just trying to get error bars around these numbers, and the second is not really doing it quantitatively which we really haven’t mentioned. You have these three questions you’re trying to answer and you really should be trying to get hard numbers against them and then compare those numbers to another hard number which is your traction goal. Once you identify the right channel that is really promising that seems like it might actually work in the sense that the numbers look good, and if it looks like you started to optimize it and scale it, it would reach your traction goal, then you’re doubling down. This is the other area people mess up. This is the inner circle now. You hit the bullseye and you’re working on that channel not getting rid of the other channels. It’s really non-intuitive because say you have three promising tests in channels. Say you did a little PR and you did some social ads on Twitter and you did some offline meet ups. All three, they were promising. They had a little bit of success, but the Twitter ads were just well and above the rest. The right thing to do in our framework is to double down the Twitter ads and really focus on that. What people often do is they still focus a bit of their time on the PR and the meet ups because they know they are going to get some results out of them. The problem with that is their marginal benefit of focusing on the Twitter is much higher and when you really focus on it, what you’re really doing then is now focusing your testing effort on that one channel so now you’re uncovering the underutilized strategies and tactics within that channel. The only way to do that is to really focus. The time you’re spending on these other channels that yeah, they get you a little traction, but that’s time taken away from uncovering the best tactics you could use on the main channel. That’s the other area that people messed up when they’re focusing is not really doubling down on the one channel and getting rid of the other tests they were running.
Mike [22:03]: It almost seems like by focusing on the one channel you’re getting exponential results versus some of these other channels where you’re getting incremental or multiplicative results which are not comparable if you go far enough into that one channel that you’ve dug into or that you’ve identified as the one that’s going to give you the most traction. Is that an accurate way to portray that?
Gabriel [22:22]: Yeah. Not everyone can get the exponential growth, but that’s what you would hope. To do that, what you’re doing or advocating is you are becoming a worldwide expert at that channel. If you’re really focusing on say social ads via Twitter and Facebook, you’re really digging into all the case studies, all the forums, what people are on the platform cutting edge, what they’re saying about their own platform. For example, so right now Facebook video ads are kind of outperforming everything because Facebook is really focused on competing there. That may not be the case a month for now, but you want to be first to those tactics because when you’re first to those new tactics, those are where that exponential stuff really happens, the really high click-through rates and things like that. You want to be on the cutting edge of those. This just goes more into saying that going to underutilized places in the world gives you great conversion rates both channels and then tactics within channels. The only way to really do that is to really be in optimization mode and that requires a lot of effort and all that other effort is distracting you from getting there.
Mike [23:30]: Now one of the things that you talked about earlier was that you have to be in each of these channels and before you even do that you go and you define what your traction goal is going to be so that you have some sort of basis for measurement. Now how do you define that traction goal? What should that look like? Are there some ideas that you can share about how to define what that is or is that more specific to the type of product that you have?
Gabriel [23:54]: Yeah, I totally agree. That’s basically step zero. The other thing we added to the book was a preface about a little more of my history. That’s something I messed up early on. To give you a good example, I set out early on to get traction via SEO because that’s what I knew from my last business. But it turns out that I was pretty successful at that and spent a lot of time doing it and so I ranked really highly for the term new search engine to get to duckduckgo.com. I got number one on it, but it was just not enough people to really move the needle for what my traction goal really needed to be which ultimately was like 100,000 searches a day, not 10,000 which is where that ended up getting me. If I had sat down initially and realized my traction goal should be 100,000 searches a day, then I would have looked at SEO and either changed my SEO strategy completely or not done SEO to begin with. So it really is important to take a step back initially and figure out what your traction goal is. What I think that should be is a hard number that really moves the needle for your business and achieves some kind of significant inflection point of your business. That could be a number of things depending on what your situation is. The number itself, of course, will vary depending on your business, but for most people starting out that number is often one of three things. It’s how much traction do I need to get profitability, how much traction do I need to get financing, or what do I need to prove that I have product market fit. Those are usually specific numbers like I can look in the market and see which companies are getting financed and see how much traction they have in terms of growth or revenue or whatever the metric is in your industry and say, okay that’s what I need to hit. Then you can back out from that from your pricing about how many customers I kind of need and that’s the number you should be evaluating against these tests. You should definitely start identifying what that goal is. It goes right back to what kind of business you’re running too because if you’re not concerned with high growth or financing and you’re really concerned with paying your bills at a certain level of profitability, then that should be your goal. You should say I need to take home x amount a month and from that I can back out how many customers I need to do that then that should be your traction goal.
Mike [26:10]: Yeah. So those traction goals can either be the revenue that you’re specifically looking at or could be tied to a piece of functionality in your product. For example, a search engine, number of users is much more important, or not even users but like searches per month is important versus if you’re in a situation where you need to be able to pay the bills, you need to have that revenue coming in and you need to be able to tie those marketing efforts directly back to those revenue goals. You can tweak the numbers in terms of the price and the number of people coming in and just do some multiplication there to figure out is this really working for me, is this going to be a channel I can leverage or do I need to go someplace else? Depending on which of those situations you’re in and which of those metrics is important to you, you can then find what your traction goal is.
Gabriel [26:57]: That’s right. That exercise, that’s basically saying what is your business model and trying to clarify that initially, which is really an exercise everyone should do because, like you said, you can think about the pricing of your product. There’s a good post, I’m forgetting who wrote it, about the ‘hunting’ metaphor, but like hunting deer and elephants and different things, but it’s basically saying how much it’s going to take to get to a million dollar business which is what most people’s goal is initially based on what your price point is average revenue per customer. There’s wide ranges of businesses that get $0.10 a customer to $10,000 a customer and knowing where you are on that scale really influences what your goals are in terms of how many customers you need, which then changes everything about how you’re going to get traction.
Mike [27:44]: That article that you just mentioned was from Kristoff Jans and he wrote the blog article on ‘Five Ways to Build a One Hundred Million Dollar Business’. It’s kind of a graph of the size of your customer and how much money they’re paying you versus the number of customers you have. Obviously there’s this graph that goes along with it. I think the two extremes that he uses are one thousand enterprise customers each paying you $100,000 a year or, on the other end of the spectrum, you’ve got 10 million active people who you’re monetizing at $10 a year by selling ads for example. The metaphor is essentially you’re hunting elephants or hunting mice and how many of them do you want to go after and what’s your business model look like? I think it’s an interesting metaphor he used.
Gabriel [28:26] Yeah. He’s got a follow up too. He adds three more things there and he goes down to hunting flies because people wrote him back and they are like what about some of these other businesses? So he has an addendum article. It’s even a wider range. It’s really interesting because each of those categories are very different businesses, but has very direct implications for how many customers you need and how much traction you need and what your traction efforts are. So it’s really good to think about that ahead of time and think about really which type of business am I in? Which category am I on the scale?
Mike [29:00]: I think that leads back to another interesting point about if you start bringing that type of model in and start looking at, for example, a SaaS business versus a services business. Services businesses fit into this model where you’re probably charging them a heck of a lot more because you have to, because you’re interacting with them. You have to sell them on an engagement and it might be five weeks, it might be five years, but the reality is you’re charging them a heck of a lot more and those are kind of your elephants versus a SaaS model where, I guess, traditionally you want to charge as many customers as you can smaller amounts of money. But the problem is that it takes much longer to get that mass of customers. That kind of leads back to the analogy that Gayle Goodman from Constant Contact called the ‘Long, Slow SaaS Ramp of Death’. Getting that mass of customers that you need takes a long time. You can get there faster if you can charge fewer customers more money, which lends itself more toward the services model, but a lot of people are trying to get away from that if they’re trying to build product. There’s this balance that kind of needs to be struck and, as you said, it depends a lot on the model that you have behind your business. I think it’s interesting how that should be what is the piece that’s influencing what your traction goals are. I think that sometimes it’s a little confusing because the type of business that you want does not necessarily match up to the type of business that you’re going to end up with.
Gabriel [30:23]: Yeah. Right. What you’re getting at is people end up going through this and not doing this early and then they meet with kind of that harsh reality a little later on. That’s why I think it’s good to do this early and really think about hard numbers, what your goals are, because that will inform everything. Maybe you want to change what you’re doing initially.
Mike [30:44]: I think that’s a super important point to make just because going through this process you may very well find out, hey this isn’t the business that I thought it was, maybe I should go do something else. So what startups have impressed you with their ability to gain traction and why? What is it that has made them so successful?
Gabriel [31:00]: So we profile a bunch of ones in the book and each kind of has an interesting story that they did something really cool with traction. This concept, I was talking earlier with WP Engine and this engineer and his marketing I really liked because we literally had to name that channel because no one else really had named it. HubSpot and RJmetrics are two other companies that have really embraced that channel and does it pretty well. Moz would be another one. They’re all making complementary tools and sites and they’re using some of their engineering resources. The reason why it’s so cool is it’s non-intuitive that engineer resources are so sacred in a company that everyone thinks they should always use their product, but this is taking a little of those resources and using them for marketing. Developing this other tool that then drives the whole business. So HubSpot recently IPO’d, did that with their site called Marketing Greater where you could go type in your domain name and it would tell you all about how you’re doing in online marketing which basically every business who goes online needs. So they got millions of businesses through there and then from that they had a great lead channel to do inside sales and sell them on their main product. Moz has done the same thing and RJmetric which is a kind of cohort analysis company in data analytics, has done it with a bunch of different sites where a lot of their target audience is in house data development and teams who independently need to do database queries and things like that. So they made all these database kind of tools for these developers and then on there they educate them about RJmetrics. So I really love businesses go after these kind of underutilized channels. Another good example of another under utilized channel is publicity stunts which most people completely shy away from because it seems like they would be unscalable and repetitive. To some extent that’s true. There’s been a lot of ones that happen just at launch. A great example, an old example, but I like it also because I’m in Philly, for example is half.com, Josh Kopelman who currently runs First Round Capital. When they first launched half.com they had a city in Oregon renamed to half.com, Oregon, which was Half, Oregon, and they gave two jobs to the of the people there. The whole thing cost maybe $100,000. Got them national TV across the board, 40 million impressions before there were any social media. So back in 1999 and immediately vaulted them up. Six months later that company was sold for 300 million dollar plus. Then another company who does publicity stunts, Grasshopper, they really have invested in this over time and they have two employees completely dedicated to thinking up these publicity stunts and things they can do, run contests and things like that. Half of them fail, but they’ve gotten most of their traction through this effort because when they do take off it’s such a great press story. They get so much press it makes up for everything.
Mike [34:05]: Now at what point do you start taking into account the ROI on some of these channels because some of the things that you just used such as HubSpot, they have these different website marketing graders and things like that, but their price point is also substantially higher than I think your average run of the mill SaaS application. I think that their pricing starts at $200 a month and if you kind of extrapolate and say, “Ballpark it, I don’t know what these numbers actually are.” If an average customer sticks around for two years with them, that’s $4800. So for them it makes sense to fill that pipeline with as many people as they can because each of those customers is going to net them $4800. It becomes this awkward situation, especially for the people who are running really small businesses where the look at that and say, “Well that sounds great, but I can’t really afford to have an inside sales team calling these people even if that is going to be successful because I just simply can’t afford it.” How do you take those types of considerations into account?
Gabriel [35:01]: This is where the testing really comes into play. When you’re running these tests you’re trying to assess those three numbers, what the scaleability of it is, how many customers, how much it’s going to cost to acquire the customer, and is it the right customer? The second one, how much does it cost to acquire the customer, is the key one here. In this scenario, say the engineer and his marketing, they don’t need to have an inside sales team necessarily. It could be an off the shelf product that you sign up for in some kind of signup flow and that’s the test that you’re running. Will people convert from this and sign up and then how much would it cost to get them? How much contact would I need to have with them. You’re absolutely right. If you’re a small SaaS company you can’t afford any kind of personal contact like that. It costs too much money. So you need to be testing whether it will just work for your regular signup flow. I think that all comes out in the testing. That relates back to your traction goal and kind of knowing how much you can spend to acquire a customer.
Mike [35:57]: I think that’s a pretty good place to wrap it up. This book comes out, I believe, today you said, correct?
Gabriel [36:02]: That’s right. Today. October 6th.
Mike [36:04]: So if anyone’s interested in buying that, they can go over to tractionbook.com. We’ll link it up in the show notes. They can also get it on Amazon or Barnes and Noble, correct?
Gabriel [36:13]: That’s right. We have a couple other retailer links like IndieBound. They’re all at tractionbook.com.
Mike [36:18]: Great. If anyone wants to follow up with you, where would they do that?
Gabriel [36:21]: Twitter is best. My handle is @yegg. Y-E-G-G.
Mike [36:25]: Awesome. Well thanks for coming on the show Gabriel.
Gabriel [36:27]: My pleasure.
Mike [36:28]: If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Out of Control by Moot used under creative comments. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 235 | When Is It Time To Level Up?
/
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike help you answer the question, when is it time to level up? They address how to think through the process and what concerns there might be to leveling up.
Items mentioned in this episode:
Transcript
Rob: In this episode for Startups for the Rest of Us Mike and I answer the question “When is it time to level up?” This is Startups for the Rest of Us episode two hundred thirty-five.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products whether you’ve built your first product or are just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike: Chris Kottom who had suggested our episode on stair-stepping had sent us in another link. He’s got a book called Minitest Cookbook and it’s aimed at helping Ruby and Rails developers write maintainable test cases using mini tests. I went over and checked out the website. It’s pretty cool. It’s got a lot of stuff in there. He’s got a nice little eBook that goes along with it and looks like it’s got a lot of good information in there.
Rob: Congratulations, Chris. We’ll make sure to link that up in the show notes. We also received some praise for episode two hundred thirty, which is our fifth anniversary episode where we had our wives come on and do the show. It’s from Patrick [May?] and he says, “Hello, folks. First off, I love the show and it’s real business life theme, no baloney for sure. I’ve never emailed you but after the spouse episode today I had to comment. Ladies, it was so great to hear from the other or better half of an entrepreneurs life. As a small scale farmer and entrepreneur I felt connected with this episode. My future wife and girl friend of eight years supports me, helps me tackle tough decisions, and keeps me focused when I wander. You guys rock and keep it up. Thanks.”
Mike: Thanks, Patrick. We really appreciate that. I’ve heard a lot of people have been pointing their spouses toward that particular episode and having them listen to it.
Rob: I know. It seemed to have resonated to hear that side of it. I’m glad. We were obviously inspired by Techzing’s two hundredth episode where they had their wives come on and Sherry was actually on that episode as well. But the format seems to speak to a lot of people and I think it tells maybe this other side of the story. It’s like the other business partner’s side of the story that isn’t told enough, I think.
Mike: The unsung heroes.
Rob: I think exactly. People who put up with us in the day to day life.
Mike: Well the only other thing I’ve got is my book is coming out for its public launch next week. So that will be out, I think about the time this episode goes live.
Rob: Very cool. So if folks want to check it out where would they go?
Mike: Singlefounderhandbook.com.
Rob: Nice. All right. Well this week’s episode Mike and I are going to be talking about when is it time to level up. And it’s actually based on a question from Simon at Small Farm Central. Simon writes, “I have a couple of products that I feel are pretty mature. They’re growing ten to thirty percent a year but I can’t grow them super fast because the market’s a bit tapped out. The vertical is very small and we rule the vertical pretty well. I have some new products that I’m working on but I’m wondering when is it time to reduce investment in these more mature products and focus on the new ones that probably have more growth potential. Even if I stop investing and pull back on my existing products, they will keep generating cash since they are SaaS apps.”
So the question is how do you know your product is mature, how do you now when to move on, and really we’re boiling it down to when is it time to level up? I’m using that term level up in the context of our stair-step episode a few episodes back, and also in the context of Patrick McKenzie’s talk at MicroConf where he talked about moving from Bingo Card Creator, which was a small price point, one time purchase and most of his traffic was a single channel. It was SEO with some ad words. And then he leveled up to Appointment Reminder, which was SaaS, and now he’s leveling up to [?] Starfighters.io. And it’s really in line with the stair-step approach that I’ve been talking about for awhile and that we’ve covered a few episodes ago. I think there’s more to dig into this, the specifics of when you should think about leveling up and what some of the concerns should be, and how to think through that whole process.
Here’s some thoughts about when to consider leveling up. And by leveling up I mean moving from that step one, which is typically a single purchase priced product up to multiple purchase priced products, and then up to recurring revenue.
Now in Simon’s case in particular he actually owns two small SaaS apps in this same space and he helps small farmer manage their web presence, is one of his apps. Imagine Squarespace for small farms. And the other one helps them manage their CSA programs. CSA is where a consumer you could pay the farm a monthly subscription and you get a basket of fresh produce every week or every other week. It stands for Community Supported Agriculture. But he knows this market really well. It is a very small niche market so it’s not going to be something that grows like an app for marketers or an app for designers. It’s a good point he brings up, says his growth is not super fast. It’s ten to thirty percent a year. Which is slower than a lot of apps that we might hear about. And I think that’s the first point at which you should consider perhaps moving on, is when revenue has essentially flatlined or is growing very slowly. And if you’ve spent six to twelve months trying to increase it and investing time and energy in trying to find new traffic sources or trying to improve conversion rates and they’re not going up, that is, to me, a leading indicator that you might want to think about adding another product to your portfolio or leveling up.
Mike: Yeah, I think that’s all about a balancing act, too. The ten to thirty percent a year, call it twenty percent, and if you try really, really hard and you get twenty percent but then you don’t try hard at all for the next six months, say, and you still get twenty percent growth, then it’s indicative that there’s not a lot of, I’ll say external influence, that you can provide that’s going to push that business forward. It’s going to move on its own but I think a lot of this also boils down to the fact that just certain types of markets, they take a long time to essentially tap into to get those customers onboarded. And I would imagine that this is not a very tech savvy crowd, so you’re probably going to have to do a lot of hand-holding in order to get those people on board. So, even if you are to try and scale those efforts up, it’s not as though you probably have the man power to be able to get as many people onboarded as you would like.
Rob: I think this relates to the law of diminishing returns. Early on as you’re building and you’re starting to market, you’re going to increase revenue month after month. And then at a certain point you’re going to hit a plateau, and we have talked about this in the past about breaking through plateaus, and there can be any number of causes for that, but if you’ve been working on an app for a number of years and you can see the pattern of it has been slow growth all along, and it’s going to continue to be that, then maybe that’s not a time to bail on it, right? Because it’s just the status quo and that is what this market looks like. But if you’ve had years of eighty percent growth, fifty percent growth, and then it’s slowly tapering off and you feel like you’ve peaked in the market and you might be starting to lose interest, then that’s the time where I think that you’re starting to perhaps lose momentum.
That takes us into our second point of when to potentially consider leveling up, is when your momentum has died down for an extended period of time. Basically, when you’re own personal interest is starting to wane. And I find that this often happens around the time when plateaus start to come up. Because when your business is growing like gangbusters, you’re momentum doesn’t tend to die.
Because the problem with losing momentum is that if you don’t care, if you don’t love this business any longer and you’re starting to maybe lose interest, you’re going to start wandering. You’re going to start thinking about other ideas, you’re not all in anymore, and the business is naturally going to suffer because of this. And so that’s the second thing, is if your revenue has peaked or is flatlined, or if your personal momentum and desire to grow the business has flatlined, both for an extended period of time, those are the points where I really start thinking about should I be making a transition out of this.
Mike: Yeah, I think those things are tied pretty well together in terms of the motivation and how fast you’re growing, because if you’re growing fast you’re motivated to keep doing it, but as your returns start diminishing on the same effort, you’re just not as motivated. And I found that even with the stuff I’ve done. I don’t know if there’s a specific name for that, but it almost seems like there should be.
Rob: Yeah, I know. I think there’s a judgement call to this because every business is going to hit some plateaus and every business is going to lose your interest for different periods of time. So you might have two weeks or three weeks or a month where you hit a plateau and where you’re bored with it and you’re fed up. And to me that’s not long enough. It’s got to be something like six months where you’ve tried everything you can think of and nothing is working, and you’ve asked for advice, and you’ve talked to advisers or mastermind forks or whatever community it is that you have, and you’ve tried everything that you can think about and you’re at the end of your rope and you’re still not growing. That’s the point where, I’d say, are pretty solid indicators that you either need to seek more help, like you need to pay a consultant to come in and help, or you need to start thinking about potentially moving on/leveling up.
Mike: I think something else that factors into this is how much money you’re making from it. There’s a difference between whether it’s something you’re doing on the side or versus whether it’s something that it’s completely your full-time income as well.
Rob: Yeah, I agree. And I think this begs the question of do you always have to keep growing, because there’s a lot of talk in the venture funded startup space about growth, and I think there’s also a lot of talk in the bootstrap startup space about growth, and I’m not sure that growth is necessarily an end goal for everybody, nor should it be. I think depending on where you are in your life, let’s say you’ve just had a child, you may not care about growing for a year or two, or you just want to rent a trailer and drive around the country and hang out with your family. Growth is not necessarily the end all be all of all this stuff. I know I talk about it a lot. It’s been a personal goal of mine to grow businesses over the past few years but if you hit the point where you’re making ample money to live on, I don’t think there’s anything wrong with living the life. Like in quotes, “Living the life,” for awhile and really evaluating whether or not you want to start another app.
You and I were discussing this before, not to use the word coast, because coast has a negative connotation, but I coasted on revenue for a solid eighteen months. It was around 2010, maybe, 2011, we had our second child and there was a solid ten months where I worked a day and a half a week, two days a week. Nothing grew but nothing flailed either. And then there was about another six months where I was just enjoying it and doing things and that’s when I wrote the book and that’s when the Academy really got built. I don’t think that a constant push for growth necessarily should be the goal for everyone at all times. I think it depends on your situation.
Mike: Yeah, growth for the sake of growth shouldn’t necessarily be the goal. It’s what are the things that you’re trying to achieve and why. Why is it that you want those things? If you want growth in order to make more money so that you can do X, Y, and Z then that’s fine, but at that point it’s not growth that’s the goal it’s that X, Y, and Z, whatever that happens to be.
Rob: Right. So I think what I’d do if I were in Simon’s shoes is to go on a retreat and I would get the heck out of Dodge for forty-eight or seventy-two hours, try to be alone and basically ponder this decision and its ramifications and ask a bunch of questions. There’s actually a good podcast episode. It’s Sherry and mine’s podcast called ZenFounder. And you go to zenfounder.com, episode two. We outline the things you should ask in a retreat. But one of the questions that I would be asking is do I still have interest in this niche? Do I still want to grow these apps? Do I really want to start over with a new product in a new market? Because I think that’s what Simon’s asking about because he’s saying his market is too small, currently. Because starting over with that new product in a new market is very, very hard and don’t underestimate how much of a challenge and how long that takes. Looking backwards at the past two plus years, that Derek and I have spent building Drip from scratch, it’s a ton of work. I think that’s something to really think about. It sounds great at the beginning and there are going to be some hard times again. So ask yourself, are you in a place in your life, and mentally where you want to take that leap and go through the hardship of starting something new.
Mike: And I think that if you’re going to do that that’s something that you have to really commit to because it can be very easy to become complacent when you’re in a place where you’ve got money coming in, you don’t have to work terribly hard to get that money coming in the door, and you can essentially drag out other things that you’re working on for an extended period of time because there’s no push or drive for you to complete it in a short amount of time. So just be mindful that if you’re going to go in that direction then you need to commit to doing it or not bother because otherwise you’re going to waste a lot of time and something that you could have easily finished in eight or nine months is going to take you three or four years to finish.
Rob: Right. And the good part is that Simon has a lot of experience. He’s basically grown these two SaaS apps to the point of success. I don’t know what his revenue is but I know that he has a few employees and he owns this market. So he definitely has a lot of experience under his belt and the true stair-step approach of learning these things early on. So I think he does have some advantages under his belt. But I do think that going on a retreat and thinking through do you need to keep growing right now, is it time for you to maybe live the life for a little while, take four or six months and coast and enjoy it, or are you geared up to really start something and hammer it out, start a new app. I think this ties into thinking about it, in terms of fast growth versus slow growth. Because every app and every market is not going to be fast growth. The vertical of small farms or catering to restaurants, or selling into hotels. There’s a bunch of niche markets that we can think of, especially if you’re building a niche piece of software for those markets, where I just don’t really think it’s feasible to have this hundred percent or two hundred percent year over year growth every year. Your growth is going to be slow the entire time, and I don’t necessarily think that’s a bad thing as long as you have the patience to do it and it’s not driving you crazy.
Mike: Yeah, and we had an extended conversation about how to essentially present that fast growth versus slow growth. We talked about auto pilot, we talked about coasting. All these different words that have different connotations depending on how you use them. And I don’t know what the end words for them really should be but it comes down to what your growth curve looks like. Fast paced marketing startups, you’re going to have a lot of heavy growth and it’s going to be easier to onboard people, and you’re going to be able to move them through your sales funnel quickly, versus these other things where the growth is significantly slower, in the neighborhood of, as we said earlier in the episode, the ten to thirty percent year over year growth. That is much slower but the question also comes out as to how far down the road does that growth look like it’s going to go? Is it going to tap itself out in a year or is it going to be ten years or twenty-five years? I think there’s a very big difference between some of those different numbers. And it’s going to influence, in some ways, what you decide to do moving forward. I think that ultimately what you do is also going to be heavily influenced by what you’re interested in.
Rob: Yeah, I think it ties into personality as well. Certain folks are more patient and more willing to just hang out an build a successful, highly profitable app but not feel like their always tantalized into going into that next high growth niche market that everybody’s talking about. I have a lot of respect for the folks that are doing that and can stick with one thing for years on end. So I think that’s an interesting way to think about it.
I think the stuff we’ve talked about so far can be summarized under “Is this something that you want to do?” You need to think about it from your personal perspective. I think another question I would ask myself is is there another opportunity that you can think of where each hour of your time will be worth five X, or ten X more than with your current business? Because if that’s not the case and you don’t have your finger already on something, I’d be less inclined to back away from this. Again, unless you’re really fed up with where you are and you want to make a quick exit, I’d be thinking about what’s next and thinking about how that will be different. Without that “What’s next,” it makes it a little harder. I think just leaving a business behind without having an idea of what you’d be up to next maybe leaves a question mark in my mind. For my personality I think it would leave me concerned but maybe that’s not a general feeling.
Mike: One thing that just jumped in my mind was, for this particular business, have you set out everything that you’ve achieved to do?
Rob: Yeah.
Mike: And I think that if you have then I think it’s probably definitely time to look around and see what else you could do and maybe move on. But if there are things that you set out to achieve originally that are still within the realm of possibility and you just haven’t done them yet, I think you may very well run into a place down the road where you’re like “Gee, I wish I had done that.” Maybe not. It depends on what those things are but it seems to me like that’s something else to keep in mind.
Rob: Yeah, I think that’s a good point. I think the last thing I’ll throw in here because it tied into my decision when I moved from HitTail and moved onto Drip, was is there an external dependency that could potentially render your product moot like you’re integrated with Twitter and they’re going to jack with your API, or you’re integrated with Google and they keep changing everything every six months. In Simon’s case, I don’t think it is, but in the case of HitTail, if Google’s going to be changing things and breaking your app altogether then it might be a good time to think about diversifying.
So I think those are the thoughts and concerns and the questions that I will be asking. And I know Simon asked a little bit about how do you know when your product is mature or how do you know when you own the market. I feel like you have a better sense of it than we do, just because we don’t know your market. And my guess is if you ask yourself or you look at the data, how many small farms there are and how many you’ve reached, you have a pretty good sense of whether or not you can accelerate growth or whether or not this is just a solid business that is hit maybe a plateau. I do think that I would think of it in terms of a plateau and not as the end all be all of the business because my guess is someone somewhere could take this business to the next level. The question that I would ask is what would it take to [?] X this business and do you think that’s possible? And that can play into this decision of if you think it’s possible and these are the steps then do you want to do those?
Mike: I think my sense of that is just very slightly different, which is just that is there a possibility for this business to double or triple in size within a reduced time frame than what you’re currently looking at? As I said, I think it’s slightly different than what you just said, but it boils down to is it even possible, not just for you but for anybody? And if it’s not that might be your indicator to say okay, let’s go do something else or, as we talked about before, maybe you’re just happy where you are and just keep running this business for the next fifteen, twenty years.
Rob: Right. Which I do not think is a bad thing because the pains of starting over are not to be understated. So if you decide to stick with it, that’s great. We wish you the best of luck. If you decide to use this as a time to have an exit and level up, I thought about three different options for how I’ve seen this done and two of them are good choices and the last one is pretty much a bad idea, but we’ll walk through each of them.
The first choice that I’m throwing out, and these are in no particular order, they’re not in priority or anything, the first option is to sell the app. What’s nice is that there is a market that has started to coalesce over the last couple of years for these higher end SaaS apps, especially, but pretty much bootstrap software. And even eCommerce and product test service and all that stuff. There’s now becoming a bit of a liquid market that is more than just the low end flip of market where everything’s twelve months of revenue or twelve months of profit or whatever. So there are definitely solid website brokers out there that are dealing in this type of stuff and the multiples vary depending on growth and all types of stuff, but frankly with a SaaS app that is fairly systemized I think you can get at least two and a half times your annual net profit and potentially up to three, three and a half. Which it becomes an interesting number at that point. If you’re doing a chunk of change each year and you’re able to get 3X that change then realistically your choice is do I take this money off the table now and give me time to start thinking about what my next idea is, potentially acquire something that is more interesting or build it from scratch, or do I stick around for the next three years and try to manage this thing on the side in order to earn that same amount of money?
The second option that I’ve seen people do successfully, but only a few times, is to actually put someone in charge of the app. [Heaton?] Shaw did this with Crazy Egg where they hired basically a CEO to run it, full-time, that person was not focused on other apps. I attempted to do this with HitTail, and I had Derek working half-time on HitTail, half-time on Drip. This is way back in the early days of Drip. The problem was is that Drip quickly grew. It became a bigger app, bigger opportunity than HitTail so I pulled him off and we both started working on Drip, and as a result it didn’t work out for me because I wasn’t willing or wasn’t able to find someone who I thought could totally run it on their own and run it, but perhaps Simon’s in a different situation here where he could really hire more of a CEO or COL level person who can continue to run the app in his absence.
Mike: Yeah, I think that’s the difference between whether or not you have somebody who is going to be involved in your old business that’s also in your new one. Because I think that with Crazy Egg, I don’t think that [Heaton?] and Neil had had anyone who was actively involved with KISSmetrics when they decided, essentially to relegate that to the back burner. So that may be the deciding factor, I’ll say there. But I think that this route is possible but I think that you also have to do it right. You have to make sure that you’re not stepping on an opportunity either forward or backward when you do it.
Rob: And the last of these three options for putting an app on the side is to try to do both. It’s to try to start your new app and just figure you can manage the old apps on the side and not hire someone who is not fully in charge of them. And this, from what I’ve seen and from what I’ve experienced, is not a good idea. Patrick has mentioned this with Bingo Card Creator that trying to do it on the side basically revenue dropped every year since he did that. I saw this with HitTail when both Derek and I stepped away from it, revenue dropped. It’s really, really hard to do two things well at once. The exception is early on when I had a bunch of small apps, I had little apps like [?] and Voice and Beach Towels and little eBooks here and there, those really didn’t need much management. They didn’t have a high touch sales process like I imagine the Small Farm Central does. They didn’t have nearly the moving parts that a real SaaS business did. They just really got leads through a single channel and they converted those leads and all of the stuff was really an automated process either through a virtual assistant or through code. So that’s an exception that if you have something that really, really can be automated, almost ninety-five percent or whatever, then I think you can put that on the back burner but it’s definitely much, much harder to do and I don’t know of any models I’ve seen successfully doing it with a more complex app like a SaaS app that’s doing five figures a month.
Mike: Yeah, it feels to me like that’s a function of the support and the onboarding. So for example, Bingo Card Creator, the onboarding is not very difficult but the support could potentially be much, much larger so you have to have somebody there who can manage the support side of things. And you have to be able to continue staying on top of the SEO because it’s such a low margin business. Because of the low margins you’re not going to be able to take your focus off of it because if you take your focus off of it, immediately your margins are going to plunge, your support costs are going to overtake everything else. And I think you probably experienced something similar with HitTail where you had Derek working on it half-time and then you pulled him off of it but them there wasn’t really anybody there to backfill that. It just seems like that factors into it heavily.
Rob: Yeah, the thing is most of us are running businesses that change frequently even though it may not feel like that. And if you have a business that relies on SEO for a lot of your traffic or relies on ad words, that stuff is changing every six months, so you can lose a lot of your rankings when Google decides to do an update or ad words get more expensive. Or if your using Facebook ads, as an example, they change algorithms and they change the way things are done and suddenly a main source of your traffic goes away and if it was your main business you would spend the time experimenting and figuring it out. But if you’ve now moved on to something else it’s really hard to shift your focus back and spend the week or two weeks or three weeks, whatever it’s going to take, to completely rediscover another traffic source or to reoptimize an existing traffic source that you’ve lost. And so that’s where, in every case that I can think of, trying to do an old somewhat complex app and to start a new one, it breaks down eventually. It may work for six months, it may work for twelve months, but eventually you’re probably going to hit a roadblock with one of these many changing things that we see that you’re then not going to have the time or desire to go back and fix.
Mike: Well, Simon, I really hope that that helps answer some of your questions. If you have a question for us you can call it into our voicemail number at 1.888.801.9690 or email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Out of Control by MoOt used under Creative Commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
