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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about the Bluetick marketing plan. Mike breaks down his plan in three categories, one-time, ongoing, and long-term. The two go back and forth on the most effective strategies for each category.
Items mentioned in this episode:
- Bluetick
- FemtoConf
- Price Intelligently
- Product Hunt
- CSS Gallery List
- LeadFuze
- Whitetail Software
- Zapier
Mike: In this episode of Startups For The Rest Of Us, Rob and I are gonna be doing a teardown of the Bluetick Marketing plan. This is Startups For The Rest Of Us episode 384.
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 Mike.
Rob: I’m Rob.
Mike: We’re here to share our experiences to help you avoid the same mistakes we’ve made. How are you doing this week, Rob?
Rob: I’m doing alright. I was just looking through our 584 worldwide iTunes reviews. We’re approaching 600 people, 16 more and we’ll be crossing that 600 mark, which is quite a milestone. Some recent reviews, there’s one here form just last week, from […] and he says, “Great podcast, been listening for years.” One from Mr. Man Man from the UK, he says, “Full of great practical advice. Discovered the show recently and now a regular listener. Extremely valuable advice for anyone who wants to build tech products.” Limons from the US says, “Every episode is invaluable. Somehow Mike and Rob ensure that every episode has at least one and usually a ton of valuable info. I love the presentation style and how much they pack in. I don’t think anyone just started tech business without listening to this podcast.” Thank you very much for those.
You can log into iTunes, or Stitcher, or Downcast, or Overcast, and leave a five-star review without even typing in all those crazy technical words and phrases and sentences. Just hit the five star button and it will go a long way towards helping us stay motivated to record the podcast. Also, helps us grow our audience which convinces us to keep doing every week, to ship every Tuesday, as they say.
How about you? What have you been up to aside from-so you lost power. People know I did a solo episode last week. How was that with no power and no water?
Mike: Oh, that sucks. It was about a day or so that we lost power. We lost it, I think, at around 10:00 o’clock or 11:00 o’clock at night and then we didn’t get power back until probably 6:00 or 7:00 the next day.
Rob: It’s tough.
Mike: Yeah, it sucks. The real hard part is that with no running water either because we have a well and the water comes up through the well with the electricity that powers the pump. We actually have some giant jugs of water that we keep downstairs just in case we do lose power or something happens with our water because we’ve had issues with our pump as well. You lose your pump and you can’t have any running water which is surprising, you use it a lot but you never ever think about of what would happen if I didn’t have water today or what would happen if I don’t have electricity today. It’s just inconvenient to say the least.
Rob: Right. I’m glad you’re back. You went to Germany recently.
Mike: Yup. Went to FemtoConf which was pretty awesome. I had a great time. There were probably about 40-50 people there. There were some issues with a few people getting into FemtoConf just because they were flying in from the Eastern US. Of course the snow storm came through and hit the New England area so some people were delayed, some people just didn’t get there at all. Travel for a few people was kind of a mess. Fortunately, I flew out on Thursday and got there and kind of recovered, no real major issues with jet lag. But I really like the feel of it.
It was a lot like MicroConf when it was much, much smaller. Just much smaller groups, intimate conversations very much like MicroConf. The feel of it and the vibe was very reminiscent of that, I’d say in the very, very early days of MicroConf 2011-2012 when you didn’t necessarily know everybody or you’re just kind of getting introduced to what other people’s businesses were. There were a couple of talks on the first day. Then the next day Sherry gave a small workshop. Then we split off into a couple other ones where Alex Yumashev from JitBit did one on kind of like engineering growth hacking that you could do. Then Mojca Mars gave one on Facebook Ads which I went to that one. She went through and basically set everybody up with their Facebook Ads account, walked them through exactly how to get things started, and kind of helped them figure out what it was that they needed to do moving forward.
Rob: That sounds super cool. There was just one or two talks a day?
Mike: On Saturday there was four talks and then on Sunday there was Sherry’s workshop in the morning, and then there were two other workshops after that. Thomas Smale from FE International was supposed to be there, so there was supposed to be two workshops, and followed by another two workshops. It kind of run simultaneously in different rooms but because Thomas couldn’t make it, Sherry ended up doing one for everybody, and then the other two were split. First speaker on Saturday was Claire Suellentrop who’s also going to be speaking at MicroConf in a couple of months.
Actually, what’s that? Six weeks away right now? Claire spoke first and then it was followed by Aleth, she spoke about GDPR, and then I spoke about email follow-ups, and then Patrick Campbell, he was one of the people who was delayed, he spoke about modifying your pricing and how to figure out what an ideal pricing model should be for your business, and then using it as one of the biggest growth leverage in your business. I think I got a lot out of that talk because I’m kind of right in the middle of evaluating pricing and figuring out what to do with it, and how to pitch it to people.
But he also pointed out the fact that SaaS has gotten substantially more competitive over the past several years. He had graphs and charts to show the number of competitors, the people that started five years ago had versus people who started two years ago versus people who started last year. It was just fascinating the amount of data that he had on that based on all the stuff that they do for Price Intelligently.
Rob: Yep. His talks are always super valuable and have a lot of data. It sounds like a lot of fun, man. Sherry was there, obviously. Told me about it and said she enjoyed it as well and said there was a ton of overlap with the MicroConf crowd. I think she said most people go to one of the MicroConfs which is fun. It’s fun to get together in almost a more mastermind-y arrangement. I know it’s not that small but I bet you kind of know everybody and know what they’re up to and you can literally talk to everyone at the conference.
Mke: Yeah. If you don’t know them before you get there then it’s easy to at least have those conversations and get to know them by the end of it.
Rob: For sure. Cool. What are we talking about today?
Mike: Well, I had asked a few people what they wanted to hear on the podcast. One of the biggest things that came out of it was what is going to be the initial marketing plan for Bluetick now that the new website is up and running. I wanted to talk about that and kind of just go back and forth, and giving I guess a high level indication of what I’m going to be doing. And then you and I can talk about either specifics of it or vet some ideas around or even just tear some of these ideas apart, and say, “Look, don’t do this,” because more than happy to hear some of the advice that you have to share.
Rob: For sure. I know I had shared with you at one point the Drip marketing game plan and the HitTail one actually. The HitTail is a little bit out of date but did you look through that, at all, to populate this list you have?
Mike: Some of those things are pulled from there. I haven’t gone back to either those in a while. I probably should do that at this point. Most of what I’ve been doing lately has been really focused on either MicroConf or getting the new website up and running and now that that’s in place and things are settling down a little bit with MicroConf, I can go back and take a look at those. But some of these things are pulled from that.
Rob: Yeah, that makes sense. One thing I would consider before we dive in, you have it broken down into two categories, kind of, “I’m gonna do these things now,” and then my longer term things. Maybe you do them over as you get time or as you get budget. Something I would think about is to even have one before now or to split the now into two buckets is to have one-time things and on-going things. One of your bullets here is product listing sites, like product on beta list, and I would even go so far as to say all the CSS Galleries.
There’s 50 different things; there’s getapp.com, there’s Capterra, there’s AppStorm, there’s this whole list that you can put together. Those are truly gonna be one-time things. I think it might help your mental model of like, “Okay, gonna do those once. Gonna get the heat of traffic.” Even podcast store is kind of a one-time thing. You’re not gonna do that for a year whereas webinars, joint webinars, and that kind of stuff I think is more on-going. Does it help for you to think about it like that?
Mike: Yes. In Teamwork I have a project that’s specifically called Bluetick Marketing that just has lists and lists of things there. I’m looking at it now there’s probably 20 different lists in here and there’s about 162 different to-do items in there. One of them is specifically one-time marketing tasks. Things like going into the Chrome Web Store and looking to see if there’s anything that can be leveraged there, submit into the Google Apps Marketplace. The products listing sites, inside of that various accounts are different places, and documented certain processes, etc. Mostly just one-time things that I need to do it once or is it’s a task that needs to be done but the output of that could then be leveraged over and over again.
Rob: Okay, that makes sense. What I’ve done is update the list a little bit and I just kind of threw some things that’s called one-time and then we have on-going, and then a later list. Will that work for you?
Mike: Yeah.
Rob: Let’s see. Let’s dive in.
Mike: You wanna go straight into the now sort of things?
Rob: Yeah. Let’s talk about the one-time things because I think that these are things that I have all of my marketing plans. But specifically, I’m gonna keep talking about HitTail and Drip because that’s when I formalized this and put it into a doc. I really thought through where are the places that I can get a bump now that I’ve launched. It’s like the website’s live, every time I try to get written up on Venturebeat, and Techcrunch, and ReadWrite web, and GigaOM when it existed, all these things. It never worked but at least I tried it. I was trying to get some type of buzz.
Then there are the ones that are easier or guaranteed. It’s like startupli.st and BetaList, and makeuseof.com, all the things we just talked about, like Producton and that kind of stuff. You’re almost guaranteed to get a listing even though it might take a while to do. I think if you ever venture back, maybe those little-oh, and CSS Galleries is the other one. If your site is good enough and is a custom-design, I realize yours is probably more templatized, but always got a lot of traffic with HitTail and Drip from the CSS Galleries.
Did it convert amazingly well? No. But did it to convert to some trials for almost zero effort because in essence I would have a VA or I think I may have even hired a service at one point because there are like a hundred different CSS Galleries. I think there was someone who productized it and I paid $99 and submitted some info and they submitted it to all of them. To me, that’s a great zero time $99 investment because if you get one or two trials, depending on your price point, that pays it off.
That’s how I always entered it. I think if you ever venture back then need to make a bazillion dollars then maybe these kind of little initial approaches could be a waste of focus or a waste of time but I think given that every trial counts for you, I think those things are important to do. Chrome Web Store is the other one you said in the Google Apps Marketplace. I had zero look with the Chrome Web Store. What’s the difference between the Chrome Web Store and the Google Apps Marketplace?
Mike: I’ll be honest, I don’t know. I’d have to go and take a look at that. I think the Chrome Web Store was specifically for Chrome plugins. At one point, I had on my list of things to put into Bluetick like a small Chrome extension. Obviously, it never materialized. It’s not that it’s not a road map, it’s just I didn’t get there. I don’t know if that’s even viable or something that I could do because they may just say, “No, you have to have an actual Chrome extension to be able to put that in here.”
Rob: Yeah, that’s what it is. While you were talking, I went to the Google Apps Marketplace. It’s now called the G Suite Marketplace. If you integrate essentially into the G Suite, it also looks like you can just integrate with Gmail as well. Since you do that and neither Drip nor HitTail did, I never submitted to the Google Apps Marketplace. That would an interesting distributing channel.
On the Chrome Web Store I did get a minimum Drip and HitTail in and it had zero traction. But I’m not saying it’s not worth the time but it didn’t do anything. It’s pretty crowded in there now. It’s kind of like the iOS app store I think about, in the early days it was a lot easier to get found. I know that PipeDrive said that a lot of their early growth came from the Chrome Web Store but that was a different time. It was five years ago or whatever. It’s one of those things where you have to create some images and you have to create some XML and you have to submit it and it will take you probably half a day to do. You gotta wait if you wanna do that or not. It depends on what else you have going on.
I would probably lean towards doing it just because it is one more distribution channel and you could get lucky but I think it’s not as high priority as pitching podcasts as an example, because that’s gonna have a really high success rate for you.
Mike: Right. The other thing that comes to mind is going through the process of putting out on all those products listing sites. It contributes to long tail SEO as well.
Rob: Yeah, that’s right.
Mike: It contributes to your page authority and Google will see all those lengths coming in and just building those backlinks is kind of important.
Rob: Yup, I would agree with that.
Mike: You said CSS Galleries, fill me in on this because this is something that hadn’t even crossed my mind.
Rob: The only reason that they even came on my radar is when I acquired HitTail–no, it wasn’t HitTail. It was a different site. It was a productized service I had. It was called CMS Themer, CMS Themer at the time.
Mike: I remember that.
Rob: Yeah. It had a really nice design and it would get quite a bit traffic from CSS Galleries. The interesting thing is CMS Themer was really targeting designers and so that traffic converted very well. I’ve just always made it part of the marketing plan. Obviously, it doesn’t convert nearly as well when it’s an app like HitTail or Drip, but again, this posted a link into our docket. It’s cssgallerylist.com. For $60, they submit to hundreds of galleries. For $60 and almost no time it’s worth it for the backlinks, it’s worth it even if the traffic doesn’t convert, it’s just another channel to get out there. Again, the last time I did this was five years ago, there maybe a better resource than this cssgallerylist.com but I do know that I used these guys and it saved me a lot of time.
Mike: Yeah, for sure.
Rob: This is not something that’s gonna grow your business overnight or be some huge game-changing thing but it’s just all these little parts of the snowball that you’re kind of turn the pack on and then seeing which ones get you any kind of traction.
Mike: Right. I think the important thing to keep in mind when going through this stuff is that every little bit helps and you don’t always know that any one link is going to contribute anything but if it gets one person over and the ROI on that is gonna be almost no way to calculate that but you may get three people over and one person converts. It’s not a 33% conversion rate for that obviously but that can help.
Rob: That’s right. Have you considered how you could do an ‘ask me anything’ on Reddit or you could do a Show HN where you say, “Hey, here’s this business. It doing…” whatever the revenue is, or I don’t know if you can be vague about that or not, but I don’t know how you wanna handle it. Then basically say, “I’ve grown it to this. Give me your feedback,” or whatever. Have you thought about that? I don’t know if that’s worthwhile or if that’s just a big waste of time.
Mike: I have. I’m in a couple of Facebook groups. That was suggested to me a couple of months ago via somebody that said, “Hey, you should do an ‘ask me anything’ on Reddit.” I put it on my list but it wasn’t something that kind of rose, I’ll say, close to the top of things that I thought were, not necessarily game changers, but in terms of weighted priority, I didn’t feel it was something that would help out a lot.
Rob: It’s tough. If you’re marketing directly towards developers, then it would make more sense.
Mike: Right. If it was something like ‘ask me anything’ on growthhackers.com for example, that’d be a totally different story. That’s something that I probably should add to the list to be honest.
Rob: Oh, I think you should, yep.
Mike: Anything else in terms of one-time activities that come to mind that’s not on this list?
Rob: I was just trying to think about that. On startups.com, answers that are on Startups used to be kind of a place but I don’t even think that exist anymore. The bummer about Quora is that it’s really not a one-time thing. What I would do with a one-time thing is set-up, subscribe to some topics, there’s probably a cold email, or even just email. You want email sales, you want the email sales channels not the email marketing channel because email marketing tends to be bulk email and that’s not what you’re doing.
I would subscribe to categories or topics that fit your thing so that you’re notified when questions are asked because you wanna be an early answer. You don’t wanna go on a bunch of old Quora threads and add your answer because those threads already have a bunch of up votes and you’re not likely to be the answer that shows for everybody because that’s really what you want. I did that in the early days of Drip. It’s a bit time-consuming but what I found was the questions that come through tend to be so far into your wheelhouse, that they’re really easy to answer.
Even if I type a couple of paragraphs, it just flowed out. I didn’t have to research because it was things like, “What are approximate open right rights? What’s a good open right for a list?” It’s like, “Well, I actually know what the range is. Here, I’ll talk it through.” It’s gonna be stuff that these questions for me would be tough to answer because I’m not knee-deep in this warm email engagement the way you are. Anyways, I would consider as the one-time part of that just subscribing and seeing how it shapes out.
Mike: Yeah,that’s interesting being able to rattle off some of those numbers right off the top of your head. Because it’s part of my talk that I did for FemtoConf. I looked specifically into that and looked across 70,000 emails that had been sent out through Bluetick and looked to see what the open rates were and what the response rates were across those, and then I cross-sectioned them and got the average, the best case, worst case, across everybody’s accounts. It was interesting what the numbers came out to be and then asking the audience I said, “Hey, here is a number, what do you think is this in terms of the open rate?” It was about, I’d say a third of the audience got it right which means that two-thirds did not which indicates that these numbers are, I’ll say, a little bit obscure or opaque and not everybody knows that they are.
Rob: Yeah, that makes sense.
Mike: I think a couple of other things that come onto this list is, I don’t know if they’re one-time or you would classify them as one-time, but like a podcast tour, for example. I feel like it’s something that you can do it once when you start and then if you’re going to try and do it again you have to have something compelling to follow-up with, I’ll say.
Rob: I do think of a podcast tour as a one-time thing but it’s not as one-time as say CSS Gallery submission, but it’s gonna move the needle more than them. CSS Gallery and the BetaList and all that stuff. I just posted a link to whitetailsoftware.com and Robert Graham had that pre launch email list building directories. We can include that in the show notes but I think you have 50 or 100 that he had his VA submit to, so that’ll help as well. But all that to say, podcast tour is gonna take several months because you’re gonna email and get scheduled, and by the time it comes out, it’ll be months down the line.
I think the big thing, the advice that I would give when doing a podcast tour is it would be easy for you to just go on a bunch of entrepreneur podcasts and say, “Look, I launched a product. I’m building this SaaS product.” You’ll convert some of those, it’ll be a low conversion rate. The audience who’s gonna convert the best for you is gonna be folks doing sales. It’s gonna be folks both doing cold outreach and then doing the warm nurturing that Bluetick allows you to do, this stuff that comes right out of your inbox and looks very personable. It’s not bulk email like MailChimp or Drip but it’s the one-on-one connecting whether it’s cold or warm. Who’s doing that, right? This is BDRs and salespeople. I know some of those are also founders but I don’t think that’s gonna be your market.
I think initially, you can get SaaS founders, and you can get our audience, and the MicroConf audience, and not crew. It’s good to talk about it here. I’m not saying you shouldn’t go on Mixergy and talk about it but compared to the size of that audience, the conversion rate is gonna be pretty small. The podcast that I would target that I think are gonna be your low-hanging fruit, is to go on podcast that are talking about sales, and talking about tech sales, selling SaaS apps is probably the B2B sales approach.
You can come on not to tell the story of your product but you can pitch it as, “Look, I’m an expert in this because I’m in it day-to-day and I’m seeing dozens or hundreds of customers who use our product and I’m seeing the patterns. I’m seeing the successes and how they’re doing it well. I see the failures and the mistakes people are making.” Does that make sense? I would definitely go after that space rather than focus on the founder and entrepreneur space.
Mike: Yeah, it totally makes sense. That was actually my hesitation, I’ll say, of doing that because I didn’t think that approaching those, the startups community would be something that will really resonate. Like you said, I’ll get some sales out of it but it’s not gonna be a high-converting channel for me.
Rob: Yeah, in all honesty, I will probably do both but I would start with the sales folks, the sales podcast. We both know at least a dozen people who have podcasts that I’m sure you could come on and talk about some aspect of your business. Try to vary it because we have this small community and so if you go on all the podcast of our friends and talk about the same thing on every podcast, everybody hears it, there’s only so many people in it. I will try to suggest different topics, different aspects. If you could talk about the launch on one, you could talk about the stress on another, you could talk about marketing approaches on another.
I do think that is still worthwhile because it’s easy for you to do because you’re used to doing podcasts and it’s 30-45 minutes of your time once it’s booked. It’s not actually that much of a time investment to be in the earbuds of likely several thousands or tens of thousands of people, but as I said, I do think I would start with trying to assess out what are kind of some B2B sales podcast that I can get on?
Mike: The interesting thing about that is there’s two different ways that I could approach that particular problem of going out to the people who are running those podcast. One of them is send directly into Bluetick and let Bluetick follow up with those people. The other one is that there’s a company I’ve stumbled across that will take kind of what your requirements are for appearing on podcast and will go out through the different network of podcasts that they have contact with, and essentially pitch you to them. I’ve mixed feelings on doing that, to be perfectly honest, but at the same time, there’s a time component that it’s gonna suck up some of my time to do it myself but in many ways, it comes across better if I do it myself.
Rob: Yeah. That’s hard. There is a balance because we get a lot of pitches on this show and on Zen Founder. If it’s not the person pitching themselves, I tend to delete them, that’s just a thing. I do glance through them but I don’t think we’ve ever had anyone on the show who wasn’t pitching themselves. When I had an executive assistant who is doing stuff back in the Drip days, when I was still running the business, she could email people as me, look straight out of my inbox, and so you could develop the pitch and have someone else send it as you. But it just depends on what you wanna do. I don’t know but I don’t have a good answer for that.
Mike: But again, at that point, I could just put it through directly into Bluetick and have Bluetick send out the email.
Rob: That’s true. Ta-da. That’s cool.
Mike: It’s interesting because occasionally, when I’ll email people whether they contacted me to ask me something about Bluetick, occasionally they’ll have heard the podcast and they’ll ask in their email as to whether or not it was sent from me personally or whether Bluetick sent it. I’m just, “If you can’t tell, doesn’t that speak to what the product does?”
Rob: Right. Does it matter? Yeah, that’s funny.
Mike: Does it matter?
Rob: We’ve talked at length here about the one-time upfront things. You have nice list of the things that you plan to do on an on-going basis, why don’t we look at a few of those?
Mike: Sure. The things that pop-up high on my priority list-actually, you know what, now that I’m looking through this, one of the other things that is on the on-going list should probably be moved over into one-time is the public Zapier integration.
Rob: Oh, yeah.
Mike: I’ve got a private integration right now but I’ve not taken it public and that’s something that I’ve been asked about a couple of times by Zapier. I just haven’t done it yet to be perfectly honest. There’s a lot of edge cases that either are not handled well or I know that there’s other changes that need to be made and I’d rather make those changes before I open it up than have to fix a bunch of other stuff. Because there’s some things that I do some manual data manipulation just to make sure that things are working right for certain customers. I need to put a more permanent solution in place for those.
That’s something that after going through the process, I believe they put it out through their mailing list. I forget what their mailing list is but it’s something like 1 million people or something like that, something ridiculously large. The conversion rate is not gonna be high but it’s more about driving awareness than it is about converting people at that point.
Rob: Yeah, you’re just trying to get the word out so people have heard of you at this point. One other one-time thing that I would do, it’s not a marketing approach, but I would set up Google alerts for relevant terms that you wanna monitor like company names of competitors, try to hear about like articles I think are relevant or conversations that are relevant, you have to use your judgment there but I do think getting something setup so that your kind of participating or at least aware of what’s going on in your space is helpful.
Mike: Yeah. I have a couple of them set up right now but it’s mainly for Bluetick. What I find is I’m getting a lot of emails about dog conversations that are happening.
Rob: Yeah, I could see that.
Mike: I guess if we’re gonna jump right into the ongoing stuff or the short term things that I was looking at, the first on my list is webinars.
Rob: Yep. Are you planning, because right below that you have JV webinars.
Mike: Right. I wouldn’t say I lumped them together but I think the general process is going to be similar for them whereas with the webinars, there’s joint webinars and there’s just the regular webinars. The regular ones are ones that I was probably gonna promote to my own email list and then maybe do one on a regular basis or promote it on a Tuesday every other week or something like that. And then with the joint webinars those would be much more scheduled where I’m leveraging other people’s audiences and contacting influencers and see if they’re interested in having me come and talk specifically to their audience about how Bluetick can solve a particular problem for them. I see it almost like the podcast tour but with a little bit more, I’ll say, pinpoint accuracy or a little bit more focused specifically on those people because I don’t wanna go pitch somebody and say, “Hey, can I just do a joint webinar with you?” But not actually have something that’s gonna be valuable to offer to their audience.
Rob: Right. I would the joint webinars before I try to do internal webinars because it is such a nice way to reach out beyond your own audience. Just through doing webinars to your own list, you’re gonna one and then you’re not gonna fill anymore, you know what I mean, until you get more people either using your product or on your email list. We tried early on with Drip to just run Facebook ads, get people to opt into a webinar, and we’re gonna try to run one every week, and we just couldn’t get people to show up at a price that was worth it for us.
Again, not saying it’s not possible but it’s an entire funnel that you have to develop. It’s gonna take you quite a bit of time and money to do whereas the JV webinars is a low-hanging fruit for you, because JV webinars is about who you know. You do have a good network of people who I think you could contact and have access to their audience right away, basically for free, without running all the ads and developing a funnel. It’s just conversations. I’d definitely prioritize the joint webinars above do your own.
Mike: How would you structure any sort of special offers for those people going to a joint webinar? There’s a lot of discussion and I’ve thought about this myself. I was like, do I wanna offer a discount or I wanna give additional services or special templates like, “Hey, you can only get this here because you’re coming to this particular person’s webinar.” My concern is really putting a lot of extra effort into something that-at the end of the webinar, it may turn out to be nothing. I may not get very many sign-ups out of it or I may get a lot but I don’t know. It’s hard to predict how much time and effort to make things custom for that person’s audience. You know what I mean?
Rob: Yeah, I do. I would lean heavily towards some type of bonus and it’s time-limited. You say, “Hey, free to sign up in the next two or three days, then you get this extra thing.” whether it’s a discount or the thing that you billed. Discounts are the lazy way to do it. It’s like the zero time way but it chews through your money. If you have no time, absolutely no time, then yeah, give people a discount, but discounts are not exciting. They’re not as exciting as like, “Get this complete email series,” even if it’s only three or four emails, my guess is, you can crank that out just using copy+paste from what you’re using already or from what you’re recommending to people and just edit it for their specific niche.
If you talk to a bunch of freelancers then it’s like, “Here’s the way they follow-up and do it for freelancers.” A lot of it is gonna be the same as any other sequence you have but you’re just gonna tweak a few things. I’m guessing, in about half an hour you could probably crank something like that out. You don’t even need to do that in advance of the webinar because if you don’t get sign-ups then you just don’t build it. But if you get sign-ups using that coupon code then you just manually reach out to people because it’s not like you’re gonna get 500 sign-ups. You’re gonna get 10, or 20, or 30. It’s gonna be a small amount. You can just hit people up and distribute that to them. I’m thinking of something like that. It’s high value for someone signing-up but it’s pretty low effort for you to create.
Mike: Yeah, that makes sense. I think right now when you go and sign up, I was probably gonna pull this off as things progress, but when you go and sign up right now, there’s kind of an offer there that basically says I’ll create an email sequence for you based on whatever scenario you describe and that will be your first sequence. It’s kind of concierge onboarding but I’ll say it’s probably not very well described in the website right now but it is something that I just offer to people as they come to sign up.
Rob: Yeah. If you get 30 sign-ups at a time that’s gonna get tough. I think you’re gonna have to stop doing that because it’s too time-intensive. You have to back off as you start getting more sign-ups.
Mike: Right.
Rob: What else? You have direct follow-ups with the following; invite to demos, you have current mailing list, prior prospects which I think is good, and personal LinkedIn contacts.
Mike: Yep. I have a couple of different spreadsheets based on when I was doing early validation. Some people said, “Hey, now is not a good time. Maybe later on when you’re further along.” And then there’s people who have come in and I’ve done a demo with them and things just didn’t work out for whatever reason, or they sign-up but they never followed through or they used it for a little bit, and then they said, “Yeah, this isn’t working out for me.” I’ve got this pool of people that I can go to that fit into that criteria, that I can put them into a Bluetick sequence, for example, and invite them to come back and check it out or go to a demo or something like.
But in addition to that, I also have the mailing list that is in the Drip account which I have been putting on the website where there’s an email course that you can go through. It’s like a 5-day course which I’m in the process of copy+pasting all the content all of that to make it a slightly longer course. But those people that I can go to directly, I can take them out of Drip and then plug them into Bluetick, and individually follow up with each of them. I could do that based on lead score for example and just sort them by lead score and then add them in in that order and say, “These are the people that I’m gonna approach first versus these are all the people who are probably, I’ll say, less interested, but still on the list.”
Rob: Yeah. I think that’s a good idea to kind of approach. I was definitely gonna say anybody who’s cancelled in the past, if the product’s a lot better than when they’ve tried it, you definitely wanna contact them. Prospect who haven’t converted, people who’ve been paywalled because they don’t wanna give their credit card, now is the time when you’re doing this to just circle back and clean all that out.
The personal LinkedIn contacts, you gotta use your judgement there, you don’t wanna come off as… I’ve never done that but if you know someone who really should value out of it and you do a very soft pitch like, “Hey, just to let you know I just launched this. I thought it might be helpful.” Not anything that’s forceful like, “Jump on a call. Jump on a call.” Then, I think, it’s halfway reasonable.
Mike: Yeah. I wasn’t planning on doing that. What I was gonna do was go through my LinkedIn contacts and just look. Obviously, I’m gonna hand pick which ones i’m gonna contact and which ones I’m not. I’ve got people who I know are software developers or they’re engineering managers, or something like. They’re really not a good fit for it but that doesn’t mean that I can’t go to them and say, “Hey, I just wanted to check in with you and see how are things going, and let you know I just recently launched this. If you know of anyone who could use this, I’d love an introduction just to kind of help me out.” I’m leveraging my personal relationships at that point.
Rob: I could see doing that. I just added a couple things to the list. Actually, you have retargeting on there, mostly Facebook. I think it says Facebook primarily, I think that’s a really good idea to get set up whether you use perfect audience, you have the display networks like Google and stuff already, you just tick Facebook and it gets probably a material but I think you should get that set up pretty quick. That’d be probably towards the top of my list. Do you already have the pixel installed?
Mike: Yep.
Rob: Okay, good.
Mike: yeah, I’ve had that in pixel installed for a while. But then, the reality there is, I’ve put it under ongoing because there’s a one-time piece of setting it up and there is the follow on activities where you go in and you analyze how much traffic you’ve brought in, do you have a critical mass yet, what kind of advertisements you’re doing. It’s kind of two different components to that but I do find that even with my two-step process for the sign-up, you put in your email address and password, and it takes you over to a credit card page, and there’s people who don’t fill that out.
Obviously, those people, I wanna follow up with anyway but I also wanna make sure that people who come to the iste and then go over there but never even fill out that first page, I still wanna be able to retarget those people to bring them back. Because obviously, they were interested enough to go look at the signup page but they didn’t actually sign up.
Rob: I think in the interest of time here because we’re running pretty long today. I think you should consider-paid acquisition I have written here, it’s a tough one. It all depends on if you have budget and if you have time to sit there and test a bunch of stuff, so something to consider, maybe it goes on your later list but it’s definitely if you can get it to work, it’s really, really good. Cold email outreach, you have the tool to do it, nice to use your own tool. You can go to something like LeadFuze and get a list of people, and start doing the outreach yourself, or you can hire someone to the outreach for you.
We had mixed results when we did Drip but it definitely drove enough trials that have made it worth spending. We were spending money on it at that time and it definitely had positive ROI for us. Integration Marketing which is you just think of all the top 10 integrations that you would wanna have and think about trying to get either in their director. If it’s Stripe or Basecamp, they’re probably not gonna co-promote with you because they’re so big but they have these integration directories. Or if they’re a little bit smaller, if they’re a startup, they’ll probably have a list and are willing to email out and promote you. That requires dev time, of course, so it has to be worth your while.
But that was something we did 30 something integrations with Drip and it makes a lot of sense with a tool like Drip because it it a hub of data and so we integrated with a bunch of shopping carts and all types of marketing tools. That both helped our customers but it also really helped to start to get traction and kind of be everywhere in their early days. I think those are the other three I would throw out that you may wanna do sooner rather than later.
Mike: Yeah. I’ve already been asked by people about integrating directly into Bluetick using the API and I’ve kind of pushed off mainly because I know that there are parts of the API that are still changing, so I haven’t really structured it in a way that says, “Hey, this is available for you to use and it’s pretty solid versus these other pieces where you shouldn’t touch it.” I had a conversation with somebody at FemtoConf where they said they actually have three different versions of their API published. One of them was for them internally, and then there’s another one that’s a public API, and then they have special endpoint specifically for Zapier. It’s interesting they split theirs out and I think it makes a lot of sense as well. It’s just a matter of rearranging some things a little bit to allow people to do that and say, “Hey, this area is solid. This area is off-limits or don’t touch them.”
Rob: Yep, that makes sense. Anything else that you wanna pull out of here? Either in ongoing? It looks like you have a couple more and then you have some stuff for later?
Mike: Yup. The one idea that have come to mind that somebody had mentioned to me at FemtoConf was the idea of having Bluetick offered as sort of a managed service for x thousand dollars a month. Then they’ll send all of their contacts over into Bluetick and then, it’s my responsibility to make sure that things are running smoothly for them so that they don’t have to go in and manage anything which, if you set up a lot of the automation and stuff, you don’t have to worry about that, but there’s also ongoing tweaking, A/B testing, or making sure that, “Are these numbers any reasonable ballpark of what they should be?” If you’re getting a low open rate, for example, how would you necessarily know unless you’re looking at all the other data. I have access to that but other people don’t. Those are the things that I can provide a lot of additional value for customers but they don’t necessarily have access to it on their own if they just signed up.
Rob: Yeah. That makes sense. There’s a risk with managed services because they can just suck up a bunch of your time and also the revenue is not worth nearly what a SaaS revenue is in terms of a multiple-whether you’re gonna raise funding or whether you’re gonna sell or whatever. If you have a bunch of consulting revenue, it’s worth like 1X, 1X the revenue versus actual recurring revenue, it’s a different story. I shouldn’t say recurring. It’s higher margin revenue where if it’s software it has 70% or 80% margin. If it’s consulting it has what, 10%, 20%, 30% margin. It’s something that I would consider in the early days but it just matters what cash position you’re in. I think you would do it for the cash and not really for the long term prospect of the company because I don’t think you wanna grow a big kind of productized service long term.
Mike: No, I agree. The way I was gonna structure it was like, “Hey, here’s a managed service that if you wanna subscribe to you can,” and it’s either a three-month or a six-month contract, and then that’s it. If I decide to continue offering it then they can continue paying me for it but if I decide that we’re not gonna do this anymore, then things are kind of pushed back. It wouldn’t be something that you can just go to the website and buy off the shelf but it’d be limited three to six months contract or something like that. You’re right, it would absolutely be for improving cash flow for example, but it would also put a solid number on, “Hey, what is this particular customer going to be worth to me in the next three months or in the next six months.” Does that make sense?
Rob: Yeah, I think it’s interesting. Certainly trying it with one customer is not gonna hurt much. That’s the thing, is to see how much-if it’s valuable to them, if it’s workable for you, and obviously if you do it for 10 or 20 people, you’re getting yourself in pretty deep but you don’t have to do that. You can just dip your toe and then figure it out.
Mike: Yeah. I was gonna do it for probably one to five. The other nice thing that I thought that would deliver to me is the ability to work hand-in-hand with those customers and see what exactly what it was that they’re trying to do as opposed to, “Hey, here sign up to Bluetick,” and then after that, I don’t really have a ton of visibility into their business or exactly what challenges they’re trying to solve. I know generally what they’re trying to do but I don’t get that insight or I don’t have calls with them to really see on a weekly basis like, “Hey, what are you really trying to get out with this?” I think that those insights would actually help me build a better product longer term.
Rob: One of the thing I see on your later list that I like, that I don’t think we’ve covered, is you have this library of email templates, lead gen, and you use this as a lead gen to acquire email addresses? I think that’s intriguing both for the SEO and you can always run ads to it, you could retarget to it and you’re basically giving something away. I think that’s gonna take a ton of time for you to set-up. It’s a little more complicated than it sound but I’m glad you have it on your later list so at least, in a few months, once you get some of these other ones done, you can move into that, and start thinking about how to shape that up.
Mike: Right. The other nice, I’ll say, by-product of doing that is that, I could create those inside of Bluetick as a library where you can when you create your account, you can just select from a bunch of them, kind of a similar to the way that Drip has those pre-made blueprints for different situations, this would be exactly that. Like, “What situations have I run into with different customers that they’re trying to get a response or get the customer to take an action? What sorts of things work? What sorts of things don’t? What sorts of approaches do you wanna try?” You can almost categorize them. It’s like, “This is extremely aggressive versus to do the exact same thing to get somebody to a call. This one is much more laid back and hands off, and it depends on the situation whether it’s cold email versus a warm email with somebody who’ve had three or four conversations with us.” Which one you would use?
Rob: Cool. Well this was a good run. Thanks for bringing this on the show. I had fun talking about it. I’m guessing we’ve provided quite a bit of value for the folks who are thinking about this kind of stuff.
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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 Mike.
Rob: I’m Rob.
Mike: We’re here to share our experiences to help you avoid the same mistakes we’ve made. How are you doing this week, Rob?
Rob: I’m doing alright. I was just looking through our 584 worldwide iTunes reviews. We’re approaching 600 people, 16 more and we’ll be crossing that 600 mark, which is quite a milestone. Some recent reviews, there’s one here form just last week, from […] and he says, “Great podcast, been listening for years.” One from Mr. Man Man from the UK, he says, “Full of great practical advice. Discovered the show recently and now a regular listener. Extremely valuable advice for anyone who wants to build tech products.” Limons from the US says, “Every episode is invaluable. Somehow Mike and Rob ensure that every episode has at least one and usually a ton of valuable info. I love the presentation style and how much they pack in. I don’t think anyone just started tech business without listening to this podcast.” Thank you very much for those.
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How about you? What have you been up to aside from-so you lost power. People know I did a solo episode last week. How was that with no power and no water?
Mike: Oh, that sucks. It was about a day or so that we lost power. We lost it, I think, at around 10:00 o’clock or 11:00 o’clock at night and then we didn’t get power back until probably 6:00 or 7:00 the next day.
Rob: It’s tough.
Mike: Yeah, it sucks. The real hard part is that with no running water either because we have a well and the water comes up through the well with the electricity that powers the pump. We actually have some giant jugs of water that we keep downstairs just in case we do lose power or something happens with our water because we’ve had issues with our pump as well. You lose your pump and you can’t have any running water which is surprising, you use it a lot but you never ever think about of what would happen if I didn’t have water today or what would happen if I don’t have electricity today. It’s just inconvenient to say the least.
Rob: Right. I’m glad you’re back. You went to Germany recently.
Mike: Yup. Went to FemtoConf which was pretty awesome. I had a great time. There were probably about 40-50 people there. There were some issues with a few people getting into FemtoConf just because they were flying in from the Eastern US. Of course the snow storm came through and hit the New England area so some people were delayed, some people just didn’t get there at all. Travel for a few people was kind of a mess. Fortunately, I flew out on Thursday and got there and kind of recovered, no real major issues with jet lag. But I really like the feel of it.
It was a lot like MicroConf when it was much, much smaller. Just much smaller groups, intimate conversations very much like MicroConf. The feel of it and the vibe was very reminiscent of that, I’d say in the very, very early days of MicroConf 2011-2012 when you didn’t necessarily know everybody or you’re just kind of getting introduced to what other people’s businesses were. There were a couple of talks on the first day. Then the next day Sherry gave a small workshop. Then we split off into a couple other ones where Alex Yumashev from JitBit did one on kind of like engineering growth hacking that you could do. Then Mojca Mars gave one on Facebook Ads which I went to that one. She went through and basically set everybody up with their Facebook Ads account, walked them through exactly how to get things started, and kind of helped them figure out what it was that they needed to do moving forward.
Rob: That sounds super cool. There was just one or two talks a day?
Mike: On Saturday there was four talks and then on Sunday there was Sherry’s workshop in the morning, and then there were two other workshops after that. Thomas Smale from FE International was supposed to be there, so there was supposed to be two workshops, and followed by another two workshops. It kind of run simultaneously in different rooms but because Thomas couldn’t make it, Sherry ended up doing one for everybody, and then the other two were split. First speaker on Saturday was Claire Suellentrop who’s also going to be speaking at MicroConf in a couple of months.
Actually, what’s that? Six weeks away right now? Claire spoke first and then it was followed by Aleth, she spoke about GDPR, and then I spoke about email follow-ups, and then Patrick Campbell, he was one of the people who was delayed, he spoke about modifying your pricing and how to figure out what an ideal pricing model should be for your business, and then using it as one of the biggest growth leverage in your business. I think I got a lot out of that talk because I’m kind of right in the middle of evaluating pricing and figuring out what to do with it, and how to pitch it to people.
But he also pointed out the fact that SaaS has gotten substantially more competitive over the past several years. He had graphs and charts to show the number of competitors, the people that started five years ago had versus people who started two years ago versus people who started last year. It was just fascinating the amount of data that he had on that based on all the stuff that they do for Price Intelligently.
Rob: Yep. His talks are always super valuable and have a lot of data. It sounds like a lot of fun, man. Sherry was there, obviously. Told me about it and said she enjoyed it as well and said there was a ton of overlap with the MicroConf crowd. I think she said most people go to one of the MicroConfs which is fun. It’s fun to get together in almost a more mastermind-y arrangement. I know it’s not that small but I bet you kind of know everybody and know what they’re up to and you can literally talk to everyone at the conference.
Mke: Yeah. If you don’t know them before you get there then it’s easy to at least have those conversations and get to know them by the end of it.
Rob: For sure. Cool. What are we talking about today?
Mike: Well, I had asked a few people what they wanted to hear on the podcast. One of the biggest things that came out of it was what is going to be the initial marketing plan for Bluetick now that the new website is up and running. I wanted to talk about that and kind of just go back and forth, and giving I guess a high level indication of what I’m going to be doing. And then you and I can talk about either specifics of it or vet some ideas around or even just tear some of these ideas apart, and say, “Look, don’t do this,” because more than happy to hear some of the advice that you have to share.
Rob: For sure. I know I had shared with you at one point the Drip marketing game plan and the HitTail one actually. The HitTail is a little bit out of date but did you look through that, at all, to populate this list you have?
Mike: Some of those things are pulled from there. I haven’t gone back to either those in a while. I probably should do that at this point. Most of what I’ve been doing lately has been really focused on either MicroConf or getting the new website up and running and now that that’s in place and things are settling down a little bit with MicroConf, I can go back and take a look at those. But some of these things are pulled from that.
Rob: Yeah, that makes sense. One thing I would consider before we dive in, you have it broken down into two categories, kind of, “I’m gonna do these things now,” and then my longer term things. Maybe you do them over as you get time or as you get budget. Something I would think about is to even have one before now or to split the now into two buckets is to have one-time things and on-going things. One of your bullets here is product listing sites, like product on beta list, and I would even go so far as to say all the CSS Galleries.
There’s 50 different things; there’s getapp.com, there’s Capterra, there’s AppStorm, there’s this whole list that you can put together. Those are truly gonna be one-time things. I think it might help your mental model of like, “Okay, gonna do those once. Gonna get the heat of traffic.” Even podcast store is kind of a one-time thing. You’re not gonna do that for a year whereas webinars, joint webinars, and that kind of stuff I think is more on-going. Does it help for you to think about it like that?
Mike: Yes. In Teamwork I have a project that’s specifically called Bluetick Marketing that just has lists and lists of things there. I’m looking at it now there’s probably 20 different lists in here and there’s about 162 different to-do items in there. One of them is specifically one-time marketing tasks. Things like going into the Chrome Web Store and looking to see if there’s anything that can be leveraged there, submit into the Google Apps Marketplace. The products listing sites, inside of that various accounts are different places, and documented certain processes, etc. Mostly just one-time things that I need to do it once or is it’s a task that needs to be done but the output of that could then be leveraged over and over again.
Rob: Okay, that makes sense. What I’ve done is update the list a little bit and I just kind of threw some things that’s called one-time and then we have on-going, and then a later list. Will that work for you?
Mike: Yeah.
Rob: Let’s see. Let’s dive in.
Mike: You wanna go straight into the now sort of things?
Rob: Yeah. Let’s talk about the one-time things because I think that these are things that I have all of my marketing plans. But specifically, I’m gonna keep talking about HitTail and Drip because that’s when I formalized this and put it into a doc. I really thought through where are the places that I can get a bump now that I’ve launched. It’s like the website’s live, every time I try to get written up on Venturebeat, and Techcrunch, and ReadWrite web, and GigaOM when it existed, all these things. It never worked but at least I tried it. I was trying to get some type of buzz.
Then there are the ones that are easier or guaranteed. It’s like startupli.st and BetaList, and makeuseof.com, all the things we just talked about, like Producton and that kind of stuff. You’re almost guaranteed to get a listing even though it might take a while to do. I think if you ever venture back, maybe those little-oh, and CSS Galleries is the other one. If your site is good enough and is a custom-design, I realize yours is probably more templatized, but always got a lot of traffic with HitTail and Drip from the CSS Galleries.
Did it convert amazingly well? No. But did it to convert to some trials for almost zero effort because in essence I would have a VA or I think I may have even hired a service at one point because there are like a hundred different CSS Galleries. I think there was someone who productized it and I paid $99 and submitted some info and they submitted it to all of them. To me, that’s a great zero time $99 investment because if you get one or two trials, depending on your price point, that pays it off.
That’s how I always entered it. I think if you ever venture back then need to make a bazillion dollars then maybe these kind of little initial approaches could be a waste of focus or a waste of time but I think given that every trial counts for you, I think those things are important to do. Chrome Web Store is the other one you said in the Google Apps Marketplace. I had zero look with the Chrome Web Store. What’s the difference between the Chrome Web Store and the Google Apps Marketplace?
Mike: I’ll be honest, I don’t know. I’d have to go and take a look at that. I think the Chrome Web Store was specifically for Chrome plugins. At one point, I had on my list of things to put into Bluetick like a small Chrome extension. Obviously, it never materialized. It’s not that it’s not a road map, it’s just I didn’t get there. I don’t know if that’s even viable or something that I could do because they may just say, “No, you have to have an actual Chrome extension to be able to put that in here.”
Rob: Yeah, that’s what it is. While you were talking, I went to the Google Apps Marketplace. It’s now called the G Suite Marketplace. If you integrate essentially into the G Suite, it also looks like you can just integrate with Gmail as well. Since you do that and neither Drip nor HitTail did, I never submitted to the Google Apps Marketplace. That would an interesting distributing channel.
On the Chrome Web Store I did get a minimum Drip and HitTail in and it had zero traction. But I’m not saying it’s not worth the time but it didn’t do anything. It’s pretty crowded in there now. It’s kind of like the iOS app store I think about, in the early days it was a lot easier to get found. I know that PipeDrive said that a lot of their early growth came from the Chrome Web Store but that was a different time. It was five years ago or whatever. It’s one of those things where you have to create some images and you have to create some XML and you have to submit it and it will take you probably half a day to do. You gotta wait if you wanna do that or not. It depends on what else you have going on.
I would probably lean towards doing it just because it is one more distribution channel and you could get lucky but I think it’s not as high priority as pitching podcasts as an example, because that’s gonna have a really high success rate for you.
Mike: Right. The other thing that comes to mind is going through the process of putting out on all those products listing sites. It contributes to long tail SEO as well.
Rob: Yeah, that’s right.
Mike: It contributes to your page authority and Google will see all those lengths coming in and just building those backlinks is kind of important.
Rob: Yup, I would agree with that.
Mike: You said CSS Galleries, fill me in on this because this is something that hadn’t even crossed my mind.
Rob: The only reason that they even came on my radar is when I acquired HitTail–no, it wasn’t HitTail. It was a different site. It was a productized service I had. It was called CMS Themer, CMS Themer at the time.
Mike: I remember that.
Rob: Yeah. It had a really nice design and it would get quite a bit traffic from CSS Galleries. The interesting thing is CMS Themer was really targeting designers and so that traffic converted very well. I’ve just always made it part of the marketing plan. Obviously, it doesn’t convert nearly as well when it’s an app like HitTail or Drip, but again, this posted a link into our docket. It’s cssgallerylist.com. For $60, they submit to hundreds of galleries. For $60 and almost no time it’s worth it for the backlinks, it’s worth it even if the traffic doesn’t convert, it’s just another channel to get out there. Again, the last time I did this was five years ago, there maybe a better resource than this cssgallerylist.com but I do know that I used these guys and it saved me a lot of time.
Mike: Yeah, for sure.
Rob: This is not something that’s gonna grow your business overnight or be some huge game-changing thing but it’s just all these little parts of the snowball that you’re kind of turn the pack on and then seeing which ones get you any kind of traction.
Mike: Right. I think the important thing to keep in mind when going through this stuff is that every little bit helps and you don’t always know that any one link is going to contribute anything but if it gets one person over and the ROI on that is gonna be almost no way to calculate that but you may get three people over and one person converts. It’s not a 33% conversion rate for that obviously but that can help.
Rob: That’s right. Have you considered how you could do an ‘ask me anything’ on Reddit or you could do a Show HN where you say, “Hey, here’s this business. It doing…” whatever the revenue is, or I don’t know if you can be vague about that or not, but I don’t know how you wanna handle it. Then basically say, “I’ve grown it to this. Give me your feedback,” or whatever. Have you thought about that? I don’t know if that’s worthwhile or if that’s just a big waste of time.
Mike: I have. I’m in a couple of Facebook groups. That was suggested to me a couple of months ago via somebody that said, “Hey, you should do an ‘ask me anything’ on Reddit.” I put it on my list but it wasn’t something that kind of rose, I’ll say, close to the top of things that I thought were, not necessarily game changers, but in terms of weighted priority, I didn’t feel it was something that would help out a lot.
Rob: It’s tough. If you’re marketing directly towards developers, then it would make more sense.
Mike: Right. If it was something like ‘ask me anything’ on growthhackers.com for example, that’d be a totally different story. That’s something that I probably should add to the list to be honest.
Rob: Oh, I think you should, yep.
Mike: Anything else in terms of one-time activities that come to mind that’s not on this list?
Rob: I was just trying to think about that. On startups.com, answers that are on Startups used to be kind of a place but I don’t even think that exist anymore. The bummer about Quora is that it’s really not a one-time thing. What I would do with a one-time thing is set-up, subscribe to some topics, there’s probably a cold email, or even just email. You want email sales, you want the email sales channels not the email marketing channel because email marketing tends to be bulk email and that’s not what you’re doing.
I would subscribe to categories or topics that fit your thing so that you’re notified when questions are asked because you wanna be an early answer. You don’t wanna go on a bunch of old Quora threads and add your answer because those threads already have a bunch of up votes and you’re not likely to be the answer that shows for everybody because that’s really what you want. I did that in the early days of Drip. It’s a bit time-consuming but what I found was the questions that come through tend to be so far into your wheelhouse, that they’re really easy to answer.
Even if I type a couple of paragraphs, it just flowed out. I didn’t have to research because it was things like, “What are approximate open right rights? What’s a good open right for a list?” It’s like, “Well, I actually know what the range is. Here, I’ll talk it through.” It’s gonna be stuff that these questions for me would be tough to answer because I’m not knee-deep in this warm email engagement the way you are. Anyways, I would consider as the one-time part of that just subscribing and seeing how it shapes out.
Mike: Yeah,that’s interesting being able to rattle off some of those numbers right off the top of your head. Because it’s part of my talk that I did for FemtoConf. I looked specifically into that and looked across 70,000 emails that had been sent out through Bluetick and looked to see what the open rates were and what the response rates were across those, and then I cross-sectioned them and got the average, the best case, worst case, across everybody’s accounts. It was interesting what the numbers came out to be and then asking the audience I said, “Hey, here is a number, what do you think is this in terms of the open rate?” It was about, I’d say a third of the audience got it right which means that two-thirds did not which indicates that these numbers are, I’ll say, a little bit obscure or opaque and not everybody knows that they are.
Rob: Yeah, that makes sense.
Mike: I think a couple of other things that come onto this list is, I don’t know if they’re one-time or you would classify them as one-time, but like a podcast tour, for example. I feel like it’s something that you can do it once when you start and then if you’re going to try and do it again you have to have something compelling to follow-up with, I’ll say.
Rob: I do think of a podcast tour as a one-time thing but it’s not as one-time as say CSS Gallery submission, but it’s gonna move the needle more than them. CSS Gallery and the BetaList and all that stuff. I just posted a link to whitetailsoftware.com and Robert Graham had that pre launch email list building directories. We can include that in the show notes but I think you have 50 or 100 that he had his VA submit to, so that’ll help as well. But all that to say, podcast tour is gonna take several months because you’re gonna email and get scheduled, and by the time it comes out, it’ll be months down the line.
I think the big thing, the advice that I would give when doing a podcast tour is it would be easy for you to just go on a bunch of entrepreneur podcasts and say, “Look, I launched a product. I’m building this SaaS product.” You’ll convert some of those, it’ll be a low conversion rate. The audience who’s gonna convert the best for you is gonna be folks doing sales. It’s gonna be folks both doing cold outreach and then doing the warm nurturing that Bluetick allows you to do, this stuff that comes right out of your inbox and looks very personable. It’s not bulk email like MailChimp or Drip but it’s the one-on-one connecting whether it’s cold or warm. Who’s doing that, right? This is BDRs and salespeople. I know some of those are also founders but I don’t think that’s gonna be your market.
I think initially, you can get SaaS founders, and you can get our audience, and the MicroConf audience, and not crew. It’s good to talk about it here. I’m not saying you shouldn’t go on Mixergy and talk about it but compared to the size of that audience, the conversion rate is gonna be pretty small. The podcast that I would target that I think are gonna be your low-hanging fruit, is to go on podcast that are talking about sales, and talking about tech sales, selling SaaS apps is probably the B2B sales approach.
You can come on not to tell the story of your product but you can pitch it as, “Look, I’m an expert in this because I’m in it day-to-day and I’m seeing dozens or hundreds of customers who use our product and I’m seeing the patterns. I’m seeing the successes and how they’re doing it well. I see the failures and the mistakes people are making.” Does that make sense? I would definitely go after that space rather than focus on the founder and entrepreneur space.
Mike: Yeah, it totally makes sense. That was actually my hesitation, I’ll say, of doing that because I didn’t think that approaching those, the startups community would be something that will really resonate. Like you said, I’ll get some sales out of it but it’s not gonna be a high-converting channel for me.
Rob: Yeah, in all honesty, I will probably do both but I would start with the sales folks, the sales podcast. We both know at least a dozen people who have podcasts that I’m sure you could come on and talk about some aspect of your business. Try to vary it because we have this small community and so if you go on all the podcast of our friends and talk about the same thing on every podcast, everybody hears it, there’s only so many people in it. I will try to suggest different topics, different aspects. If you could talk about the launch on one, you could talk about the stress on another, you could talk about marketing approaches on another.
I do think that is still worthwhile because it’s easy for you to do because you’re used to doing podcasts and it’s 30-45 minutes of your time once it’s booked. It’s not actually that much of a time investment to be in the earbuds of likely several thousands or tens of thousands of people, but as I said, I do think I would start with trying to assess out what are kind of some B2B sales podcast that I can get on?
Mike: The interesting thing about that is there’s two different ways that I could approach that particular problem of going out to the people who are running those podcast. One of them is send directly into Bluetick and let Bluetick follow up with those people. The other one is that there’s a company I’ve stumbled across that will take kind of what your requirements are for appearing on podcast and will go out through the different network of podcasts that they have contact with, and essentially pitch you to them. I’ve mixed feelings on doing that, to be perfectly honest, but at the same time, there’s a time component that it’s gonna suck up some of my time to do it myself but in many ways, it comes across better if I do it myself.
Rob: Yeah. That’s hard. There is a balance because we get a lot of pitches on this show and on Zen Founder. If it’s not the person pitching themselves, I tend to delete them, that’s just a thing. I do glance through them but I don’t think we’ve ever had anyone on the show who wasn’t pitching themselves. When I had an executive assistant who is doing stuff back in the Drip days, when I was still running the business, she could email people as me, look straight out of my inbox, and so you could develop the pitch and have someone else send it as you. But it just depends on what you wanna do. I don’t know but I don’t have a good answer for that.
Mike: But again, at that point, I could just put it through directly into Bluetick and have Bluetick send out the email.
Rob: That’s true. Ta-da. That’s cool.
Mike: It’s interesting because occasionally, when I’ll email people whether they contacted me to ask me something about Bluetick, occasionally they’ll have heard the podcast and they’ll ask in their email as to whether or not it was sent from me personally or whether Bluetick sent it. I’m just, “If you can’t tell, doesn’t that speak to what the product does?”
Rob: Right. Does it matter? Yeah, that’s funny.
Mike: Does it matter?
Rob: We’ve talked at length here about the one-time upfront things. You have nice list of the things that you plan to do on an on-going basis, why don’t we look at a few of those?
Mike: Sure. The things that pop-up high on my priority list-actually, you know what, now that I’m looking through this, one of the other things that is on the on-going list should probably be moved over into one-time is the public Zapier integration.
Rob: Oh, yeah.
Mike: I’ve got a private integration right now but I’ve not taken it public and that’s something that I’ve been asked about a couple of times by Zapier. I just haven’t done it yet to be perfectly honest. There’s a lot of edge cases that either are not handled well or I know that there’s other changes that need to be made and I’d rather make those changes before I open it up than have to fix a bunch of other stuff. Because there’s some things that I do some manual data manipulation just to make sure that things are working right for certain customers. I need to put a more permanent solution in place for those.
That’s something that after going through the process, I believe they put it out through their mailing list. I forget what their mailing list is but it’s something like 1 million people or something like that, something ridiculously large. The conversion rate is not gonna be high but it’s more about driving awareness than it is about converting people at that point.
Rob: Yeah, you’re just trying to get the word out so people have heard of you at this point. One other one-time thing that I would do, it’s not a marketing approach, but I would set up Google alerts for relevant terms that you wanna monitor like company names of competitors, try to hear about like articles I think are relevant or conversations that are relevant, you have to use your judgment there but I do think getting something setup so that your kind of participating or at least aware of what’s going on in your space is helpful.
Mike: Yeah. I have a couple of them set up right now but it’s mainly for Bluetick. What I find is I’m getting a lot of emails about dog conversations that are happening.
Rob: Yeah, I could see that.
Mike: I guess if we’re gonna jump right into the ongoing stuff or the short term things that I was looking at, the first on my list is webinars.
Rob: Yep. Are you planning, because right below that you have JV webinars.
Mike: Right. I wouldn’t say I lumped them together but I think the general process is going to be similar for them whereas with the webinars, there’s joint webinars and there’s just the regular webinars. The regular ones are ones that I was probably gonna promote to my own email list and then maybe do one on a regular basis or promote it on a Tuesday every other week or something like that. And then with the joint webinars those would be much more scheduled where I’m leveraging other people’s audiences and contacting influencers and see if they’re interested in having me come and talk specifically to their audience about how Bluetick can solve a particular problem for them. I see it almost like the podcast tour but with a little bit more, I’ll say, pinpoint accuracy or a little bit more focused specifically on those people because I don’t wanna go pitch somebody and say, “Hey, can I just do a joint webinar with you?” But not actually have something that’s gonna be valuable to offer to their audience.
Rob: Right. I would the joint webinars before I try to do internal webinars because it is such a nice way to reach out beyond your own audience. Just through doing webinars to your own list, you’re gonna one and then you’re not gonna fill anymore, you know what I mean, until you get more people either using your product or on your email list. We tried early on with Drip to just run Facebook ads, get people to opt into a webinar, and we’re gonna try to run one every week, and we just couldn’t get people to show up at a price that was worth it for us.
Again, not saying it’s not possible but it’s an entire funnel that you have to develop. It’s gonna take you quite a bit of time and money to do whereas the JV webinars is a low-hanging fruit for you, because JV webinars is about who you know. You do have a good network of people who I think you could contact and have access to their audience right away, basically for free, without running all the ads and developing a funnel. It’s just conversations. I’d definitely prioritize the joint webinars above do your own.
Mike: How would you structure any sort of special offers for those people going to a joint webinar? There’s a lot of discussion and I’ve thought about this myself. I was like, do I wanna offer a discount or I wanna give additional services or special templates like, “Hey, you can only get this here because you’re coming to this particular person’s webinar.” My concern is really putting a lot of extra effort into something that-at the end of the webinar, it may turn out to be nothing. I may not get very many sign-ups out of it or I may get a lot but I don’t know. It’s hard to predict how much time and effort to make things custom for that person’s audience. You know what I mean?
Rob: Yeah, I do. I would lean heavily towards some type of bonus and it’s time-limited. You say, “Hey, free to sign up in the next two or three days, then you get this extra thing.” whether it’s a discount or the thing that you billed. Discounts are the lazy way to do it. It’s like the zero time way but it chews through your money. If you have no time, absolutely no time, then yeah, give people a discount, but discounts are not exciting. They’re not as exciting as like, “Get this complete email series,” even if it’s only three or four emails, my guess is, you can crank that out just using copy+paste from what you’re using already or from what you’re recommending to people and just edit it for their specific niche.
If you talk to a bunch of freelancers then it’s like, “Here’s the way they follow-up and do it for freelancers.” A lot of it is gonna be the same as any other sequence you have but you’re just gonna tweak a few things. I’m guessing, in about half an hour you could probably crank something like that out. You don’t even need to do that in advance of the webinar because if you don’t get sign-ups then you just don’t build it. But if you get sign-ups using that coupon code then you just manually reach out to people because it’s not like you’re gonna get 500 sign-ups. You’re gonna get 10, or 20, or 30. It’s gonna be a small amount. You can just hit people up and distribute that to them. I’m thinking of something like that. It’s high value for someone signing-up but it’s pretty low effort for you to create.
Mike: Yeah, that makes sense. I think right now when you go and sign up, I was probably gonna pull this off as things progress, but when you go and sign up right now, there’s kind of an offer there that basically says I’ll create an email sequence for you based on whatever scenario you describe and that will be your first sequence. It’s kind of concierge onboarding but I’ll say it’s probably not very well described in the website right now but it is something that I just offer to people as they come to sign up.
Rob: Yeah. If you get 30 sign-ups at a time that’s gonna get tough. I think you’re gonna have to stop doing that because it’s too time-intensive. You have to back off as you start getting more sign-ups.
Mike: Right.
Rob: What else? You have direct follow-ups with the following; invite to demos, you have current mailing list, prior prospects which I think is good, and personal LinkedIn contacts.
Mike: Yep. I have a couple of different spreadsheets based on when I was doing early validation. Some people said, “Hey, now is not a good time. Maybe later on when you’re further along.” And then there’s people who have come in and I’ve done a demo with them and things just didn’t work out for whatever reason, or they sign-up but they never followed through or they used it for a little bit, and then they said, “Yeah, this isn’t working out for me.” I’ve got this pool of people that I can go to that fit into that criteria, that I can put them into a Bluetick sequence, for example, and invite them to come back and check it out or go to a demo or something like.
But in addition to that, I also have the mailing list that is in the Drip account which I have been putting on the website where there’s an email course that you can go through. It’s like a 5-day course which I’m in the process of copy+pasting all the content all of that to make it a slightly longer course. But those people that I can go to directly, I can take them out of Drip and then plug them into Bluetick, and individually follow up with each of them. I could do that based on lead score for example and just sort them by lead score and then add them in in that order and say, “These are the people that I’m gonna approach first versus these are all the people who are probably, I’ll say, less interested, but still on the list.”
Rob: Yeah. I think that’s a good idea to kind of approach. I was definitely gonna say anybody who’s cancelled in the past, if the product’s a lot better than when they’ve tried it, you definitely wanna contact them. Prospect who haven’t converted, people who’ve been paywalled because they don’t wanna give their credit card, now is the time when you’re doing this to just circle back and clean all that out.
The personal LinkedIn contacts, you gotta use your judgement there, you don’t wanna come off as… I’ve never done that but if you know someone who really should value out of it and you do a very soft pitch like, “Hey, just to let you know I just launched this. I thought it might be helpful.” Not anything that’s forceful like, “Jump on a call. Jump on a call.” Then, I think, it’s halfway reasonable.
Mike: Yeah. I wasn’t planning on doing that. What I was gonna do was go through my LinkedIn contacts and just look. Obviously, I’m gonna hand pick which ones i’m gonna contact and which ones I’m not. I’ve got people who I know are software developers or they’re engineering managers, or something like. They’re really not a good fit for it but that doesn’t mean that I can’t go to them and say, “Hey, I just wanted to check in with you and see how are things going, and let you know I just recently launched this. If you know of anyone who could use this, I’d love an introduction just to kind of help me out.” I’m leveraging my personal relationships at that point.
Rob: I could see doing that. I just added a couple things to the list. Actually, you have retargeting on there, mostly Facebook. I think it says Facebook primarily, I think that’s a really good idea to get set up whether you use perfect audience, you have the display networks like Google and stuff already, you just tick Facebook and it gets probably a material but I think you should get that set up pretty quick. That’d be probably towards the top of my list. Do you already have the pixel installed?
Mike: Yep.
Rob: Okay, good.
Mike: yeah, I’ve had that in pixel installed for a while. But then, the reality there is, I’ve put it under ongoing because there’s a one-time piece of setting it up and there is the follow on activities where you go in and you analyze how much traffic you’ve brought in, do you have a critical mass yet, what kind of advertisements you’re doing. It’s kind of two different components to that but I do find that even with my two-step process for the sign-up, you put in your email address and password, and it takes you over to a credit card page, and there’s people who don’t fill that out.
Obviously, those people, I wanna follow up with anyway but I also wanna make sure that people who come to the iste and then go over there but never even fill out that first page, I still wanna be able to retarget those people to bring them back. Because obviously, they were interested enough to go look at the signup page but they didn’t actually sign up.
Rob: I think in the interest of time here because we’re running pretty long today. I think you should consider-paid acquisition I have written here, it’s a tough one. It all depends on if you have budget and if you have time to sit there and test a bunch of stuff, so something to consider, maybe it goes on your later list but it’s definitely if you can get it to work, it’s really, really good. Cold email outreach, you have the tool to do it, nice to use your own tool. You can go to something like LeadFuze and get a list of people, and start doing the outreach yourself, or you can hire someone to the outreach for you.
We had mixed results when we did Drip but it definitely drove enough trials that have made it worth spending. We were spending money on it at that time and it definitely had positive ROI for us. Integration Marketing which is you just think of all the top 10 integrations that you would wanna have and think about trying to get either in their director. If it’s Stripe or Basecamp, they’re probably not gonna co-promote with you because they’re so big but they have these integration directories. Or if they’re a little bit smaller, if they’re a startup, they’ll probably have a list and are willing to email out and promote you. That requires dev time, of course, so it has to be worth your while.
But that was something we did 30 something integrations with Drip and it makes a lot of sense with a tool like Drip because it it a hub of data and so we integrated with a bunch of shopping carts and all types of marketing tools. That both helped our customers but it also really helped to start to get traction and kind of be everywhere in their early days. I think those are the other three I would throw out that you may wanna do sooner rather than later.
Mike: Yeah. I’ve already been asked by people about integrating directly into Bluetick using the API and I’ve kind of pushed off mainly because I know that there are parts of the API that are still changing, so I haven’t really structured it in a way that says, “Hey, this is available for you to use and it’s pretty solid versus these other pieces where you shouldn’t touch it.” I had a conversation with somebody at FemtoConf where they said they actually have three different versions of their API published. One of them was for them internally, and then there’s another one that’s a public API, and then they have special endpoint specifically for Zapier. It’s interesting they split theirs out and I think it makes a lot of sense as well. It’s just a matter of rearranging some things a little bit to allow people to do that and say, “Hey, this area is solid. This area is off-limits or don’t touch them.”
Rob: Yep, that makes sense. Anything else that you wanna pull out of here? Either in ongoing? It looks like you have a couple more and then you have some stuff for later?
Mike: Yup. The one idea that have come to mind that somebody had mentioned to me at FemtoConf was the idea of having Bluetick offered as sort of a managed service for x thousand dollars a month. Then they’ll send all of their contacts over into Bluetick and then, it’s my responsibility to make sure that things are running smoothly for them so that they don’t have to go in and manage anything which, if you set up a lot of the automation and stuff, you don’t have to worry about that, but there’s also ongoing tweaking, A/B testing, or making sure that, “Are these numbers any reasonable ballpark of what they should be?” If you’re getting a low open rate, for example, how would you necessarily know unless you’re looking at all the other data. I have access to that but other people don’t. Those are the things that I can provide a lot of additional value for customers but they don’t necessarily have access to it on their own if they just signed up.
Rob: Yeah. That makes sense. There’s a risk with managed services because they can just suck up a bunch of your time and also the revenue is not worth nearly what a SaaS revenue is in terms of a multiple-whether you’re gonna raise funding or whether you’re gonna sell or whatever. If you have a bunch of consulting revenue, it’s worth like 1X, 1X the revenue versus actual recurring revenue, it’s a different story. I shouldn’t say recurring. It’s higher margin revenue where if it’s software it has 70% or 80% margin. If it’s consulting it has what, 10%, 20%, 30% margin. It’s something that I would consider in the early days but it just matters what cash position you’re in. I think you would do it for the cash and not really for the long term prospect of the company because I don’t think you wanna grow a big kind of productized service long term.
Mike: No, I agree. The way I was gonna structure it was like, “Hey, here’s a managed service that if you wanna subscribe to you can,” and it’s either a three-month or a six-month contract, and then that’s it. If I decide to continue offering it then they can continue paying me for it but if I decide that we’re not gonna do this anymore, then things are kind of pushed back. It wouldn’t be something that you can just go to the website and buy off the shelf but it’d be limited three to six months contract or something like that. You’re right, it would absolutely be for improving cash flow for example, but it would also put a solid number on, “Hey, what is this particular customer going to be worth to me in the next three months or in the next six months.” Does that make sense?
Rob: Yeah, I think it’s interesting. Certainly trying it with one customer is not gonna hurt much. That’s the thing, is to see how much-if it’s valuable to them, if it’s workable for you, and obviously if you do it for 10 or 20 people, you’re getting yourself in pretty deep but you don’t have to do that. You can just dip your toe and then figure it out.
Mike: Yeah. I was gonna do it for probably one to five. The other nice thing that I thought that would deliver to me is the ability to work hand-in-hand with those customers and see what exactly what it was that they’re trying to do as opposed to, “Hey, here sign up to Bluetick,” and then after that, I don’t really have a ton of visibility into their business or exactly what challenges they’re trying to solve. I know generally what they’re trying to do but I don’t get that insight or I don’t have calls with them to really see on a weekly basis like, “Hey, what are you really trying to get out with this?” I think that those insights would actually help me build a better product longer term.
Rob: One of the thing I see on your later list that I like, that I don’t think we’ve covered, is you have this library of email templates, lead gen, and you use this as a lead gen to acquire email addresses? I think that’s intriguing both for the SEO and you can always run ads to it, you could retarget to it and you’re basically giving something away. I think that’s gonna take a ton of time for you to set-up. It’s a little more complicated than it sound but I’m glad you have it on your later list so at least, in a few months, once you get some of these other ones done, you can move into that, and start thinking about how to shape that up.
Mike: Right. The other nice, I’ll say, by-product of doing that is that, I could create those inside of Bluetick as a library where you can when you create your account, you can just select from a bunch of them, kind of a similar to the way that Drip has those pre-made blueprints for different situations, this would be exactly that. Like, “What situations have I run into with different customers that they’re trying to get a response or get the customer to take an action? What sorts of things work? What sorts of things don’t? What sorts of approaches do you wanna try?” You can almost categorize them. It’s like, “This is extremely aggressive versus to do the exact same thing to get somebody to a call. This one is much more laid back and hands off, and it depends on the situation whether it’s cold email versus a warm email with somebody who’ve had three or four conversations with us.” Which one you would use?
Rob: Cool. Well this was a good run. Thanks for bringing this on the show. I had fun talking about it. I’m guessing we’ve provided quite a bit of value for the folks who are thinking about this kind of stuff.
If you have question for us, call our voicemail at 1-888-801-9690 or email 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. Visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 383 | Considering Monetizing SaaS with Ads, Should a WP Plugin Company Consider SaaS, and More Listener Questions
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Show Notes
In this episode of Startups For The Rest Of Us, Rob flies solo and answers a number of listener questions. The topics include monetizing SaaS with ads, should a WP plugin company consider SaaS and more.
Items mentioned in this episode:
- ZenFounder
Startup Blueprint: 7 Skills For Founders, Builders & Leaders
Start Small, Stay Small: A Developer’s Guide to Launching a Startup
In this episode of Startups For The Rest Of Us, I kicked Mike off the show. I fly solo and I’m answering a bunch of listener questions, covering topics ranging from monetizing SaaS using ads to whether a WordPress Plugin company should consider launching a SaaS, as well as how to deal with the struggles of launching a two sided marketplace. This is Startups For the Rest of Us episode 383.
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, and Mike has no power for the past day or two. He has no internet, and I think a storm came through and knocked out a bunch of power. He won’t have it back he said at the earliest til midnight tonight. I jump into a car with my son, my 11 year old. We are heading to Lake Geneva, Wisconsin for Gary Con in about two hours. There was no overlap.
Mike emailed me and let me know he wasn’t able to make it and so my goal was to find a guest this morning. I emailed three or four people short notice and no one is able to show up. Here I am, we ship every week, every Tuesday morning an episode comes out.
I dug into our listener question bag and we were down to one listener question last week, we’re up to eight or nine this week, which is great. I enjoy these episodes when we answer listener questions. We’ve been doing them a lot more lately. What I’ve noticed is it feels like there’s a lot more listener participation and it also feels like we’re keeping up with topics that are not just coming out of our heads.
These are really questions and topics that you, the listener, are thinking about. It feels like I enjoy these episodes because I feel like they’re as relevant as we can be to the moment of what you’re thinking about and what you’re launching as a listener base. We are here to share our experiences, to hope you avoid the same mistakes we’ve made. Also, to weigh in on questions that you have as you’re growing, building, launching your startup.
Let’s dive into our first question. It’s from [Dylan Dee 00:02:10] and it’s about whether he can use advertising as a SaaS revenue model. He says, “My company is Dunwich Technologies, it’s a healthcare focused consultancy. We’re developing a SaaS app to help patients better understand their confusing medical bills. I see the value in one off uses, doesn’t feel like an app that could garner much daily activity or many daily active users. It’s more like an every so often use. This coupled with not wanting to charge for the app leaves me with few revenue options. Would medical/pharma ads on this app be the only or the best way to monetize it in your opinion?”
My opinion is this will not work at all. Because if you don’t have a lot of daily actives, then ad based revenue models are gonna bring in pennies for you. I would be shocked if you have people logging in once a month or once every other month. Let’s say you had 100,00 people using the app and they only log in once a month, you’re gonna make hundreds of dollar. It is catastrophically low, the ad rates are just very low these days. You look at a company like Facebook or Twitter, Google, and the only reason that ads work for them is because they have so many people constantly using the app.
If you’re going direct to consumer and you don’t think you can charge for it or don’t want to charge for it, I would think of this as more of a lead gen thing. Can it generate leads? Can you build up a free customer based and generate leads for your consultancy? Or, can it generate leads for another SaaS app that you may want to charge for, or a video course–I’m just throwing things out.
Obviously, you may not want to create a video course, you get the idea. If you’re gonna build something that truly is freemium but there is no ‘mium’ to it, there’s no premium aspect because you’re not gonna upsell. But actually, that is another thing you can think about is to launch this. See what happens, see if there’s any uptick. If you get 10,000 free users in there asking for more things, you could then consider going freemium and having a paid tier on top of this. Even if it does just a $5 or $10 a month thing.
It’s really hard to do B2C SaaS, it’s not done very often. If you look at even Dropbox, they are trying to pivot into the enterprise because that’s where more money is and the lower churn and all the stuff. Box.net kind of beat them to the punch on that. I think that Dropbox was conceived as a B2C company but if they really want to maximize the valuation frankly, they want to get into the enterprise because enterprise customers have higher lifetime values. And if you look at the stock market in public or even the private markets, companies serving mid market and enterprise, and even SMBs are valued higher than the same amount of revenue serving consumers because that revenue tends to be more volatile.
All that to say, I don’t think you have any chance of making any money that’s gonna move the needle using an advertising model. I would say if you’re gonna build it, if you really want to, give the thing away, see what happens, see if it becomes lead gen. If nobody uses it, then that’s fine too. At least you took your shot.
Our next question is an audio question. It’s about a WordPress Plugin company, whether they should offer a SaaS offering.
“Hey Rob and Mike. I love the show. My name is Kyle, thanks for taking my question. I work for a small WordPress Plugin company. We’re pretty well established and doing just fine, but looking to grow and take on some new exciting project. I have some ideas that I wanted to get your input on.
Basically, I want to see if introducing a small SaaS offering might make sense for our business? Obviously, we distribute our WordPress Plugin, that’s our business right now. Our customers are mostly in ecommerce but I was in the interest of helping our customers succeed and solve real problems that they have. Also becoming as indispensable to them as we can be while at the same time introducing new streams of revenue for our business.
I was wondering if maybe we should consider adding a SaaS offering which we make available only initially to our existing users. Not something that we market to our broad audience, but something that we just silently roll out to users of our plugins already. I’m thinking this could be something very simple, some tool like helping them with their email delivery or file storage, data backups, staging environments, remote site management, reporting businesses sites, something like that, I don’t know. We can make a simple tool, put it in front of existing users and say, ‘Click here to take advantage of this extra monthly tool.’
My questions are, how do you feel about the idea of creating some simple, light MVP simple SaaS product? Initially making it only available to current users of our plugin. Do you have any opinions about the type of SaaS product which would be the best for us to choose if so? Something simple yet still useful to our customers for mostly running ecommerce sites. Thanks so much and I look forward to meeting both of you this year at Micro Conf, thanks.”
This is a great question. I think a lot of WordPress Plugin vendors probably think about this because the appeal of having monthly recurring revenue versus the potential spikiness of WordPress Plugin in the one time sales, it’s appealing. SaaS and subscription revenue is the golden ticket that everyone is looking for.
I would say that just to start with, a, I think this is a great idea. I’m all for it. I think if you wanted to tip toe into it, you should definitely do it. I would say that when I talk to folks who do WordPress or do one time sales, they’re always talking about launching a SaaS. When I talk to people who have SaaS apps, so many of them are jealous of these one time sale products because those product price points tend to be higher.
You might sell a WordPress Plugin for $40 to $200 and you get that nice pop right off the bat. If you sell one customer, you make $200 that month. Whereas if you have a lightweight SaaS, you might make $10 that month from the customer and you gotta keep them around and you’re constantly working to do that to retain them. I know that with DotNetInvoice, which was an invoicing software I owned years ago, it was $300 for the product, for a developer to buy it and use it.
We only sold 8-15 copies a month. You think about that, you think about let’s just say 10, you think about making 10 new SaaS sign ups that stick around and become customers and that is catastrophic. Unless you’re very, very expensive, in the enterprise. But just the normal, let’s say you’re $20, $30, $40 a month, that’s slow growth. It’s gonna be agonizing. Whereas if we sold 10 of DotNetInvoice, it was $3,000 a month. At the time, I was looking to make a car payment or make a house payment and I was doing consulting. This was just a little side project that I didn’t spend a ton of time on. That dollar amount and getting all the lifetime value upfront from your customers, there is some appeal to that.
I would say don’t look that [inaudible 00:09:17]. Do realize that the couple beauties of WordPress are that you do get all the lifetime value upfront and that you have that built-in distribution channel of the WordPress repo, and that also ranks high in Google which then can bring people to your WordPress page and get that free download. With all that said, when I talked to a lot of WordPress folks who have plugins, are making some money, they are always thinking of how to get into SaaS, and I don’t think that’s a bad thing. A, I think it’s great. SaaS is more complicated, it levels you up. There’s more to learn, it is that recurring revenue that you’re looking for.
Number one, I think yes, you should give this a shot. Number two, I think you have an advantage because you already have paying customers. I have no idea about this business if you have a thousand people who’ve purchased it or if you have ten thousand, but that is a great built in audience right there to start a SaaS from.
I’ve talked on the podcast and at MicroCon a couple of years ago about what I believe are the only four true competitive advantages in SaaS. It’s who you know, it’s your network. It’s who knows you, it’s your audience, that includes customers. And it’s being early to a space and being a growth hacker, someone who knows how to think through methodically and really grow anything.
This is a case where you already have an existing audience of customers, you do have an advantage over someone starting from scratch. You have customers who probably trust you and like you. If you build something with them in mind, you should be able to have a pretty good strat to your business.
In addition, you probably have a bunch of free users and I know they won’t convert as well but that should be a number that’s 10 or even 100 times the number of people who’ve actually paid you and so you do have some reach there. That’s the plus side.
The negative side is you building a SaaS is gonna take a lot more time than building a WordPress Plugin in general. There’s so much more, there’s the hosting and the infrastructure and uptime and all the stuff that you don’t have to deal with. It is gonna be a big learning experience. I wouldn’t want you to think just because you’ve built software, you’ve built products and you’ve sold it, you definitely have learned a lot but SaaS is going to be that next level up in terms of complexity.
In my opinion, if I were you, especially in the ecommerce space, I would start talking to my customers, you already have them. You can have a few ideas and I think in a perfect world you might have three of four ideas that you start running by customers and saying which one of these would you absolutely, no doubt, would sign up for tomorrow. Take that short list and run it by, I’m sure you know a bunch of them personally, and then start emailing a hundred of your customers at a time even if you don’t know them and being just like, “Hey we’re considering branching into this, would you buy it?” I think you’re gonna get pretty good feedback form that pretty quickly.
That’s how I would approach it, I think, asking my opinion, you’ve asked my opinion about what kind of app you should build, I have no idea because I don’t know. I don’t know your customer base or what you’re currently serving. I think that the best WordPress to SaaS progressions are things like Opt-In Monster where it was just a WordPress Plugin and then they just launched basically the same thing as the SaaS app. It was subscription, they already had the features that they knew that was killer, they had experience in it. They literally just turned the WordPress Plugin into a recurring subscription.
If you’re not on WordPress, you can still use it but you pay the monthly. Craig Hewitt is doing this with his WordPress Plugin Seriously Simple Hosting, and then it’s Castos now. Moving from this WordPress space and just building a SaaS out of it, I think that’s a good way to go because you already have experience with that. You already have inbound interest, folks finding you through the WordPress repo so you do have that traffic source and distribution channel.
Again, I think if you want to get in this and get into the recurring game, I think it’s a good idea and I do think you have some advantages given your current business. Thanks for the question.
Our next question is from Alex Baxter. He says, “Love the podcast, big fan. I’m attempting to bootstrap a startup in the job site space.” A job website, a two-sided marketplace. “As I begin to look for companies to post jobs to the site, would you suggest allowing companies to post jobs for free to get the initial supply of jobs up for candidates to view then worry about monthly fees later, or trying to charge from the get go? I’m leaning towards free but I wanted your thoughts.”
The reason I like this question is because it’s the classic two sided marketplace. Whenever I talk to anyone about a two-sided marketplace, I say basically the same thing. You’re gonna have to figure out which side you need to get first. In this case, you’re not gonna have any job seekers come to the site if it has no jobs. You have to get the jobs up first.
Yes, I would beg, borrow, and steal to get jobs on this site. I’ve seen new job sites launched and they’ll go and scrape Monster, Indeed, Hot Jobs and all these other things in order to populate their jobs and start form there and then spin out. I’m not saying you should or shouldn’t do that but it’s a way to think about it. There are jobs postings out there that you would be able to populate on your site and it’s additional distribution for them.
In terms of offering for free to employers, I probably would, because you have no traffic. You really can’t charge them because you have no job seekers yet. In my opinion, it’s probably a, “Hey, this is going to be free for the first three months or six months or until we have 10,000 uniques a month, or until every job receives 50 views per month.” There’s something that just needs to trigger that they need to start paying you. Because you don’t want to get a bunch of your best employers and just be like, “Yep, this side is free to post,” because that’s not a business perpetually.
You have to take an approach that long term you’re not comping your best customers. That’s why it kills me, I‘ve seen people pretty often do this with SaaS where they get this launch list or they get 5 or 10 interested customers and they say, “Yeah, for your feedback, I’m just going to comp you lifetime.” I think to myself no, these are your first 10 people. You can give them a discount, you can comp them for six months, give a discount for the first year. You can do that because they are giving you effort but also providing them a ton of value with the software.
If they’re willing to sit and work for beta software with you, then they probably have a pain point that you’re also helping with. Don’t do that would be my advice. Don’t cut that revenue off at the knees, especially in the early days when you need it most.
For this, I would definitely consider just cold outbound outreach. I’m guessing this is probably a vertical and you probably know all the companies in that vertical and that would be cold emails, cold phone calls to basically just start with like, “Hey, I see jobs on your site. Can I repost these here? Do you give me permission?”
Technically, I got to be honest, I don’t know if you even need permission legally. Whether it’s an ethical thing. You’re providing them with more distribution, you’re republishing jobs, but do they have a copyright to the job posting? They may. You may want to check with them first. You’re gonna have to talk to a lawyer, just do your research on that, but that’s what I would do is if they already have jobs posted in their own site, I would look to just be like I will do this for free for the first three months since we’re getting started up and I will just pull all your jobs in, are you cool with that? Try to make it as easy as possible. I would either a scraper, an importer, hire a VA, I would do something that is able to pull in those jobs so these folks are not having to do the work and it’s just a simple and easy yes.
And then, your results are gonna make or break whether they want to pay you. That’s a cool and a stressful situation to be in. I think back to I believe it was TripAdvisor in their early days. Their big game is building all these SEO pages. They’ll have a destination and then they’ll have all the rankings and then they get all the search engine traffic. They were trying to monetize and they went to cut deals with travel ticketers, airlines, hotels, all of this stuff. They basically said, “Buzz off, we don‘t care.”
TripAdvisor already had a bunch of traffic, they turned on this [inaudible 00:17:22] to some of these ticketers, and I don’t know if it was airlines or hotels or just people selling tickets but whatever it is, people selling the things that they were talking about on TripAdvisor. They turned on this [inaudible 00:17:33] and just started sending a bunch of traffic, they didn’t charge for it and they didn’t get a kickback, they didn’t get a commission, but then they turned it off after two to four weeks. At that point, the people selling tickets said, “Wait a minute, what did you just do?” They said, “We turned the traffic off.” They said, “What do we need to do to get that turned back on?” That’s your conversation.
That’s where you start. You said, “Well, we’re gonna charge you. You need to give us a cut of the ticket sales.” That’s what you’re going to be, that’s the situation you’re gonna be in here is thinking about if you get these job for free for three months and no one applies to your site, they’re not gonna pay you. But if they get fantastic talent, it doesn’t need to be a lot, I’ve used a few job sites where I only got three or four applicants but they were all top notch because it was just a really small niche and I continued using them after that. Very good question, I appreciate that Alex and I hope it helps.
Our next question comes from Robert Andrews. He says, “I’m a long time tech journalist and editor turned content consultant. I’ve written a book it’s called Startup Blueprint: Seven Skills For Founders, Leaders and Builders. It was a bit of an experiment in discovering those skills, distilling them and frankly trying to make my first product. Think it turned out great. I have some good reviews but I’d love to get feedback particularly on the marketing strategy. After spending so long witting the book, I did almost nothing to get it in people’s hands. It’s the proverbial tree which no one heard falling in the forest.
My current approach is to offer a free sample chapter in return for an email triggering email sequence and weekly insights from the book as well as links to purchase,” which I think is a great idea. “Built out the campaign in Drip, put the sign up form on the site, but it has no traffic. I thought of driving sign-ups with Facebook and LinkedIn lead ads but I’m not sure these can be cost effective enough to market product like a book. Any thoughts? Appreciate it.”
This is a good question. I think, as Robert alluded to, this is somewhat of a common thing. Authors don’t tend to think about the marketing side of it. If you were to do this “right”, then you would be doing pre launch. You’d build a prelaunch list. If you listen to ZenFounder, you heard Sherry and I talking about our book for the past six months when we started writing it. You can even go so far–when Brennan Dunn works on a project, he’s actively sharing pieces of it on Twitter, on his blog, to his email list, and just build anticipation over time. That’s what I did when I wrote my first book back in 2010. I was sharing pieces of it getting feedback and that’s really the way to do it because it engages people and then by the time you get there it’s a no brainer for someone to buy it.
If you haven’t done that, then, yeah you are starting from a cold start and especially in this space, there’s so many people with the startup message and the entrepreneurial message. It is hard to stand out. I think Facebook and LinkedIn ads I do not believe will work just because of the cost. Typically, you need LTV of 150 and up to work but you know what? This is the learning experience.
You’ve said it, I totally, personally, would run some Facebook and LinkedIn ads just to see what it feels like. Maybe your conversion rate on a book because it’s so cheap will be way higher than the software that I’ve tried to sell using Facebook and LinkedIn ads. There’s a chance it will work, you can find a small subset of people or some some audience that will be willing to buy it. Even if you only breakeven, part of this is just getting the reach out there. Because every customer who buys from you, now they’re part of your audience. You have their email address and I think that’s a great way to do it.
I think another way is of course, I’ve talked about this a lot, is a podcast tour. If you have no name or no reach, then it is just gonna be cold emails to podcasts, you’re going to have to figure out what the story is because it’s not, “I just wrote a book. Can I come and talk about it on your show?” Because you’re gonna get zero yeses for that. You have to figure out what the angle is for that particular show and why that show’s audience would really want to hear about one of the concepts from your book. If you have any type of network in this space obviously, then that’s where you want to start.
And then of course public speaking, if you do any of that. If you get invited, you can often ask the organizers to buy a copy of your book for everybody at the conference, both Sherry and I have done that and it’s worked out really well. It gets it in more people’s hands, you give them a discount of course. But then you get up there and people get to here you and then you have a video that gets on YouTube or Vimeo and then you can promote that. There’s all these angles.
But I find selling a book a lot different than selling software because it’s so much more about your credibility, it’s about the person who wrote it, and it’s also about the message as well but it’s much less about the utility than software. Software has to solve a problem right away. People will churn out of it immediately. But a book can be an impulse purchase and it’s just about throwing a wide net and finding a lot of people who could potentially be interested. Like I said, it’s an impulse purchase. I will often hear about a book, and just as I’m hearing the podcast, jump into Audible and buy it because my Audible credits were so dang cheap.
I’m on the annual plan and I buy a bazillion books a year, very much an impulse purchase for a lot of people, especially if it’s a $20, $25 book. But the advice I would give is figure out how you’re gonna couch or position your book so that it’s different than everything else. Because when I hear the title, which again is Startup Blueprint: Seven Skills For Founders, Leaders and Builders, it sounds like a lot of other books, it sounds somewhat generic, it’s not super inspiring to me, personally. I probably wouldn’t buy it based in the title alone. You’re gonna have to figure out how do I further differentiate it from all the other books that are talking about the same topics.
An example is my first book came out 2010, it’s called Start Small, Stay Small: A Developer’s Guide to Launching a Startup. I had a couple of advantages. I had an audience of a bunch of developers who a lot were into products. I called it Start Small, Stay Small which was interesting title for a startup book because no one ever talks about staying small. It was like that’s curious. I really niched it down; A Developer’s Guide to Launching a Startup. I actually got a bunch of people telling me, “This isn’t just for developers, anyone can use this.” I said, “I know, but I really wanted, if you were a developer, to just basically be a no brainer purchase for you.” That’s what happened, and the book has done very well.
I’m trying to think what the most recent numbers are, it’s probably sold maybe 12,000 copies at between $20 and $35 a piece. Some of that’s been on Amazon, but yeah, hundreds of thousands of dollars literally I’ve made from that book. That was never the intent but it definitely did very well and I think part of that was because I had this small audience. This was before Micro Conf, it was I believe before the podcast or maybe right at the same time as the podcast was coming out. It was before a lot of this stuff.
I was really just a blogger and a guy who was making a full time living off of these small products and that was about it. It wasn’t like I had the reach or the network or anything that I have today and yet this book just kept selling. I think it also helped, it was a good book. It was well written, I put everything I had into it. I was super prescriptive and super detailed. It wasn’t like it was just a pure marketing thing, there was also a virtuous cycle of word of mouth that helped it continue to spread and sell over the years.
Good question, Robert, I appreciate it. I hope those thoughts are helpful.
I think that wraps this show. If you have a question for us, call our voicemail at 888-801-9690. You can also email an mp3 file or any type of audio file really to us at questions@stratupsfortherestofus.com, audio questions go to the top of the stack almost always, answer those first, but we do of course accept text questions as well via email. 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 a full transcript of each episode. Thanks for listening, we’ll see you next time.
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, and Mike has no power for the past day or two. He has no internet, and I think a storm came through and knocked out a bunch of power. He won’t have it back he said at the earliest til midnight tonight. I jump into a car with my son, my 11 year old. We are heading to Lake Geneva, Wisconsin for Gary Con in about two hours. There was no overlap.
Mike emailed me and let me know he wasn’t able to make it and so my goal was to find a guest this morning. I emailed three or four people short notice and no one is able to show up. Here I am, we ship every week, every Tuesday morning an episode comes out.
I dug into our listener question bag and we were down to one listener question last week, we’re up to eight or nine this week, which is great. I enjoy these episodes when we answer listener questions. We’ve been doing them a lot more lately. What I’ve noticed is it feels like there’s a lot more listener participation and it also feels like we’re keeping up with topics that are not just coming out of our heads.
These are really questions and topics that you, the listener, are thinking about. It feels like I enjoy these episodes because I feel like they’re as relevant as we can be to the moment of what you’re thinking about and what you’re launching as a listener base. We are here to share our experiences, to hope you avoid the same mistakes we’ve made. Also, to weigh in on questions that you have as you’re growing, building, launching your startup.
Let’s dive into our first question. It’s from [Dylan Dee 00:02:10] and it’s about whether he can use advertising as a SaaS revenue model. He says, “My company is Dunwich Technologies, it’s a healthcare focused consultancy. We’re developing a SaaS app to help patients better understand their confusing medical bills. I see the value in one off uses, doesn’t feel like an app that could garner much daily activity or many daily active users. It’s more like an every so often use. This coupled with not wanting to charge for the app leaves me with few revenue options. Would medical/pharma ads on this app be the only or the best way to monetize it in your opinion?”
My opinion is this will not work at all. Because if you don’t have a lot of daily actives, then ad based revenue models are gonna bring in pennies for you. I would be shocked if you have people logging in once a month or once every other month. Let’s say you had 100,00 people using the app and they only log in once a month, you’re gonna make hundreds of dollar. It is catastrophically low, the ad rates are just very low these days. You look at a company like Facebook or Twitter, Google, and the only reason that ads work for them is because they have so many people constantly using the app.
If you’re going direct to consumer and you don’t think you can charge for it or don’t want to charge for it, I would think of this as more of a lead gen thing. Can it generate leads? Can you build up a free customer based and generate leads for your consultancy? Or, can it generate leads for another SaaS app that you may want to charge for, or a video course–I’m just throwing things out.
Obviously, you may not want to create a video course, you get the idea. If you’re gonna build something that truly is freemium but there is no ‘mium’ to it, there’s no premium aspect because you’re not gonna upsell. But actually, that is another thing you can think about is to launch this. See what happens, see if there’s any uptick. If you get 10,000 free users in there asking for more things, you could then consider going freemium and having a paid tier on top of this. Even if it does just a $5 or $10 a month thing.
It’s really hard to do B2C SaaS, it’s not done very often. If you look at even Dropbox, they are trying to pivot into the enterprise because that’s where more money is and the lower churn and all the stuff. Box.net kind of beat them to the punch on that. I think that Dropbox was conceived as a B2C company but if they really want to maximize the valuation frankly, they want to get into the enterprise because enterprise customers have higher lifetime values. And if you look at the stock market in public or even the private markets, companies serving mid market and enterprise, and even SMBs are valued higher than the same amount of revenue serving consumers because that revenue tends to be more volatile.
All that to say, I don’t think you have any chance of making any money that’s gonna move the needle using an advertising model. I would say if you’re gonna build it, if you really want to, give the thing away, see what happens, see if it becomes lead gen. If nobody uses it, then that’s fine too. At least you took your shot.
Our next question is an audio question. It’s about a WordPress Plugin company, whether they should offer a SaaS offering.
“Hey Rob and Mike. I love the show. My name is Kyle, thanks for taking my question. I work for a small WordPress Plugin company. We’re pretty well established and doing just fine, but looking to grow and take on some new exciting project. I have some ideas that I wanted to get your input on.
Basically, I want to see if introducing a small SaaS offering might make sense for our business? Obviously, we distribute our WordPress Plugin, that’s our business right now. Our customers are mostly in ecommerce but I was in the interest of helping our customers succeed and solve real problems that they have. Also becoming as indispensable to them as we can be while at the same time introducing new streams of revenue for our business.
I was wondering if maybe we should consider adding a SaaS offering which we make available only initially to our existing users. Not something that we market to our broad audience, but something that we just silently roll out to users of our plugins already. I’m thinking this could be something very simple, some tool like helping them with their email delivery or file storage, data backups, staging environments, remote site management, reporting businesses sites, something like that, I don’t know. We can make a simple tool, put it in front of existing users and say, ‘Click here to take advantage of this extra monthly tool.’
My questions are, how do you feel about the idea of creating some simple, light MVP simple SaaS product? Initially making it only available to current users of our plugin. Do you have any opinions about the type of SaaS product which would be the best for us to choose if so? Something simple yet still useful to our customers for mostly running ecommerce sites. Thanks so much and I look forward to meeting both of you this year at Micro Conf, thanks.”
This is a great question. I think a lot of WordPress Plugin vendors probably think about this because the appeal of having monthly recurring revenue versus the potential spikiness of WordPress Plugin in the one time sales, it’s appealing. SaaS and subscription revenue is the golden ticket that everyone is looking for.
I would say that just to start with, a, I think this is a great idea. I’m all for it. I think if you wanted to tip toe into it, you should definitely do it. I would say that when I talk to folks who do WordPress or do one time sales, they’re always talking about launching a SaaS. When I talk to people who have SaaS apps, so many of them are jealous of these one time sale products because those product price points tend to be higher.
You might sell a WordPress Plugin for $40 to $200 and you get that nice pop right off the bat. If you sell one customer, you make $200 that month. Whereas if you have a lightweight SaaS, you might make $10 that month from the customer and you gotta keep them around and you’re constantly working to do that to retain them. I know that with DotNetInvoice, which was an invoicing software I owned years ago, it was $300 for the product, for a developer to buy it and use it.
We only sold 8-15 copies a month. You think about that, you think about let’s just say 10, you think about making 10 new SaaS sign ups that stick around and become customers and that is catastrophic. Unless you’re very, very expensive, in the enterprise. But just the normal, let’s say you’re $20, $30, $40 a month, that’s slow growth. It’s gonna be agonizing. Whereas if we sold 10 of DotNetInvoice, it was $3,000 a month. At the time, I was looking to make a car payment or make a house payment and I was doing consulting. This was just a little side project that I didn’t spend a ton of time on. That dollar amount and getting all the lifetime value upfront from your customers, there is some appeal to that.
I would say don’t look that [inaudible 00:09:17]. Do realize that the couple beauties of WordPress are that you do get all the lifetime value upfront and that you have that built-in distribution channel of the WordPress repo, and that also ranks high in Google which then can bring people to your WordPress page and get that free download. With all that said, when I talked to a lot of WordPress folks who have plugins, are making some money, they are always thinking of how to get into SaaS, and I don’t think that’s a bad thing. A, I think it’s great. SaaS is more complicated, it levels you up. There’s more to learn, it is that recurring revenue that you’re looking for.
Number one, I think yes, you should give this a shot. Number two, I think you have an advantage because you already have paying customers. I have no idea about this business if you have a thousand people who’ve purchased it or if you have ten thousand, but that is a great built in audience right there to start a SaaS from.
I’ve talked on the podcast and at MicroCon a couple of years ago about what I believe are the only four true competitive advantages in SaaS. It’s who you know, it’s your network. It’s who knows you, it’s your audience, that includes customers. And it’s being early to a space and being a growth hacker, someone who knows how to think through methodically and really grow anything.
This is a case where you already have an existing audience of customers, you do have an advantage over someone starting from scratch. You have customers who probably trust you and like you. If you build something with them in mind, you should be able to have a pretty good strat to your business.
In addition, you probably have a bunch of free users and I know they won’t convert as well but that should be a number that’s 10 or even 100 times the number of people who’ve actually paid you and so you do have some reach there. That’s the plus side.
The negative side is you building a SaaS is gonna take a lot more time than building a WordPress Plugin in general. There’s so much more, there’s the hosting and the infrastructure and uptime and all the stuff that you don’t have to deal with. It is gonna be a big learning experience. I wouldn’t want you to think just because you’ve built software, you’ve built products and you’ve sold it, you definitely have learned a lot but SaaS is going to be that next level up in terms of complexity.
In my opinion, if I were you, especially in the ecommerce space, I would start talking to my customers, you already have them. You can have a few ideas and I think in a perfect world you might have three of four ideas that you start running by customers and saying which one of these would you absolutely, no doubt, would sign up for tomorrow. Take that short list and run it by, I’m sure you know a bunch of them personally, and then start emailing a hundred of your customers at a time even if you don’t know them and being just like, “Hey we’re considering branching into this, would you buy it?” I think you’re gonna get pretty good feedback form that pretty quickly.
That’s how I would approach it, I think, asking my opinion, you’ve asked my opinion about what kind of app you should build, I have no idea because I don’t know. I don’t know your customer base or what you’re currently serving. I think that the best WordPress to SaaS progressions are things like Opt-In Monster where it was just a WordPress Plugin and then they just launched basically the same thing as the SaaS app. It was subscription, they already had the features that they knew that was killer, they had experience in it. They literally just turned the WordPress Plugin into a recurring subscription.
If you’re not on WordPress, you can still use it but you pay the monthly. Craig Hewitt is doing this with his WordPress Plugin Seriously Simple Hosting, and then it’s Castos now. Moving from this WordPress space and just building a SaaS out of it, I think that’s a good way to go because you already have experience with that. You already have inbound interest, folks finding you through the WordPress repo so you do have that traffic source and distribution channel.
Again, I think if you want to get in this and get into the recurring game, I think it’s a good idea and I do think you have some advantages given your current business. Thanks for the question.
Our next question is from Alex Baxter. He says, “Love the podcast, big fan. I’m attempting to bootstrap a startup in the job site space.” A job website, a two-sided marketplace. “As I begin to look for companies to post jobs to the site, would you suggest allowing companies to post jobs for free to get the initial supply of jobs up for candidates to view then worry about monthly fees later, or trying to charge from the get go? I’m leaning towards free but I wanted your thoughts.”
The reason I like this question is because it’s the classic two sided marketplace. Whenever I talk to anyone about a two-sided marketplace, I say basically the same thing. You’re gonna have to figure out which side you need to get first. In this case, you’re not gonna have any job seekers come to the site if it has no jobs. You have to get the jobs up first.
Yes, I would beg, borrow, and steal to get jobs on this site. I’ve seen new job sites launched and they’ll go and scrape Monster, Indeed, Hot Jobs and all these other things in order to populate their jobs and start form there and then spin out. I’m not saying you should or shouldn’t do that but it’s a way to think about it. There are jobs postings out there that you would be able to populate on your site and it’s additional distribution for them.
In terms of offering for free to employers, I probably would, because you have no traffic. You really can’t charge them because you have no job seekers yet. In my opinion, it’s probably a, “Hey, this is going to be free for the first three months or six months or until we have 10,000 uniques a month, or until every job receives 50 views per month.” There’s something that just needs to trigger that they need to start paying you. Because you don’t want to get a bunch of your best employers and just be like, “Yep, this side is free to post,” because that’s not a business perpetually.
You have to take an approach that long term you’re not comping your best customers. That’s why it kills me, I‘ve seen people pretty often do this with SaaS where they get this launch list or they get 5 or 10 interested customers and they say, “Yeah, for your feedback, I’m just going to comp you lifetime.” I think to myself no, these are your first 10 people. You can give them a discount, you can comp them for six months, give a discount for the first year. You can do that because they are giving you effort but also providing them a ton of value with the software.
If they’re willing to sit and work for beta software with you, then they probably have a pain point that you’re also helping with. Don’t do that would be my advice. Don’t cut that revenue off at the knees, especially in the early days when you need it most.
For this, I would definitely consider just cold outbound outreach. I’m guessing this is probably a vertical and you probably know all the companies in that vertical and that would be cold emails, cold phone calls to basically just start with like, “Hey, I see jobs on your site. Can I repost these here? Do you give me permission?”
Technically, I got to be honest, I don’t know if you even need permission legally. Whether it’s an ethical thing. You’re providing them with more distribution, you’re republishing jobs, but do they have a copyright to the job posting? They may. You may want to check with them first. You’re gonna have to talk to a lawyer, just do your research on that, but that’s what I would do is if they already have jobs posted in their own site, I would look to just be like I will do this for free for the first three months since we’re getting started up and I will just pull all your jobs in, are you cool with that? Try to make it as easy as possible. I would either a scraper, an importer, hire a VA, I would do something that is able to pull in those jobs so these folks are not having to do the work and it’s just a simple and easy yes.
And then, your results are gonna make or break whether they want to pay you. That’s a cool and a stressful situation to be in. I think back to I believe it was TripAdvisor in their early days. Their big game is building all these SEO pages. They’ll have a destination and then they’ll have all the rankings and then they get all the search engine traffic. They were trying to monetize and they went to cut deals with travel ticketers, airlines, hotels, all of this stuff. They basically said, “Buzz off, we don‘t care.”
TripAdvisor already had a bunch of traffic, they turned on this [inaudible 00:17:22] to some of these ticketers, and I don’t know if it was airlines or hotels or just people selling tickets but whatever it is, people selling the things that they were talking about on TripAdvisor. They turned on this [inaudible 00:17:33] and just started sending a bunch of traffic, they didn’t charge for it and they didn’t get a kickback, they didn’t get a commission, but then they turned it off after two to four weeks. At that point, the people selling tickets said, “Wait a minute, what did you just do?” They said, “We turned the traffic off.” They said, “What do we need to do to get that turned back on?” That’s your conversation.
That’s where you start. You said, “Well, we’re gonna charge you. You need to give us a cut of the ticket sales.” That’s what you’re going to be, that’s the situation you’re gonna be in here is thinking about if you get these job for free for three months and no one applies to your site, they’re not gonna pay you. But if they get fantastic talent, it doesn’t need to be a lot, I’ve used a few job sites where I only got three or four applicants but they were all top notch because it was just a really small niche and I continued using them after that. Very good question, I appreciate that Alex and I hope it helps.
Our next question comes from Robert Andrews. He says, “I’m a long time tech journalist and editor turned content consultant. I’ve written a book it’s called Startup Blueprint: Seven Skills For Founders, Leaders and Builders. It was a bit of an experiment in discovering those skills, distilling them and frankly trying to make my first product. Think it turned out great. I have some good reviews but I’d love to get feedback particularly on the marketing strategy. After spending so long witting the book, I did almost nothing to get it in people’s hands. It’s the proverbial tree which no one heard falling in the forest.
My current approach is to offer a free sample chapter in return for an email triggering email sequence and weekly insights from the book as well as links to purchase,” which I think is a great idea. “Built out the campaign in Drip, put the sign up form on the site, but it has no traffic. I thought of driving sign-ups with Facebook and LinkedIn lead ads but I’m not sure these can be cost effective enough to market product like a book. Any thoughts? Appreciate it.”
This is a good question. I think, as Robert alluded to, this is somewhat of a common thing. Authors don’t tend to think about the marketing side of it. If you were to do this “right”, then you would be doing pre launch. You’d build a prelaunch list. If you listen to ZenFounder, you heard Sherry and I talking about our book for the past six months when we started writing it. You can even go so far–when Brennan Dunn works on a project, he’s actively sharing pieces of it on Twitter, on his blog, to his email list, and just build anticipation over time. That’s what I did when I wrote my first book back in 2010. I was sharing pieces of it getting feedback and that’s really the way to do it because it engages people and then by the time you get there it’s a no brainer for someone to buy it.
If you haven’t done that, then, yeah you are starting from a cold start and especially in this space, there’s so many people with the startup message and the entrepreneurial message. It is hard to stand out. I think Facebook and LinkedIn ads I do not believe will work just because of the cost. Typically, you need LTV of 150 and up to work but you know what? This is the learning experience.
You’ve said it, I totally, personally, would run some Facebook and LinkedIn ads just to see what it feels like. Maybe your conversion rate on a book because it’s so cheap will be way higher than the software that I’ve tried to sell using Facebook and LinkedIn ads. There’s a chance it will work, you can find a small subset of people or some some audience that will be willing to buy it. Even if you only breakeven, part of this is just getting the reach out there. Because every customer who buys from you, now they’re part of your audience. You have their email address and I think that’s a great way to do it.
I think another way is of course, I’ve talked about this a lot, is a podcast tour. If you have no name or no reach, then it is just gonna be cold emails to podcasts, you’re going to have to figure out what the story is because it’s not, “I just wrote a book. Can I come and talk about it on your show?” Because you’re gonna get zero yeses for that. You have to figure out what the angle is for that particular show and why that show’s audience would really want to hear about one of the concepts from your book. If you have any type of network in this space obviously, then that’s where you want to start.
And then of course public speaking, if you do any of that. If you get invited, you can often ask the organizers to buy a copy of your book for everybody at the conference, both Sherry and I have done that and it’s worked out really well. It gets it in more people’s hands, you give them a discount of course. But then you get up there and people get to here you and then you have a video that gets on YouTube or Vimeo and then you can promote that. There’s all these angles.
But I find selling a book a lot different than selling software because it’s so much more about your credibility, it’s about the person who wrote it, and it’s also about the message as well but it’s much less about the utility than software. Software has to solve a problem right away. People will churn out of it immediately. But a book can be an impulse purchase and it’s just about throwing a wide net and finding a lot of people who could potentially be interested. Like I said, it’s an impulse purchase. I will often hear about a book, and just as I’m hearing the podcast, jump into Audible and buy it because my Audible credits were so dang cheap.
I’m on the annual plan and I buy a bazillion books a year, very much an impulse purchase for a lot of people, especially if it’s a $20, $25 book. But the advice I would give is figure out how you’re gonna couch or position your book so that it’s different than everything else. Because when I hear the title, which again is Startup Blueprint: Seven Skills For Founders, Leaders and Builders, it sounds like a lot of other books, it sounds somewhat generic, it’s not super inspiring to me, personally. I probably wouldn’t buy it based in the title alone. You’re gonna have to figure out how do I further differentiate it from all the other books that are talking about the same topics.
An example is my first book came out 2010, it’s called Start Small, Stay Small: A Developer’s Guide to Launching a Startup. I had a couple of advantages. I had an audience of a bunch of developers who a lot were into products. I called it Start Small, Stay Small which was interesting title for a startup book because no one ever talks about staying small. It was like that’s curious. I really niched it down; A Developer’s Guide to Launching a Startup. I actually got a bunch of people telling me, “This isn’t just for developers, anyone can use this.” I said, “I know, but I really wanted, if you were a developer, to just basically be a no brainer purchase for you.” That’s what happened, and the book has done very well.
I’m trying to think what the most recent numbers are, it’s probably sold maybe 12,000 copies at between $20 and $35 a piece. Some of that’s been on Amazon, but yeah, hundreds of thousands of dollars literally I’ve made from that book. That was never the intent but it definitely did very well and I think part of that was because I had this small audience. This was before Micro Conf, it was I believe before the podcast or maybe right at the same time as the podcast was coming out. It was before a lot of this stuff.
I was really just a blogger and a guy who was making a full time living off of these small products and that was about it. It wasn’t like I had the reach or the network or anything that I have today and yet this book just kept selling. I think it also helped, it was a good book. It was well written, I put everything I had into it. I was super prescriptive and super detailed. It wasn’t like it was just a pure marketing thing, there was also a virtuous cycle of word of mouth that helped it continue to spread and sell over the years.
Good question, Robert, I appreciate it. I hope those thoughts are helpful.
I think that wraps this show. If you have a question for us, call our voicemail at 888-801-9690. You can also email an mp3 file or any type of audio file really to us at questions@stratupsfortherestofus.com, audio questions go to the top of the stack almost always, answer those first, but we do of course accept text questions as well via email. 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 a full transcript of each episode. Thanks for listening, we’ll see you next time.
Episode 382 | Fixing Onboarding, Marketing a Low LTV Product, and More Listener Questions
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions, topics include fixing onboarding, marketing a low LTV product, and the legality of cold email.
Items mentioned in this episode:
Mike: In this episode of Startups For The Rest Of Us, Mike and I talked about how to fix your onboarding, marketing the product with a low lifetime value, and more listener questions. This is Startups For The Rest Of Us episode 382.
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 Mike.
-: And I’m Rob, I guess. And I’m not Mike.
Rob: That’s what Sherry said when she was on the show, “And I’m not Mike.” What’s going on this week, man?
Mike: I just pushed the new Bluetick website live this week. That’s finally out there, they were out, I think, Monday night. Just been making some minor tweaks here and there just to get the images all straightened out and smooth out some other rough edges.
My main focus was just getting the design itself in place and then the copy along with the new updated theme because it’s all built on WordPress. Now that that’s stuff’s in place, I actually have to leave in four or five hours to go to FemtoConf and then once I get back, then I’ll probably finish off the rest of the little minor things that need to be taken care of and just make sure all my plugins are installed and all the analytics are working and then from there just start marketing.
Rob: The site looks great, it looks really nice. It’s like ten times better than what you had up there. All the way from the look, to the images, to just the verbiage and then what you have there. Bravo on that. Can I give you two small critiques? I’m sure these are behind on your list. You have a testimonial on the home page which I think is great.
Mike: Actually those are gonna be swapped out.
Rob: Cool, you got multiple, but put big old quotes around it. There’s something about seeing quotes around it. I know there’s Justin’s face there and then there’s a testimonial to the right of it but without the quotes, it’s like there’s just something there. I really like to call out large quotes because then people know the guy is saying that. It’s a little thing that I see in a lot of sites but I think there’s some impact.
Mike: Yeah, I’ll definitely do that. What’s the next one?
Rob: The other one is, you know what, this one isn’t actually a critique. You have one sentence description at the bottom of the page in the footer about Bluetick and it says, “Bluetick relieves the soul deadening drudgery of email follow up for founders, overworked sales executives, and anyone who’s ever lost a perfectly good lead to the email blackhole.” That’s a really well-written thing. Why does it say FIP? What’s FIP mean?
Mike: I don’t know, actually I think that’s gotta be RIP.
Rob: There’s just a little typo there. I don’t love your logo because it took me a while to figure out what it is but it looks like it’s a dog eating an envelope or carrying an envelope, is that right?
Mike: Yeah, it’s carrying an envelope.
Rob: I’m sure it looks better when it’s big but given the size on your site right now. Listeners, you should go to bluetick.io and check all this out and see if you agree with me or what else we can figure out. I’m sure changing your logo is like priority 942 on your list right now.
Mike: Yeah. The only reason I even had the logo done was because before it was just text and I wanted to have something up there so that people could associate the logo with the text itself because there’s familiarity that people get with certain text fonts especially when they go with a particular logo but I’m gonna be using that logo inside of some of the emails and stuff that are being sent out. I just want that familiarity to at least be there.
It wasn’t necessarily important, it was just like okay, if I’m doing a step up, the previous logo was literally a stock image that was just black and white of a dog’s face and it was just not very relevant, I’ll say.
Rob: I would think if you could somehow simplify just the dog’s face, turn it into a line drawing or something. Again, I realized it’s hard because you can’t do it yourself, you’re gonna have to hire somebody. I don’t think this is a deal breaker, I don’t think people are not gonna sign up for the app because of that. It’s just something that every time I come to the site I notice it and I’m like it’s a little busy.
Mike: This is gonna turn into a website tear down episode.
Rob: It’s gonna be the whole episode. These are very minor things. There are no typos on the page, the copy is good, personal touch at scale for all your follow up emails, that’s your headline. It’s really well-written. Obviously you could split test against something but nothing comes to mind as like boy, this copy is really jacked up or anything. It looks good.
The only two, again these are minor things, your Drip widget popped up on me after maybe 5 to 10 seconds. I was in the middle of reading your headline or the subheading and the thing popped up. I would probably push that out to 30 seconds, you have quite a bit of [inaudible 00:05:05] on the page, maybe even 45 seconds. Just give people a bit of time to read a little more.
Last thing is, your title tag on your home page, it says, “Home-Bluetick.” I know you’re not doubling down on SEO right now but really, Google has probably indexed you already. You may wanna start that with something, I don’t know what keyword you’re gonna be targeting or keywords but whether it’s email follow up or whatever generic phrase you would love to rank number one in Google, at least have that somewhere in there, probably towards the front.
Again, I wouldn’t keyword stuff but Home-Bluetick isn’t gonna get you much. You don’t want people to find you for the word home. People are gonna find you for the word Bluetick. Neither those really need to be there, although I’d probably still have Bluetick in there somewhere. That’s about it, man.
Mike: All of those are great suggestions. Some of them, like you said, the typo, I knew that I had to get to that but I just hadn’t gotten to it. I feel like extending out the Drip widget a little bit so that it gives people more time. All the title tags and stuff like that, I have not even looked at any of those yet. That’s on the list of things to do when I get back.
Rob: You have some art on the tour page, that’s very cartooning. Those look really cool, I like the feel of that. It’s very professional feel.
Mike: The designer who did the website, he came up with those illustrations. We went back and forth on a couple of different design ideas that he had and those are the ones that came out of it.
Rob: Very cool, man. Good luck. I’m interested to hear how it impacts conversions and all that kind of stuff.
Mike: The main focus of doing all of this stuff was just to give the website a much better feel to it so that when somebody either came to the website itself or was directed to it because of a referral, it doesn’t look like something that they would’ve just clicked the back button and said, “No, I’m not even gonna give this a chance.” I did hear that as feedback from people where I recommend it to so and so they told me that if I had not recommended it to them, they wouldn’t have even given a second thought.
It’s really to just overcome that as a primary objection. I can do a demo for somebody or a webinar and I could sell them on it and say, “Yes, this is what the product does.” By showing them inside the product and what it can do for them and solve their problems, yes it’s fine. But a completely cold lead who comes to the website has no idea and they’re not gonna give it a chance, that’s really what it is. The bar for something like a SaaS product is much higher than something that the old website could even overcome.
Rob: The bar is much higher than it was five or ten years ago as well. I think you made a good call here. Doubling down on this, you’re at the point where you’re starting to scale getting more trials coming through the websites, now is the time to do that. If you spent much time on this when you’re in customer development, it would’ve been a waste of time. I think it was a good use of time and money.
I wanted to talk a little bit about MicroConf, it’s coming up in April, Starter Edition. We still have tickets left and we have some really good speakers this year. We have Mary Pullen who’s talking about her first year of SaaS bootstrapping. We have Alli Blum talking about copywriting and onboarding emails, she’s been on the show. You’re speaking, Justin Jackson, Ben Orenstein, Courtland Allen from Indie Hackers, Mojca Mars about Facebook Ads, really solid lineup this year.
If you’re at all interested in hanging out with 100-250 folks who are all the way from idea to making a full time living from their business, head over to microconf.com, click on Starter and the tickets are relatively inexpensive compared to most conferences and we do still have some left. We’d love to see you there.
The other thing is I’m driving to Lake Geneva, Wisconsin next Thursday or I guess it’s two days after this will air to attend Gary Con, have you heard of that?
Mike: I have not. Is that related to Gary Gygax?
Rob: Yes, Gary Gygax was the creator of Dungeons and Dragons. He died in I think it was 2010, 2012. Basically friends and family just got together and played a bunch of games. It’s like there’s table top games, there’s card games, and RPGs and miniatures and the war games and all that kind of stuff. It was like 20 or 30 people the first year and they jokingly called it Gary Con in his honor. The next year, they sold a few tickets and they had 100 people and it just turned into this thing.
I went last year, it’s kinda neat being in the midwest. I’ve never gone because I was never gonna fly from California out to Lake Geneva, Wisconsin but being in the midwest, it’s like a four or five hour drive. Last year I was kinda nervous about going, my son and I, we obviously love and play these games but we’re not sophisticated gamers, we’re just playing for fun and there are about 1200 people there. It was a blast, man. It was so much fun.
People are really nice and welcoming. I’d come up with my ten year old son and I was like, “Hey, we’ve never played this.” They’re like, “No problem, we have a character for you, here’s how you do it.” They were just super helpful. Anyways, I’m really looking forward to that. If anybody happens to listen to this and be there, please drop me a line. We’d love to connect with you but if not, I’ll certainly report back about the nerdery that’s gonna take place in Lake Geneva next week.
Mike: That’s awesome. I’ve been to a couple of gaming conventions like that, there was one in Buffalo, New York that I went to. It’s probably 10 or 12 years ago. It’s interesting because there was a guy there who had a role playing game that he was trying to launch and trying to get funding for but he was also still doing play testing for it. There was a room of 25 of us, he basically threw us into this game. I think the game was called monoxide amazon or something like that.
The idea was you’re in this world where you just basically have to run away from everything, everything is out to kill you. Half the people died in 10 or 15 minutes or something like that. It was like an hour long session but out of all of us, I think there were only five or six of us that made it out alive.
Rob: That’s cool. That’s the neat part. Last year the same thing happened, there were several people there who were trying to get their games on Kickstarter or going to put them on but they were doing play testing. My son actually played that Tower Defense game board game that he enjoyed a lot. The convention itself, it is four days.
We’re only going for three days of it but it’s not just some eight hour session, we’ll probably game as much as we can, eight to twelve hours a day, we’ve already signed up for tables in advance and then we’re also wandering around. There’s so much cool stuff to buy too, it’s really bad. I need to limit my spending but I get overwhelmed how much cool stuff people bring. It’s a great time to buy dice and miniatures and all kinds of geeky stuff.
Mike: Cool. What are we talking about this week?
Rob: We have a few listener questions. Actually, by the end of this episode, we will have zero listener questions in the cue. I don’t know if it’s woohoo or not. We’re gonna have to come up with some content next week. If you do have questions for us, please, email them to us at questions@startupsfortherestofus.com or certainly call our voicemail number which we read at the end of every show.
Our first question is from Tim Win. He has a couple questions in the same email. His first question, he says, “I was wondering, for a B2B Saas targeting specific niche market, what will be a good amount of traffic I should try to generate to get meaningful feedback?” Aside from it depends, do you have thoughts on this? Because it does depend, that’s a very general answer. Let’s weigh it on, I may have some thoughts.
Mike: I think when you ask a question like this, what you’re really trying to get out is the amount of feedback that I’m getting good enough in relation to what other people would get or are you getting the feedback that you need to make a decision. I think that’s how I would approach it to figure out whether or not you’re getting enough traffic.
You have to decide on what your KPI for that website is and how you’re going to be gathering information from people. Let’s say that you use Hotjar and you put a poll on your website and you get 100 or 500 people to it and you get 3 people to answer the poll, that’s not a good percentage but 3 people out of 500 visitors is not going to help you in any way, shape, or form. Even just adding once answer is gonna skew things in such a direction that it’s just not helpful.
I think I would look at it in terms of how much feedback you’re getting versus how many people are visiting. Also, recognize that when you’re looking at the traffic stats for a particular website, it’s very easy to misinterpret bots coming to the website to just crawl it versus actual visitors who were there for purpose or came from a particular search term or were directed from an email or another website.
Rob: If you’re using Google Analytics, though, I don’t think it picks up bots, I’m pretty sure it does not, it’s only if you look at raw server logs, just a caveat in there.
Mike: But it is hard to tell when you’re looking at that because you do see on the server logs, you’ll get 20 or 30 visits a day. I’m not convinced that Google accurately filters out all the robots that it’s supposed to.
Rob: Really? Because it’s JavaScript. Typically a bot is like a crawler, it’s a Python Script that’s just doing something. It shouldn’t “execute” JavaScript. You need to execute JavaScript to have Google Analytics track you. I know that Google’s crawler does execute some JavaScript, there are stuff, it’s possible but my guess is that most bots are not executing the Google Analytics.
I’m guessing they would exclude it if they could. They’re pretty smart about that. The point is if you’re not using Google Analytics and you’re using your logs, they could be in there.
Mike: That’s true. With this particular question, what you’re really trying to get out is what is the information that you’re trying to retrieve from people and what feedback is it that you want. Do you want conversations? Do you want them to comment on something? Do you want to get them on a phone call? What is the KPI that you’re trying to push people towards? Are they doing it?
I don’t think it’s a matter of trying to measure the actual traffic itself because, I think, bear minimum, you probably need at least 500 visitors a month, anything below that you’re just really not gonna be able to make a meaningful business out of it.
The other thing to consider is the fact that not every B2B SaaS product needs to have traffic coming to its website if that’s not your primary source or primary channel for marketing the product. If you’re doing outbound cold emails, for example, or if you’re sending postcards in the mail to people or you’re doing cold calling, none of those things involve people coming back to your website so there’s an implicit assumption here that the traffic that’s coming to the website is based on SEO or content marketing or something along those lines.
I would just be hesitant to say that there’s 100% correlation between website traffic versus being able to get that meaningful feedback because if you are doing cold calling, for example, you can get on a call with somebody and you can ask them questions and talk to them, get the information you need and they never hit your website at all. That’s something to keep in mind.
Rob: I think that’s probably the first point that I would make. I think that that’s something to keep in mind, is it’s not about necessarily driving a bunch of traffic to a form or to an opt-in. It depends on your business idea but boy, if you have no audience and no reach, I would probably start with some type of outbound, cold email, or maybe some ads going to a landing page or something.
There’s just no better way to get feedback because that’s his questions, it’s not how do I build a meaningful business, it’s how do I get meaningful feedback. The way you do that is you ask for it. It tends to have to be outbound. I would hang on with this concentric circle marketing I was talking about.
I would talk to my friends and colleagues and then their friends and colleagues and then their audience and then eventually you get to the cold audiences but I would start in the center with the people that you know if you truly are going for feedback.
In the early days of Drip, yes, I threw up a landing page and put some copy on there. The only reason I did that was because I was going on podcasts and people were asking me about it and I wanted somewhere to send people.
Eventually, once I knew what we were gonna build, I started doing some ads to it and I did build a list from there but that was not the way I got meaningful feedback. The way I got meaningful feedback was a bunch of warm emails to people within my network asking them, would you use this tool? Here’s a screenshot, what do you think? And then started building momentum there. I think that’s the way to think about this.
If you wanna build an actual sustainable business and you’re asking about how much traffic, DotNetInvoice, which depended on the month but between $2000 and $4000 a month, pretty consistent, sometimes it got to 5000. That site had 1000 to 1500 uniques for years. It was just a really high converting site and it was in a vertical. That’s what he’s asking about here.
He’s like, it’s a B2B SaaS, it’s in a vertical niche. You don’t need that much but you are gonna top out at some point and just stop growing. DotNetInvoice was $300 one-time purchase. Keep that in mind as well.
With 1500 people coming to your site, if you think about, let’s just throw out a 1% conversion rate to trial, you’re gonna get 15 people into trial funnel, that’s with credit card upfront. Let’s say you close 50% of those to customers which is likely, then you’re gonna have seven or eight new customer a month.
You have to ask yourself, if you charge $1000 a month, that’s probably pretty good. If you’re charging $10 a month, that’s not very good. You have to think about your price point and just think about the numbers that I threw out there and you can do backwards math and figure out how many people you need to send to figure out how fast you wanna grow.
Tom’s second question was that he seems to be getting free trial sign ups but once users get into his onboarding which is like a getting started wizard, he seems to lose them. It’s only three steps, it’s nothing too complicated, just adding their location, product service they provide, and setting a payment processor so they can take payments from their customer.
“Some seem to get to this part and never log in. Any idea why? It’s driving me crazy.” What would you do if you were in his shoes, Mike?
Mike: I was gonna say there’s no way for us to really answer why that is. I think that if I were in his shoes and I was having this particular problem, I would email those people individually who never got past that point and see if you can help them, either just walk them through it or ask them questions about what their experience was. Your best case scenario is to get them onto a call to walk them through it and do a personalized onboarding session and then watch them as they go through it so you could just use Zoom to watch over their shoulder as they go through.
The nice thing about doing that is if you do it for them, then they see it but if you let them do it because they don’t know exactly what they’re doing, they’re going to click on stuff that they shouldn’t and you’re gonna be able to recognize that and say, “Why did that person click there?” You can ask them literally on the call, “Why did you click on that? What was it that made you think that you were supposed to click on that?”
Maybe they’re getting confused about the UI, maybe they just don’t have time to log in so they never set up their account.
I think there are other questions I would also ask about like do they come into the site and get there or do they just never come in? If they’ve gone through the signup, does it take them directly over to this three-step process or do they have to get an email and then they click on the email and then they come back into the application. How is that sequence of events set up and what’s the flow look like for the end user?
It could very well be that some people, depending on their browser for example. I’ve run into this with Bluetick in certain situations where some browsers, on occasion, do not work and it had to do with a race condition inside the JavaScript code. Some things work fine and then other ones didn’t. I didn’t know that because I wasn’t monitoring exactly what browsers people were using.
Like I said, because it was a race condition, it sometimes happened but not always. You really just need to talk to them and watch over their shoulder to watch them go through that and ask those questions to find out what it is that you’re doing. If they already got through that first step, they signed up, you have their email address or at least presumably you should. Contact them and follow up with them until you get an answer as to why they didn’t go through that next step.
Maybe they realized at that point that it was going to be more to set up than they thought it was. At that point, you have to evaluate, do I put this process in place? Do I need them to do those three things all at once? Could I spread it out? Are there ways to interject that as part of them using the product without forcing them through that concrete step all upfront? Let’s say that the location, for example, could you pull that from their credit card information?
Rob: Like their IP.
Mike: Yeah, that too. It depends on how accurate you need it to be. Like time zone, you could probably pull from somebody’s browser. If you need the address, could you pull it from their credit card? That depends on whether or not you’re taking credit card upfront which sounds like it’s not because it’s free trial. Those are the places I would start.
Rob: I think that’s spot on. The one other thing I would consider is taking away self-service signup and just putting a request demo button. When they hit that, they can just book right in Calendly and set something up. If you really wanna do this well and this is what you’re focused on, the requested demo button, you could respond to that within minutes.
If you’re relatively low traffic and you really are just hacking away all day right now, try to get back to people within ten minutes of them clicking that and just get them on the phone, do a Zoom meeting and do a screen share and walk them through. It’s essentially what you said, Mike, but I’m just saying you take away the self-service signup portion.
I think that right now it’s gonna be about talking to customer sounds like you’re still in the early days. You could throw Hotjar on there and do screen recordings, you could throw Crazy Egg in there and do heat maps, you can do all that stuff but you’re never gonna find out why, you’re just gonna see what is happening. The why is obtained through having a conversation with them. I would be more hands on these early days, you don’t have to do that forever. I think you’ll certainly find out that it’s pretty valuable for your learning, for accelerating your learning in these early days.
The last question was for you, Mike. He says, “I was listening to one of the podcasts, Mike was saying bluetick.io was having usability issues he had to fix. Are you able to get into detail? Just curious as to what some of them are.” I recall you talking about one usability issue, interested in talking about that?
Mike: Sure. The main usability issue that I have addressed towards the past six months or so, they had to do with onboarding. When somebody signs up for Bluetick, one of the first things that you have to do is you have to set up your mailbox and you have to add in your username and password. If you’re using Gmail, there’s all these different settings that you have to connect. You have to have IMAPS or hostname, username, password, port number, the encryption level. You also have to have the exact same information for your SMTP server because it may not be the same.
Initially, I had a set up page where you had to set up your mailbox and there were probably a dozen different settings. What I would do is I would personalize onboarding for each person, walk them through it, watch the backend because not everybody knows what ports they’re using for their mail server. Some people are technical, some people are not, so I walk through it with them.
I got to a point where I knew that certain types of mail servers were very common, you’re using Gmail or Google Apps. I could guess what those are because it’s always gonna be imap.gmail.com and then also smtp.gmail.com but your username and password are gonna be different.
I could basically filter out a bunch of those and I was able to shorten down the page itself but in addition to that, there were still problems because if you a have two factor authentication set up or you don’t, you either have to enable less secure apps or you have to enable two factor authentication and you also have to make sure that IMAP is enabled.
Overtime, I whittled down the number of things that somebody had to do to get their mailbox set up. At some point, I transitioned to the point where if you are using Google Apps or G Suite, as I call it now, you can just click through and go through the OAuth authentication. That basically takes care of everything for you, you’re just putting your username and password in Google, click the button and boom, everything is taken care of for you.
There’s very much a progression where I slowly pulled myself out of the setup process. On day one, I didn’t necessarily know what everybody needed and I didn’t have everything coded. I pushed myself into the process to make sure that it got done.
Rob: I think that’s a great way to do it. We had several integrations in Drip that were a pain in the butt to set up. You had to go and install a WebHook and do all this and that. We’ve been going back as we’ve grown and scaled and making them all OAuth if the provider allows OAuth. We always call it V1. V1 integration was just to plugin and then V2 is to add OAuth and V3 was to make the triggers native. There were all these things and we just have the verbiage or the language that we all knew on the dev team.
You have been in your early days, it’s customer development time. You could’ve spent another three weeks in the early days making it super simple but you didn’t need to because you’re walking people through it. I guess this is technically a usability issue but it’s like a deliberate decision to move faster and then circle back and iterate. I think that’s something that people should keep in mind as you’re building your app. It doesn’t need to be the best all the time, you gotta do your best.
Do you want your code to have not a lot of croft and not have technical debt? I wouldn’t skimp on that. But when you’re moving fast, I think making a first past through and having the usability in some areas be not as ideal as maybe you’d like and you know that and you plan to come back, I think that’s a pretty good approach.
Mike: The other thing that I use specifically in this particular case which people might find useful is that I made this decision for this piece of it specifically because it was a setup piece. I knew that it was something that most customers are only ever going to do once and once it’s done, that’s the end of it. Even if it takes me 30 minutes or 45 minutes on a call to set somebody up and get that stuff connected properly, it doesn’t matter because it won’t have to be done again.
Obviously I don’t wanna be on a call with every single person for 45 minutes just to get them set up and then after that try to do some level of onboarding and customer development. If I can get that stuff taken care of later on, I basically just kicked it down the road because it was that one-time set up and it wasn’t gonna have to be done again. You can use that as a deciding factor as to where you’re going to spend your time.
I see a lot of other vendors doing this where if certain things are painful, you tend to find those things in places where the customer doesn’t have to do it very often. The one example that comes to mind is Oracle installer which for 10 to 15 years was busted. It was fundamentally broken on Windows, you literally could not install Oracle without it failing and then having to go in and fix stuff. They finally fixed it in 2012 or something like that. But for a long time, it did not work at all.
Rob: I remember that, that was crazy.
Our next question is about cold email, it’s from Greg Ristow from utheory.com. He says, “I love the show, I’ve got a startup music theory learning site which is just now at $1500 per month in revenue with very little marketing.” Congratulations, by the way. That’s a nice market to hit.
“Starting to think about email marketing strategies for reaching college music theory faculty, and high school music teachers. I’m wondering about the legality of gathering names and emails from school websites. When I look around the web, I get conflicting information on how CAN-SPAM applies.” That’s a law in the US about not spamming people. “I know in my own day job as a college music faculty member, I regularly get emails from companies who pulled my email from my school’s website. Any advice?”
Mike, I know you have a lot of thoughts on this. I’d say give a short answer and then a longer answer.
Mike: The shorter answer is that it is legal to go to somebody’s website and pull the email addresses. At that point, depending on how you email them, that’s where the piece of CAN-SPAM falls into place. It’s not about whether or not you pull the emails from the website or whether you gather their contact information, it’s really about what you do with it after the fact.
Underneath the umbrella of the CAN-SPAM Act, there’s basically three different types of emails that are sent out. There’s commercial emails, there’s transactional emails or relationship emails, and then there’s other. I’ll talk about those in a minute but most of what CAN-SPAM basically says is don’t lie to people or forge header information when you’re sending emails and try to hide what it is that you’re trying to do.
For example your from email address should actually be you or your business. Who it’s to should be that person, don’t be forging emails to people like if I were to send an email to you and I forged the header information and said that it was Bill Gates, then it starts to fall under the CAN-SPAM laws. Lying about those things, not specifying that something’s an advertisement, or line about what the subject is.
Let’s say that you say that it’s about your recent payment, and then in the body of the email you’re saying it’s a Viagra commercial or advertisement. That right there is a violation of CAN-SPAM because you’ve not said that it’s an advertisement and you’ve also lied in the subject line.
Not telling people how to opt out of future emails, that’s another one and then honoring the opt outs. A lot of those things are typically handled by an email service provider. Those are the things that you don’t typically have to worry about.
Going back to the three different categories of email that are defined here, there’s the commercial intent which basically is an advertisement of some kind. That’s really where the pieces of the CAN-SPAM Act are that you need to pay attention to. If you’re advertising a product or a service and you’re promoting it and sending emails to these people, it’s very clear that you’re trying to get them to sign up for a service, that is a commercial intent email.
If it’s a transactional email, that essentially is exemplified by things like somebody comes to your website, buy something, and then you send them a receipt. Emailing them the receipt, that’s a transactional email because they did something and then they received based on what they did.
The third one is other. This is where you get into a very, very grey area because all three of these things are all about the primary purpose of the message. What is it that that email was intended to do and what are the contents of it. If I send somebody an email that is completely unsolicited and it’s got links for them to buy my service or to come into my website and look at the product to learn more because I’m essentially pitching it to them and saying, “Hey, would you like to learn more about this? Here’s the website.” That is more of a commercial content.
If I email somebody and I say, “Hey, I’d like to talk to you about X because I’m exploring this idea.” Or, “I have a product and I’m doing some customer development.” That is not commercial because you’re not actively selling them something, there’s not an advertisement in it. It’s also not transactional. What happens is those types of emails fall under other.
I will put a blanket categorization here that says I’m not a lawyer. Just take some of this with a little bit of interpretation and a grain of salt because this isn’t legal advice. But my reading of all of these things is that that commercial content, the transactional and other, you can essentially leverage those three. Depending on what it is that you’re putting in the email, a lot of times, you can force it to fall underneath the other category which essentially says that it doesn’t need to follow these CAN-SPAM laws and regulations.
Rob: I think the TLDR on that. Again, we’re not lawyers, we can’t give legal advice but it is generally accepted practice that, yes, people do scrape emails from websites, whether they gather them by hand or whether they have a VA to do it or whether they write a script to do it. It is legal to cold email people even for commercial purposes, I receive them all the time.
I may morally or ethically consider them spam and certain people do and they say, “You’re spamming me.” Based on the legal definition, that’s not. I would give you the advice, don’t use a bulk email program, you’ll get shut down. Script that list and then import it into Drip or MailChimp or anywhere, we’ll block your account because people will mark them as spam, there’s gonna be bounces, people are not gonna open them, they’re just gonna have low engagement. Those cold emails should not be in a tool like Drip or MailChimp, they should be in a tool more like Yesware or Bluetick.
Mike: That’s correct. The interesting thing there is that the reason Drip and AWeber and MailChimp and all those others are stopping people from sending those types of emails and stopping them from importing the list and blasting them out is because what happens is that people on the receiving end of it, if they don’t like the message, they can mark it as spam. That’s not a legal definition that it was spammed, it was that that person classified as spam. What happens is that then negatively impacts the provider.
In that case, they’re protecting not only themselves but also all of the other customers that they have. Let’s say that I imported a thousand emails into Drip and I basically blast something out and then a lot of them started getting marked as spam, I am then thereby impacting the rest of Drip’s customer which obviously is a no, no. I would expect them to shut me down.
Versus if you send it out through Yesware or Bluetick or all these other things. What happens in those cases is if somebody reports to the spam, it actually goes against your own domain as opposed to somebody else’s. From my standpoint, if you’re gonna bash your own domain and you really are spamming people, and it is classified as spam, then you’re negatively affecting your own domains, not mine, not any other customers. At that point it doesn’t impact me as much.
The email service providers, the reason they’re doing it is not for legal reasons, it’s to essentially protect their current customer base and the send rates and deliverability of everything else that they’re doing.
Rob: That’s right because they shared IPs and shared sending domains. We are at time, sir. At the start of the show I said we’d get through all the questions but we did not, we have one question for future episodes. We will revisit that at some point. You wanna wrap us up for today?
Mike: Was that a deliberate lengthening of the episode to make sure that we had the one left or no?
Rob: No it wasn’t, I figured we would get to all of them, we didn’t have that many questions but obviously some of the answers were more in depth and we just ran a little long today.
Mike: If you have questions for us, you can call it into number at 1-888-801-9690 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. Visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
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 Mike.
-: And I’m Rob, I guess. And I’m not Mike.
Rob: That’s what Sherry said when she was on the show, “And I’m not Mike.” What’s going on this week, man?
Mike: I just pushed the new Bluetick website live this week. That’s finally out there, they were out, I think, Monday night. Just been making some minor tweaks here and there just to get the images all straightened out and smooth out some other rough edges.
My main focus was just getting the design itself in place and then the copy along with the new updated theme because it’s all built on WordPress. Now that that’s stuff’s in place, I actually have to leave in four or five hours to go to FemtoConf and then once I get back, then I’ll probably finish off the rest of the little minor things that need to be taken care of and just make sure all my plugins are installed and all the analytics are working and then from there just start marketing.
Rob: The site looks great, it looks really nice. It’s like ten times better than what you had up there. All the way from the look, to the images, to just the verbiage and then what you have there. Bravo on that. Can I give you two small critiques? I’m sure these are behind on your list. You have a testimonial on the home page which I think is great.
Mike: Actually those are gonna be swapped out.
Rob: Cool, you got multiple, but put big old quotes around it. There’s something about seeing quotes around it. I know there’s Justin’s face there and then there’s a testimonial to the right of it but without the quotes, it’s like there’s just something there. I really like to call out large quotes because then people know the guy is saying that. It’s a little thing that I see in a lot of sites but I think there’s some impact.
Mike: Yeah, I’ll definitely do that. What’s the next one?
Rob: The other one is, you know what, this one isn’t actually a critique. You have one sentence description at the bottom of the page in the footer about Bluetick and it says, “Bluetick relieves the soul deadening drudgery of email follow up for founders, overworked sales executives, and anyone who’s ever lost a perfectly good lead to the email blackhole.” That’s a really well-written thing. Why does it say FIP? What’s FIP mean?
Mike: I don’t know, actually I think that’s gotta be RIP.
Rob: There’s just a little typo there. I don’t love your logo because it took me a while to figure out what it is but it looks like it’s a dog eating an envelope or carrying an envelope, is that right?
Mike: Yeah, it’s carrying an envelope.
Rob: I’m sure it looks better when it’s big but given the size on your site right now. Listeners, you should go to bluetick.io and check all this out and see if you agree with me or what else we can figure out. I’m sure changing your logo is like priority 942 on your list right now.
Mike: Yeah. The only reason I even had the logo done was because before it was just text and I wanted to have something up there so that people could associate the logo with the text itself because there’s familiarity that people get with certain text fonts especially when they go with a particular logo but I’m gonna be using that logo inside of some of the emails and stuff that are being sent out. I just want that familiarity to at least be there.
It wasn’t necessarily important, it was just like okay, if I’m doing a step up, the previous logo was literally a stock image that was just black and white of a dog’s face and it was just not very relevant, I’ll say.
Rob: I would think if you could somehow simplify just the dog’s face, turn it into a line drawing or something. Again, I realized it’s hard because you can’t do it yourself, you’re gonna have to hire somebody. I don’t think this is a deal breaker, I don’t think people are not gonna sign up for the app because of that. It’s just something that every time I come to the site I notice it and I’m like it’s a little busy.
Mike: This is gonna turn into a website tear down episode.
Rob: It’s gonna be the whole episode. These are very minor things. There are no typos on the page, the copy is good, personal touch at scale for all your follow up emails, that’s your headline. It’s really well-written. Obviously you could split test against something but nothing comes to mind as like boy, this copy is really jacked up or anything. It looks good.
The only two, again these are minor things, your Drip widget popped up on me after maybe 5 to 10 seconds. I was in the middle of reading your headline or the subheading and the thing popped up. I would probably push that out to 30 seconds, you have quite a bit of [inaudible 00:05:05] on the page, maybe even 45 seconds. Just give people a bit of time to read a little more.
Last thing is, your title tag on your home page, it says, “Home-Bluetick.” I know you’re not doubling down on SEO right now but really, Google has probably indexed you already. You may wanna start that with something, I don’t know what keyword you’re gonna be targeting or keywords but whether it’s email follow up or whatever generic phrase you would love to rank number one in Google, at least have that somewhere in there, probably towards the front.
Again, I wouldn’t keyword stuff but Home-Bluetick isn’t gonna get you much. You don’t want people to find you for the word home. People are gonna find you for the word Bluetick. Neither those really need to be there, although I’d probably still have Bluetick in there somewhere. That’s about it, man.
Mike: All of those are great suggestions. Some of them, like you said, the typo, I knew that I had to get to that but I just hadn’t gotten to it. I feel like extending out the Drip widget a little bit so that it gives people more time. All the title tags and stuff like that, I have not even looked at any of those yet. That’s on the list of things to do when I get back.
Rob: You have some art on the tour page, that’s very cartooning. Those look really cool, I like the feel of that. It’s very professional feel.
Mike: The designer who did the website, he came up with those illustrations. We went back and forth on a couple of different design ideas that he had and those are the ones that came out of it.
Rob: Very cool, man. Good luck. I’m interested to hear how it impacts conversions and all that kind of stuff.
Mike: The main focus of doing all of this stuff was just to give the website a much better feel to it so that when somebody either came to the website itself or was directed to it because of a referral, it doesn’t look like something that they would’ve just clicked the back button and said, “No, I’m not even gonna give this a chance.” I did hear that as feedback from people where I recommend it to so and so they told me that if I had not recommended it to them, they wouldn’t have even given a second thought.
It’s really to just overcome that as a primary objection. I can do a demo for somebody or a webinar and I could sell them on it and say, “Yes, this is what the product does.” By showing them inside the product and what it can do for them and solve their problems, yes it’s fine. But a completely cold lead who comes to the website has no idea and they’re not gonna give it a chance, that’s really what it is. The bar for something like a SaaS product is much higher than something that the old website could even overcome.
Rob: The bar is much higher than it was five or ten years ago as well. I think you made a good call here. Doubling down on this, you’re at the point where you’re starting to scale getting more trials coming through the websites, now is the time to do that. If you spent much time on this when you’re in customer development, it would’ve been a waste of time. I think it was a good use of time and money.
I wanted to talk a little bit about MicroConf, it’s coming up in April, Starter Edition. We still have tickets left and we have some really good speakers this year. We have Mary Pullen who’s talking about her first year of SaaS bootstrapping. We have Alli Blum talking about copywriting and onboarding emails, she’s been on the show. You’re speaking, Justin Jackson, Ben Orenstein, Courtland Allen from Indie Hackers, Mojca Mars about Facebook Ads, really solid lineup this year.
If you’re at all interested in hanging out with 100-250 folks who are all the way from idea to making a full time living from their business, head over to microconf.com, click on Starter and the tickets are relatively inexpensive compared to most conferences and we do still have some left. We’d love to see you there.
The other thing is I’m driving to Lake Geneva, Wisconsin next Thursday or I guess it’s two days after this will air to attend Gary Con, have you heard of that?
Mike: I have not. Is that related to Gary Gygax?
Rob: Yes, Gary Gygax was the creator of Dungeons and Dragons. He died in I think it was 2010, 2012. Basically friends and family just got together and played a bunch of games. It’s like there’s table top games, there’s card games, and RPGs and miniatures and the war games and all that kind of stuff. It was like 20 or 30 people the first year and they jokingly called it Gary Con in his honor. The next year, they sold a few tickets and they had 100 people and it just turned into this thing.
I went last year, it’s kinda neat being in the midwest. I’ve never gone because I was never gonna fly from California out to Lake Geneva, Wisconsin but being in the midwest, it’s like a four or five hour drive. Last year I was kinda nervous about going, my son and I, we obviously love and play these games but we’re not sophisticated gamers, we’re just playing for fun and there are about 1200 people there. It was a blast, man. It was so much fun.
People are really nice and welcoming. I’d come up with my ten year old son and I was like, “Hey, we’ve never played this.” They’re like, “No problem, we have a character for you, here’s how you do it.” They were just super helpful. Anyways, I’m really looking forward to that. If anybody happens to listen to this and be there, please drop me a line. We’d love to connect with you but if not, I’ll certainly report back about the nerdery that’s gonna take place in Lake Geneva next week.
Mike: That’s awesome. I’ve been to a couple of gaming conventions like that, there was one in Buffalo, New York that I went to. It’s probably 10 or 12 years ago. It’s interesting because there was a guy there who had a role playing game that he was trying to launch and trying to get funding for but he was also still doing play testing for it. There was a room of 25 of us, he basically threw us into this game. I think the game was called monoxide amazon or something like that.
The idea was you’re in this world where you just basically have to run away from everything, everything is out to kill you. Half the people died in 10 or 15 minutes or something like that. It was like an hour long session but out of all of us, I think there were only five or six of us that made it out alive.
Rob: That’s cool. That’s the neat part. Last year the same thing happened, there were several people there who were trying to get their games on Kickstarter or going to put them on but they were doing play testing. My son actually played that Tower Defense game board game that he enjoyed a lot. The convention itself, it is four days.
We’re only going for three days of it but it’s not just some eight hour session, we’ll probably game as much as we can, eight to twelve hours a day, we’ve already signed up for tables in advance and then we’re also wandering around. There’s so much cool stuff to buy too, it’s really bad. I need to limit my spending but I get overwhelmed how much cool stuff people bring. It’s a great time to buy dice and miniatures and all kinds of geeky stuff.
Mike: Cool. What are we talking about this week?
Rob: We have a few listener questions. Actually, by the end of this episode, we will have zero listener questions in the cue. I don’t know if it’s woohoo or not. We’re gonna have to come up with some content next week. If you do have questions for us, please, email them to us at questions@startupsfortherestofus.com or certainly call our voicemail number which we read at the end of every show.
Our first question is from Tim Win. He has a couple questions in the same email. His first question, he says, “I was wondering, for a B2B Saas targeting specific niche market, what will be a good amount of traffic I should try to generate to get meaningful feedback?” Aside from it depends, do you have thoughts on this? Because it does depend, that’s a very general answer. Let’s weigh it on, I may have some thoughts.
Mike: I think when you ask a question like this, what you’re really trying to get out is the amount of feedback that I’m getting good enough in relation to what other people would get or are you getting the feedback that you need to make a decision. I think that’s how I would approach it to figure out whether or not you’re getting enough traffic.
You have to decide on what your KPI for that website is and how you’re going to be gathering information from people. Let’s say that you use Hotjar and you put a poll on your website and you get 100 or 500 people to it and you get 3 people to answer the poll, that’s not a good percentage but 3 people out of 500 visitors is not going to help you in any way, shape, or form. Even just adding once answer is gonna skew things in such a direction that it’s just not helpful.
I think I would look at it in terms of how much feedback you’re getting versus how many people are visiting. Also, recognize that when you’re looking at the traffic stats for a particular website, it’s very easy to misinterpret bots coming to the website to just crawl it versus actual visitors who were there for purpose or came from a particular search term or were directed from an email or another website.
Rob: If you’re using Google Analytics, though, I don’t think it picks up bots, I’m pretty sure it does not, it’s only if you look at raw server logs, just a caveat in there.
Mike: But it is hard to tell when you’re looking at that because you do see on the server logs, you’ll get 20 or 30 visits a day. I’m not convinced that Google accurately filters out all the robots that it’s supposed to.
Rob: Really? Because it’s JavaScript. Typically a bot is like a crawler, it’s a Python Script that’s just doing something. It shouldn’t “execute” JavaScript. You need to execute JavaScript to have Google Analytics track you. I know that Google’s crawler does execute some JavaScript, there are stuff, it’s possible but my guess is that most bots are not executing the Google Analytics.
I’m guessing they would exclude it if they could. They’re pretty smart about that. The point is if you’re not using Google Analytics and you’re using your logs, they could be in there.
Mike: That’s true. With this particular question, what you’re really trying to get out is what is the information that you’re trying to retrieve from people and what feedback is it that you want. Do you want conversations? Do you want them to comment on something? Do you want to get them on a phone call? What is the KPI that you’re trying to push people towards? Are they doing it?
I don’t think it’s a matter of trying to measure the actual traffic itself because, I think, bear minimum, you probably need at least 500 visitors a month, anything below that you’re just really not gonna be able to make a meaningful business out of it.
The other thing to consider is the fact that not every B2B SaaS product needs to have traffic coming to its website if that’s not your primary source or primary channel for marketing the product. If you’re doing outbound cold emails, for example, or if you’re sending postcards in the mail to people or you’re doing cold calling, none of those things involve people coming back to your website so there’s an implicit assumption here that the traffic that’s coming to the website is based on SEO or content marketing or something along those lines.
I would just be hesitant to say that there’s 100% correlation between website traffic versus being able to get that meaningful feedback because if you are doing cold calling, for example, you can get on a call with somebody and you can ask them questions and talk to them, get the information you need and they never hit your website at all. That’s something to keep in mind.
Rob: I think that’s probably the first point that I would make. I think that that’s something to keep in mind, is it’s not about necessarily driving a bunch of traffic to a form or to an opt-in. It depends on your business idea but boy, if you have no audience and no reach, I would probably start with some type of outbound, cold email, or maybe some ads going to a landing page or something.
There’s just no better way to get feedback because that’s his questions, it’s not how do I build a meaningful business, it’s how do I get meaningful feedback. The way you do that is you ask for it. It tends to have to be outbound. I would hang on with this concentric circle marketing I was talking about.
I would talk to my friends and colleagues and then their friends and colleagues and then their audience and then eventually you get to the cold audiences but I would start in the center with the people that you know if you truly are going for feedback.
In the early days of Drip, yes, I threw up a landing page and put some copy on there. The only reason I did that was because I was going on podcasts and people were asking me about it and I wanted somewhere to send people.
Eventually, once I knew what we were gonna build, I started doing some ads to it and I did build a list from there but that was not the way I got meaningful feedback. The way I got meaningful feedback was a bunch of warm emails to people within my network asking them, would you use this tool? Here’s a screenshot, what do you think? And then started building momentum there. I think that’s the way to think about this.
If you wanna build an actual sustainable business and you’re asking about how much traffic, DotNetInvoice, which depended on the month but between $2000 and $4000 a month, pretty consistent, sometimes it got to 5000. That site had 1000 to 1500 uniques for years. It was just a really high converting site and it was in a vertical. That’s what he’s asking about here.
He’s like, it’s a B2B SaaS, it’s in a vertical niche. You don’t need that much but you are gonna top out at some point and just stop growing. DotNetInvoice was $300 one-time purchase. Keep that in mind as well.
With 1500 people coming to your site, if you think about, let’s just throw out a 1% conversion rate to trial, you’re gonna get 15 people into trial funnel, that’s with credit card upfront. Let’s say you close 50% of those to customers which is likely, then you’re gonna have seven or eight new customer a month.
You have to ask yourself, if you charge $1000 a month, that’s probably pretty good. If you’re charging $10 a month, that’s not very good. You have to think about your price point and just think about the numbers that I threw out there and you can do backwards math and figure out how many people you need to send to figure out how fast you wanna grow.
Tom’s second question was that he seems to be getting free trial sign ups but once users get into his onboarding which is like a getting started wizard, he seems to lose them. It’s only three steps, it’s nothing too complicated, just adding their location, product service they provide, and setting a payment processor so they can take payments from their customer.
“Some seem to get to this part and never log in. Any idea why? It’s driving me crazy.” What would you do if you were in his shoes, Mike?
Mike: I was gonna say there’s no way for us to really answer why that is. I think that if I were in his shoes and I was having this particular problem, I would email those people individually who never got past that point and see if you can help them, either just walk them through it or ask them questions about what their experience was. Your best case scenario is to get them onto a call to walk them through it and do a personalized onboarding session and then watch them as they go through it so you could just use Zoom to watch over their shoulder as they go through.
The nice thing about doing that is if you do it for them, then they see it but if you let them do it because they don’t know exactly what they’re doing, they’re going to click on stuff that they shouldn’t and you’re gonna be able to recognize that and say, “Why did that person click there?” You can ask them literally on the call, “Why did you click on that? What was it that made you think that you were supposed to click on that?”
Maybe they’re getting confused about the UI, maybe they just don’t have time to log in so they never set up their account.
I think there are other questions I would also ask about like do they come into the site and get there or do they just never come in? If they’ve gone through the signup, does it take them directly over to this three-step process or do they have to get an email and then they click on the email and then they come back into the application. How is that sequence of events set up and what’s the flow look like for the end user?
It could very well be that some people, depending on their browser for example. I’ve run into this with Bluetick in certain situations where some browsers, on occasion, do not work and it had to do with a race condition inside the JavaScript code. Some things work fine and then other ones didn’t. I didn’t know that because I wasn’t monitoring exactly what browsers people were using.
Like I said, because it was a race condition, it sometimes happened but not always. You really just need to talk to them and watch over their shoulder to watch them go through that and ask those questions to find out what it is that you’re doing. If they already got through that first step, they signed up, you have their email address or at least presumably you should. Contact them and follow up with them until you get an answer as to why they didn’t go through that next step.
Maybe they realized at that point that it was going to be more to set up than they thought it was. At that point, you have to evaluate, do I put this process in place? Do I need them to do those three things all at once? Could I spread it out? Are there ways to interject that as part of them using the product without forcing them through that concrete step all upfront? Let’s say that the location, for example, could you pull that from their credit card information?
Rob: Like their IP.
Mike: Yeah, that too. It depends on how accurate you need it to be. Like time zone, you could probably pull from somebody’s browser. If you need the address, could you pull it from their credit card? That depends on whether or not you’re taking credit card upfront which sounds like it’s not because it’s free trial. Those are the places I would start.
Rob: I think that’s spot on. The one other thing I would consider is taking away self-service signup and just putting a request demo button. When they hit that, they can just book right in Calendly and set something up. If you really wanna do this well and this is what you’re focused on, the requested demo button, you could respond to that within minutes.
If you’re relatively low traffic and you really are just hacking away all day right now, try to get back to people within ten minutes of them clicking that and just get them on the phone, do a Zoom meeting and do a screen share and walk them through. It’s essentially what you said, Mike, but I’m just saying you take away the self-service signup portion.
I think that right now it’s gonna be about talking to customer sounds like you’re still in the early days. You could throw Hotjar on there and do screen recordings, you could throw Crazy Egg in there and do heat maps, you can do all that stuff but you’re never gonna find out why, you’re just gonna see what is happening. The why is obtained through having a conversation with them. I would be more hands on these early days, you don’t have to do that forever. I think you’ll certainly find out that it’s pretty valuable for your learning, for accelerating your learning in these early days.
The last question was for you, Mike. He says, “I was listening to one of the podcasts, Mike was saying bluetick.io was having usability issues he had to fix. Are you able to get into detail? Just curious as to what some of them are.” I recall you talking about one usability issue, interested in talking about that?
Mike: Sure. The main usability issue that I have addressed towards the past six months or so, they had to do with onboarding. When somebody signs up for Bluetick, one of the first things that you have to do is you have to set up your mailbox and you have to add in your username and password. If you’re using Gmail, there’s all these different settings that you have to connect. You have to have IMAPS or hostname, username, password, port number, the encryption level. You also have to have the exact same information for your SMTP server because it may not be the same.
Initially, I had a set up page where you had to set up your mailbox and there were probably a dozen different settings. What I would do is I would personalize onboarding for each person, walk them through it, watch the backend because not everybody knows what ports they’re using for their mail server. Some people are technical, some people are not, so I walk through it with them.
I got to a point where I knew that certain types of mail servers were very common, you’re using Gmail or Google Apps. I could guess what those are because it’s always gonna be imap.gmail.com and then also smtp.gmail.com but your username and password are gonna be different.
I could basically filter out a bunch of those and I was able to shorten down the page itself but in addition to that, there were still problems because if you a have two factor authentication set up or you don’t, you either have to enable less secure apps or you have to enable two factor authentication and you also have to make sure that IMAP is enabled.
Overtime, I whittled down the number of things that somebody had to do to get their mailbox set up. At some point, I transitioned to the point where if you are using Google Apps or G Suite, as I call it now, you can just click through and go through the OAuth authentication. That basically takes care of everything for you, you’re just putting your username and password in Google, click the button and boom, everything is taken care of for you.
There’s very much a progression where I slowly pulled myself out of the setup process. On day one, I didn’t necessarily know what everybody needed and I didn’t have everything coded. I pushed myself into the process to make sure that it got done.
Rob: I think that’s a great way to do it. We had several integrations in Drip that were a pain in the butt to set up. You had to go and install a WebHook and do all this and that. We’ve been going back as we’ve grown and scaled and making them all OAuth if the provider allows OAuth. We always call it V1. V1 integration was just to plugin and then V2 is to add OAuth and V3 was to make the triggers native. There were all these things and we just have the verbiage or the language that we all knew on the dev team.
You have been in your early days, it’s customer development time. You could’ve spent another three weeks in the early days making it super simple but you didn’t need to because you’re walking people through it. I guess this is technically a usability issue but it’s like a deliberate decision to move faster and then circle back and iterate. I think that’s something that people should keep in mind as you’re building your app. It doesn’t need to be the best all the time, you gotta do your best.
Do you want your code to have not a lot of croft and not have technical debt? I wouldn’t skimp on that. But when you’re moving fast, I think making a first past through and having the usability in some areas be not as ideal as maybe you’d like and you know that and you plan to come back, I think that’s a pretty good approach.
Mike: The other thing that I use specifically in this particular case which people might find useful is that I made this decision for this piece of it specifically because it was a setup piece. I knew that it was something that most customers are only ever going to do once and once it’s done, that’s the end of it. Even if it takes me 30 minutes or 45 minutes on a call to set somebody up and get that stuff connected properly, it doesn’t matter because it won’t have to be done again.
Obviously I don’t wanna be on a call with every single person for 45 minutes just to get them set up and then after that try to do some level of onboarding and customer development. If I can get that stuff taken care of later on, I basically just kicked it down the road because it was that one-time set up and it wasn’t gonna have to be done again. You can use that as a deciding factor as to where you’re going to spend your time.
I see a lot of other vendors doing this where if certain things are painful, you tend to find those things in places where the customer doesn’t have to do it very often. The one example that comes to mind is Oracle installer which for 10 to 15 years was busted. It was fundamentally broken on Windows, you literally could not install Oracle without it failing and then having to go in and fix stuff. They finally fixed it in 2012 or something like that. But for a long time, it did not work at all.
Rob: I remember that, that was crazy.
Our next question is about cold email, it’s from Greg Ristow from utheory.com. He says, “I love the show, I’ve got a startup music theory learning site which is just now at $1500 per month in revenue with very little marketing.” Congratulations, by the way. That’s a nice market to hit.
“Starting to think about email marketing strategies for reaching college music theory faculty, and high school music teachers. I’m wondering about the legality of gathering names and emails from school websites. When I look around the web, I get conflicting information on how CAN-SPAM applies.” That’s a law in the US about not spamming people. “I know in my own day job as a college music faculty member, I regularly get emails from companies who pulled my email from my school’s website. Any advice?”
Mike, I know you have a lot of thoughts on this. I’d say give a short answer and then a longer answer.
Mike: The shorter answer is that it is legal to go to somebody’s website and pull the email addresses. At that point, depending on how you email them, that’s where the piece of CAN-SPAM falls into place. It’s not about whether or not you pull the emails from the website or whether you gather their contact information, it’s really about what you do with it after the fact.
Underneath the umbrella of the CAN-SPAM Act, there’s basically three different types of emails that are sent out. There’s commercial emails, there’s transactional emails or relationship emails, and then there’s other. I’ll talk about those in a minute but most of what CAN-SPAM basically says is don’t lie to people or forge header information when you’re sending emails and try to hide what it is that you’re trying to do.
For example your from email address should actually be you or your business. Who it’s to should be that person, don’t be forging emails to people like if I were to send an email to you and I forged the header information and said that it was Bill Gates, then it starts to fall under the CAN-SPAM laws. Lying about those things, not specifying that something’s an advertisement, or line about what the subject is.
Let’s say that you say that it’s about your recent payment, and then in the body of the email you’re saying it’s a Viagra commercial or advertisement. That right there is a violation of CAN-SPAM because you’ve not said that it’s an advertisement and you’ve also lied in the subject line.
Not telling people how to opt out of future emails, that’s another one and then honoring the opt outs. A lot of those things are typically handled by an email service provider. Those are the things that you don’t typically have to worry about.
Going back to the three different categories of email that are defined here, there’s the commercial intent which basically is an advertisement of some kind. That’s really where the pieces of the CAN-SPAM Act are that you need to pay attention to. If you’re advertising a product or a service and you’re promoting it and sending emails to these people, it’s very clear that you’re trying to get them to sign up for a service, that is a commercial intent email.
If it’s a transactional email, that essentially is exemplified by things like somebody comes to your website, buy something, and then you send them a receipt. Emailing them the receipt, that’s a transactional email because they did something and then they received based on what they did.
The third one is other. This is where you get into a very, very grey area because all three of these things are all about the primary purpose of the message. What is it that that email was intended to do and what are the contents of it. If I send somebody an email that is completely unsolicited and it’s got links for them to buy my service or to come into my website and look at the product to learn more because I’m essentially pitching it to them and saying, “Hey, would you like to learn more about this? Here’s the website.” That is more of a commercial content.
If I email somebody and I say, “Hey, I’d like to talk to you about X because I’m exploring this idea.” Or, “I have a product and I’m doing some customer development.” That is not commercial because you’re not actively selling them something, there’s not an advertisement in it. It’s also not transactional. What happens is those types of emails fall under other.
I will put a blanket categorization here that says I’m not a lawyer. Just take some of this with a little bit of interpretation and a grain of salt because this isn’t legal advice. But my reading of all of these things is that that commercial content, the transactional and other, you can essentially leverage those three. Depending on what it is that you’re putting in the email, a lot of times, you can force it to fall underneath the other category which essentially says that it doesn’t need to follow these CAN-SPAM laws and regulations.
Rob: I think the TLDR on that. Again, we’re not lawyers, we can’t give legal advice but it is generally accepted practice that, yes, people do scrape emails from websites, whether they gather them by hand or whether they have a VA to do it or whether they write a script to do it. It is legal to cold email people even for commercial purposes, I receive them all the time.
I may morally or ethically consider them spam and certain people do and they say, “You’re spamming me.” Based on the legal definition, that’s not. I would give you the advice, don’t use a bulk email program, you’ll get shut down. Script that list and then import it into Drip or MailChimp or anywhere, we’ll block your account because people will mark them as spam, there’s gonna be bounces, people are not gonna open them, they’re just gonna have low engagement. Those cold emails should not be in a tool like Drip or MailChimp, they should be in a tool more like Yesware or Bluetick.
Mike: That’s correct. The interesting thing there is that the reason Drip and AWeber and MailChimp and all those others are stopping people from sending those types of emails and stopping them from importing the list and blasting them out is because what happens is that people on the receiving end of it, if they don’t like the message, they can mark it as spam. That’s not a legal definition that it was spammed, it was that that person classified as spam. What happens is that then negatively impacts the provider.
In that case, they’re protecting not only themselves but also all of the other customers that they have. Let’s say that I imported a thousand emails into Drip and I basically blast something out and then a lot of them started getting marked as spam, I am then thereby impacting the rest of Drip’s customer which obviously is a no, no. I would expect them to shut me down.
Versus if you send it out through Yesware or Bluetick or all these other things. What happens in those cases is if somebody reports to the spam, it actually goes against your own domain as opposed to somebody else’s. From my standpoint, if you’re gonna bash your own domain and you really are spamming people, and it is classified as spam, then you’re negatively affecting your own domains, not mine, not any other customers. At that point it doesn’t impact me as much.
The email service providers, the reason they’re doing it is not for legal reasons, it’s to essentially protect their current customer base and the send rates and deliverability of everything else that they’re doing.
Rob: That’s right because they shared IPs and shared sending domains. We are at time, sir. At the start of the show I said we’d get through all the questions but we did not, we have one question for future episodes. We will revisit that at some point. You wanna wrap us up for today?
Mike: Was that a deliberate lengthening of the episode to make sure that we had the one left or no?
Rob: No it wasn’t, I figured we would get to all of them, we didn’t have that many questions but obviously some of the answers were more in depth and we just ran a little long today.
Mike: If you have questions for us, you can call it into number at 1-888-801-9690 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. Visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 381 | SaaS Marketing from Square One
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about SaaS marketing from square one. Topics include where to start marketing, what types of channels to use, and what your timeline will look like.
Items mentioned in this episode:
Mike: In this episode of Startups For The Rest Of Us, Rob and I are going to be talking about SaaS marketing from square one. This is Startups For The Rest Of Us episode 381. 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 Mike.
Rob: And 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: I had never realized that we say Startups For The Rest Of Us three times in the introduction.
Mike: Yeah. I stumble over it a little bit sometimes. I think you did it well.
Rob: It’s a long title. Yeah, I know. We should think about changing that.
But aside from that, things are actually going really well this week. As you know, I mentioned on the show before, Sherry and I have put together a book called the Entrepreneur’s Guide to Keeping Your Shit Together. Sherry was very much the first authored and the driving force behind this and I can contributed topics, stories, anecdotes, I did some of the writing, but for the most part it was Sherry writing. But super stoked to have it out, men.
It launched on Wednesday of last week and so far, sales have been good. We’re going with an all Amazon approach, which is interesting. It’s something I haven’t don’t before. It’s a trip because you don’t get your customer email addresses but the one click buy makes it so much easier for people to buy versus coming to your website and entering credit card and phone into a Stripe form or whatever.
So far two thumbs up. I think Sherry’s learning a ton. I’ve obviously been offering advice and helping draft emails and put the wrong link in the launch email, that was me in my own software. I said it though Drip and I told Sherry, “If it’s a bug in Drip, or it’s my copy paste error, I’m still screwed! I can’t even blame it on anybody. It’s my fault.” It wasn’t a bug in Drip. I just made a copy paste error and left the ‘h’ off the http for the book link. I had to resend the correction which I pretty much never done, ever in my launch career. I always triple check stuff and I was in too much of a hurry.
Mike: That’s funny. I was actually going to accuse you of writing only one line in the entire book and it was the little anecdote where it says Rob’s thoughts and then there is, “Uhm, no.” and then “and Rob.”
Rob: Yeah. Exactly. I wrote that. I also wrote a bunch of the stories in there. It was a fun project. You know what’s fun about it for me, was being able to contribute, I did more than just consult on it but the redrafts and the edit and help shape things. It was not the full burden. I was not the founder on this one, I was more like the board member, adviser or something. That’s kind of cool.
It’s also fun to see someone launch a product like this at this scale for the first time. Because you feel vulnerable, you’re excited but you’re not sure what to do, and you’re just stumbling along. I can just see all the stuff shaping up as she’s going through the process.
Mike: Yeah. I’m sure it’s nerve wracking for her too. When you first put something out there, especially with a book. I think with software there’s that layer of obstruction like, oh yeah, you created this but you’re in the background and the software is the thing that people are seeing. I think with the book, you’re putting your expertise out there as well and that can be a little nerve wracking, especially because you’re not sure how it’s going to be received, did you hit on the right pain points that people have, are they really the things that people are feeling. Not that you’re not confident, it’s just that there’s a difference between a small subset of people that you’ve actively worked with versus a much larger set, especially when you don’t know who those people are.
Rob: Totally. It’s always just vulnerable. I think vulnerable is the right word, when you throw something out and thousands of people in essence are going to wind up buying this book here and hopefully most of them read it. You just have to be prepared for thoughts and comments and that’ll be both positive as well as critiques. It’s just a lot to put yourself out there, whether it is with software or a book.
Mike: Yeah. I’m very glad that I got both the paperback version and the Kindle version because I had to fight my wife off for the book because she saw it and she took it.
Rob: Oh, that’s funny. Cool. Glad to hear it.
Mike: Yup. Anyway, we went through that over the weekends. It’s a good read, I liked it.
Rob: I was going to ask what you thought of it.
Mike: It touches on a lot of topics that have not been well talked about but they’re starting to and I think that Sherry’s probably a very big contributing factor to that just based on her talks at MicroConf and how well they’ve been received, but I think it’s a topic of discussion that people are a little bit more comfortable discussing now than they were 5 years or 10 years ago. It’s nice to have it now but I almost wish it was out there 10 years ago.
Rob: Yeah, I know. Absolutely, I wish I had this book when I started. If you don’t know what this book is about, it’s about how to run your business without letting it run you. It’s how not to spin out of control and be super stressed out and how to know yourself more, how not to burn your relationships, how to stay human, how to stay connected to people. She calls it like Founder Mental Health but I always think of that as like, I don’t know, if I’m not depressed, or I don’t have an anxiety, I don’t need it. But it’s not that. It’s just how to fight through and really stay sane and maintain solid relationship to not piss off your wife, and your kids, and neglect your family, and gain a bunch of weight, and go crazy. I was so freaking stressed running Drip and selling Drip, I wish that I had a resource like this.
If that sounds like you, or you think you might be encountering that anytime soon, you can search on Amazon, there’s a Kindle and a paperback version, Entrepreneur’s Guide To Keeping your Shit Together, and we’ll link it up in the show notes for sure. Sherry recorded an audio version and has submitted it to Audible but it is not approved yet. I’ll probably talk about that once it’s approved as well.
Mike: Very cool. I’m in the middle of working on my FemtoConf Talk and it’ll probably be something of a preview of my MicroConf Talk to be honest. It’s nice to be getting that much of a jumpstart on it. I don’t think that usually I start on my talks until probably a month or so before the conference. It’s like two and a half, three months out at this point. It’ll be nice to get that done in advance and then give a preview of it and see what resonates and what doesn’t and be able to go through it a few times in addition before a live audience as opposed to just getting up there and giving it in front of a live audience for the first time at MicroConf.
Rob: Yeah. I could see that. It’s really nice to be able to give a talk twice. I always give a talk better, almost always given better the second time.
Mike: And the other thing is paper spiders. If you enjoy pranks of any kind, go into the bathroom, and on the other side of the toilet paper roll, draw a giant black spider and then put it back so they can’t see it.
Rob: Really. Even though it’s just drawn?
Mike: Because you can’t see it until you flip the roll over.
Rob: Nice. Where did you hear about this?
Mike: I saw it online but I practiced that yesterday and my son was not pleased.
Rob: Yeah. That’s funny. Cool. What are we talking about today?
Mike: Today we’re going to be talking about SaaS marketing from square one. This actually comes to us as a sort of a listener question. I put out on Twitter a couple of weeks ago asking if there were any topics specifically that people wanted to hear about. One of them is from Phillip who’s asked, “How to start a product from scratch? After my MVP is ready, because growth hacks are everywhere but nobody talks about starting marketing from a blank page. No social media, no newsletter recipients, no SEO, nothing, zero traffic.” I thought we would go through this and talk though some ideas around where you would even start with that.
At the very base level, you’ve got an MVP, we talked about this extensively. If you haven’t done marketing before, you get to this point where you got a product to put out there, then you’ve done things wrong but I also feel like we just get a number of questions that are around this where people have already made that mistake and it’s too late to change it, so now what do I do?
We’re going to talk thorough where you start, different types of channels you can use, and strategies to put the product out there and try to make it into a success even if you haven’t started doing any of the marketing beforehand.
Rob: Sounds good. I know this is a common question. It’s something that overtime, if you listen back to previous episodes, and if you look in both of our books, Start Small, Stay Small, The Single Founder Handbook, or even blog posts. This is just such a common topic that we’ve covered but it’s worth revisiting every so often and trying to see if there is either new information or just to revisit for all of our edification and a reminder for all of us.
Mike: The first question to ask is where do you even start? I think that in a situation like this, you need to work a little bit backwards. The first thing to look at is knowing what’s your timeline and your runway look like. By this, I mean really what date is it that you need to be making x dollars and MRR, whether it’s $5000 a month or $10,000 a month. How much money is it that you’re spending on a monthly basis, how much do you need to leave your job, how much money do you need to recover in order to pay back a particular loan or something like that. What are the hard deadlines that you have set that you need to be conscious of? Then based on those things, what are their current pricing plans that you have, how many customers would you need in order to be able to meet whatever that MRR goal is?
Establishing this timeline really does two things for you. The first one is that it provides you with a required trajectory. How many customers do you need to add on a daily, weekly, or monthly basis in order to get there? And the second thing this does is it helps you to eliminate certain types of marketing channels, because if you have a really short timeline, some longer term marketing channels are simply not going to work for you so you can completely throw the out the window and focus on other things that are shorter. And they may not be repeatable or suitable but they will help get you to where you need to be.
Rob: I like the idea of this one. I think that as you get more experience, let’s say it’s your second or third app, or second or third success, I think you can get really good at determining these timelines, build timelines, actually building the product and then ramping up marketing and taking a half ass guess at it.
I remember that doc I put together for HitTail, it was like the marketing game plan. It wound up being somewhat accurate but I wasn’t as experienced as I was when we launched Drip in 2013. That doc, I put together this whole analysis of how many uniques I thought I could drive to the site each month, how many would convert to trial, how many would convert to paid, what the growth would look like. I mapped it out and it wound up being shockingly accurate. The only thing that killed us was we didn’t have a product market fit yet and so I underestimated churn.
When you don’t have product market fit, your churn can be 20%, 25%, so you lose a lot more people. If churn had been closer to what I thought, the growth would have been very, very much in line with what I was guessing at.
The one issue I have with this, with the thing that I think could be hard, if this is literally your first time, you don’t know any of the rules of thumb. You don’t know, hey if I asked for credit card up front, I’m going to get between 0.5% and 2% of visitors convert to trial depending on how appealing my site is, what the price point is, and all that. You don’t know if you’re asking for credit card upfront, you should convert between 40% and 60% of trials to paid users and then your churn should be pretty thing in the first two months and then drop.
It’s just all that stuff you can either learn from experience or you can listen to podcasts like this, when we had Ruben Gomez on the show, probably, 50-100 episodes ago, he and I threw out a bunch of rules of thumb exactly around this and it’s towards the end of that episode. If you want to go back and listen to it, I also put it in my MicroConf Talk last year or the year before. I just had one slide, the rules of thumb things I use to do it.
I like the idea of asking where do you need to get to because this is something investors would ask you if you took them. If you’re not taking investment, it is nice to think about where you’re going and not just go out and wander. I feel like if you don’t know where you’re going, how do you know how to get there?
Mike: That introduces the idea of having a fudge factor. The timeline that you can put together based on your pricing plans and how many customers you need and the timeline, that’s a best case scenario. You’re going to have to go over that. Let’s say that you need 200 customers in order to get to 10,000 a month, how many do you realistically need to shoot for? Is it 200? Probably not, because you’re going to have people who sign up and then decide that they are not going to become customers or they go through a trial and then they say, “This isn’t for me.” Or they just never even set up the software, or set up their account and do anything with it. There’s lots of people who fall into that category.
You have to overshoot by some margin but at the same time you need a starting point of some kind. This simple calculation of your timeline runway and number of customers is going to at least help put you in the right ballpark. That’s really what you’re looking for. How do I get in the right ballpark? How do I get started on the right path versus I’m not going to do anything because I don’t even know where to start.
The next step is once you got that information in mind, the next thing to do is to break out your plan of attack into the different types of marketing channels that you’re going to go after. These aren’t specifically marketing channels you probably find in a book that it would say that okay, these are all encompassing.
These are two that I thought would apply specifically to this type of situation. The first pair of marketing channel is sustainable versus unsustainable. It’s really just a broad categorization of the different types of marketing approaches you might try. And then the second one is inbound versus outbound efforts. There’s lots of different ways to categorize or classify different marketing efforts but let’s just focus on these two pair.
Sustainable versus unsustainable, the way I really put these into perspective or talk about these is that with sustainable, it requires some sort of systematic repetition over time. It’s usually harder to get going but they tend to have a longer life to them.
Some examples of this will be things like SEO, content marketing, blogging, email newsletters, video channels on YouTube, paid acquisition, etc. And then with unsustainable marketing channels, these tend to be one time or burstable activities. If it’s one time, typically you can do it once and then that’s it. An example of something like that would be listing your website on product time. You could do that once but the chances of you being able to do that more than once for the same application are probably pretty slim. You can come out with new features or subsets of things you could add on there but they tend to be things that you’re not going to do for a while.
And then there’s burstable activities like doing a podcast story. You’re probably not going to go on the same podcast over and over again but you could go to multiple podcasts and do it like a podcast story. You could answer a bunch of questions on Quora, you could do joint seminars with other people, you could do integration marketing. Again, that’s an example of something that you would be able to do one time but you’re not going to integrate with Calendly more than once for example.
Those are the types of sustainable versus unsustainable activities that I would look at and I will classify your marketing activities as one of the two. That leads us down the road in the inbound versus outbound.
Rob: Yeah. Some of the sustainable channels you mentioned, most of them require ongoing work but they’re like a flywheel, they’re this big heavy wheel that just getting going is going to take you months and months. It’s going to start yielding rewards maybe three, six, nine months down the line. But the longer you push it, the faster it’s going to go.
SEO is that where boy, you’re going to see nothing for maybe six months. Obviously, there’s ways to hack around that and stuff, I’m just setting some expectations. It’s like don’t expect a bunch of results right away. But if you start seeing results, then you just build on those and build on those and then they last for a long time.
As you said, the unsustainable are those one time activities that I do actually think so you have questions on Quora in the unsuitable. I’ve seen some folks take an approach where those get upvoted and they wind up being popular and they get a lot of SEO traffic overtime. It depends on how you do it. I think there are still some question I’ve answered on Quora that continued to get votes two, three years later. When you look at it, they’ve had thousands and thousands of views.
I think you need a mix of both but as I said, I think it was last episode, an answer to Craig Hewitt’s question. The one time things or the things I would do early on because they get you the big boost, they’re one time and they’re quick. Doing that joint webinar, if that gets you 10, 20 paying customers, you might not see 20 paying customers from SEO for six months or more. Right now, what you need is revenue. You need customers, you need people paying you. Once you have the people paying you, then you can use that money then to par lay up and reinvest it back into more joint webinars or you can invest in SEO content marketing, etc.
Mike: When I mentioned answering questions on Quora, it wasn’t so much that your traffic was sustainable, it was like you can’t answer the same questions on Quora more than once or it’s a burstable thing where you might answer 10 or 15 or 20 different questions and then you wouldn’t continue looking for more questions because there aren’t more questions to answer. You basically have to wait a while. That’s really what I meant by classifying it as unsustainable. Not that ongoing benefit from it is not sustained, but the activity that you do around it is just that one time or you do it a couple of times and that’s it. Does that makes sense?
Rob: Oh yeah, totally.
Mike: Again, I think as Rob pointed out, some of these things will cross over from one side to the other. It’s not very much black and white. Some things will cross over from one type to the next. That leads us over into inbound versus outbound. The way I separate or classify things as inbound or outbound is inbound is functions on the basis of attracting people versus outbound activities and marketing channels, they function on the basis of actively and proactively going out and contacting people.
Inbound would be things like the SEO content marketing where you’re publishing things and you’re trying to attract people to your platform or you blog or email newsletter, things like that, versus outbound which is you’re actively doing cold calling, sending out cold emails, doing outbound email prospecting on LinkedIn or doing paid advertisements. Paid ads is kind of a mixed bag as well because that flips a couple of different categories of these channels. That’s the main differences between inbound versus outbound.
When you’re early on and if your timeline is short, you want to focus mostly on the outbound efforts. The reason for that is because you need a lot more control over the activity. You want to be able to tie the activity that you’re doing to the number of people coming in because waiting for customers to come to you is not going to be enough. You could wait for months or years, you may not still get the number of customers that you need versus doing those outbound activities where you can essentially drive the conversation and you can go actively get in front of those people as opposed to waiting for them to come to you.
Rob: I agree. I think that outbound has become more and more prominent in SaaS. I think it’s become more prominent as the enterprise players or enterprise software has come in. If you think back 10 years, they were very, very few enterprise SaaS or even mid-market SaaS companies that were targeting mid-market and enterprise companies. In those fields, there’s a lot outbound. There’s a lot of outbound cold calling, is what it’s traditionally been.
I think when SaaS was mostly focused on the Fortune 5 Million as 37signals says, it’s so much more about creating content. It’s the Joel Spolsky approach, it’s the Basecamp approach, and those were the models that I think we saw and those are the models that certainly resonated with me coming over as a developer. I didn’t want to do the cold calls, and the cold emails, and the outbound stuff.
I see a lot of value in both, to be honest. Probably not cold calls myself these days but I think even if you’re bootstrapped, I think getting over the mental stigma of not doing outbound, I think is something that you’re going to want to at least wrestle with internally and not just focus on the SEO, and the split testing, and the content marketing. Those are the things that I was blogging about 2007, 2008, and they do still work but they’re not nearly as easy because there’s so much more competition.
If you want to get somewhere faster than I do think you’re going to a mix of inbound and outbound. Again, going back to HitTail, I did no outbound except for JV emails that I would do with folks, but with Drip, we absolutely did outbound cold emails and we did a lot of paid advertising both for HItTail and Drip.
Mike: Once you’ve established a revenue base or gotten to your initial goals, you can switch over a little bit. Or if your timeline is long enough because you’ve got a lot of runway to work with or you love your full time job and you don’t want to quit but you like doing something on the side, then it’s easier to wait for those longer term strategies to pan out. Basically, it gives you more options when you’ve got a longer runway or you’ve got a longer timeline.
At that point, things like concept marketing make a lot more sense because you can decouple the customer acquisition rate from the activities that you’re doing. You can do link building, you can create content, create videos for YouTube, all those different things because you have the time to spare. But if you are in a position where you want to find out quickly whether or not this is going to go anywhere, you need to push on those things and you need to do those outbound efforts in order to verify quickly versus waiting because you could wait for a very long time to find out, and you almost never know for sure. But obviously, if somebody posts a link on Reddit or something like that and you get 10,000 customers, yeah, that’s a pretty good stamp of approval. But the chances of that happening are so minute that it’s not realistic to even think about depending on those things.
I think with the things that we’ve talked about so far, the next question that comes to mind is, okay, all of this sounds great but where do I actually start? We’ve talked around the issue and I think to address it head on, the first place that I would start is looking at your personal network and seeing if there’s anyone in that personal network who can help you.
The prime example that I think I would point people to in most cases is go to your LinkedIn profile and see who you’re connected to, who you’ve worked with in the past, or go to your Twitter profile and see who you follow or who follows you and find those people, contact them, and say, “This is what I’m doing, this is what I’m working on. Is there a use for this either in your business or do you know somebody it could be useful for?”
There’s ways to go about it without seeming overly salesy. You can definitely just say, “Hey, I’m working on this. Can you take a look at it and give me some advice.” Or, “I’d like a little bit of help. What do you think that I should do?” Those are great places to start the conversations because it’s asking somebody for help versus, “Hey, can I sell this to you?”
That’s a much better starting point for conversation especially if you don’t have a good working relationship with that person or you haven’t met them in person before because then it opens the door for them to put themselves in a position of “expert” where they’re giving you advice. People love to give advice on whatever your new product is.
No matter what you built, people will always want to give you advice on it. It doesn’t mean that it’s good or bad or that it’s going to be exactly what you should be doing, but it’s at least a starting point for conversation. From there, you can branch out, find out who they know, see if there’s channels that they can promote it through, or if they’re just interested.
Some types of products are going to resonate very, very well with certain people and they may say, “Hey, I can’t personally use this but I have an audience that I cater to and they would love to take a look at this. Can we take a look at it and do a deep dive, or get on a call and talk about a little bit more, or maybe go through a demo?” That gives them a little bit more materials to work with than you just sending them a cold email saying, “Hey, I would like you to take a look at this and I think it might help your business.” Those conversations and discussions are going to get you a lot farther if you have some sort context with the person, try to help them to understand what it is that you’re doing.
Rob: That’s a good point. I think that if I was starting out today, some of the approaches that I would focus on early on, I would definitely be looking at paid acquisition. I’d be looking depending on your product, it’s going to be Facebook, or Instagram, or LinkedIn, or Twitter probably. AdWords is probably not going to work because it’s just too expensive these days. It depends on how much you want to get in to run the ads.
I know some people just are averse to it and I had someone doing some marketing for me at one point. I was mentoring and teaching him and he said, “Is there anything I can do aside from running ads?” He just really didn’t want to learn that. It’s an interesting opinion and perspective.
Some people want to do it more the viral approach or with content. You have to figure out what you’re going to enjoy. If you have budget to hire somebody, that’s great because folks who know how to run ads are going to be way, way, way better at it than you. But if you have to suck it up and you don’t have any money to hire someone, then obviously, that’s going to be an option.
The thing that I like about paid acquisition, man, is even in the early days, if it’s not profitable at least you’re getting people in there to try it out and you get some kind of feedback.
Another thing I would consider right off the bat of course is an email newsletter. Email has just been a critical part for everything I have ever done including MicroConf, and my blog, and selling books, and selling software, getting people to use SaaS. It’s just such an asset to have.
I don’t know these days that I would start a blog if I were going to try to market a new SaaS app. If I was going to do content marketing, I would probably take a different approach to it. I would at least debate whether the resources that I would need and the on-going publication, the on–going article cost would not be better spent doing more bigger content efforts. We did this with Drip, we started getting success, we had an ebook, and then I did an audio version of that ebook. It was about email marketing automation I think I was getting started with.
I think maybe we did a video course and we submit those to Producton, and we put it on Gumroad, and we sold a bunch of copies but we gave it away for the first few days and it got a bunch of traction through those. They were more one time bursts but they did help longer term with SEO because we had so many backlinks from these things. It’s an interesting thing to think about instead of publishing content constantly.
Is it an option to do less frequent content but just try to make a bigger splash? This is part of the thing that you see, let’s say Neil Patel or some of the other big blogger, content marketers moving in that direction writing. Even if they aren’t doing ebooks or package products that they’re giving away, they are doing this longer form stuff. It’s less content or fewer posts but they’re a lot longer form.
Of course then that leads you to SEO. If you know how to do SEO and you’re good at it, by all means do it. If you’re trying to learn it from scratch today, it’s going to take a while, I’m not saying don’t do it but it is much harder than it used to be and it’s going to be a big road up there, but if you can get SEO content marketing, email newsletter, and paid acquisition, if you get two of those working, you’re going to have a pretty nice growth engine.
In the early days of Drip, I just have alerts on Quora and when stuff would come up in the email marketing category or startup category, I try to jump in and answer those. I’m a big fan of podcasts tours. I have done them for years and if you can pull one off, I think there’s a lot of value there, for not a lot of time investment.
And then of course, join webinars if you do have the network. It all depends on what your unique asset it. If you’re really good at SEO, then go after that, if you’re good at paid acquisition then go after that, and if you have a good network then you can work that to get people to email you.
If you have none of these, one day, back in the day, all of us had none of those. You have to pick one, you have to start from scratch, you have to hustle.
That’s the thing is it’s never going to be as hard as this first app. When you’re starting it with no revenue, no customer base, no network, no audience, that’s when it’s going to be the hardest. That’s when you have to push the hardest. It’s only going to get easier from then on.
Mike: Something else I mentioned that goes along with what you said was that in those early days, when you’re trying to get the product out the door and get it in the hands of people, there’s almost no substitute for getting directly in front of somebody and talking to them about your products and what it is that you’re trying to achieve and how it solves the problem that you went after.
There’s a lot of credibility and trust that goes into signing up for a SaaS app these days. You can overcome a lot of objections just by having a conversation with somebody. Whether it’s a phone call, or a webinar, or one on one demo through a Zoom account or Skype or something like that, you can overcome a lot of trust issues just by having that one on one conversation with somebody and answering their questions. Your website doesn’t need to look fantastic, you don’t have to have a great onboarding experience.
You can hand walk somebody through your onboarding and talk them through every single question they have and the information you’re going to get from them about what concerns they have or just the questions that they ask are going to be very valuable to you and being able to come up with answers that will not only answer them but also answer everyone after them who’s going to have the same types of questions. If they ask, “How do I use this piece over here?” You know that that’s probably going to come up for other customers. Or if they say, “What does this button on the bottom right here do?” If it’s got a weird icon, they may say something to you. If they do, you can use that to make the product better and hopefully reduce the number of questions which ultimately reduces the friction which helps people move through the sales pipeline a little bit better.
Yes, it’s tedious. It takes a long time to get through that but the insights that you’re going to get from that are massive. It just helps you move things along. It is slow, it’s a slow process but it does work over the long term. You just have to walk through every single step of it.
Rob: That wraps us up for the day. If you have a question for us, call our voicemail number at 888-801-9690 or email 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 a full transcript of each episode. Thanks for listening, we’ll see you next time.
Episode 380 | Allocating Your Marketing Budget, Minimum SaaS Documentation and More Listener Questions
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions. The topics include marketing budget allocation, documentation for SaaS, and digital marketing.
Items mentioned in this episode:
Rob: In this episode of Startups For The Rest Of Us, Mike and I discuss allocating your marketing budget, minimum SaaS documentation, and we answer more listener questions. This is Startups For The Rest Of Us episode 380.
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: I’m Mike.
Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What is the word this week, sir?
Mike: Well, if I had a way to put an emoji in here, I’d put a sad face in because my new website is not live yet. I was expecting it to be done.
Rob: Yeah. It’s been a couple of weeks since we recorded last.
Mike: I handed the things off to a designer and he was working on it and then some stuff came up and he wasn’t able to finish it on the previously proposed schedule. Completely understandable stuff, completely out of his control, but I’m a little disappointed when things get pushed off a little bit. Still plugging forward and hoping that things will be pushed out and live within the next week or so anyway.
Rob: Got it. Next podcast episode I will give you a bunch of crap if it’s not live.
Mike: Yeah, sure. You can evaluate the design and I can tell you to go to hell.
Rob: “Hey, Mike. I would tweak these three things. Boy, that’s really an odd color,” and you’re like, “Dude, stop. It’s all done. I’m going with this.”
Mike: I like fluorescent orange.
Rob: Yeah, that’s funny.
Mike: I’m just kind of in a holding pattern right now waiting for that to get all squared away so that I can kind of launch some other marketing campaigns and see how things go.
Rob: That’s cool. It’ll be nice to get that. I’m excited to see it because we talked about it a couple of episodes ago. Your current site doesn’t do the product justice. I’m interested to see what it looks like. For me, I was in San Francisco last week at SaaStr. I will admit it, I liked it better this year than last year.
I’ve only been to two SaaStrs and my general appraisal is they’re way too damn big, way too big. They say that they’re 10,000 people there and it feels like more than that. I really think they should a, sell fewer tickets, and b, there’s this big emphasis on bring your whole team, so half of the people you talk to it’s like, “I run marketing for this startup. I am in support.”
Nothing against that but I don’t get a lot of value out of that. I wanna be with other founders or I wanna be, if it’s a marketing conference, I wanna be with people in marketing. But it’s this really broad swath of people. I find the lack of focus and the size to be detrimental to the conference. I think it would be better but I think the point there is different with MicroConf where it’s highly focused content, and we try to get the people together.
A lot of people were just there to network and business meetings. It wasn’t even hallway track conversation it was like, one guy I saw in the lobby, I’m trying to think. I think he recognized me or he recognized the Drip name of or the other. He said, “Yeah, a long time Drip user. I just lined up seven meeting a day. Here, I don’t go to any of this sessions.” There are people who came and did just that which I’m sure is fruitful but it’s an interesting way to view the conference. We had, I participated in about four or five meetings over the course of the three days myself.
Mike: I use to go do the Symantec and Altiris conferences out in Vegas and it was the same type of thing. There were people who would go solely so that they had easy access to people to line up meetings one after another. That was the only reason that they went. They didn’t go to any of the sessions or anything. They just go there to talk to people.
Rob: Yes. With that in mind, again, I went to somewhere between three and five meetings so I did miss a few sessions but with that in mind, my learning this year were that the panels, panels in general, not just at SaaStr, I’ve never seen a panel that’s any good. They’re always gonna be watered down and even if the topic is super intriguing, they’re just not well done.
That’s one of the reasons we don’t do panels at MicroConf. I think we’ve done one panel out of the 14 or 15 MicroConfs we’ve run. We set it up very specifically and we gave everybody a heads up and asked them to be super tactical but I just started avoiding the panels early on in the conference, the SaaStr conference. I was only going to the solo where it was one person, because I knew that they would have slides, and they would have thought through a premise, and be making a point, and having an opinion.
That’s what I really enjoyed about it where I saw several talks that were good. They were like, I’ll say, MicroConf quality with a high bar with a lot of – from experienced people like a former product leader at box.net, as an example. You know that she has a lot of experience and knows what she’s talking about.
Mike: Yeah, I’m with you. I’ve never really seen panels work out very well to the point that they’re interesting and you get any reasonable takeaways from them. I wonder if that has a lot to do with, I don’t think it’s just the format, but I also think that it’s a matter of trying to give everybody either equal opportunity to talk or I think another contributing factor is the issue of having questions that aren’t necessarily, I’ll say, as well prepared as a talk.
Because if somebody’s up on stage, they’ve given their talk generally a fair amount of thought behind it, have a story arc or something like that. There’s background, they can do lead ins to different pieces of the story but with a panel, you can’t do that at all. It’s very difficult to establish rapport and create some sort of an arc that people can follow.
Rob: It’s a good point. We’re touching on some things that could be fixed. I was talking to Jason Cohen, he was there, he did a talk and then he and I were hanging out, talking. We were having this exact conversation and he suggested, “You know what? If you instead made it a debate, it would be way more interesting.” It’s a panel but it’s essentially a debate and then I said, “Wow, but then don’t do three-person panels, just have two.”
Can you imagine Jason Cohen, Hiten Shah up on stage? “Alright, I want one of you to take the side of bootstrapping, one to take the side of raising funding, and then we’re gonna go through six topics.” We’re gonna say, “Alright, how does this impact hiring? Go.” And the two of them debate. Then, “How does this impact how fast you can grow? Go.” Just run through these topics. That, I was suddenly intrigued by.
Mike: Yeah, that is something interesting. As soon as you started mentioning that and saying that you’re gonna have two people like Hiten Shah and Jason Cohen up on stage and kind of debating something, I was like, “What happens when they agree on something?” Well, yeah, you have one of them take opposing sides, that makes more sense.
Rob: You have to set it up in advance to either that even if they don’t fully believe it, they just do it. Folks who are on the debating team or have done debate, you just have to do that. You sometimes have to debate something, you have to be on the side that you don’t agree with or you pick issues that you do know that they’re on the opposite sides of. You and I could debate things like…
Mike: Who’s gonna win an arm wrestling match?
Rob: Who’s gonna win an arm wrestling match, inbound and outbound email, because you’re outbound and I’m inb–anyway. Coming up with things off the cuff is not my strong – this is why I prepare talks.
Alright, we’re gonna answer some listener questions this week. First question is a voicemail. It’s about allocating your marketing budget. This question comes to us from our very own Craig Hewitt, the founder of PodcastMotor, and Seriously Simple Podcasting.
Mike: And Castos now.
Rob: And Castos now. “Hey, Rob and Mike. This is Craig Hewitt from the Rogue Startups podcast. I had a question for you guys today about how you would think about allocating marketing. Say you have $1000 month you wanna spend on marketing for a SaaS tool, how would you think about allocating that money for different things like content, or SEO, or paid acquisition, and let’s say that it’s a relatively young SaaS product that is, say, below a few thousand dollars a month at MRR. Interested to hear your thoughts on how you would approach this problem and if you have any specific answers that you think would be kind of best practices. As always, love the show, thanks for everything you guys do.”
Mike: I think this is an interesting question because the parameters of the problem here is that you have $1000 for the month and what marketing activities do you prioritize for your business or how do you go about evaluating them. I think, in some ways, the question is almost misphrased because not everything is going to have a dollar cost associated with it, especially if you’re bootstrapping and you’re early on, and you are able to do things yourself.
For example, if you’re doing SEO, there is not really a dollar cost associated with that. It’s actually more of your time than anything else versus if you’re doing paid advertising where clearly, there is a budget that you have to set aside, and you have to be able to do that or if you’re paying people to write articles, but at the same time, you can also write those articles yourself. It’s a question of resource allocation, not necessarily just dollars. There’s the time of yourself for doing it, and then there’s the money associated with those things, and then there’s the output of that. How much are you going to be able to reach people? How broad is your reach going to be after you spend the money and the time?
I think that that’s probably the most important thing to focus on is what is your reach going to be based on the resources you have spend. If you spend half your time for the month and you’re able to get 10x the reach, then if you were to spend $1000 or even $2000, then you’re going over your budget at that point, but you’re not gonna be able to get to as many people. I would look at it in terms of reach and then refine that over time because you’re probably not gonna get it right in the first month, you’re probably not even gonna get it right by the third or fourth month. You’ll be able to narrow it down and you’ll be able to start eliminating different options.
But I would probably focus on most three different things in any given month, and then at the end of every month evaluate them against one another to see how far of a reach did you get, and was it qualified. Did you reach the right people? Because if you’re not reaching the right people, and you’re not getting to a scale that you need, then it means that that channel or whatever it was that you were trying is basically worthless. It doesn’t do anything for you.
If you get in front of them and you are doing it at a rate that is, I’ll say reasonable, it’s gonna depend a lot on what your channel is because 1% in one channel could be, you should expect 50% in another. But as long as it’s reasonable, then I would essentially double down on that, and refine it, and optimize it.
But if you can’t get anywhere close to what is reasonable based on what objectively other people are telling you that they’re seeing in their industries, then I would switch to a different tactic and see if that one works out because it’s gonna be different for every type of business, every type of product.
Rob: Yeah, the way I would think about this is it’s actually an approach that I used to do. Well, I did it for HitTail and did it for Drip, and I saw Noah Kagan doing something similar but better. It’s basically take a Google spreadsheet or an Excel spreadsheet and write out all your marketing approaches, and then try to guesstimate how many trials you think or visitors you think you can drive from it.
You put the cost, estimated level of effort for hours whether that’s for you or someone on your team is doing it, and then you just try to sort them, you come up with a simple algorithm, just sort probably by impact unless there’s something that’s substantially more and more effort. You just want pure volume of trials, or new customers, or revenue, however you wanna measure that.
Early in the SaaS apps career, assuming you have product market fit where people are using it, paying for it, return is low, all you’re trying to do is find marketing approaches that work. You’re very likely, for small SaaS app, you’re gonna find one, maybe two. You’d love to have 10 but it’s gonna be one or two that’s gonna have the most impact over time. I like to think of them, there is short term, there is long term.
The short term ones are doing a joint venture mailing where you email your list – I’m gonna say podcast because we know that Craig runs Castos which is a podcast hosting and let’s just assume that that’s what he’s looking at. You’d find either a podcast blog or someone who does a podcast about podcasting, ask them to mention it, and you would also mention their podcast too to your audience or something like that. That’s a little bit of a quirky way to do it but you get the idea.
Maybe there’s another podcasting SaaS that helps with recording like ZenCastr or something and you do a JV with them where they email your people and you email yours. Then there’s just straight up affiliate stuff. That’s where you can approach people and just say, “Look, I’ll pay you 30% perpetual or 20% perpetual topline revenue from anybody you refer. Here’s your link.” See how many people will do that. There’d be podcast advertising.
The reason I keep coming back to podcast is because your audience’s podcast hosts are most likely to listen to other podcasts, and so you can just start buying spots on those podcasts that are talking to other content creators. There’s paid ads which these days I’m gonna say is Facebook. AdWords is gonna be very unlikely, it’s just gonna be too expensive for you to get to work although you could try it, outbound email. These are all the short term things.
When I say short term, they can work for a long time, but they can give you a short term boost. They’ll instantly, if you do a JV mailing, boom, you’ll get much customers that day, hopefully, you do. Then you have to do another one every month in order to make it work. Then there’s these longer kind of flywheel things, stuff like SEO, content marketing even, I’ll say, guest post is kind of in the middle there. Guest posts can get you a one-time shot but they also build up SEO overtime.
You may wanna do both but honestly, if I were in your shoes, and I were just getting started, I would go for a bunch of the short wins because when you’re doing, I don’t know Craig’s revenue, but I’m gonna try when Hittail was doing $1500 or $2000 a month, all I wanted to do was get it to $5000 or $10,000 a month. I didn’t care if it was unsustainable, or the marketing approaches completely didn’t scale at all.
As soon as I got to $5000 or $10,000, I had so many more options. I can hire better people, I can hire more people, I had huge budget than the market. I wasn’t constrained to the $1000. I didn’t have very high expenses so I had $5000 or $8000 a month to market this thing. Now things really open up for you. Then you can start doing multiple. “Alright, I’m gonna get a blog going with landing pages and blah, blah, blah.”
I have to admit, if I was marketing a podcast hosting service, I love the idea of – you know where all your customers are. They’re all in the iTunes store. It’s like the best deal ever, to be marketing to that audience. It’s not a huge audience but you know where they all are. You know that the business podcast and any kind of for profit podcast that takes advertising is making money.
There’s a lot of hobbyist podcasts talking about whatever, dungeons and dragons, movies, or whatever, that’s more like a B2C sale. You’re gonna want to stick to the more popular ones and you’re gonna want to stick to certain categories that common sense is gonna tell you, “These people have money and they’re gonna be willing to pay for it.” That would probably, to me, be the very first thing I do is either have VA scrape or write a scraper because you know all the iTunes pages are all on the web, in the browser.
Hopefully Craig hasn’t already come up with this. It’s like some secret sauce thing but I’m totally giving it away but I’m just coming off the top of my head and thinking how I would begin to approach it. Maybe I would test some paid advertising but probably not before I did outbound email, joint venture mailings, trying to get some affiliates to work with me, and even joint venture webinars are interesting, I don’t know if that one’s gonna work in this space but to basically latch onto someone else’s audiences and be like, “Hey, let’s either do a webinar to each other’s audiences,” or you say, “Hey, can I do it to your audience Mr. Podcaster? You fill the seats and I’ll give you cut of whatever the people buy.”
I realized that’s a long answer but that’s how I would think about it and with $1000 a month, I would, like I said, I would test things until something works because that’s something working buys you the luxury of being able to do multiple things at once. While I was testing, I would really stick to one thing at a time, and I would hustle, and I’d learn everything about it that I know. I’d read up on it and immerse myself in it for one to two weeks of just consuming content about it, and buying the Udemy course, and watching the MicroConf talk, and talking to XYZ expert about it, calling them up on clarity, paying them their $3 a minute that they need. Once I’ve figured I have my head around it, I would just dive in deep.
This is what I did with HitTail back in 2012, I think it was. I just picked the topic that I thought would work and dove into it. I spent one to two months just hammering on it. If it didn’t work, I moved on to the next one. The ones that did, they made that up. They made it so that I was able to grow it as substantially as I did.
Great question, Craig. I appreciate you sending that in.
Our next question is another voicemail. It’s about what documentation you might need for a SaaS. “Hi, Mike and Rob. Thanks so much for your podcast. It’s been so useful over the years I’ve been listening to it.
My question today is around documentation. What do both of you think you need, a standard, to run a SaaS online business? I’m looking for things like a test document to do routine tests on new releases, for example, checking everything is still working, documentation on service, processes, service definitions, the list could be endless. But I’d really like to hear from you in terms of what you think you need structurally, in terms of documentation set to operate, to run your businesses. Also, what was required, do you think, for selling businesses well or would be seen to be required by someone looking to invest or purchase your business? Thanks for this again.”
Mike: I think there’s actually two questions here. One is what is the documentation you need internally to run the business and then the second one is what do you need to have in place in order to sell the business. I think that there’s two answers to that. It can be on completely opposite extremes.
In order to run the business, at the very least, again this may depend on how complicated your business is, but there are businesses that are run with everything in the founder’s head and that’s really all they need because it’s small enough and it makes enough money. There’s not a lot of things that they need to do on a day-to-day basis that are gonna be things that they’re going to forget how to do. Then as your business gets more complicated and as you add more people into the business, that’s where you need to start documenting things and having things, processes written down so that whoever you bring in to help you out, they can follow those, and you don’t have to micromanage them because that’s really why you’re bringing somebody into the business is so that they can do things without you having to do them yourself.
Some of it is for scalability purposes of the business, some of it is just you don’t have enough hours in a day, but all of those things need to be documented so that you don’t have to still be involved in those things that you’re hiring somebody else to do. When you get to the point where you’re selling the business, that’s probably where there’s gonna be a lot more documentation that’s going to be needed so when somebody comes in to take over the business, they are going to be able to pick up the business and run without you having to be involved.
Again, this is a little bit more advanced. If you’re gonna be there for the next year or two, it’s probably not as big a deal. If somebody is acquiring your business and you’re required to be with them for the next 18 months, or 24 months, or 36 months, whatever happens to be, that’s probably less important but it still probably needs to be done at some point along the way because they don’t want to run into a situation where, let’s say, you stepped out on the street, you got hit by a bus and killed, they bought this asset that they don’t know how to leverage and you continue to make money from, that’s a very valid concern for the acquirer.
But if it’s something small and it’s very simple to run and operate, you’re probably gonna need less documentation. There is that slide and scale and it really depends a lot on your business complexity, revenue, number of employees, and overall risk tolerance, I’ll say.
Rob: Yeah. When I think of internal documentation, which is what we’re talking about here, I think of two types; I think of processes, non-technical processes, “This is how you do a marketing campaign.” Or, “This is how you check support. This is how you respond to these,” kind of a Wiki type thing. Then I think of kind of the technical docs of if stuff goes down, this is how you repair it, this is what the architectural schema is like in the end points and stuff.
Again, that’s all internal. If you have an API that’s external, you obviously need to document that but let’s just keep internal docs in mind. For internal processes, I never created documents until I was ready to hand it off to a person. If I was doing it myself, I did not spend the time. That has always worked. It’s just like in time documentation. Often, the way I would document it is I would bring the person on it and say, “Alright, here’s your job, it’s to check sporty mails and respond to these. Please look through the history and see I’ve responded, and I’m gonna throw together a Google doc, or I would throw together a Screencast.” And then I’d say, “Can you turn that into a Wiki? So that if we bring a second person on, then you can train them using the materials.” I have put the burden on the person doing it. I delegate that to them to create the processes.
This is just the way I do it. This is way more time-efficient for me. I don’t enjoy creating the processes. If you do, then by all means, you can do it. It’s gonna be better than the person creating it themselves. But for me, I’m trying to get stuff done in the business and I don’t wanna spend a bunch of time writing a bunch of stuff up for technical documentation.
If you’re a single developer and you’re working on it, I would veer very much on the side of less documentation purely because a lot of us came from these enterprise backgrounds, I was coding in Java, and .net, and doing these big consultant projects, and we had to document everything, you don’t wanna do that for your startup. It’s a waste of time. Until you’re bringing more people on and trying to get them ramped up, and even then, even these days where it’s as complicated as Drip is, we basically have a GitHub Wiki where we have articles written by internal developers on different subsystems, and then we do have these things called Runbooks. I’m not sure if you’ve heard this term but it’s a developer term, kind of a DevOps term to describe how to run a system.
If you get a page that something is down, if you got a text that something’s down, you go to the Runbook for that subsystem and it’s supposed to tell you how to troubleshoot and how to do things. Those are valuable. We did not have those until we were at probably 8-10 engineers. It didn’t feel like we did it too late, it didn’t at all. I’m glad we have them now but it wasn’t like we were running around for years with our hair on fire because we didn’t have this documentation.
With that said, Derrick was more stressed out than I would’ve liked and that he would’ve liked because we didn’t delegate this stuff soon enough, and Derrick was on call for years. It was too much. That is how the one regret is it would’ve been nice to have some Runbooks early on. But to document a system, extensive, detailed system documentation falls out of sync so fast when you’re in a startup, and not doing waterfall development, like we did 10 years ago. I would go very documentation light until there comes a time when you need it and then you can document it. That’s a good question. Thanks for sending that in. I hope that helps.
Our next question is from Eoin from Bitesize Irish Gaelic. He’s a developer and he has a question about hiring a developer to write code. He says, “Hi Mike and Rob. What are your thoughts on hiring a developer contractor rather than doing my own development? Do you generally see more leverage in stepping away from development? I’m thinking of Michael Gerber’s book, The E Myth Revisited. I lean towards not being a developer/technician,” as he calls it, “in my business.
Having said that, there’s time and energy involved in hiring and delegating, and on Odesk, a good developer can be $40 an hour. Admittedly, what probably muddies the water on my question is I like development. I’ve had a few developers working on my projects over the years and it’s hard psychologically to let go of the development to someone else. I found the best flow to be developing new features for my webapp, that’s not to say I get great satisfaction from trying to work straight to growing up the business, this really is my life’s work. Possibly, a better way for me to ask the question about it is how can I train my thinking to allow myself to get out of the way of my business’ growth?”
What do you think, Mike?
Mike: Well, there’s obviously definitely opportunities to hire somebody as a developer and pull yourself out of that particular role. As long as you hire the right person, that can be awesome because it will remove you from the heavy lifting of writing the code day in and day out, and having to flip back and forth between things like marketing activities, and sales activities, and then going hardcore into the software development, and then diving into customer support.
The ability to replace yourself in one of those areas that requires a lot of mental overhead is, I won’t say priceless, but there’s a lot of value in being able to do that. That said, I would also ask the question what is it that you are probably the best at? Is it writing code? Is it going to be that for you? Or are you much better at doing marketing activities? I would kind of make the conscious decision about whichever one of those roles you provide the most value for, you take on that responsibility and probably stay there.
It’s not to say that if you’re a developer you can’t learn marketing or that you’re not gonna be any good at it. But what is is that you enjoy doing, what is it that really kind of excites you, and drives you forward everyday. Because if you like diving back into the coding and you do it constantly, it’s gonna be difficult for you to step away from that and hand it over to somebody else and let them make all the difficult decisions.
You can, in some cases, stay heavily involved in the development side of things, if you wanna switch over to marketing, if that’s your passion, but I will say that it’s difficult to do both heavy marketing activities and also be heavily involved in the product architecture side of things especially if it gets to any level of complexity. It’s gonna be difficult. I would just keep those things in mind but it’s a balancing act.
There’s no one right way that’s going to work in every situation. It’s really about what is going to work for you and what is gonna be less distracting for you because if you’re in the middle of an email campaign, and you’re thinking, “God, I wish I can go in and fix this code,” for example and then you start doing it. You’re actually hurting yourself even if you have somebody else there who can do it and they are tasked with that.
You’re basically hurting the relationship or the parameters of the employee-contractor agreement by taking things over and doing them. Because then, it’s gonna feel to them like, “Oh, this person doesn’t trust me,” or “I’m being micromanaged.” Then you introduce yourself to a world of other problems that you had no idea that you were gonna run into.
Rob: Yeah. And to add one more piece of information, because we often shorten emails people send, and I skipped one paragraph. He said, “I run this business while working a full time job and I have a family. I spend around 45 minutes per day on ‘rock activities’.” Means developing new features, analyzing customer survey, planning new price points, like doing really solid stuff. Then another 45 minutes managing part time employees and generally trying to keep up with his inbox.
He’s very, very time constrained. That’s another data point. I think I’ll speak to his situation and then I’ll speak more generally. I think given his situation, it sounds, given that his time is so constrained, this is when I start to think about hiring help. At first it was VAs, then it was contractors even though I could write the code, and really enjoyed writing the code, with only 45 minutes a day for rock activities or big rock activities. I would seriously think about trying to find a good developer.
I think that’s the thing is he’s saying, “How can I train my thinking to allow myself to get out of the way?” It sounds like he already knows what the right answer is in his situation. I think that, assuming that the webapp features and having more of them are gonna help the business grow, and that there is enough competition that is warranted because sometimes, that’s not the case. Sometimes the app is good and it just needs marketing in which case I wouldn’t hire a developer, just let the app sit there, it’s a single feature, and it has a product market fit, and you just need to dump marketing into it, then go do that.
But if you really do need on-going development to continue acquiring new customers and/or compete with competitors, I would heavily, heavily lean in this situation towards finding a good contractor. I’m glad he suggested a $40/hour contract because I think at $15/hour, it can introduce a lot of headaches because you find kind of less experienced people and they can write crappy codes.
So yes, there is a hurdle, a mental hurdle to get over, I think I’ve repeated it to myself over and over, “Is this hassle worth it if it grows the business and allows me to quit my job?” What is your number one goal here? Is it to quit your job? Is it to have enough money to live on from your business and what’s the fastest way to get there? It’s probably, in this case, assuming you do need to develop features, it’s gonna be hiring someone.
I would also look, everyone else has done this, I shouldn’t say everyone else but a lot of people have done this. I made this work on a shoestring budget and almost exactly – [inaudible 00:28:47] you’re talking about, and so have many other people. Hiring developers when we were developers and it felt weird, and yes, you micromanage it first. You just figure it out.
As entrepreneurs, we tend to have growth mindsets, we tend to be somewhat flexible even if we don’t think we [inaudible 00:29:01] the code, and eventually you will, I think, feel better about it.
More generally when people ask this question, I kind of say, “What do you really wanna do? What’s gonna make you happy? What is your goal here?” My goal early on was to quit consulting and quit my job. That was more important to me than continuing coding even though I really, really liked to code.
For me, the quickest way to get there was to buy webapps or to pay contractors to build things because I was working 8-10 hours a day. I was booked full time, billing $100, $150 an hour, it didn’t make sense for me to take days when I was earning that money and go write something when I can hire someone back then for $20/hr, that was decent. That was my number one goal. I was willing to sacrifice writing code even though I loved it. Some people are not and that’s okay.
I listen to the Art of Product podcast with my co-founder Derrick and Ben Orenstein who a lot of folks know from MicroConf and Thoughtbot. I’m pretty sure at one point he said, “Yeah, if I’m gonna do a software product, I wanna write the code. I don’t wanna get out of it.” That’s okay. You can totally do this. You look at what Derrick did. Derrick still wrote a bunch of the code on Drip, or all the code for the first year.
In that case, he found essentially a non-technical co-founder in me. For Ben, I would just say okay, go into the business. But that can strain on you. You can do whatever you want. You’re just gonna have to move a little slower which is fine. You’re probably gonna have to contract out to do other things that normally I would tell you to do, like being the Chief Operations Office, handling and helping with support, and hiring.
If you’re really in the code, you need to be shielded from that. You’re gonna need to find somebody that can help shield you. Build a simpler product because you can’t build, and market, and do sales, and do all these things for a bigger product if you’re not gonna delegate the code. It’s gonna be a challenge for you long term.
But there are people that do it. Peter the CEO of Teamwork, he still writes some code. I’m sure he would admit that it’s probably not the best use of his time at times with a 100-150 person company, but he enjoys it so much that he still wants to be part of it. I think there’s leeway here but best practices, what I would advise, what I think maximizes your chance of success, and will get you there faster, is to stop writing code.
But I totally think you can succeed while still writing code if it really, really is what you wanna do, and you love it. I’ll add one final note. I still write code on the weekends. I wrote some crappy PHP script a few weeks ago just to scrape some websites and hit some APIs because it’s fun, for no other purpose and to do it. Even though I don’t do it for my job, I do have the freedom now to kind of do it for fun and really enjoy it.
I think we have time for one more question today. This one is about digital marketing and whether it works for B2B SaaS. This is from Alistair Scott from riskmemo.com. He says, “What’s the best marketing channels for B2B SaaS business? Is digital marketing such as Facebook, AdWords, etcetera, a viable technique for a B2B SaaS business or is it too broad?”
I don’t know if he’s talking about digital marketing or paid advertising because Facebook and AdWords are really more paid advertising. “My app will be ready to market in a couple of months, and I only need to target a specific role in a company, the person responsible for health and safety. I’m getting very promising feedback from people within my network but test digital marketing campaigns as a smoke test haven’t been successful. Your thoughts are much appreciated.”
Mike: I think this is a really hard question to answer because there’s so many variables involved in doing what appears to be just paid advertising which I think that’s what he’s referring to when he says digital marketing because there’s lots of other forms of digital marketing.
You could write ebooks for example. I’ve seen companies who write ebooks and then they publish it on Amazon and use that as a marketing channel. Now that’s digital marketing, but at the same time, you could also argue that it’s not necessarily marketing because you’ve got a book that you’re selling but you could say that’s a product, it’s a revenue stream. But at the same time, if you have a longer term goal of converting to people who are buying the book into customers of your SaaS application, and the book tells them how to do it, but your SaaS does it for them, then in theory that’s a marketing channel for you. It’s digital marketing.
I would differentiate between those two and say that digital marketing can absolutely work but it really depends on the specific implementation of it. In terms of doing paid advertising, it’s hard for me to say. I feel like there are certain types of industries where paid ads are simply not going to work. It’s not because they can’t work, it’s because the ROI does not work. The numbers themselves don’t make sense. If you have to spend $50 to get a customer and their lifetime value is only $30, yes, you can spend money and acquire those customers but you’re losing money every single time so you can’t sell at a loss and make it up on volume. It’s not gonna happen.
Rob: You make it up on volume.
Mike: Yeah, you can’t do that. I mean, you can but you’re gonna go broke. That’s the bottomline. You can try to spend your way out of it and maybe it’s possible that you have to do that in the short term to figure out something that you can tweak and optimize because your first cuts at it are not going to probably work out very well. You’re still learning what to do, what things work, what the software does, and how you target different types of people, and different companies. There’s a learning curve associated with it.
You’re not gonna be the best at it when you first go out there and try it but eventually over time, your costs are going to go down because you’re gonna get better at it, and you’re gonna be able to outperform your competitors, and get in front of the right people. That said, even after you have all that, it still may not work out financially because you’re still losing money on it. It could be that there’s other things that you have to do aside from paid advertising. But I think that if you’re selling a B2B SaaS product, in most cases, doing online marketing in some format, is probably going to drive revenue for you especially if it’s a low touch sales process.
If it’s high touch, the digital marketing may bring awareness, but you may very well have to do outbound campaigns, and cold calling, and direct marketing, and things like that. I would combine it if that’s the case but this sounds to me like this question’s really aimed directly at how do I do digital marketing to make it successful.
Rob: Yeah. The answer to will this work is I don’t know until you try it. That’s what I would do. I would think that your odds are gonna be…
Mike: Well, it sounds like he has tried it and it hasn’t worked.
Rob: Yeah, I guess you’re right. Here’s what I would think. Facebook, I can’t imagine it working for this. I don’t think you can get someone’s title from Facebook. Can you, in the ads? I don’t know what their segmentation is like these days.
Mike: I don’t know. I don’t think so.
Rob: Here’s the two things I would try for this; outbound email and LinkedIn advertising. Yep, LinkedIn advertising because you can then target based on someone’s title, their job title. You can title regions and all that stuff. Then outbound email, because then you just go somewhere, find a list, outbound email or calling, whatever it is. Because then you can find the list of people. It’s cold calling in essence but at least you know that they are the role that you need if it’s that specific.
I could see toying around with some AdWords because you don’t necessarily need someone to be the role but you need them to searching for something that implies they need your software. The problem with that is it’s gonna be too expensive. I don’t know any AdWords keywords anymore that are possibly affordable unless your LTV is just through the roof. Those are the two things I would try. Facebook, probably not. AdWords, probably too expensive. Thanks or the question. I hope that helps.
Mike: I think that about wraps us up for today. If you have a question, you can call it into our voicemail number at 1-888-801-9690 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 a full transcript of each episode. Thanks for listening, we’ll see you next time.
Episode 379 | There and Back Again, a Founders Tale of Services to Product to Services
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In this episode of Startups For The Rest Of Us, Mike interviews Marie Poulin, chief designer and digital strategist at Oki Doki, about her journey from consulting to products and services.
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Episode 378 | Billing Systems Suck, Here’s How to Make Yours Suck Less
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In this episode of Startups For The Rest Of Us, Rob and Mike talk about billing systems. Some of the topics covered include monthly vs. annual, credit cards upfront/or not, dunning, and paid vs free trials.
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Mike: In this episode of Startups for the Rest of Us, Rob and I are gonna be talking about why billing systems suck, and how to make yours suck less. This is Startups for the Rest of Us Episode 378.
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 Mike.
Rob: I’m not eating a sandwich.
Mike: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob, aside from not having a sandwich?
Rob: I’m hungry and you’re eating a sandwich.
Mike: Yes.
Rob: You have a turkey sandwich.
Mike: I do. I described it to you in exquisite details just before the podcast.
Rob: I know you did. I’m like starving. I realized it was lunch time right now. This week’s pretty good, man. I think it feels like when I dropped my 11-year old off to school, was 23 below, but it’s up to 17 below. That’s not too bad. T-shirts and shorts day.
Mike: I think it was Brennan Dunn who had asked on Twitter earlier today why you didn’t ski.
Rob: I saw that. Yeah. I have a serious answer for it.
Mike: Oh, yeah.
Rob: Yeah.
Mike: I’ll tell you what, you give your answer and then I was gonna give my answer that I was…
Rob: Oh, got it. In all honesty, I grew up, we just didn’t really have the money to go to the mountains, and get all the gear, or I should say we spent the money doing other things. We didn’t go on ski vacations. There were mountains a couple of hours drive from us in Tahoe, but it just wasn’t a thing we did, and we always played sports, and so you didn’t wanna get injured, because I had friends who busted their knees up, they needed surgery.
I ran track for nine years, and my brother played football for eight. It was just something that we’re like sports were more important to us than the potential danger of doing that. That’s the serious answer. Now, what’s your take?
Mike: Mine was gonna be that because you grew up in California, whenever the temperature got below 70, you wrap yourself in a parka and just didn’t go outside.
Rob: This is true. Yeah, that’s the real answer.
Mike: But, of course, it’s ironic that now you’re in Minneapolis and it feels like 23 below.
Rob: I know. It hurts you’re nose and stuff, but man, with the right gear, it’s not the end of the world. You don’t wanna stay out for too long, but it sounds really awful and it’s fun. The sun’s out, you know, the sun’s shining, it’s bright.
Mike: As long as you’re not standing still, you’re fine. If you’re standing out there, of course, you’re gonna get cold, but if you’re moving around, it’s not a big deal.
Rob: Right. Yep. Anyways, I wanna extend an invitation. If you’re a listener, and you or your company might be interested in sponsoring MicroConf, or sponsoring some scholarships. We have quite a few companies that are lining up to pay for folks who can’t afford to come to MicroConf but feel those people would get some value out of it.
If you’re interested in doing either of those things, we’ll give you a recognition on the podcast. You’re obviously talked about a lot at MicroConf itself. And then we have you on the website, and people are hearing about you, you’re just kind of doing good for the founder community. Get in touch with Mike at sponsors@microconf.com.
How about you, what’s going on?
Mike: Well, I’ve had a rough week of support tickets after I pushed my new release. I’ve talked about this before. I was working on this major release. I got to a point where I’d done enough testing on it that I said, “Okay, everything looks good. Let me push this out.” Pushed it out, and see here is two weeks ago on Thursday. It was the week before I went to Big Snow Tiny Conf and pushed it out, everything looked fine, everything was great for four days or so.
Then, Monday I leave. Then, I started getting a couple of support tickets, and I started to get more support tickets. I ended up spending basically a full day while I was at Big Snow Tiny Conf just working on those things and trying to figure out what was going on. It got to the point where I actually rolled back to the previous release and then the problems kept continuing, I’m like, “Oh, God. What is going on here?”
Finally, I tracked it down, it turns out that it was a library from Google that I was using for authentication that was causing the issue, that was causing like one piece of the app to break. But everything else was still working. Eventually, I fixed that. Unfortunately, it was not actually directly related to the release itself, it happened to show up at the same time. I spent a lot of time trying to figure out what I did wrong versus, “Hey, what library is causing this?”
Rob: Wow, yeah, that sucks. That happens every once in a while. Obviously, it’s something you try to avoid but it will happen with these apps that we’re just constantly changing. It’s like you’re rolling changes out, or a library itself changes and breaks things. Are you completely past it now or is there any fall out?
Mike: I’m still dealing with the support issues here and there. Part of the reason for me pushing out was that I knew I didn’t have 100% test code coverage, but I also knew that the vast majority of it was working, and I just don’t know what little things are broken. There’s been a few things here and there that I’ve had to fix, but nothing major aside from the one issue, the Google library.
Everything’s working fine. It actually functions a lot faster, and is more scalable than it was before as well. I think it’s in a better place. It’s just that week or so was rough while trying to figure out what was going on. I was doing like a lot of stuff manually.
Rob: Yeah, that’s a bummer, man. That’s when your hair is on fire, and you’re not shipping any features because you’re just rushing around from one thing to the next, trying to figure it out.
Mike: What’s worse is that it’s just things sort of worked. That was the worst part. There were fundamental changes I made, and it’s just, I couldn’t figure it out. It’s just forever.
Rob: That’s a bummer. Cool.
What are we talking about this week?
Mike: We’re gonna be talking about billing systems, and mostly why they suck, and how do you make yours suck a little bit less. This question had come to us, I asked on Twitter what people wanted to hear, and Brennan Dunn had asked a question about billing. I pointed them to Derrick’s article, Derrick your co-founder on Drip, where he’d written a blog article about when to build your own billing engine. We’ll link that up in the show notes. This discussion, I think, kind of relates back to episode 375 where we talked about how to evaluate per seat versus tiered pricing models. But this is more about the mechanics of the billing system.
I think the place to start the discussion is really what is it that you’re actually billing people for? Because this is gonna impact your product messaging, your marketing, the positioning in the industry versus competitors, and the pricing itself.
Rob: Yeah. There’s a lot of things to think about with this. Brennan’s particular question was on handling annual billing and kind of talking through do you do credits versus just do an annual bill where you bill someone upfront. We’ll certainly be talking about that as well as a number of other things that you have listed here in the outline.
Mike: As I said with the first question, what is it that you’re actually billing people for. I think you have to narrow it down and talk about it in terms of what is going to be on your pricing page. I actually saw a website earlier today where they had three different pricing tiers, and then they had the enterprise plan which you would kind of expect.
But then when you start looking through at the different limits on the different plans, it was all over the map. It was actually very difficult to figure out where you would fit into each of these. They build on the number of users, and then there were two other metrics that they build on, but both of them were variable.
Some customers may have a lot of one metric versus the second metric. Some of them may have a lot of both, and then there’s obviously room for somebody to say, “Well, I don’t need that at all, that doesn’t matter to me.” Like, “Why am I actually being billed for this?” I just think that it’s interesting to note that. You have to make sure that what you’re billing people for is what they care about.
Rob: Yeah, exactly. We talked about this a few weeks ago with per seat versus kind of a metered billing based on subscribers, or disc space, or whatever. As soon as you go to multiple of those, you’re gonna make some people mad. That’s not to say you shouldn’t do it. But like we talked about, in the early days, you don’t have a lot of data, just pick one. Pick one thing to kind of meter on and make some tiers, and go with it. Then, as you get more data, you can later add them. But the more complicated your billing, the more complicated your billing engine. That is not something that you wanna be dealing with when you’re trying to find product market fit.
Mike: Some of the things you might want to bill people on, obviously, like there’s the pricing tiers themselves and the different metrics within it, but Drip for example uses a metered billing system. You bill based on the number of subscribers that are in your account. Why don’t you talk a little bit about metered billing because that applies a lot to web hosts, for example, where you’re paying for storage, or bandwidth, or processing usage, and things like that. But talk a little bit about what was it that made you decide to choose that specifically for Drip?
Rob: Yeah. Metered billing is a bit of a misnomer for Drip. When I think of metered billing, I think of Amazon, AWS, where it’s truly like per minute billing, or per gigabyte used, whereas Drip is metered with tiers, and it’s based on subscriber count.
In the early days of Drip, it was a different metric. It was the number of new subscribers you got into your account each month because Drip was more focused around just having an email mini course. It was not a full-blown ESP. Once we became an email service provider, it just made more sense to kind of fit into the mental model that other competitors were doing. That’s how we started.
It probably won’t be that way forever. We’ve got to the point where we’re a marketing automation platform now, and there are some people with 20,000 subscribers who send 4 million webhooks a month. It really hammers our servers, and you think about it, and you’re like, “Huh. That person’s actually getting quite a bit of value out of Drip. More value than someone with 20,000 subscribers, and sending 0 webhooks, and it costs us more because we need to add more servers and such.”
There’s something to think about. Again we started fairly simple, we adjusted, we’ve had multiple versions of our billing. At this point, for the most part, how many subscribers you have should be how much value you get out of the app. That’s the key thing to think about. What is the thing in your app that someone gets a lot of value by having more of it?
With Amazon EC2, which is Elastic Computing, it’s how many minutes you have a server running. With Dropbox, it’s how much storage space you need. With something like Drip, it’s how many subscribers you have or email sends. You could argue that way, but the standard way to do it is subscribers. Or with a tool like a CRM system or a sales management system, it would most likely be seats, because the more people that are using it, the more value you get out of it.
Mike: That’s kind of an overview of the metered side of things, but then there’s also per subscription, and you also mentioned per user, and then you could feature gate based on the features themselves. You could charge more for certain features versus other features. You could have add-ons. But all of these things kind of factor into what it is that you’re actually billing people for, and that’s what you need to pay attention to when you’re looking at your billing system or you’re trying to implement one for your product.
Once you’ve decided on that piece of it, you need to understand whether or not you’re gonna be offering a free trial, or it’s essentially going to be paid upfront. That has implications on the database itself, and whether you can have a user that doesn’t have a credit card. Do they have to give you money first? Do you have the opportunity to put something in there that says, “Okay, somebody can sign up without a credit card.” Do you have to build that side of things?
These are things that I’m kind of looking at now with Bluetick. Initially, it was designed in a very particular way, and then I just kind of ripped out the subscription side of things and then did everything through like a WordPress plugin and had people paying me that way. I’m just kind of like manually doing things back and forth to kind to synchronize between Stripe, and between the application. I’m still doing that today. But it made me think about, “Oh, well, had I gone down the road of trying to design all these things in early on, it would have been a lot more difficult because I was trying to answer questions that I didn’t know the answers to, it just would have been really, really hard.”
That’s something else to think about. Are you going to require that credit card upfront or not? Can you have users without a subscription attached to them? Can users be shared between accounts or between subscriptions, for example, are you gonna have a multi-user system? Those are things to take into account.
Rob: Yeah. I think there are four stages, or four different levels of providing friction upfront. Friction is a negative way to say it, but it’s how a new trial user will think about it. You can ask for a credit card upfront and charge them in advance. Then, refund them on request. That’s the most amount of friction because they literally have to put money out. You can ask for credit card upfront and not bill them upfront, but then bill them after a 14-day trial, or 21, or 30-day trial. That’s a pretty standard way to do it.
You can not ask for a credit card upfront. I guess there’s only three, as I’ve thought through it, you cannot ask for a credit card up front then they basically have a free trial until it expires, and then at that point you ask for a credit card. I guess the fourth would be that it’s a free trial, a freemium model where it’s free perpetually at a small usage number like a Dropbox, or like Drip, Drip has a forever free plan.
Typically, when I default, it depends on the space you’re in. If you’re B2C, you’re probably gonna wanna go more either freemium or no credit card upfront. Your conversion rates to paid are gonna be a lot lower. But you’re gonna get a lot more people in the funnel. If you’re going enterprise, you either want to not have self-service sign up at all or if you’re more mid market which is below enterprise but not quite small to medium, you probably don’t wanna have a credit card because a lot of folks let’s say you’re in a $50 million company, the marketing manager may or may not have access to a credit card to just sign up for free trials. It’s not as common as we think it is when you’re dealing with really small businesses or kind of 10-person startups like we think about.
But for the most part, if you’re going kind of B to small B, B to SMB, might think of an app like HitTail, I think of maybe even like a Bluetick. They’re probably gonna have a credit card available, asking for it upfront does not tend to be too much of a blocker and having a free trial where you charge them at the end is what I’ve defaulted to in the past. Probably, if I were to launch a new app, that’s what I would do.
The one kicker there is if you have enough people who can handle the support and/or the sales burden of all the leads that you’re gonna get without asking for credit card, then by all means, do that. But you’re gonna have more pre-qualified leads, or I should say, the leads you get, you’ll have fewer of them but they’re going to be more qualified if you do ask for that credit card. It is a way to limit the number of people that are signing up for your app if you are bootstrapped. If you’re underfunded, and understaffed, asking for a credit card upfront is a good way to do that.
But there are pros and cons to each of these. It’s probably an entire episode on its own. I think we may even have one or two episodes where we just discussed that. But those are the kind of levels to think about. All of those impact your billing system, because it’s gonna impact how your billing systems works, when emails are sent out, if you have a trial versus credit card. You have an entirely different sequence of emails that need to be triggered to notify people.
My advice is if you’re gonna build a billing system that’s gonna handle this, then, you keep in mind that you very well may want to switch this. You don’t hard code a bunch of stuff. You make it extremely flexible, such that you could later go in and just change the length of your trial without modifying a bunch of code and having to retroactively update the database, or that you can switch from credit card upfront to credit card after without catastrophic consequences.
Mike: That’s all the hard part really is trying to figure out all that stuff out in advance, and knowing that if you go down a particular path with the marketing side of things, if you want to experiment or change things, or run into and educate a certain situation that you didn’t expect for example, the person signing up does not have a credit card available for them typically that they can use for this.
Or if they want to be able to sign up for it, and then use the value that they received out of it to go back to their manager and say, “Hey, can I get the corporate credit card now?” Versus asking for it upfront, kind of putting their own reputation on the line. If things don’t work out, then they look bad to their manager. Those are things that you probably don’t know upfront until you get far enough down the path of validating the product for your customers and getting them on boarded. You have to be able to reverse course on some of those things, and that’s what makes this stuff challenging.
I guess the next question is where do you store this data? Where do you store this information? I referred to this kind of thing or this question as what’s your source of authority? A lot of people just use Stripe or whatever the payment gateway is that they use for it. A lot of different payment vendors will have this data available for you, but it’s not always easy to get at and there may not always be an API for it.
I think most listeners are probably developers and they’re going to want to store this information in their own database, but you can only store so much of it. You can’t store every credit card number for example because it’s a PCI compliance violation. There’s a lot of stuff that you can’t store in your own database. There’s gonna be a need to synchronize, in some way, shape, or form between your own database and the other systems. Is that gonna be webhooks? Is that going to be a data dump that you just bring down from them, and upload into your own database? Do you need to synchronize with an accounting system? Those are all the things you need to at least think about.
But really, the fundamental question you’re trying to answer here is what is going to be your source of authority for this data, because you have to keep in mind not only all of those things, but all of the different situations that we’ve talked about previously. Where are you getting credit card upfront, or afterwards, and then other stuff that we’re gonna be talking about which is things like chargebacks and credits, and upgrades, and downgrades, and proration, and things like that.
Rob: Yeah. In the past, I think HitTail was already built, it was actually built using PayPal subscriptions. I acquired it, I turned it to Stripe, and I kept some of the info in the database but I also had to login to Stripe to do certain things, and that was a pain in the butt and I regretted it.
When we did Drip, we agreed that the Drip database itself would be the source of truth, and it was made super easy to report so that you could just do a select in the database. Didn’t need to go out and hit other APIs. That meant that every monetary transaction has to come from within the Drip app. We have a web admin where you don’t go into Stripe to refund people. You literally hit a refund button in the Drip admin, it goes out and hits Stripe and refunds it.
In very early days, it was kind of a pain in the butt because let’s say we had a refund the second month we were live and we had 20 people, 20 customers, I remember saying, “Derrick, I’m just gonna go onto Stripe really quick and do it.” He said, “No, no, no. Don’t. We want everything in the database, and I don’t wanna have to go back.” He spent an hour wiring up a little refund button, just hacking it in. It was kind of a pain in the early days because I didn’t wanna spend that time working on that. But now, once we kind of hit escape velocity, I was very, very thankful that we did take the time to do it.
Moving forward, if I were to build another app like this with recurring billing, I would want all the data. I would lean towards having all of the data in my database. But there obviously are tradeoffs with that, because it’s gonna require a little more time upfront.
Mike: Yeah. I was gonna mention that. The requirement for you to essentially do development every single time you need to make an update in one of those systems, it just adds to the number of things that you need to implement. Sometimes, they’re not always straight forward, not every vendor has an API that’s as easy to navigate and use as Stripe does. A lot of them are just terrible, some of them just don’t have something you can use.
There’s other sides of storing all of that data in your own app which is, for example, reporting or using other third party services like dunning services, or something like Baremetrics where you’re trying to figure out what does my revenue look like over time. You may be able to hook it in, and just say, “Okay, use Stripe and pull that information out.” But if you’re doing your own billing system with your own subscriptions versus Stripe subscriptions, it can be a lot more difficult to pull those reports.
Rob: That’s exactly correct, yup. It’s a bummer there. A bunch of services that you’ve named, Churn Buster, and I think Stunning, and certainly Baremetrics, and there’s a bunch that tie into Stripe subscriptions. If you don’t use that and you build your own, you miss out on that.
That is something that we did. We had to build some additional reporting that we know we’re not gonna be able to get from those apps, and that’s the tradeoff we had. The Drip billing is complicated enough that Stripe subscriptions were not a fit for us. It would have been catastrophic. We would have been very, very limited if we had used them. But there are cases where people are not bouncing up and down tiers as frequently, and you don’t want to take control of let’s say the trial and how prorating and all that’s done where Stripe subscriptions, I think, are a fit.
Mike: You mentioned upgrading and downgrading, that’s something else we should probably dive right into. I think this goes partially towards monthly subscriptions. I think you can get away with, let’s say for example, somebody decides to upgrade their account or downgrade their account, I think a lot of times you’d get away with it if they’re in a monthly subscription to not bother prorating it.
Either you just bite the bullet and take the loss on it or you kind of eyeball it, and say, “Okay, we’ll charge you this much to kind of get it in there.” Stripe does have a proration option that you can use. But if they’re on an annual plan and they decide that they wanna upgrade three months into it, what do you do? Clearly, you’re probably gonna wanna upgrade them at that point, but if they’ve already paid for a year in advance, you can’t just charge them for another year and extend the contract by another year on top of that. That’s something your billing system is going to need to take care of and handle.
In addition to that, there’s downgrades, but what happens if somebody accidentally upgrades, or they upgrade, and then the next day they upgrade again, or they upgrade an hour later, for example, maybe they chose the wrong one, how do you handle that?
Rob: Yeah. There’s a bunch of different ways to handle it, and all of them has some type of negative outcome, including just being confusing if it’s hard to explain to people, they might get confused. There are ways to do it. If you’re gonna do it annually, you can do it with credits where someone just buys a certain amount of credits upfront and then you consume them overtime. They could pay $500, get $600 in credit. Then, as they go up and down each month, you’re just drawing from their credits. That’s the way we chose to do with Drip.
Derrick and I had a three hour whiteboarding session trying to figure this out. I remember, trying to decide which approach to go. If you look at WP Engine, if you sign up for an annual account, you pay in advance, then you have overages like, I think, too many people hit your site or whatever, I think they just bill you that month. They’ll say you went over by $10, and here’s a $10 charge to your card. They trust that the card is gonna be good on file for the duration of that year. That’s certainly another way to approach it.
This is not an annual thing, but if someone’s mid-month–we have Drip customers who will literally get upgraded three times in a month, or four times in a month because their list is growing so fast. Each of those times, you can either bill them right on the spot as it goes up, which gets a little irritating for people, they don’t like seeing a bunch of charges, or you can bill them, you’re essentially billing them at the end of the month for the prior month’s usage. That’s how MailChimp does it. That’s how a lot of ESPs do it actually. When your first month billing is the plan, it bills you for the next 30 days for the plan that you’re currently on, and then, at the end of that month, it looks backwards, and it bills you for the next month, but it bills you the amount of the prior month. Again, it’s a little confusing, but it’s kind of technically the right way to do it, or certainly an accurate way to do it.
Mike: Yeah. That’s the problem with that type of metered billing, or a situation where they could go over some particular limit and you have to charge them more is that you don’t know that until afterwards. Clearly, if somebody goes over by one unit of whatever it is on a given day, you don’t wanna charge them for just that one, you wanna wait until the end of the month. It really depends on what the thing is that you’re actually billing people for. All the different other situations that could potentially come up, and anticipating those, and gearing your billing system to account for those, not just from a technical standpoint and a monetary standpoint, but how is it going to make the customer feel?
You mentioned the idea that somebody doesn’t wanna see a bunch of charges on their card, especially in a short period of time. If you’re charging them at the point where they upgrade or downgrade, that could be an issue because then they’re seeing all these things that are all on a short period of time. I use an American Express for a lot of things. I have it hooked to my phone. I will get like a little notification every time something gets charged on it. If other people have that hooked up, they’ll see it every single time you do it. You have to be sensitive to that kind of thing.
Rob: Another thing to think about is versioning your pricing and/or grandfathering. These things are related. Typically, if you’re gonna build your own system, you may change pricing overtime. You may even change what you bill on. Like I had said in the early days of Drip, we billed on the number of new subscribers, and now we bill on the number of subscribers that you have in your account at any given time.
During those changes, you don’t just want to rewrite your billing engine, you don’t just wanna rewrite that code. You wanna have a version of it that can still run at least in the short term, or if you decide to grandfather people, existing customers, which is what I’d recommend. It isn’t always the thing to do but it’s what I’ve always done. Eventually, at some point, you run an app for 10, 20 years, you probably don’t wanna have all these people still grandfathered in at your prices from 20 years ago. But grandfathering in in general, especially for long term customers, it makes them feel good, and let them know that you’ve done that. You can send out the email and say, “Hey, pricing is going up, but we’re gonna grandfather you in for now.” It’s also cool, you can use this as a way to get a bump in trials, or bump in new customers, is to be public that prices are going up in two or three weeks. If anyone’s on the fence thinking about signing up, they’ll sign up if you are gonna indeed grandfather people.
Mike: Something that’s probably not talked a lot about when you’re dealing with the billing system is things like chargebacks or credits. Let’s say that you have a customer where something goes wrong, or maybe you lost data of theirs, or something went wrong with their account, or you’ve made a promise that such and such feature will be delivered, and you had to roll it back, and it’s just not there or you wronged them in some way, or even if you just wanna give somebody a warm fuzzy feeling because you think that they deserve it or just wanna promote some good will, you may give them a credit.
If somebody’s really pissed off at you, they could do a chargeback and then those things need to somehow be reflected in whatever your source of authority is. If you’re doing that in your own database, you have to have the mechanisms in place to be able to surface those things, and then also be able to account for them in your reporting plus the customer’s reporting. If they have a page where they can go and see what they’ve been billed, they need to be able to see that stuff.
Rob: Another thing to think about is whether your free plan, if you have a free plan, if that is a billing plan. In general, I would recommend, that yes, it be a billing plan. It just helps with reporting and it helps if someone’s on a free plan that they get an email receipt at the end of every month saying, “Hey, you were billed $0 for this account.” Reminds people that the account is there. Obviously, people can cancel the account if they don’t wanna get the email anymore, but in our early days, we have compt accounts for developers who are working on integrations, and of course, we have a free plan now, and everyone gets essentially an invoice email that says, “You’ve been charged $0.” We really haven’t had issues with that. I think that’s the way to go.
Mike: Yeah. But I think that’s easy to overlook as well, because if you’re thinking about writing a billing engine, you’re not thinking about how do I send an invoice to somebody for $0 because they’re not being charged. Why would you even do that? But the points that you bring up are valid. I think the one that’s the most benefit you is that it gets you another excuse to get in their mailbox every month. Even if it’s for a free offering or you gave somebody a free plan.
I guess you probably wouldn’t do this for an annual plan, because you’re only sending them the billing emails at the billing cycle itself. You’re not gonna email them every month, but for all the other ones, you’re gonna wanna send that email regardless whether or not they got charged so that, if they’re not using that product, and you don’t have other automations in place to help bring them back, then it does remind them that the account exists, and they could use it.
I think the one other thing to think about that is probably not really commonly thought about for annual plans is that there’s an implication and an impact that an annual plan can have on an acquisition offer. If you are selling a business, or buying one, if there are people who have paid for annual plans, and let’s say that somebody gave you $1000 for an annual plan, if you’re six months into it and let’s say that you go to sell that business, well, whoever you’re selling it to is on the hook for delivering the other $500 of value that you’ve promised to that customer.
There’s almost a little bit of debt here that you’re accumulating in the product by offering that annual plan if you were to transfer ownership of it to somebody else. The reverse is true as well. If you buy a product from somebody and there’s a bunch of annual plans that have been paid, you still need to deliver on those services for the annual plans because that money is presumably already spent, or is considered inside of the bank account. But that’s something you have to take into account when you’re either acquiring or selling a company. If the company is big enough, that could mean a lot of money in one direction or the other.
Rob: I never sell lifetime plans.
Mike: Yes.
Rob: Throw that in there.
Another thing to think about is dunning. I remember, the first time I heard this phrase, I had no idea what it meant, but it just means how do you let people know that their credit card, or their payment method is failing? If you’ve used Stripe subscriptions, then you could use something like Churn Buster, or Stunning. If not, then you’re probably gonna have to either write your own. I think, with our Drip billing engine, we throw an event into Drip and it triggers a workflow in Drip. We’ve built it out in Drip which is an easy enough way to do it. But you do need to think about this.
Whether you’re gonna have to make phone calls, that’s the other thing. Are you gonna call people or are you just gonna email them, because you’re gonna get a lot more credit card members and accidental churn, in essence, or involuntary churn as it’s called. You’re gonna get a lot less of that if you make the phone calls. But do you have their number? Do you have the time to do that? I would say if you’re at any scale that it is worth your time to collect that phone number and give them a call, even if you’re not and you’re just in their early days, I would definitely use email. You’re gonna have to hit them up multiple times. You’re gonna wanna retry the charges as well, so there’s a lot to think about here.
That’s the cool part, if you do think about using Stunning or Churn Buster. They have figured out the best practices, so you don’t have to do that. I will disclose that I am an angel investor in Churn Buster. I’m not trying to necessarily promote them. But I do know that they get better results than you will probably get early on until you’ve done some testing, and you’ve seen what works, which may or may not be worth the effort.
Mike: That’s kind of the benefit of using those types of services. They’ve already got the process laid out, because they’ve worked on it, and implemented it with multiple people. If you’re doing all of this yourself, then you’re essentially forced to figure out what that process should look like, then evaluate later on whether or not it’s a good process. They’ve done that work for you so that you can just pay them. It kind of gets taken care of versus building it all out yourself and doing all the work and then kind of recovering from the mistakes that you’re gonna make along the way.
I think one of the most painful things that I’ve found is dealing with currency, taxes, and invoices. Depending on what it is that you’re selling, you may or may not have to collect sales tax for it. But currency, being able to accept currency in multiple denominations, and be able to provide invoices to people, it seems like you wouldn’t necessarily need that. But there are people in certain countries where they absolutely have to have an invoice, and there’s really no way around it. You can do them manually but it’s still painful to have to do it.
Early on, you can just do them manually, and you get on with your life but it’s nice if you can batch them up. But having an invoice in the apps so that your customers don’t have to ask you every single time, once you get to a certain scale, it really is not feasible to do them manually anymore. You just can’t do it. Either you have to build something, or you can use off-the-shelf services like Chargify or Chargebee, Biddly I think it is. Spreedly, I think that’s what they’re called. But a lot of them will create these invoices for you so that you don’t have to do it. But again, there’s downsides to that, because you have to do all the integrations with them. They will take care of a lot of these things that we’ve already talked about.
Rob: Invoices are something that will be a pain for you, if you have customers in the European Union. Because in the US, you don’t need to give every customer an invoice and they’re able to write stuff off. But in EU, they need an invoice with a bunch of specific stuff on it in order to be able to write it off.
What we did early on is just made a simple Ruby on Rails template, and it’s an invoice. You just click it right from your billing page in Drip and it spits out all the info that you need. The first few times I was doing it manually in a Word doc, and it gets old really quick, especially if you’re gonna have to do that every month. Something you’d wanna think about once it starts becoming a pain but don’t prematurely optimize that one.
Mike: Then, the last thing to think about when you’re looking at a billing system is whether or not you’re going to have multiple products. Are those products gonna be tied to specific subscription plans? For example, if you have three-tier subscription plan, and you can buy this particular add-on or service, but it’s only available if you buy the third tier. Those things have implications on your backend design, and how you account for it in not just the billing engine, but also in your reporting as well.
These are things that can be difficult. They can be hard to figure out how are you going to put those in but it is something to consider because you may get to a point or a situation where you realize that your product itself is probably something that could stand alone. But it may do better as a productized service offering where you have this add-on service, or there could be other add-on services that you discover later on, and say, “Hey, I could make an extra $500, or $1000 per customer that I sign up,” or maybe you have an onboarding fee, or a consulting fee, or something like that that you add in there.
They could be potential revenue generating opportunities, but it impacts how you implement and design everything. Those are things that are worth considering. But I wouldn’t say, as Rob said earlier, don’t premature optimize for those things. But just be aware that they do exist, and there are other opportunities there.
Rob: Lastly, you’ll wanna think about reporting. How are you going to see which payments are failing? How are you gonna see how many new trials you have, how much money you’ve made each day, how much money you’ve made each month? Are you gonna build out extensive reports, or are you just gonna have a raw sequel query in the early days?
If you’re a developer, that’s what I would do. But you gotta think about that as your team grows. As you start getting other people on board, you will need to build some type of dashboard if you don’t have one from your billing system provider, or something like a Baremetrics that can just link right into your Stripe subscriptions.
There’s pros and cons to both of these. I think if you have the ability to just use a third party, do that because building these things is such a pain. But you do get more control when you build them and overtime you can extend it. You can do exactly what you want with it, again, since we didn’t use Stripe subscriptions, we did build our own dashboards. We have some pretty killer stuff inside Drip that’s abled, that’s predictive, and then there’s also historical.
I can tell this by looking at a few numbers kind of where we are in the month at any given time. You will definitely wanna have some kind of nice reporting with the SaaS app, because your metrics are really the lifeblood of the company.
Mike: There’s advantages to integrating with these third party subscription management software companies, but at the same time, you don’t necessarily wanna go down that road early on if you can’t afford it. That’s just the tradeoff that you need to make. It’s like the classic. Do you build it or do you buy it? We kind of talked a lot about the different things to be careful of if you’re building it. If you don’t wanna go down that road, then, buying something off-the-shelf is also an option.
Rob: Well, Mike, I’m off to go eat a sandwich. If you have a question for us, call our voicemail number at 1-888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt. It’s 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 377 | Staying Sane While Starting Up With Dr. Sherry Walling
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Show Notes
In this episode of Startups For The Rest Of Us, Rob talks with Dr. Sherry Walling about staying sane while starting up. Sherry talks about her work with the founder community as a clinical psychologist. How to deal with stresses and fears while growing a business and the importance and power of retreats.
Items mentioned in this episode:
- ZenFounder
- The Zen Founder Guide to Founder Retreats
- SherryWalling.com
- The Entrepreneur’s Guide to Keeping Your S**t Together
Rob: In this episode of Startups for The Rest of Us, Dr. Sherry Walling and I discuss staying sane while starting up. This is Startups for The Rest of Us Episode 377.
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. Im Rob.
Sherry: Hi, I’m not Mike.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What is the word this week, not Mike?
Sherry: Well, I’ve been compulsively checking for the mail. I keep going down and pushing the snow out of the way so I can open the front door to see if the package has arrived that has what I hope is the final proof for my new book. But we had 11 inches of snow so the whole infrastructure of the city is slow going and I’m not sure that the delivery will get here today.
Rob: Traffic is not great today. There’s just a lot of stuff. All the schools are closed. All three of our kids are home today, and I feel your urgency. You’ve run through a few proofs. It’s the cover. Is the cover having some struggles with the printer?
Sherry: The cover’s having some trouble and part of it has been sort of the designer not understanding which template to use but also not asking but me also not making sure. There have been some communication lapses and then the first round of the proof came the week before Christmas and so we were bogged down with the holiday as well. So it’s just sort of a slow process to get that final hurdle of the final, perfect, most beautiful version of the book printed.
Rob: I can feel you there. In case someone is completely lost, you are Dr. Sherry Walling. You and I have been married for going on 18 years. You and I host a podcast called ZenFounder. You are @ZenFounder on Twitter. You recently completed a book with a little help from me. I’m the with on the book. I’m the second author. The book is called The Entrepreneur’s Guide to Keeping Your Shit Together, How to Run Your Business Without Letting It Run You. I’m pretty stoked about the book. Are you stoked? Are you excited?
Sherry: I am excited and I also feel some trepidation. I think it’s like founders [inaudible 00:02:31] You’re gonna launch something, it’s like you’re putting a little bit of yourself out there in the world. In this case, it feels like it’s a lot of myself. It’s 50,000 words from yours truly. It’s a lot about how I think about life as a founder and I’m super excited to put it out there. It’s been a lot of hard work. But I’m also totally scared that people will hate it or they won’t care.
Rob: The indifference would be not good. You’re packaging a heck of a lot of expertise into the book. You have a PhD in Psychology. You have also been married to me, a serial founder, for like I said going on 18 years. You’re an entrepreneur yourself having essentially launched ZenTribes. You’ve launched essentially a consultant practice. You have actually a really good ebook that’s gotten pretty reviews on retreats, how to take founder retreats. We’ll actually talk about that a little later on the episode. But you’re getting yourself out there in a way that I don’t think you or I would have expected even 10 or 15 years ago. There’s been a shift in you since maybe the last 5-7 years.
Sherry: I set out when I began my career as an academic. Life as an academic has a lot of conference presentation and writing but it’s just on a much smaller scale. In the opinion of most academic communities, what it means to cultivate expertise is 15 years in the trenches and lots and lots of papers. I’ve ended up shifting and now I’m working in the founder space and I still now have 15 years of expertise in lots and lots of podcasts, maybe not papers. I’ve begun to be someone who has wanted to get information and helpful tips to a much wider audience, not just the academic community, which of course has meant lots of hustle and lots of hard work to try to package a message in a way that’s most helpful and most accessible to people who need it.
Rob: That’s the thing in the startup or the founders space. I have, over the years, seen a few people come out of the woodwork, who are being the CEO/Coach or the Founder/Coach but they don’t have the credentials and in a lot of cases don’t have the experience that you do.
I remember maybe four or five years ago you were saying, “I want to go location-dependent with my work.” I remember us having this kind of conversation like “Should you dive deeper into yoga? Do you want to do more of that or do you want to dive deeper into serving founders?” It was a deliberate decision and we started ZenFounder and quickly become obvious how much of a dearth of really knowledgeable people there are in terms of staying sane and staying happy and keeping relationships healthy and not struggling with anxiety or depression or at least fighting through it, figuring out how to work with it.
There are so few people in our world. This is both the venture funded world, it is the bootstrapped world, and it’s also the broader entrepreneurial world. Let’s say you’re not doing a startup, there seems to be a real, definite need for folks, someone like you with your expertise. There aren’t any around. Every time you speak in a conference, it seems like people are saying, “Wow, what a breath of fresh air, not a lot of people are talking about this.”
Sherry: I think there are lots of helpful sources of information from lots of different places. One of the things that I try to do is to pair years of science based education and even my years working as a researcher with the on-the-ground experience. And I think being married to you is worth two PhDs on Entrepreneurial Science.
But I think much of this conversation began when Aaron Swartz committed suicide. And then shortly thereafter, I felt like we heard very often about founders who had taken their own lives or whose lives have just got totally derailed. I look at those kinds of instances or something that is potentially preventable, not 100% of the time, not perfectly. I certainly don’t know, I don’t have all the answers to try to keep someone alive when they don’t want to be alive.
I think there’s a lot of information in the psychological literature, especially in the clinical psychological literature, that can be super helpful to help people manage stressful lives and optimize their performance which is what most of us are trying to do. I think sometimes people hear clinical psychologists and they think like, “I don’t need a doctor,” or “I don’t need to see a therapist.” If we reverse engineer what we know about what breaks people down, what causes mental illness, if we do that backwards, often we can learn a lot about what helps people be really well. I think that’s what we try to accomplish with ZenFounder; get the information out there that can prevent problems before they start.
Rob: I think in addition to that, I see you as keeping people at the top of their game. Stress and all the stuff we’re talking about, all the negatives because there’s so much that comes with being a founder that just is thrown at you constantly, it can and will negatively impact your performance, and your throughput, and your ability to think clearly, and your ability to make really sharp and quick decisions.
I see you helping people, whether it’s one-on-one, whether it’s through your ZenTribes, whether it’s through the book or through the podcast, keeping people on top of their mental games so that they can perform because a founder’s job is not sitting on the sidelines and hanging out. It’s like you’re in the middle of the field, you’re the quarterback and everybody’s relying on you. If you’re stressed, you’re hungry, you’re tired, you’re not sleeping well, you’re sick, whatever, it negatively impacts everything including your bottom line and long-term, your health.
That’s where every founder or aspiring founder needs to be thinking about this topic, about how to stay sane, and how to stay mentally well and healthy and strong while you’re starting up. Even if you’re just an early [inaudible 0:08:41], if you’re doing it nights and weekends, you’re gonna get less sleep. You need to start thinking about how am I gonna counteract that? How am I not gonna burn myself out? How am I not gonna push myself too far? That’s where the message coming from you is so critical. I think a lot of people hand wave it away. Some of the founders go, “I don’t need that,” or, “I’m not sick,” or, “I don’t have depression,” or, “I don’t have anxiety.” That’s not the point. It’s just being more productive and being on top of your game and really not letting yourself burn out.
Sherry: I think I’m a reasonable speaker. I definitely have things like [inaudible 00:09:12]. I’m always astounded when I start talking about things like sleep or things like communication with your spouse. When I give a conference presentation on some of the basic parts of life, the room is pretty transfixed. People are really hungry to figure out how to help their lives go more smoothly, not only to optimize their performance, which of course is a high goal for many founders, but I think to make life enjoyable even in the midst of doing hard things.
Rob: We’ve talked about your background. Folks who want to learn more about you can go to www.zenfounder.com. We’ve talked about why this is an important topic for pretty much everyone listening to the podcast and why folks should be thinking about this from day one.
When you’re just getting started, there’s gonna be tough times. When you start to have success, there’s gonna be stress. The more success you have, the more stress I felt I had. There’s so much writing on you. You get a company to 10 people, now they’re relying on you. The dollar swings are way bigger. You have a great month versus a bad month. It used to be a couple of thousand dollars, it can be 40-50 grand difference. And suddenly it’s like “Whoa! The stakes just became very high!” Hopefully, folks listening to this have been taking notes if they haven’t been thinking about this yet.
I wanna touch on two topics today and have you talk through them a little bit. These are both out of the book. We’re gonna talk about self-knowledge and I wanna touch on retreat. You started going on retreats and I was really intrigued by them. I went on my first retreat years ago and I came back and raped about it on the podcast. And then it kind of spread through our circles. And there was no one, absolutely no one, talking about founder retreats before we did. I feel a certain pride that we were able to bring that into the space because it’s just a novel and helpful thing. Everyone who goes on one comes back to me and says, “Oh my gosh, it completely blew my mind!” I wanna be able to make sure that we do touch on that.
Let’s dive in a little bit to this idea of knowing yourself or self-knowledge. In the book, you talk about some different extremes. You talk about chaos versus rigidity, introversion versus extroversion, fixed mindset versus growth mindset. I know each of those is a concept all to its own. Maybe kick us off with why is it so critical to know yourself, and then talk through maybe one or two of those concepts.
Sherry: The premise of the conversation about self-knowledge is very practically helps you plan around your relative weaknesses and maximize your relative strengths. If you’re thinking about starting a business or you’re knee-deep in the process already, if you can have moments when you sort of catch yourself and ask, “What am I good at in this scenario? Where’s my sweet spot?” And then also be able to tell the truth about like “Oh, I’m really not good at this part of this problem or at this part of my business.”
That’s really what we’re talking about when we’re talking about self-knowledge; the ability to think about your own process in real time. When you can do that, when you are someone who can self-reflect pretty well, it means that you have the option or the opportunity to be able to plan around things that you’re not good at. If you know that you are not particularly good at public speaking or you’re not particularly good at marketing or there are pieces of what’s required of you that you’re not strong in, you can invest the time and energy to really learn how to counteract those weaknesses or you can hire help or you can do something about it. But when you go in blind and you’re not paying attention, that’s when you risk sacrificing potentially good outcomes when you risk sacrificing the success of what you’re working on because you haven’t taken the time to stop and think “Oh wait, actually I suck at networking. I need to get better at that or I need some help.”
Rob: So is this a lot about strengths and blind spots?
Sherry: It is, to some extent. Each of the topics that we talk about in that chapter are different continuums.
Chaos versus rigidity is an interesting one. I picked this up from a woman named Filipa Perry who is a therapist in the UK. She talks about how we can organize our conceptualization of mental health along that continuum. You can break at either polarities. If you are hyperchaotic or very chaotic, then you might be somebody who really has trouble following through. Perhaps you are really able to think outside the box and move quickly, but you aren’t that great at communicating what you are thinking to people who are working with you and for you.
Chaos at the outer edges can become very problematic, but if you move in towards the middle of the continuum, there are some real strengths there that are important to know about yourself.
The other side of that continuum is rigidity. Under extreme stress, some of us tend to be very rigid. We need things in a very specific way, a certain way, and we become very anxious when our environment doesn’t align with what we believe we need. That kind of rigidity, on either ends of the spectrum, they look like obsessive-compulsive disorder or an anxiety that is un-wielding or inflexible.
Knowing whether under stress you tend to clamp down and become more rigid or whether you tend to let it all hang out and lose your keys and forget to pick your kids up, and tend toward the chaotic, you can plan around that. Say you are about to launch a new product and you know that you tend to get a little bit chaotic when you are under pressure, you might need to invest a little bit more time in organization, or you might need some extra help, or you might need to think about the things that generally fall through the cracks when you’re under stress and make a plan for them.
Rob: And can it also be not just blind spots that you need to account for, because I think that’s a good point. Sometimes feeling a sense of anxiety or depression and not knowing what it is and finally realizing, “Oh, it’s because I hate this part of the job.” Like unearthing what you love versus what you don’t and being able to then delegate that.
Sherry: Right. It’s always a conversation about strengths and weaknesses. When you realize ” Oh my gosh, this piece of my business totally stresses me out.” Once you have enough money to hire someone, hire someone to do that. Hire someone to do the thing that has the highest emotional pain point because even the most mentally sane person is gonna waste some cycles and spend some anxiety on something that causes a lot of apprehension. If you can have someone do that for you, then that’s gonna save you both the doing of the task as well as the anxiety that goes along with it.
Rob: How about one of the other two dichotomies I mentioned? There was a fixed mindset and growth mindset and introvert and extrovert.
Sherry: I think the same can be true of introversion and extroversion. Those are ways of organizing how we relate to the external environment. If you are introverted, you are pretty attuned to what’s going on inside of your own head. You might be somewhat apprehensive or reticent with a lot of social stimulation. The way that you recharge or refill your emotional bucket, so to speak, is doing things that are either alone or with fairly low-key social stimulation.
Versus an extrovert on the other end of the spectrum who really feeds off of social interaction. That is energizing, they love to be engaged in conversation and maybe animated, outgoing. These are usually the terms that we come to associate with extroversion. Those are both great personalities, right? The strength of an introvert in being able to observe and read a situation, the strength of an introvert in being able to think first and speak later, those are super valuable in the founder world.
But if you need to make that really energetic sales pitch, and that just fairly is not your personality, you have to really gear yourself up. You have to practice extra. You have to have all of your resources about you, whether that’s spending extra time to make a really amazing keynote or whether you bring someone to present with you. Those are the ways that we problem solve around our relative weaknesses.
The thing about knowing yourself isn’t that one way of being is better or worse. It’s that we all are a mixture of skills and abilities and we have to be super honest about what we’re good at and what we’re still growing in.
Rob: I think it has a profound impact on my, I wouldn’t say success as a founder, but it’s more like my ability to become and remain happy as I’ve started these companies and launched all these products. Early on, I remember feeling guilty as I jump job to job every couple of years. My dad told me people are gonna look at your resume, it’s not gonna be a great thing. And then I realized that I don’t like working on the same thing forever. It was just something I learned about myself that I was probably never gonna build a product and keep it around for 10 years. There’s been just a few exceptions in my life.
I think finally understanding that about myself and not feeling guilty and stressed about it when I get 18 months or 24 months into a project and I start really feeling down on it and burned out and all this stuff. As soon as I switch to a new project, I’m just fired up. I know some people who do that every month or two and then you’re never gonna get anything done. But I will see a product to enough success that it makes it worth it and then want to just move on.
Sherry: If you really accept that about yourself, then you would be razor sharp on honing the skills that it takes to get a startup going and then to a certain level where you can just hand it off to somebody else. Hypothetically, you wouldn’t really stress about do I babysit this thing for the next five years. You would just say, “No, this is what I’m good at. This is what I do. I know myself well enough to know that I am not going to retire out of this company.”
Rob: Let’s talk about how you do this. Someone listening to this says, “Okay, I don’t know myself very well.” How do you go about introspecting to the point that you can start identifying things for yourself?
Sherry: I think one of the best ways to do that, to really create space for meta reflection, for thinking about how you’re doing, is to have a practice of going on a retreat once, maybe twice a year, where you satisfy the day-to-day and put down your to-do list, turn off your computer and ignore all notifications and buzzes and beeps and things that often distract your attention. And then, begin to really ask yourself some deeper questions about what have been you successes over the last year; what have been the points in the year that brought you the most joy where you felt you’re most in your sweet spot. And then you ask the opposite kinds of questions. Where did you feel like your life was being sucked from you? Where were you miserable? Where did you feel like you failed? Begin to really look at those questions as an amalgam and look at what does it tell you about what kinds of moments and experiences you’re drawn to and what kinds of things really seem to not go so well for you?
Rob: You’ve thought and written a lot about this. You wrote the ZenFounder Guide to Founder Retreats which is available on Gumroad. I assume you have a link to it from www.zenfounder.com as well. That’s a 28-page ebook and 2 worksheets. You also wrote a bit about it in the Entrepreneur’s Guide that we’re talking about today. That’s a lot of fun, a lot of content on something. It sounds like just based on that, this is a really crucial piece and something that you believe in quite a bit.
Sherry: Absolutely. It’s not just me. There’s some great research behind the benefit of really disrupting your schedule and stepping aside from your normal context. One thing that’s really important about a retreat is you really should not do it in your office. You need to go to the mountains, you need to go to the coast, you need to go somewhere with different sensory cues, with a different environment so that you can let your mind engage the questions of your life in a different way. That’s helpful to begin to vary the ways that your brain is used, sort of like the well-trodden paths that your brain is used to taking. If you can get out of your normal environment, you create a level of environment to a novelty that lets your brain think in a different way.
Rob: That makes sense. It’s taking two days away from the spouse and the kids or just your everyday life, head somewhere. We used to go to the beach. We had the beach apartment and we go there all the time. But other folks I know would go to the mountains, go to the desert, and really just hold yourself up. If I recall, I didn’t even bring a laptop most times. I had my phone in case there was an emergency and I need to check email or something, but I would bring the black notebook with a pen and just start with those questions. Typically, a bunch of stuff fell out right out of that because it was like, “What do I wanna do this year?” Some years it was like well, it’s a year where I’m either acquiring something, I’m going to build something, I’m going to tool around until I find something, or it was a growth year.
It was like whoa, just a second, you’re at Drip. I know I’m not stopping doing that, so how do I wanna get to where it needs to go? How am I gonna do that? Sometimes, it was more about the business. Sometimes, I would have the personal side of thinking about me. Oftentimes, honestly, it was a combination of both.
Sherry: It’s just time to ask those big questions like how am I doing? Am I happy in this life that I’ve constructed for myself? If not, what do I need to do? Those are not those big existential questions, we can’t do that on a day-to-day. We’re busy driving people and answering email and doing the business of our life. We need to step aside to be able to really have insight into those big questions
Rob: The thing is when I would go on a retreat, most of the first day was towards just leaving everyday life behind. It wasn’t typically until late in that day or maybe it was the next day where I would start to have a little bit of clarity about things because it’s like the rest of life went away and left all this room for deep thought, a state you don’t get into everyday, hectic lives of running businesses.
You obviously go into more depth on that in the book. The book is out in the next couple of weeks, as soon as printing is finalized. You cover a lot of other stuff about understanding where you came from, optimize where you’re going, battling the haters in your head, mastering disruption, getting things done when things aren’t getting done and staying connected.
Folks can go to www.zenfounder.com/book anytime to sign up for the launch list. I think the book’s gonna have impact on a lot of people. We really are selling it as a book. It’s gonna be, what, $25? I don’t know if we have the final price, but it’s gonna be $20-$30 bucks. It’s not gonna be some info product where we have all the whiz-bang and it’s hundreds of dollars, this is something that we want to get out to as many people as possible. It’s gonna be a no-brainer for so many of the founders who struggle with this stuff or potentially will in the future and just need a toolbox or just one more piece of knowledge for people to keep it together while doing this pretty stressful thing.
Sherry: Somebody asked me who the book was for. Obviously, it’s a really good marketing question. It’s for humans. It’s for humans who have jobs and are doing things. Obviously, it is geared towards people who are founding something and running their own business. So many of us are looking for strategies to help manage stress and the challenges of our everyday life.
Rob: Yeah, for sure. That’s www.zenfounder.com/book. You also do one-on-one consulting with founders and entrepreneurs, wanna talk a bit about that?
Sherry: I do. That’s one of the things that I have just found to be so rewarding over the last few years is to be a resource for folks who are trying to do some of this how do I get to know myself, how do I become more self- reflective, how do I answer big questions about my life, how do I make decisions when decisions are hard to make? I’m a sounding board, a sounding board with a lot of experience and trained ears to hear potentially problematic thoughts and to spot blind spots and patterns that are counterproductive. I try to come alongside people and help them be as awesome as they can be in their businesses and in their lives.
Rob: It’s totally confidential and that’s something that you’re very good at so I have no knowledge of who you talk to but I do know that you have co-founder disputes that you moderate, you help folks who forgot how to communicate better with their spouse or their family. You’ve consulted founders on how to deal with either a problem employee or a manager to get through struggles with, that kind of stuff. Folks considering selling their company, they’re getting an offer and they don’t know if it’s the right decision. You’re that sounding board where it’s a little bit about advice, but it’s a lot about getting someone to think what is the right answer for them, or just leading them to the right answer when it’s a hard decision and it’s not super clear and someone really needs to dig deep and to think to think about a lot of factors in order to make the decision
Sherry: It’s a lot about asking the right questions and listening really well.
Rob: Yeah, and it can be super helpful to have someone to just think through decisions now and again. I think that wraps us up for today. Folks who want to get a hold of you, www.zenfounder.com is your home online.
Sherry: It is. If people are interested in my professional background, I also have a presence at www.sherrywallling.com.
Rob: If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 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 a full transcript of each episode. Thanks for listening, we’ll see you next time.
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. Im Rob.
Sherry: Hi, I’m not Mike.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What is the word this week, not Mike?
Sherry: Well, I’ve been compulsively checking for the mail. I keep going down and pushing the snow out of the way so I can open the front door to see if the package has arrived that has what I hope is the final proof for my new book. But we had 11 inches of snow so the whole infrastructure of the city is slow going and I’m not sure that the delivery will get here today.
Rob: Traffic is not great today. There’s just a lot of stuff. All the schools are closed. All three of our kids are home today, and I feel your urgency. You’ve run through a few proofs. It’s the cover. Is the cover having some struggles with the printer?
Sherry: The cover’s having some trouble and part of it has been sort of the designer not understanding which template to use but also not asking but me also not making sure. There have been some communication lapses and then the first round of the proof came the week before Christmas and so we were bogged down with the holiday as well. So it’s just sort of a slow process to get that final hurdle of the final, perfect, most beautiful version of the book printed.
Rob: I can feel you there. In case someone is completely lost, you are Dr. Sherry Walling. You and I have been married for going on 18 years. You and I host a podcast called ZenFounder. You are @ZenFounder on Twitter. You recently completed a book with a little help from me. I’m the with on the book. I’m the second author. The book is called The Entrepreneur’s Guide to Keeping Your Shit Together, How to Run Your Business Without Letting It Run You. I’m pretty stoked about the book. Are you stoked? Are you excited?
Sherry: I am excited and I also feel some trepidation. I think it’s like founders [inaudible 00:02:31] You’re gonna launch something, it’s like you’re putting a little bit of yourself out there in the world. In this case, it feels like it’s a lot of myself. It’s 50,000 words from yours truly. It’s a lot about how I think about life as a founder and I’m super excited to put it out there. It’s been a lot of hard work. But I’m also totally scared that people will hate it or they won’t care.
Rob: The indifference would be not good. You’re packaging a heck of a lot of expertise into the book. You have a PhD in Psychology. You have also been married to me, a serial founder, for like I said going on 18 years. You’re an entrepreneur yourself having essentially launched ZenTribes. You’ve launched essentially a consultant practice. You have actually a really good ebook that’s gotten pretty reviews on retreats, how to take founder retreats. We’ll actually talk about that a little later on the episode. But you’re getting yourself out there in a way that I don’t think you or I would have expected even 10 or 15 years ago. There’s been a shift in you since maybe the last 5-7 years.
Sherry: I set out when I began my career as an academic. Life as an academic has a lot of conference presentation and writing but it’s just on a much smaller scale. In the opinion of most academic communities, what it means to cultivate expertise is 15 years in the trenches and lots and lots of papers. I’ve ended up shifting and now I’m working in the founder space and I still now have 15 years of expertise in lots and lots of podcasts, maybe not papers. I’ve begun to be someone who has wanted to get information and helpful tips to a much wider audience, not just the academic community, which of course has meant lots of hustle and lots of hard work to try to package a message in a way that’s most helpful and most accessible to people who need it.
Rob: That’s the thing in the startup or the founders space. I have, over the years, seen a few people come out of the woodwork, who are being the CEO/Coach or the Founder/Coach but they don’t have the credentials and in a lot of cases don’t have the experience that you do.
I remember maybe four or five years ago you were saying, “I want to go location-dependent with my work.” I remember us having this kind of conversation like “Should you dive deeper into yoga? Do you want to do more of that or do you want to dive deeper into serving founders?” It was a deliberate decision and we started ZenFounder and quickly become obvious how much of a dearth of really knowledgeable people there are in terms of staying sane and staying happy and keeping relationships healthy and not struggling with anxiety or depression or at least fighting through it, figuring out how to work with it.
There are so few people in our world. This is both the venture funded world, it is the bootstrapped world, and it’s also the broader entrepreneurial world. Let’s say you’re not doing a startup, there seems to be a real, definite need for folks, someone like you with your expertise. There aren’t any around. Every time you speak in a conference, it seems like people are saying, “Wow, what a breath of fresh air, not a lot of people are talking about this.”
Sherry: I think there are lots of helpful sources of information from lots of different places. One of the things that I try to do is to pair years of science based education and even my years working as a researcher with the on-the-ground experience. And I think being married to you is worth two PhDs on Entrepreneurial Science.
But I think much of this conversation began when Aaron Swartz committed suicide. And then shortly thereafter, I felt like we heard very often about founders who had taken their own lives or whose lives have just got totally derailed. I look at those kinds of instances or something that is potentially preventable, not 100% of the time, not perfectly. I certainly don’t know, I don’t have all the answers to try to keep someone alive when they don’t want to be alive.
I think there’s a lot of information in the psychological literature, especially in the clinical psychological literature, that can be super helpful to help people manage stressful lives and optimize their performance which is what most of us are trying to do. I think sometimes people hear clinical psychologists and they think like, “I don’t need a doctor,” or “I don’t need to see a therapist.” If we reverse engineer what we know about what breaks people down, what causes mental illness, if we do that backwards, often we can learn a lot about what helps people be really well. I think that’s what we try to accomplish with ZenFounder; get the information out there that can prevent problems before they start.
Rob: I think in addition to that, I see you as keeping people at the top of their game. Stress and all the stuff we’re talking about, all the negatives because there’s so much that comes with being a founder that just is thrown at you constantly, it can and will negatively impact your performance, and your throughput, and your ability to think clearly, and your ability to make really sharp and quick decisions.
I see you helping people, whether it’s one-on-one, whether it’s through your ZenTribes, whether it’s through the book or through the podcast, keeping people on top of their mental games so that they can perform because a founder’s job is not sitting on the sidelines and hanging out. It’s like you’re in the middle of the field, you’re the quarterback and everybody’s relying on you. If you’re stressed, you’re hungry, you’re tired, you’re not sleeping well, you’re sick, whatever, it negatively impacts everything including your bottom line and long-term, your health.
That’s where every founder or aspiring founder needs to be thinking about this topic, about how to stay sane, and how to stay mentally well and healthy and strong while you’re starting up. Even if you’re just an early [inaudible 0:08:41], if you’re doing it nights and weekends, you’re gonna get less sleep. You need to start thinking about how am I gonna counteract that? How am I not gonna burn myself out? How am I not gonna push myself too far? That’s where the message coming from you is so critical. I think a lot of people hand wave it away. Some of the founders go, “I don’t need that,” or, “I’m not sick,” or, “I don’t have depression,” or, “I don’t have anxiety.” That’s not the point. It’s just being more productive and being on top of your game and really not letting yourself burn out.
Sherry: I think I’m a reasonable speaker. I definitely have things like [inaudible 00:09:12]. I’m always astounded when I start talking about things like sleep or things like communication with your spouse. When I give a conference presentation on some of the basic parts of life, the room is pretty transfixed. People are really hungry to figure out how to help their lives go more smoothly, not only to optimize their performance, which of course is a high goal for many founders, but I think to make life enjoyable even in the midst of doing hard things.
Rob: We’ve talked about your background. Folks who want to learn more about you can go to www.zenfounder.com. We’ve talked about why this is an important topic for pretty much everyone listening to the podcast and why folks should be thinking about this from day one.
When you’re just getting started, there’s gonna be tough times. When you start to have success, there’s gonna be stress. The more success you have, the more stress I felt I had. There’s so much writing on you. You get a company to 10 people, now they’re relying on you. The dollar swings are way bigger. You have a great month versus a bad month. It used to be a couple of thousand dollars, it can be 40-50 grand difference. And suddenly it’s like “Whoa! The stakes just became very high!” Hopefully, folks listening to this have been taking notes if they haven’t been thinking about this yet.
I wanna touch on two topics today and have you talk through them a little bit. These are both out of the book. We’re gonna talk about self-knowledge and I wanna touch on retreat. You started going on retreats and I was really intrigued by them. I went on my first retreat years ago and I came back and raped about it on the podcast. And then it kind of spread through our circles. And there was no one, absolutely no one, talking about founder retreats before we did. I feel a certain pride that we were able to bring that into the space because it’s just a novel and helpful thing. Everyone who goes on one comes back to me and says, “Oh my gosh, it completely blew my mind!” I wanna be able to make sure that we do touch on that.
Let’s dive in a little bit to this idea of knowing yourself or self-knowledge. In the book, you talk about some different extremes. You talk about chaos versus rigidity, introversion versus extroversion, fixed mindset versus growth mindset. I know each of those is a concept all to its own. Maybe kick us off with why is it so critical to know yourself, and then talk through maybe one or two of those concepts.
Sherry: The premise of the conversation about self-knowledge is very practically helps you plan around your relative weaknesses and maximize your relative strengths. If you’re thinking about starting a business or you’re knee-deep in the process already, if you can have moments when you sort of catch yourself and ask, “What am I good at in this scenario? Where’s my sweet spot?” And then also be able to tell the truth about like “Oh, I’m really not good at this part of this problem or at this part of my business.”
That’s really what we’re talking about when we’re talking about self-knowledge; the ability to think about your own process in real time. When you can do that, when you are someone who can self-reflect pretty well, it means that you have the option or the opportunity to be able to plan around things that you’re not good at. If you know that you are not particularly good at public speaking or you’re not particularly good at marketing or there are pieces of what’s required of you that you’re not strong in, you can invest the time and energy to really learn how to counteract those weaknesses or you can hire help or you can do something about it. But when you go in blind and you’re not paying attention, that’s when you risk sacrificing potentially good outcomes when you risk sacrificing the success of what you’re working on because you haven’t taken the time to stop and think “Oh wait, actually I suck at networking. I need to get better at that or I need some help.”
Rob: So is this a lot about strengths and blind spots?
Sherry: It is, to some extent. Each of the topics that we talk about in that chapter are different continuums.
Chaos versus rigidity is an interesting one. I picked this up from a woman named Filipa Perry who is a therapist in the UK. She talks about how we can organize our conceptualization of mental health along that continuum. You can break at either polarities. If you are hyperchaotic or very chaotic, then you might be somebody who really has trouble following through. Perhaps you are really able to think outside the box and move quickly, but you aren’t that great at communicating what you are thinking to people who are working with you and for you.
Chaos at the outer edges can become very problematic, but if you move in towards the middle of the continuum, there are some real strengths there that are important to know about yourself.
The other side of that continuum is rigidity. Under extreme stress, some of us tend to be very rigid. We need things in a very specific way, a certain way, and we become very anxious when our environment doesn’t align with what we believe we need. That kind of rigidity, on either ends of the spectrum, they look like obsessive-compulsive disorder or an anxiety that is un-wielding or inflexible.
Knowing whether under stress you tend to clamp down and become more rigid or whether you tend to let it all hang out and lose your keys and forget to pick your kids up, and tend toward the chaotic, you can plan around that. Say you are about to launch a new product and you know that you tend to get a little bit chaotic when you are under pressure, you might need to invest a little bit more time in organization, or you might need some extra help, or you might need to think about the things that generally fall through the cracks when you’re under stress and make a plan for them.
Rob: And can it also be not just blind spots that you need to account for, because I think that’s a good point. Sometimes feeling a sense of anxiety or depression and not knowing what it is and finally realizing, “Oh, it’s because I hate this part of the job.” Like unearthing what you love versus what you don’t and being able to then delegate that.
Sherry: Right. It’s always a conversation about strengths and weaknesses. When you realize ” Oh my gosh, this piece of my business totally stresses me out.” Once you have enough money to hire someone, hire someone to do that. Hire someone to do the thing that has the highest emotional pain point because even the most mentally sane person is gonna waste some cycles and spend some anxiety on something that causes a lot of apprehension. If you can have someone do that for you, then that’s gonna save you both the doing of the task as well as the anxiety that goes along with it.
Rob: How about one of the other two dichotomies I mentioned? There was a fixed mindset and growth mindset and introvert and extrovert.
Sherry: I think the same can be true of introversion and extroversion. Those are ways of organizing how we relate to the external environment. If you are introverted, you are pretty attuned to what’s going on inside of your own head. You might be somewhat apprehensive or reticent with a lot of social stimulation. The way that you recharge or refill your emotional bucket, so to speak, is doing things that are either alone or with fairly low-key social stimulation.
Versus an extrovert on the other end of the spectrum who really feeds off of social interaction. That is energizing, they love to be engaged in conversation and maybe animated, outgoing. These are usually the terms that we come to associate with extroversion. Those are both great personalities, right? The strength of an introvert in being able to observe and read a situation, the strength of an introvert in being able to think first and speak later, those are super valuable in the founder world.
But if you need to make that really energetic sales pitch, and that just fairly is not your personality, you have to really gear yourself up. You have to practice extra. You have to have all of your resources about you, whether that’s spending extra time to make a really amazing keynote or whether you bring someone to present with you. Those are the ways that we problem solve around our relative weaknesses.
The thing about knowing yourself isn’t that one way of being is better or worse. It’s that we all are a mixture of skills and abilities and we have to be super honest about what we’re good at and what we’re still growing in.
Rob: I think it has a profound impact on my, I wouldn’t say success as a founder, but it’s more like my ability to become and remain happy as I’ve started these companies and launched all these products. Early on, I remember feeling guilty as I jump job to job every couple of years. My dad told me people are gonna look at your resume, it’s not gonna be a great thing. And then I realized that I don’t like working on the same thing forever. It was just something I learned about myself that I was probably never gonna build a product and keep it around for 10 years. There’s been just a few exceptions in my life.
I think finally understanding that about myself and not feeling guilty and stressed about it when I get 18 months or 24 months into a project and I start really feeling down on it and burned out and all this stuff. As soon as I switch to a new project, I’m just fired up. I know some people who do that every month or two and then you’re never gonna get anything done. But I will see a product to enough success that it makes it worth it and then want to just move on.
Sherry: If you really accept that about yourself, then you would be razor sharp on honing the skills that it takes to get a startup going and then to a certain level where you can just hand it off to somebody else. Hypothetically, you wouldn’t really stress about do I babysit this thing for the next five years. You would just say, “No, this is what I’m good at. This is what I do. I know myself well enough to know that I am not going to retire out of this company.”
Rob: Let’s talk about how you do this. Someone listening to this says, “Okay, I don’t know myself very well.” How do you go about introspecting to the point that you can start identifying things for yourself?
Sherry: I think one of the best ways to do that, to really create space for meta reflection, for thinking about how you’re doing, is to have a practice of going on a retreat once, maybe twice a year, where you satisfy the day-to-day and put down your to-do list, turn off your computer and ignore all notifications and buzzes and beeps and things that often distract your attention. And then, begin to really ask yourself some deeper questions about what have been you successes over the last year; what have been the points in the year that brought you the most joy where you felt you’re most in your sweet spot. And then you ask the opposite kinds of questions. Where did you feel like your life was being sucked from you? Where were you miserable? Where did you feel like you failed? Begin to really look at those questions as an amalgam and look at what does it tell you about what kinds of moments and experiences you’re drawn to and what kinds of things really seem to not go so well for you?
Rob: You’ve thought and written a lot about this. You wrote the ZenFounder Guide to Founder Retreats which is available on Gumroad. I assume you have a link to it from www.zenfounder.com as well. That’s a 28-page ebook and 2 worksheets. You also wrote a bit about it in the Entrepreneur’s Guide that we’re talking about today. That’s a lot of fun, a lot of content on something. It sounds like just based on that, this is a really crucial piece and something that you believe in quite a bit.
Sherry: Absolutely. It’s not just me. There’s some great research behind the benefit of really disrupting your schedule and stepping aside from your normal context. One thing that’s really important about a retreat is you really should not do it in your office. You need to go to the mountains, you need to go to the coast, you need to go somewhere with different sensory cues, with a different environment so that you can let your mind engage the questions of your life in a different way. That’s helpful to begin to vary the ways that your brain is used, sort of like the well-trodden paths that your brain is used to taking. If you can get out of your normal environment, you create a level of environment to a novelty that lets your brain think in a different way.
Rob: That makes sense. It’s taking two days away from the spouse and the kids or just your everyday life, head somewhere. We used to go to the beach. We had the beach apartment and we go there all the time. But other folks I know would go to the mountains, go to the desert, and really just hold yourself up. If I recall, I didn’t even bring a laptop most times. I had my phone in case there was an emergency and I need to check email or something, but I would bring the black notebook with a pen and just start with those questions. Typically, a bunch of stuff fell out right out of that because it was like, “What do I wanna do this year?” Some years it was like well, it’s a year where I’m either acquiring something, I’m going to build something, I’m going to tool around until I find something, or it was a growth year.
It was like whoa, just a second, you’re at Drip. I know I’m not stopping doing that, so how do I wanna get to where it needs to go? How am I gonna do that? Sometimes, it was more about the business. Sometimes, I would have the personal side of thinking about me. Oftentimes, honestly, it was a combination of both.
Sherry: It’s just time to ask those big questions like how am I doing? Am I happy in this life that I’ve constructed for myself? If not, what do I need to do? Those are not those big existential questions, we can’t do that on a day-to-day. We’re busy driving people and answering email and doing the business of our life. We need to step aside to be able to really have insight into those big questions
Rob: The thing is when I would go on a retreat, most of the first day was towards just leaving everyday life behind. It wasn’t typically until late in that day or maybe it was the next day where I would start to have a little bit of clarity about things because it’s like the rest of life went away and left all this room for deep thought, a state you don’t get into everyday, hectic lives of running businesses.
You obviously go into more depth on that in the book. The book is out in the next couple of weeks, as soon as printing is finalized. You cover a lot of other stuff about understanding where you came from, optimize where you’re going, battling the haters in your head, mastering disruption, getting things done when things aren’t getting done and staying connected.
Folks can go to www.zenfounder.com/book anytime to sign up for the launch list. I think the book’s gonna have impact on a lot of people. We really are selling it as a book. It’s gonna be, what, $25? I don’t know if we have the final price, but it’s gonna be $20-$30 bucks. It’s not gonna be some info product where we have all the whiz-bang and it’s hundreds of dollars, this is something that we want to get out to as many people as possible. It’s gonna be a no-brainer for so many of the founders who struggle with this stuff or potentially will in the future and just need a toolbox or just one more piece of knowledge for people to keep it together while doing this pretty stressful thing.
Sherry: Somebody asked me who the book was for. Obviously, it’s a really good marketing question. It’s for humans. It’s for humans who have jobs and are doing things. Obviously, it is geared towards people who are founding something and running their own business. So many of us are looking for strategies to help manage stress and the challenges of our everyday life.
Rob: Yeah, for sure. That’s www.zenfounder.com/book. You also do one-on-one consulting with founders and entrepreneurs, wanna talk a bit about that?
Sherry: I do. That’s one of the things that I have just found to be so rewarding over the last few years is to be a resource for folks who are trying to do some of this how do I get to know myself, how do I become more self- reflective, how do I answer big questions about my life, how do I make decisions when decisions are hard to make? I’m a sounding board, a sounding board with a lot of experience and trained ears to hear potentially problematic thoughts and to spot blind spots and patterns that are counterproductive. I try to come alongside people and help them be as awesome as they can be in their businesses and in their lives.
Rob: It’s totally confidential and that’s something that you’re very good at so I have no knowledge of who you talk to but I do know that you have co-founder disputes that you moderate, you help folks who forgot how to communicate better with their spouse or their family. You’ve consulted founders on how to deal with either a problem employee or a manager to get through struggles with, that kind of stuff. Folks considering selling their company, they’re getting an offer and they don’t know if it’s the right decision. You’re that sounding board where it’s a little bit about advice, but it’s a lot about getting someone to think what is the right answer for them, or just leading them to the right answer when it’s a hard decision and it’s not super clear and someone really needs to dig deep and to think to think about a lot of factors in order to make the decision
Sherry: It’s a lot about asking the right questions and listening really well.
Rob: Yeah, and it can be super helpful to have someone to just think through decisions now and again. I think that wraps us up for today. Folks who want to get a hold of you, www.zenfounder.com is your home online.
Sherry: It is. If people are interested in my professional background, I also have a presence at www.sherrywallling.com.
Rob: If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 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 a full transcript of each episode. Thanks for listening, we’ll see you next time.
Episode 376 | SaaS Revenue Patterns, Increasing Annual Renewals, and More Listener Questions
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions on topics including SaaS revenue patterns, annual renewals, and choosing a tech stack.
Items mentioned in this episode:
Rob: In this episode of the Startups For The Rest Of Us, Mike and I talk about SaaS revenue patterns, increasing annual renewals and answer more listener questions. This is Startups For The Rest Of Us episode 376.
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: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What is the word this week, sir?
Mike: There’s no word this week but next week I will be headed to BIG SNOW Tiny Conf East. Spending a couple of days up there. There’s about a dozen people or so that go up each year and just hang out and hit the slopes every day and then talk business in the evening. That’s definitely a good time, and I’m really looking forward to it. It’s been a while since I’ve been skiing.
Rob: Yeah. You go there every year, you just come away with a lot of motivation and a lot of good ideas. It seems to really, really work for you. I’m glad that you’re able to go back again this year.
Mike: Yeah. I definitely need the time away from my computer, to be honest at this point. I’ve been heads down for the past several months straight. Haven’t really had any time to come up to breathe.
Rob: It’s always good to get away whether it’s to go on a retreat, or to do something like this. I think it’s a good call, man. I actually wish I could go this year. I won’t be able to, obviously, it’s sold out and stuff but I don’t ski, so I would show up to drink hot cocoa, and I don’t know what I’d do, watch movies or something, just snow shoe or something. I do think it’d be a lot of fun to go to one of them. At one point there were three each year, but I don’t know if there’s a Europe one this year, I think it might be just East and West?
Mike: Yes, just East and West this year. I think the Europe one, they couldn’t get enough people committed to going. There was interest but just nobody stepped up and said, “Hey, we’re definitely in.”
Rob: Yeah, that makes sense. Cool. Hey, we got a note from a listener. His name is Francois Lagier. He says, “I just wanted to reach out and say thank you. Rob and Mike, I’m a co-founder of a new SaaS company called cloudforecast.io. I wanted to reach out and say thank you for a few things.” He has a bulleted list of thanks, which is cool to get this detailed stuff.
“First, thank you for all the good content in Startups For The Rest Of Us. I recently started listening to your podcast, and I’ve been searching the archive for any episodes mentioning the word “SaaS”. As a new entrepreneur, I’m learning so much. Second, you mentioned Perfect Audience many times for your retargeting strategy. Both my co-founders and I were part of the early [00:02:35] of Perfect Audience.” Interesting. “And we are very proud of our work there. Thank you for putting a smile on my face every time you mention it.”
I’ve been a fan of Perfect Audience for a long time and Brad, one of the founders, I’ve spoken with him on the phone several times. In fact, I called him, he was one of the founders that I called during the Drip acquisition because he’s gone through an acquisition. I just wanted to get his sense of dos and don’ts and how it went there. I always appreciate being able to talk to him.
And then back to Francois’s email. “Third, I listened to episode 319 a few days ago and Rob literally mentioned the problem we are trying to solve.” He quotes me, and I say, I had a counter reminder every two weeks. It would ping us and it would say, “Check AWS spelling.” “Thank you for confirming that our idea is not completely crazy, since cloudforecast.io is a daily email report that breaks down your forecasted AWS spending by products tags and regions allowing you to understand where your money’s going. Once again, thank you for everything, have a great week.”
Mike: That’s awesome. Thanks, Francos. I really appreciate the email. It’s very interesting looking at the report that he had sent over as well. Just seen the forecast of the cloud computing spend. It’s interesting seeing it broken down like this. I don’t have nearly the expenses that are shown here. I don’t have to worry about it as much, but I can definitely see how large our installations using cloud services would definitely find that appealing.
Rob: Yeah. Thanks for the email, Francois. I really appreciate it. What else is going on with you? What’s the update on Bluetick?
Mike: I’m working on a couple of minor bugs but right now I’m trying to close out the final testing process for deploying the latest release I’ve been working on. I’m hoping that that will go up by the end of today. It’s basically a series of major improvements to test ability, and test coverage, and then overall resilience of the app in different error conditions and performance scalability, etc. The big thing is that it makes it easier and safer for me to make a bunch of updates moving forward just because the increased test coverage makes it obviously less prone to error. When things go wrong, I’ll be able to see them before it hits the production server because there are certain sections of the app that were critical to the entire thing running and being able to send out the emails and recognize when replies came in.
I won’t say that they were completely hacked together, but there was a lot of code in there that handled specific edge cases that needed to be separated out a little bit, I’ll say. Just the refactoring will make it easier to make changes in a way that does not terrify me to do so.
Rob: Yeah, it’s such a luxury. I say it’s a luxury, it’s now a must have. I think I’ve said this before, never again will I run an app that does not have full test coverage. That’s cool. Did that take you a few weeks?
Mike: Yeah, it’s taken me probably four or five weeks at this point. There were a couple places where I thought it was done a few weeks ago and then ran into a couple of issues. I have one entire section of the app completely taken care of and then I didn’t realize that there was implications of the changes that I made over in the job scheduler. I had to basically refactor a lot of that code as well. Of course, once you do that, then you got to go through all the tests. But in doing so, I’ve realized that it made things a lot easier to write a suite of tests. I was able to do that and I basically doubled the number of unit tests that are in the app based on this set of changes.
Rob: That’s cool. Time well spent, I think. It’s one of those trade-offs of you’re trying to move fast so you don’t write the test and then it will eventually come back to bite you. It tends to come back in delayed features later on, or decreased feature velocity because you start pricking things or a lot of bugs, quality, that’s my experience with test is that they had that 20%, 25% upfront. But with Drip, have been able to continue moving at a pace that a lot of apps that are 5 years old are not, it’s because of that. Derek and I have commented many times that having a software company with no technical founders is a tough way to go. I bring this up because I’ve seen several companies do it. Unless you find that contractor or the salary employee number one who is just really hell bent on writing the test, it’s easy to just push that aside and I think it’s still a detriment of a lot of software companies that are trying to do it.
Mike: Yeah. It’s definitely a tough position to be in. I can’t stress, the unit test side of things, it’s always a trade-off because you want to move faster but if you don’t take the time to write those tests and have them in place, then later on you’ll get to a point where things are breaking left and right and you have no choice but to stop and go back and in some way shape or form, put them in place because otherwise, you really can’t make any progress forward. There’s always that balancing act between how quickly you’re moving versus how many tests you’re implementing.
Rob: For sure. Let’s dive into our listener questions today. The first one is about SaaS revenue patterns. It’s from Basil Abbas from clockit.io. And he says, “Hey, Mike and Rob. Huge fan of your show, and I’ve been religiously following it for two years. It has provided ton of value in each episode and helped us launch our SaaS app to $2,500 in MRR in the first year. In year one of the operation, I’ve noticed there are some patterns to how the MRR grows month to month. For example, in the month of January, February, and March, we are growing at roughly 30% or 40% and then we failed to 15% to 20% for the rest of the year. November was a fantastic month with 40% growth until Thanksgiving and now we have 0% growth in December. We also noticed that one week before and after major holidays in the US, our growth flat lines, but it picks up after. In your experience, have you come across such patterns?”
Mike: I think in B2B SaaS, yes. I’ve definitely seen this with Bluetick lately where in December things are more or less flatlined and that was probably due to a combination of things, mostly me stepping away from the marketing but I’ve heard from various other founders that the same kind of thing tends to happen to them as well. Rob, I think you commented on this in the past where you just take December off because it’s not really worth doing anything except preparation for January and February. I have seen things dip in the summer months as well, and then they pick up after the summer.
In terms of B2C stuff, I don’t know. I would imagine in December, you can probably count on some sort of a revenue bump because you’re going into the holiday season, you can get people to buy stuff for either as gifts or gifts for themselves, to be honest. Definitely done that with my book as well. That’s what I’ve seen. Rob, what about you?
Rob: Yeah. I definitely have seen patterns. The pattern you mentioned is odd. He says the first three months of the year, they grew a ton, and then half that rate for the rest of the year. Obviously it’s going to depend on the app. I remember when I had a [00:09:20] jobs, which is a job board, tons of traffic on Sunday evening because everyone was dreading going to work the next day. Or they didn’t have a job and they pissed away a weekend and they were scrambling thinking like, “I really need to gear up in this.” It’s this fascinating pattern of that.
With just straight ahead SaaS, when I think about HitTail and Drip, I remember it was either April and May were always sketchy. I attributed it to being tax time here in the US. December was always a train wreck, flat at best. Sometimes you’d lose customers. Other than that though, all the rest of the months were pretty similar, and I don’t remember there being anything, any kind of summer slowdown. I don’t know. There are definitely some patterns but I think that you want to look once you have two or three years, you can really see more of a recurring pattern to find out. Because some months would just be slower but it wasn’t year to year that it was the same, it’s just randomness. These things can be somewhat random.
Basil had a second question and I’m going to rephrase it slightly because if I read exactly what he says, folks will be confused but he says, could you also touch on if it’s okay to consider a 5% weekly MRR growth rate? Should I think about this as percentage or should I think about it more as like a dollar amount? I think is really what he’s getting at. Because if you think about it, let’s say you’re doing $5,000 MRR and 5% weekly growth rate would you put at $250 each week. Do you think of we wanna grow by percentage each week or we’re going to continue to grow by percentage each week or are we going to grow by $250 each week, so that when you hit $10,000 you’re actually now growing at 2 1/2% a week.
The way I think about this, and there’s a few ways to think about this. I think that what you have in place today will continue to add the dollar amounts. Let’s say you have a bunch of existing traffic from SEO or you’re doing Outbound or you’re doing paid ads or whatever, that is going to continue to give you a dollar amount in general and not a percentage. As your revenue goes up, you’re not going to necessarily see that you’re going to keep up with the percentage growth. If you want to keep growing at 5% week over week, you have to either increase those traffic channels or you have to add new ones to keep it at 5%. If you think about it, if you go to $20,000 or $30,000 growing at 5% week over week is really, really hard whereas if you’re at $2,000, growing 5% is not that much. You’re just adding a small trickle of revenue.
Mike: I was going to point it out. It depends on what you’re total amount is right now, because going from 5 customers to 10 is a lot easier than going from a 1000 customers to 10,000. The amount of time that it takes is going to make a big difference based on how many customers you currently have.
Rob: For sure. I do like to think about it in percentages because it’s more aggressive. But realize if you do just have linear traffic coming in, linear conversion rate all the same, it’s that dollar amount is what’s going to stay. There’s another factor that comes into this, it’s the bigger you get, the more churn hurts. Because you’ll plateau eventually. When you have 1000 or 10,000 customers, a 5% churn rate is a hell of a lot of people that you have to replace. When you only have 20 customers, 5% churn rate is 1 person. You got to think about all this. As you scale, you do come into new problems to continue to grow.
Alright, our next question is about annual renewals and how to encourage more of them. It’s from [Gareth Helsall 00:12:59] from driverguardian.co.uk. He says, “Hope you’re doing well. I get a ton of value from the podcast. Thanks for the output. Our business is not SaaS, but I would love your input. We have an annual product that our members pay for once a year. At the minute we send three renewal email reminders. One month before, one week before, and three days before. We also send a letter that is designed to arrive after the last email. We’re considering sending text messages that go out before the letter as it would save on postage cost if we could get a response. I would appreciate any input or discussion on about what you think, [00:13:33] for renewal should be for a single time annual recurring payments products.” What do you think?
Mike: If anyone who’s not at a computer is not familiar with driverguardian.co.uk. Essentially, looks a lot like AAA here in the US where you get this membership and provide you various discounts for just showing your AAA card, but at the same time, it also give you coverage if you ran out of gas or if your car breaks down or you blow a tire or something along those lines. There you can call AAA and they’ll come and they will help you out. They’ll send you a tow truck, it’s kind of like having insurance to the point that if your car breaks down, they’ll come help you and you don’t have to pay the emergency towing rates at that time whenever that happens.
I have my own AAA membership, and what they do is they just automatically bill me at that point. They have my credit card on file and they don’t even really ask for renewal. It’s just your honest automatic renewal. That works obviously if your credit card is not expired, but even if it is, depending on what company you have that is doing your credit card processing, it may still work after the fact. If for example, Stripe I know in certain situations, if a credit card expires, it will still bill properly even though the credit card itself is expired. That’s something you might want to take a look at.
The other things is AAA does send a letter in the mail that basically says, hey here is all the information. But again, they already bill me for it and I don’t actually have to pay that invoice. It just automatically gets paid anyway. I feel it’s just a reminder that hey, we’re about to bill you for this. I think that sending out those renewal email reminders is helpful, but definitely taking a look at sending them physical letters is probably a good strategy to go after. Just because you’re putting something physical in front of them and if it’s not going to the right place it may very well be returned or it will get forwarded over versus email. Email delivery can be hit and miss, I’ll say. Especially depending on how many emails you’re sending them on a regular basis anyway. That’s the big question I would raise at this point is how many emails are you sending them throughout the course of the year to begin with and do you know that you’re getting into their mailboxes.
Rob: Yeah. I think the approach I would take or I know the approach I would take is what you said with AAA. As a customer, the fact that I set it up once and they notify me, they’re like, “Hey! We’re going to rebill you in a month.” I don’t have to go log in or click any buttons or anything, it’s just done and it’s always there. I would move the whole business model to automatically renew every year and you’re very upfront about this, when they sign up, “Hey. This will renew automatically.” Maybe it’s a checkbox that’s checked by default. “Hey, do you want us to bill you each year?” And some people will uncheck it, and then you have a different thing if that makes you feel more comfortable.
Personally, I would just say this auto renews every year. That’s the point, and you can easily cancel it with one click and we’re going to notify you multiple times before we do it, and then do the parts that you mentioned, which is these three emails but instead of saying, “Hey, renew.” It should say, “Hey, we’re going to bill you and it’s this much. Just click right here if you want to make any changes to this. If you want to opt out, we won’t bill you.” I do love the idea of SMS as well. I think that if postage costs are a killer, then you could send SMS and avoid sending letter altogether.
I think moving towards an opt out model is the way I would go with this and then still notify the people to make sure that they do receive the stuff.
Mike: I did notice on their site they have one of the selling points is that it says “no auto renewal” and it actually puts you in a tough spot because of this side of it. I don’t know whether that’s because specifically laws over in the UK or in Europe that say that you can’t do that or if it’s just something that you guys came up with that you want to pitch to people because you were tired of being auto billed for stuff that you didn’t really want or need.
But really, I view it almost like the donor cards here in the US where it’s statistically proven that if you have a opt out model versus an opt in model, you’re opt out rate is going to be substantially lower than if you reverse it. People will basically just choose the path of least resistance and they’re not going to bother to go through that actual work in order to opt out but the reverse is true as well.
Rob: I would bet that if they pull the “does not auto renew” off the marketing site, there would be almost zero impact to their conversion rate. Unless this is some big competitive advantage and I don’t feel like it is, I think that that shouldn’t impact most things especially if you really want to do it and give people the option.
Obviously, going backwards, if you have 5000 existing customers, you’re going to grandfather them into what you do now. But I would consider, to be honest, adding in this as a feature and emailing everybody and saying, “Hey, we’ve set up this thing for your convenience. By popular request.” I’m sure someone has requested this at some point. Because I use services, when they don’t auto renew me, and I say, why didn’t you bill this? I actually don’t want to have to go in and re-enter my credit card every 6 months or every 12 months. Certainly, someone has requested at some point. Bill it and see how many existing customers you can get on auto renew and go from there. I’ll bet it’ll have an impact on your bottom line for sure.
Alright, our next question is from Ovi Negrean. His company is socialbee.io. It says, “Hey guys. In a recent episode, you talked about how there are not as many productized services that have been turned into SaaS as you thought. As another data point, socialbee.io has also started with a large service component and I wrote why it’s good to start with a service first in Medium,” and we’ll include that link. “I think it’s indeed an under utilized technique they can turn more wanna-preneurs and entrepreneurs.” There we go, Mike, anther data point.
I think I was the one who made that comment and I still think it’s a lot fewer productized services to SaaS have been done as I think perhaps should be done. I still see so many people shooting for the fences. I also think far few people use this stair step approach too. These are both lower risk, more repeatable, higher chance of success. These are approaches that do that for you and I still think that it’s not as popular as it probably should be.
Mike: This is one of my 2017 predictions. We covered this in the Predictions Episode back in episode 370. The comment I had made was that I didn’t have very many data points. I felt like the bar for launching the SaaS was going to continue to become harder to reach but startups who were going to go the route of offering a service as a first based approach followed by implementing SaaS was going to become more prevalent. I didn’t see a lot of data points is really the problem. We really appreciate you sending that in.
Rob: Our next email is from Calvin. It’s about choosing your text stack. He says, “Hey guys, I’m not a software developer, I’m more of a marketer, but my question is this: As a non technical founder, how do you choose what type of code to build your app on?” He’s asking about the text stack. “I’m trying to build a rank tracker.” What do you think, Mike?
Mike: It’s so heavily dependent on what it is that you’re trying to do. It’s hard to just give a general answer for that. You really need to have somebody who has that technical background to be able to make the decisions because depending on what you’re building, certain types of technical decisions can back you into a corner that’s really hard to get out of or the entire thing could end up falling down at some point because it just can’t scale or do the types of things that you need it to do.
A rank tracker is probably one of those things where you need to choose the right technology because if you don’t, it’s not going to scale the way that you need it too and you’re not going to be able to create things in a distributed manner or spread out the jobs and the spidering that needs to go with it on order to be able to do what you need to do.
The other thing to consider especially in this particular case is that if you are scraping websites in order to do any sort of a rank tracker, you have to be a little bit careful because you can get banned from them. I know of at least two people who had to deal with issues where their scraping techniques were noticed and their app was essentially banned from those websites. They looked at it as, oh, you’re basically DDOS-ing our site. It’s like, oh no, I’m spidering it but they don’t see it that way. If your entire business rests on doing that, then it’s significant risk if that vendor or that company decides to take action to prevent you from doing it.
I ran into this 12-15 years ago with McAfee. I was scraping their website using a Perl Script and then they kept changing things around on their websites so it made it difficult to find what the anti-virus definition numbers were. Because that was what I was trying to pull. They kept changing things around and eventually I wrote a script that would pull it down and it would parse it in five different ways and try and get to what the ID was because they just kept changing the HTML and I noticed that they were alternating it between them. I just figured I do that.
This is a hard question to answer just because it depends so heavily on what it is that you’re building.
Rob: I like the points you brought up. I think that building a rank tracker has some dangers to it. I don’t think you shouldn’t do it because of that but know that there are substantial risks. A rank tracker, this is not for search engines you mentioned specifically. It’s a rank tracker for another ecosystem and it’s going to almost always be against the terms of service. If you do it, you’re going to have to do it on the down low like Mike said. It’s going to be a part of your process that A) rank trackers are brutal because anytime the UI changes, it’s going to break everything and so you’re going to have a fire drill. Know that going in. So you’re going to want to developer who doesn’t have a 1-2 week delay to get back to you. You’re going to want someone who’s able to hop on things.
Second thing is you will likely need to get a bunch of cheap servers with different IPs because at any given time, some of them are going to get blacklisted just like you said, Mike. You can’t do this at scale without that. The people I know who have built these had to do these massive server farms and at any given time, all running the same code at any given time like 20% of them were banned and blacklisted and they would cycle them through. That will be an operational thing that you will perpetually have.
Again, I’m not saying don’t do this but to think about that up front. His question is how do you decide on what language to use and the way you do that is you learn about the language and which are good at different things. Like Python and Perl are really good at scraping. I would probably use Python in this case. His question wasn’t what technology should he use but that’s probably what I would do. I would look for a Python Django developer and build your scraper and build your web front and all in Python.
But the broader question is if you’re not building a rank tracker, and you’re building a different type of SaaS, what languages should someone consider? These days, I would say Ruby on Rails, Python Django. Those are probably one of the two, those are common, you’re going to be able to find developers. If you ever wanted to sell, they’re not languages that people shun. When I had HitTail in Classic ASP, someone was asking if they could buy it. As soon as I told them it was in Classic ASP, they said they had no interest in it so that they would have to rewrite the whole thing. We eventually rewrote it on Ruby on Rails and it was much more sellable.
.NET and Java also can be looked at that in the startups space. They’re not as appealing because the .NET and Java developers, they’re more enterprisey and it’s not as easy to find startup developers who are going to be into that. It’s going to be easier with these other ecosystems. Now, there are other languages that are up and coming. I think if you really wanted to get ahead of the curve, there’s Elm, Elixir and Phoenix. I think those are going to perhaps pull some market share in terms of startups being built. Those are going to slowly pull market share from Ruby and or Python. This comes from conversations with Derrick, he’s my co-founder at Drip, and then other developers that I’m hearing talking about these things. People are really excited about them and are looking for jobs in them and they’re not that widely available.
If I was a non technical founder, I don’t think I would branch into that because it is too new still, and I’ll probably go with something more tried and true.
Mike: Yeah. The big question there is are the problems that you are likely to run into things that have been solved before and with bleeding edge products or technologies or text stacks, sometimes you’re just blazing new ground yourself and there is no solutions or resources out there and you basically have to do a lot of research and development to solve particular types of problems versus with established products like Ruby on Rails, it makes it easier for you to find a common solution to a common problem.
Rob: One other stack you could consider is PHP. There are obviously a lot of apps built in that and ones that scale as well, I’m pretty sure Facebook is built in PHP. Obviously, WordPress, which scales pretty well. But it is, in my experience of these three languages I’m recommending actually, PHP is the only one I know and it can be a complete cluster. I think I would seek more towards the Python, Ruby part of things. If PHP well written and well structured is a perfectly acceptable web language but there’s so much of it that is not, it’s easy to hang yourself.
Alright, let’s go to our next email. It’s about corporate structures and trademarks from Dylan DiMartino. He says, “Hey guys, two quick questions I’d like your opinion on. Number one, I have a consulting company incorporated in the state of Louisiana but I want to start a SaaS with it’s own name. Would you suggest simply creating it under the umbrella of my current corp or should I start a separate entity? I notice a lot of the big apps share the same name as their parent company, Uber and Snapchat. Is this standard practice? Is it worth it? Does it make marketing easier?”
I think there are two aspects to that. One is does it matter that the product name and the corporation match from a marketing perspective? And then the second thing I think of course is the liability. Do you lump it in with consulting, then those assets are unprotected. What do you think, Mike?
Mike: This is interesting question to me mainly because I’m going through it right now where I am spending off Bluetick into its own separate corporate entity. Having just recently talked to both my CPA and my attorney, I’m spinning it off into its own separate LLC. The question I’m going through right now is does it really matter whether or not the app itself is the same name as the company and I’ve decided that no, it really does matter because the app is the front end facing. I will be likely going with a company name that is different than the product.
I do that because I don’t think that it makes any difference at all to the end user but couple things you do have to keep in mind is that when you’re putting things into terms and conditions and privacy policy and stuff like that, the company name is what’s going to have to be listed there along with the product name.
The reason I decided against going with product name as the company name is one, there’s already a company out there called Bluetick Incorporated or something like that, Bluetick Outfitters, something along those lines. But bluetick.com and bluetickinc.com are both taken so I didn’t want to run in any sort of trademark infringement problems with that and because it’s a software app and I think that was in the petroleum industry or something like that, it’s different enough that I can call the app that, and it’s not a big deal but calling the company Bluetick would probably be an issue. I’m going to go with something different. I haven’t decided on what yet, I could do that in the next couple of days and then just make sure that you keep in mind all the stuff associated with places where the customer is actually going to see the company name. That’s the big thing to keep in mind. Because you don’t want the company name to be so nonsensical or off the wall that if they read it or happen to glance at it, they don’t look at it and say, “Wait a second, why am I getting this email?” Especially if down the road, the company gets acquired or you sell it or something along those lines.
That leads to the second piece of this which is should you put it underneath your current corporation or spin it off as a separate entity. I decided to spin it off as a separate one just to keep all the books separate so that if later on I do decide to sell it, or if I do any sort of fund raising or anything like that, I want to have the books, at least reasonably decent, from a very early stage as opposed to trying to separate it out much later. I’m past the point where I feel like I needed to do validation because I probably wouldn’t build a product and go incorporate and do all the things that are “necessary” things that you’re supposed to do until after you’ve gotten to the point where you have revenue coming in the door and you know that it’s going to be something that it would be worth spinning it off into its own entity.
Before that you can easily end up in a situation where you get to five to eight customers and then you have to shut it down because it’s just not making enough money. At that point it costs you more to spin up the company and then shut it down than it did for the amount of money that you gather from customers.
Rob: Yeah. I think that’s a good perspective. I think in a perfect world, the corp would match the product name but I don’t think it really matters that much honestly because the only confusion I can imagine is the credit cards. When you get a credit card statement and it’s going to have corp name typically and not the product name, that’s the time where you may get confusion. I’ve seen folks set up their corp.com and all it is is a page that says confused about a charge from us? You probably use one of our apps, and then it has a few of them. I really don’t think it’s that big of a deal from a branding perspective.
One thing to think about is the liability, well, two things, one is liability. If you mix your consulting firm with a product, if one of them were to get sued or something then they are both in the same bucket and there’s no firewall between them. You have to use your judgment as to how big of a concern that is for you. For me, when I had a bunch of products, they were all under the newer group umbrella and that name didn’t match any of the products. That was never an issue for me and I wasn’t concerned about the liability so it’s a bunch of small products that really weren’t likely to have a lawsuit come in. Again, it’s risk tolerance there.
And then the other aspect of it is if you ever want to sell it, if you just sell the technology, that’s one thing but if it ever gets acquired and people really want the financials broken out and if it’s a startup acquisition, strategic, like we did with Drip, they bought all the assets in the company, it would’ve been a disaster. It would’ve been a disaster if Drip was still under the group. I spun it out maybe a year before the acquisition because it was just growing so much that I knew it needed to be its own company. At that point, I started realizing we’re probably between $30,000 and $50,000 MRR. I would hate for liability of Drip or of the group to spill into one another and then there needs to be a firewall.
The process of ripping that out was a pain in the butt. It took several months and I paid a lawyer several thousand dollars to write up all the paperwork and try to make sure everything was transferred. I had to set up separate payroll. The group had to let go all of us, had to fire the employees and then hire them, through Drip. It was pretty crazy. I had two Gusto accounts, two different corporate credit cards, two bank accounts, two stripe accounts, too many things is what it was. But it was the right call. You got to think about that. If you’re just plugging away and starting something you think you’d get to a few grand and hope to eventually sell it, personally, I’ll probably just throw it under the same corporation assuming that you judged the liability and how much risk you’re willing to take on.
Like Mike said, setting up the entire other entity and then never getting the product off the ground, or never getting it past of couple grand in revenue, it is a lot of expense, you don’t think there’s that much expense but there is setting up upfront, if you’re on a state with an annual fee like California charges $800 a year just to have a corporation there and then you need separate software for the books, and then the CPA is going to have to file separate tax return. That’s an extra cost. There’s a lot to think about there, but I do think you’re thinking about it right.
And then his second question was, “Is it worth going through any steps for the legal protection during your early development stages? Specifically a trademark on your app name.” What do you think about that?
Mike: I don’t think so. If you’re not making any money from it, it probably doesn’t make a difference. It’s funny I did recently see this lawsuit of a company called TWiT versus Twitter.
Rob: Yes. TWiT is This Week in Tech, it’s Leo Laporte’s company.
Mike: Yeah, something along those lines. I think that previously they had taken the standpoint oh this is just a couple of techies in the garage building this app on the side for some sort of social things, it’s not a big deal. Now it’s suddenly a big deal.
Rob: TWiT is a podcasting network in essence, video and audio, and they’re located Northern California. Leo Laporte has long time been basically a tech newscaster for decades. He has his network, and maybe 30 shows in there, few dozen employees, and they have a studio up there North of San Francisco. As these guys were coming up, he has the trademark and the stuff for TWiT, and I don’t know if he has Twitter or not but he certainly has things that I think that early on he and Evan Williams had talked. He has some type of written agreement but it’s not super ironclad, and then he definitely had verbal agreements he has talked about on the show before that hey as long as they stay out of streaming audio and video, that we’re in separate areas, but Twitter’s now getting into that.
For Twitter, you know what they’re going to do? They’re going to settle, right? They’ll pay him some money. I think, I don’t know. They’re big enough, they’re a public company. It’s not that they’re doing great but this type of thing is not catastrophic at their scale. These lawsuits are things that you just throw some lawyers on it and then eventually you settle in and you pay someone $5 million or $10 million and it goes away.
Mike: The point is that they got the app to that point without having had all that stuff. And yes, it’s going to cost them, as you said, maybe it’s $5 million or $10 million which sounds like a heck of a lot of money but how much does Twitter pull in in a year. At the end of the day, it’s not really that big a deal to them to have not have that trademark from day one, or have registered it, or have gone with a different one. It’s really just like you’re trying to solve for a problem that you don’t have and you may never have. Because I don’t think that most of us are going to be in a position where we have a business as large as Twitter and are defending against the trademark because we never filed it or we never acquired it very early on in the startup.
Rob: Right. I think I have mixed feelings about this one. Filing a trademark is a couple hundred bucks. It’s not very expensive, it’s not like a patent. Software patents are $15,000-$30,000 if you file one. Whereas a trademark is inexpensive, and it’s fairly easy to do. You can go to LegalZoom or there’s a bunch of services that do this, and it’s pretty straightforward. Now if you do it and you get rejected, then you have to go and justify and do all this stuff.
I’ve only filed for one trademark. Of all the apps and all the stuff that I’ve done, and it was for Drip and I got rejected the first round. I was like, “Oh, good grief.” I don’t know. I wouldn’t say don’t do it, I do think that if you don’t have an app yet, it’s probably jumping the gun. But it isn’t that much time or money to do it. You just got to weigh it out. I don’t know if there’s a right or wrong one here, right or wrong answer.
Mike: I think it depends on how much money you are actually making from it. Because if you haven’t made a dime from it, probably not worth filing the trademark but when you get to the point where you’ve made maybe $1,000 or $2,000, at that point you might consider it once you’ve made $10,000, $20,000, $30,000 maybe really consider it. You can always push it off too because you could file it based on prior usage. There’s that as well. I think with the Twitter issue, Twitter didn’t do it first, it was the TWiT Company. They didn’t file for a trademark until it was a year after Twitter was founded but they had been previously using it. I think that’s why they have that trademark.
Rob: Yeah, you’re probably right. If you haven’t made any money from it, you probably shouldn’t file it but there’s a resonance thing there but I hear you. Cool. I think that wraps us up for the day.
Mike: Yup, I think so too. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 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 a full transcript of each episode. Thanks for listening and we’ll see you next time.
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: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What is the word this week, sir?
Mike: There’s no word this week but next week I will be headed to BIG SNOW Tiny Conf East. Spending a couple of days up there. There’s about a dozen people or so that go up each year and just hang out and hit the slopes every day and then talk business in the evening. That’s definitely a good time, and I’m really looking forward to it. It’s been a while since I’ve been skiing.
Rob: Yeah. You go there every year, you just come away with a lot of motivation and a lot of good ideas. It seems to really, really work for you. I’m glad that you’re able to go back again this year.
Mike: Yeah. I definitely need the time away from my computer, to be honest at this point. I’ve been heads down for the past several months straight. Haven’t really had any time to come up to breathe.
Rob: It’s always good to get away whether it’s to go on a retreat, or to do something like this. I think it’s a good call, man. I actually wish I could go this year. I won’t be able to, obviously, it’s sold out and stuff but I don’t ski, so I would show up to drink hot cocoa, and I don’t know what I’d do, watch movies or something, just snow shoe or something. I do think it’d be a lot of fun to go to one of them. At one point there were three each year, but I don’t know if there’s a Europe one this year, I think it might be just East and West?
Mike: Yes, just East and West this year. I think the Europe one, they couldn’t get enough people committed to going. There was interest but just nobody stepped up and said, “Hey, we’re definitely in.”
Rob: Yeah, that makes sense. Cool. Hey, we got a note from a listener. His name is Francois Lagier. He says, “I just wanted to reach out and say thank you. Rob and Mike, I’m a co-founder of a new SaaS company called cloudforecast.io. I wanted to reach out and say thank you for a few things.” He has a bulleted list of thanks, which is cool to get this detailed stuff.
“First, thank you for all the good content in Startups For The Rest Of Us. I recently started listening to your podcast, and I’ve been searching the archive for any episodes mentioning the word “SaaS”. As a new entrepreneur, I’m learning so much. Second, you mentioned Perfect Audience many times for your retargeting strategy. Both my co-founders and I were part of the early [00:02:35] of Perfect Audience.” Interesting. “And we are very proud of our work there. Thank you for putting a smile on my face every time you mention it.”
I’ve been a fan of Perfect Audience for a long time and Brad, one of the founders, I’ve spoken with him on the phone several times. In fact, I called him, he was one of the founders that I called during the Drip acquisition because he’s gone through an acquisition. I just wanted to get his sense of dos and don’ts and how it went there. I always appreciate being able to talk to him.
And then back to Francois’s email. “Third, I listened to episode 319 a few days ago and Rob literally mentioned the problem we are trying to solve.” He quotes me, and I say, I had a counter reminder every two weeks. It would ping us and it would say, “Check AWS spelling.” “Thank you for confirming that our idea is not completely crazy, since cloudforecast.io is a daily email report that breaks down your forecasted AWS spending by products tags and regions allowing you to understand where your money’s going. Once again, thank you for everything, have a great week.”
Mike: That’s awesome. Thanks, Francos. I really appreciate the email. It’s very interesting looking at the report that he had sent over as well. Just seen the forecast of the cloud computing spend. It’s interesting seeing it broken down like this. I don’t have nearly the expenses that are shown here. I don’t have to worry about it as much, but I can definitely see how large our installations using cloud services would definitely find that appealing.
Rob: Yeah. Thanks for the email, Francois. I really appreciate it. What else is going on with you? What’s the update on Bluetick?
Mike: I’m working on a couple of minor bugs but right now I’m trying to close out the final testing process for deploying the latest release I’ve been working on. I’m hoping that that will go up by the end of today. It’s basically a series of major improvements to test ability, and test coverage, and then overall resilience of the app in different error conditions and performance scalability, etc. The big thing is that it makes it easier and safer for me to make a bunch of updates moving forward just because the increased test coverage makes it obviously less prone to error. When things go wrong, I’ll be able to see them before it hits the production server because there are certain sections of the app that were critical to the entire thing running and being able to send out the emails and recognize when replies came in.
I won’t say that they were completely hacked together, but there was a lot of code in there that handled specific edge cases that needed to be separated out a little bit, I’ll say. Just the refactoring will make it easier to make changes in a way that does not terrify me to do so.
Rob: Yeah, it’s such a luxury. I say it’s a luxury, it’s now a must have. I think I’ve said this before, never again will I run an app that does not have full test coverage. That’s cool. Did that take you a few weeks?
Mike: Yeah, it’s taken me probably four or five weeks at this point. There were a couple places where I thought it was done a few weeks ago and then ran into a couple of issues. I have one entire section of the app completely taken care of and then I didn’t realize that there was implications of the changes that I made over in the job scheduler. I had to basically refactor a lot of that code as well. Of course, once you do that, then you got to go through all the tests. But in doing so, I’ve realized that it made things a lot easier to write a suite of tests. I was able to do that and I basically doubled the number of unit tests that are in the app based on this set of changes.
Rob: That’s cool. Time well spent, I think. It’s one of those trade-offs of you’re trying to move fast so you don’t write the test and then it will eventually come back to bite you. It tends to come back in delayed features later on, or decreased feature velocity because you start pricking things or a lot of bugs, quality, that’s my experience with test is that they had that 20%, 25% upfront. But with Drip, have been able to continue moving at a pace that a lot of apps that are 5 years old are not, it’s because of that. Derek and I have commented many times that having a software company with no technical founders is a tough way to go. I bring this up because I’ve seen several companies do it. Unless you find that contractor or the salary employee number one who is just really hell bent on writing the test, it’s easy to just push that aside and I think it’s still a detriment of a lot of software companies that are trying to do it.
Mike: Yeah. It’s definitely a tough position to be in. I can’t stress, the unit test side of things, it’s always a trade-off because you want to move faster but if you don’t take the time to write those tests and have them in place, then later on you’ll get to a point where things are breaking left and right and you have no choice but to stop and go back and in some way shape or form, put them in place because otherwise, you really can’t make any progress forward. There’s always that balancing act between how quickly you’re moving versus how many tests you’re implementing.
Rob: For sure. Let’s dive into our listener questions today. The first one is about SaaS revenue patterns. It’s from Basil Abbas from clockit.io. And he says, “Hey, Mike and Rob. Huge fan of your show, and I’ve been religiously following it for two years. It has provided ton of value in each episode and helped us launch our SaaS app to $2,500 in MRR in the first year. In year one of the operation, I’ve noticed there are some patterns to how the MRR grows month to month. For example, in the month of January, February, and March, we are growing at roughly 30% or 40% and then we failed to 15% to 20% for the rest of the year. November was a fantastic month with 40% growth until Thanksgiving and now we have 0% growth in December. We also noticed that one week before and after major holidays in the US, our growth flat lines, but it picks up after. In your experience, have you come across such patterns?”
Mike: I think in B2B SaaS, yes. I’ve definitely seen this with Bluetick lately where in December things are more or less flatlined and that was probably due to a combination of things, mostly me stepping away from the marketing but I’ve heard from various other founders that the same kind of thing tends to happen to them as well. Rob, I think you commented on this in the past where you just take December off because it’s not really worth doing anything except preparation for January and February. I have seen things dip in the summer months as well, and then they pick up after the summer.
In terms of B2C stuff, I don’t know. I would imagine in December, you can probably count on some sort of a revenue bump because you’re going into the holiday season, you can get people to buy stuff for either as gifts or gifts for themselves, to be honest. Definitely done that with my book as well. That’s what I’ve seen. Rob, what about you?
Rob: Yeah. I definitely have seen patterns. The pattern you mentioned is odd. He says the first three months of the year, they grew a ton, and then half that rate for the rest of the year. Obviously it’s going to depend on the app. I remember when I had a [00:09:20] jobs, which is a job board, tons of traffic on Sunday evening because everyone was dreading going to work the next day. Or they didn’t have a job and they pissed away a weekend and they were scrambling thinking like, “I really need to gear up in this.” It’s this fascinating pattern of that.
With just straight ahead SaaS, when I think about HitTail and Drip, I remember it was either April and May were always sketchy. I attributed it to being tax time here in the US. December was always a train wreck, flat at best. Sometimes you’d lose customers. Other than that though, all the rest of the months were pretty similar, and I don’t remember there being anything, any kind of summer slowdown. I don’t know. There are definitely some patterns but I think that you want to look once you have two or three years, you can really see more of a recurring pattern to find out. Because some months would just be slower but it wasn’t year to year that it was the same, it’s just randomness. These things can be somewhat random.
Basil had a second question and I’m going to rephrase it slightly because if I read exactly what he says, folks will be confused but he says, could you also touch on if it’s okay to consider a 5% weekly MRR growth rate? Should I think about this as percentage or should I think about it more as like a dollar amount? I think is really what he’s getting at. Because if you think about it, let’s say you’re doing $5,000 MRR and 5% weekly growth rate would you put at $250 each week. Do you think of we wanna grow by percentage each week or we’re going to continue to grow by percentage each week or are we going to grow by $250 each week, so that when you hit $10,000 you’re actually now growing at 2 1/2% a week.
The way I think about this, and there’s a few ways to think about this. I think that what you have in place today will continue to add the dollar amounts. Let’s say you have a bunch of existing traffic from SEO or you’re doing Outbound or you’re doing paid ads or whatever, that is going to continue to give you a dollar amount in general and not a percentage. As your revenue goes up, you’re not going to necessarily see that you’re going to keep up with the percentage growth. If you want to keep growing at 5% week over week, you have to either increase those traffic channels or you have to add new ones to keep it at 5%. If you think about it, if you go to $20,000 or $30,000 growing at 5% week over week is really, really hard whereas if you’re at $2,000, growing 5% is not that much. You’re just adding a small trickle of revenue.
Mike: I was going to point it out. It depends on what you’re total amount is right now, because going from 5 customers to 10 is a lot easier than going from a 1000 customers to 10,000. The amount of time that it takes is going to make a big difference based on how many customers you currently have.
Rob: For sure. I do like to think about it in percentages because it’s more aggressive. But realize if you do just have linear traffic coming in, linear conversion rate all the same, it’s that dollar amount is what’s going to stay. There’s another factor that comes into this, it’s the bigger you get, the more churn hurts. Because you’ll plateau eventually. When you have 1000 or 10,000 customers, a 5% churn rate is a hell of a lot of people that you have to replace. When you only have 20 customers, 5% churn rate is 1 person. You got to think about all this. As you scale, you do come into new problems to continue to grow.
Alright, our next question is about annual renewals and how to encourage more of them. It’s from [Gareth Helsall 00:12:59] from driverguardian.co.uk. He says, “Hope you’re doing well. I get a ton of value from the podcast. Thanks for the output. Our business is not SaaS, but I would love your input. We have an annual product that our members pay for once a year. At the minute we send three renewal email reminders. One month before, one week before, and three days before. We also send a letter that is designed to arrive after the last email. We’re considering sending text messages that go out before the letter as it would save on postage cost if we could get a response. I would appreciate any input or discussion on about what you think, [00:13:33] for renewal should be for a single time annual recurring payments products.” What do you think?
Mike: If anyone who’s not at a computer is not familiar with driverguardian.co.uk. Essentially, looks a lot like AAA here in the US where you get this membership and provide you various discounts for just showing your AAA card, but at the same time, it also give you coverage if you ran out of gas or if your car breaks down or you blow a tire or something along those lines. There you can call AAA and they’ll come and they will help you out. They’ll send you a tow truck, it’s kind of like having insurance to the point that if your car breaks down, they’ll come help you and you don’t have to pay the emergency towing rates at that time whenever that happens.
I have my own AAA membership, and what they do is they just automatically bill me at that point. They have my credit card on file and they don’t even really ask for renewal. It’s just your honest automatic renewal. That works obviously if your credit card is not expired, but even if it is, depending on what company you have that is doing your credit card processing, it may still work after the fact. If for example, Stripe I know in certain situations, if a credit card expires, it will still bill properly even though the credit card itself is expired. That’s something you might want to take a look at.
The other things is AAA does send a letter in the mail that basically says, hey here is all the information. But again, they already bill me for it and I don’t actually have to pay that invoice. It just automatically gets paid anyway. I feel it’s just a reminder that hey, we’re about to bill you for this. I think that sending out those renewal email reminders is helpful, but definitely taking a look at sending them physical letters is probably a good strategy to go after. Just because you’re putting something physical in front of them and if it’s not going to the right place it may very well be returned or it will get forwarded over versus email. Email delivery can be hit and miss, I’ll say. Especially depending on how many emails you’re sending them on a regular basis anyway. That’s the big question I would raise at this point is how many emails are you sending them throughout the course of the year to begin with and do you know that you’re getting into their mailboxes.
Rob: Yeah. I think the approach I would take or I know the approach I would take is what you said with AAA. As a customer, the fact that I set it up once and they notify me, they’re like, “Hey! We’re going to rebill you in a month.” I don’t have to go log in or click any buttons or anything, it’s just done and it’s always there. I would move the whole business model to automatically renew every year and you’re very upfront about this, when they sign up, “Hey. This will renew automatically.” Maybe it’s a checkbox that’s checked by default. “Hey, do you want us to bill you each year?” And some people will uncheck it, and then you have a different thing if that makes you feel more comfortable.
Personally, I would just say this auto renews every year. That’s the point, and you can easily cancel it with one click and we’re going to notify you multiple times before we do it, and then do the parts that you mentioned, which is these three emails but instead of saying, “Hey, renew.” It should say, “Hey, we’re going to bill you and it’s this much. Just click right here if you want to make any changes to this. If you want to opt out, we won’t bill you.” I do love the idea of SMS as well. I think that if postage costs are a killer, then you could send SMS and avoid sending letter altogether.
I think moving towards an opt out model is the way I would go with this and then still notify the people to make sure that they do receive the stuff.
Mike: I did notice on their site they have one of the selling points is that it says “no auto renewal” and it actually puts you in a tough spot because of this side of it. I don’t know whether that’s because specifically laws over in the UK or in Europe that say that you can’t do that or if it’s just something that you guys came up with that you want to pitch to people because you were tired of being auto billed for stuff that you didn’t really want or need.
But really, I view it almost like the donor cards here in the US where it’s statistically proven that if you have a opt out model versus an opt in model, you’re opt out rate is going to be substantially lower than if you reverse it. People will basically just choose the path of least resistance and they’re not going to bother to go through that actual work in order to opt out but the reverse is true as well.
Rob: I would bet that if they pull the “does not auto renew” off the marketing site, there would be almost zero impact to their conversion rate. Unless this is some big competitive advantage and I don’t feel like it is, I think that that shouldn’t impact most things especially if you really want to do it and give people the option.
Obviously, going backwards, if you have 5000 existing customers, you’re going to grandfather them into what you do now. But I would consider, to be honest, adding in this as a feature and emailing everybody and saying, “Hey, we’ve set up this thing for your convenience. By popular request.” I’m sure someone has requested this at some point. Because I use services, when they don’t auto renew me, and I say, why didn’t you bill this? I actually don’t want to have to go in and re-enter my credit card every 6 months or every 12 months. Certainly, someone has requested at some point. Bill it and see how many existing customers you can get on auto renew and go from there. I’ll bet it’ll have an impact on your bottom line for sure.
Alright, our next question is from Ovi Negrean. His company is socialbee.io. It says, “Hey guys. In a recent episode, you talked about how there are not as many productized services that have been turned into SaaS as you thought. As another data point, socialbee.io has also started with a large service component and I wrote why it’s good to start with a service first in Medium,” and we’ll include that link. “I think it’s indeed an under utilized technique they can turn more wanna-preneurs and entrepreneurs.” There we go, Mike, anther data point.
I think I was the one who made that comment and I still think it’s a lot fewer productized services to SaaS have been done as I think perhaps should be done. I still see so many people shooting for the fences. I also think far few people use this stair step approach too. These are both lower risk, more repeatable, higher chance of success. These are approaches that do that for you and I still think that it’s not as popular as it probably should be.
Mike: This is one of my 2017 predictions. We covered this in the Predictions Episode back in episode 370. The comment I had made was that I didn’t have very many data points. I felt like the bar for launching the SaaS was going to continue to become harder to reach but startups who were going to go the route of offering a service as a first based approach followed by implementing SaaS was going to become more prevalent. I didn’t see a lot of data points is really the problem. We really appreciate you sending that in.
Rob: Our next email is from Calvin. It’s about choosing your text stack. He says, “Hey guys, I’m not a software developer, I’m more of a marketer, but my question is this: As a non technical founder, how do you choose what type of code to build your app on?” He’s asking about the text stack. “I’m trying to build a rank tracker.” What do you think, Mike?
Mike: It’s so heavily dependent on what it is that you’re trying to do. It’s hard to just give a general answer for that. You really need to have somebody who has that technical background to be able to make the decisions because depending on what you’re building, certain types of technical decisions can back you into a corner that’s really hard to get out of or the entire thing could end up falling down at some point because it just can’t scale or do the types of things that you need it to do.
A rank tracker is probably one of those things where you need to choose the right technology because if you don’t, it’s not going to scale the way that you need it too and you’re not going to be able to create things in a distributed manner or spread out the jobs and the spidering that needs to go with it on order to be able to do what you need to do.
The other thing to consider especially in this particular case is that if you are scraping websites in order to do any sort of a rank tracker, you have to be a little bit careful because you can get banned from them. I know of at least two people who had to deal with issues where their scraping techniques were noticed and their app was essentially banned from those websites. They looked at it as, oh, you’re basically DDOS-ing our site. It’s like, oh no, I’m spidering it but they don’t see it that way. If your entire business rests on doing that, then it’s significant risk if that vendor or that company decides to take action to prevent you from doing it.
I ran into this 12-15 years ago with McAfee. I was scraping their website using a Perl Script and then they kept changing things around on their websites so it made it difficult to find what the anti-virus definition numbers were. Because that was what I was trying to pull. They kept changing things around and eventually I wrote a script that would pull it down and it would parse it in five different ways and try and get to what the ID was because they just kept changing the HTML and I noticed that they were alternating it between them. I just figured I do that.
This is a hard question to answer just because it depends so heavily on what it is that you’re building.
Rob: I like the points you brought up. I think that building a rank tracker has some dangers to it. I don’t think you shouldn’t do it because of that but know that there are substantial risks. A rank tracker, this is not for search engines you mentioned specifically. It’s a rank tracker for another ecosystem and it’s going to almost always be against the terms of service. If you do it, you’re going to have to do it on the down low like Mike said. It’s going to be a part of your process that A) rank trackers are brutal because anytime the UI changes, it’s going to break everything and so you’re going to have a fire drill. Know that going in. So you’re going to want to developer who doesn’t have a 1-2 week delay to get back to you. You’re going to want someone who’s able to hop on things.
Second thing is you will likely need to get a bunch of cheap servers with different IPs because at any given time, some of them are going to get blacklisted just like you said, Mike. You can’t do this at scale without that. The people I know who have built these had to do these massive server farms and at any given time, all running the same code at any given time like 20% of them were banned and blacklisted and they would cycle them through. That will be an operational thing that you will perpetually have.
Again, I’m not saying don’t do this but to think about that up front. His question is how do you decide on what language to use and the way you do that is you learn about the language and which are good at different things. Like Python and Perl are really good at scraping. I would probably use Python in this case. His question wasn’t what technology should he use but that’s probably what I would do. I would look for a Python Django developer and build your scraper and build your web front and all in Python.
But the broader question is if you’re not building a rank tracker, and you’re building a different type of SaaS, what languages should someone consider? These days, I would say Ruby on Rails, Python Django. Those are probably one of the two, those are common, you’re going to be able to find developers. If you ever wanted to sell, they’re not languages that people shun. When I had HitTail in Classic ASP, someone was asking if they could buy it. As soon as I told them it was in Classic ASP, they said they had no interest in it so that they would have to rewrite the whole thing. We eventually rewrote it on Ruby on Rails and it was much more sellable.
.NET and Java also can be looked at that in the startups space. They’re not as appealing because the .NET and Java developers, they’re more enterprisey and it’s not as easy to find startup developers who are going to be into that. It’s going to be easier with these other ecosystems. Now, there are other languages that are up and coming. I think if you really wanted to get ahead of the curve, there’s Elm, Elixir and Phoenix. I think those are going to perhaps pull some market share in terms of startups being built. Those are going to slowly pull market share from Ruby and or Python. This comes from conversations with Derrick, he’s my co-founder at Drip, and then other developers that I’m hearing talking about these things. People are really excited about them and are looking for jobs in them and they’re not that widely available.
If I was a non technical founder, I don’t think I would branch into that because it is too new still, and I’ll probably go with something more tried and true.
Mike: Yeah. The big question there is are the problems that you are likely to run into things that have been solved before and with bleeding edge products or technologies or text stacks, sometimes you’re just blazing new ground yourself and there is no solutions or resources out there and you basically have to do a lot of research and development to solve particular types of problems versus with established products like Ruby on Rails, it makes it easier for you to find a common solution to a common problem.
Rob: One other stack you could consider is PHP. There are obviously a lot of apps built in that and ones that scale as well, I’m pretty sure Facebook is built in PHP. Obviously, WordPress, which scales pretty well. But it is, in my experience of these three languages I’m recommending actually, PHP is the only one I know and it can be a complete cluster. I think I would seek more towards the Python, Ruby part of things. If PHP well written and well structured is a perfectly acceptable web language but there’s so much of it that is not, it’s easy to hang yourself.
Alright, let’s go to our next email. It’s about corporate structures and trademarks from Dylan DiMartino. He says, “Hey guys, two quick questions I’d like your opinion on. Number one, I have a consulting company incorporated in the state of Louisiana but I want to start a SaaS with it’s own name. Would you suggest simply creating it under the umbrella of my current corp or should I start a separate entity? I notice a lot of the big apps share the same name as their parent company, Uber and Snapchat. Is this standard practice? Is it worth it? Does it make marketing easier?”
I think there are two aspects to that. One is does it matter that the product name and the corporation match from a marketing perspective? And then the second thing I think of course is the liability. Do you lump it in with consulting, then those assets are unprotected. What do you think, Mike?
Mike: This is interesting question to me mainly because I’m going through it right now where I am spending off Bluetick into its own separate corporate entity. Having just recently talked to both my CPA and my attorney, I’m spinning it off into its own separate LLC. The question I’m going through right now is does it really matter whether or not the app itself is the same name as the company and I’ve decided that no, it really does matter because the app is the front end facing. I will be likely going with a company name that is different than the product.
I do that because I don’t think that it makes any difference at all to the end user but couple things you do have to keep in mind is that when you’re putting things into terms and conditions and privacy policy and stuff like that, the company name is what’s going to have to be listed there along with the product name.
The reason I decided against going with product name as the company name is one, there’s already a company out there called Bluetick Incorporated or something like that, Bluetick Outfitters, something along those lines. But bluetick.com and bluetickinc.com are both taken so I didn’t want to run in any sort of trademark infringement problems with that and because it’s a software app and I think that was in the petroleum industry or something like that, it’s different enough that I can call the app that, and it’s not a big deal but calling the company Bluetick would probably be an issue. I’m going to go with something different. I haven’t decided on what yet, I could do that in the next couple of days and then just make sure that you keep in mind all the stuff associated with places where the customer is actually going to see the company name. That’s the big thing to keep in mind. Because you don’t want the company name to be so nonsensical or off the wall that if they read it or happen to glance at it, they don’t look at it and say, “Wait a second, why am I getting this email?” Especially if down the road, the company gets acquired or you sell it or something along those lines.
That leads to the second piece of this which is should you put it underneath your current corporation or spin it off as a separate entity. I decided to spin it off as a separate one just to keep all the books separate so that if later on I do decide to sell it, or if I do any sort of fund raising or anything like that, I want to have the books, at least reasonably decent, from a very early stage as opposed to trying to separate it out much later. I’m past the point where I feel like I needed to do validation because I probably wouldn’t build a product and go incorporate and do all the things that are “necessary” things that you’re supposed to do until after you’ve gotten to the point where you have revenue coming in the door and you know that it’s going to be something that it would be worth spinning it off into its own entity.
Before that you can easily end up in a situation where you get to five to eight customers and then you have to shut it down because it’s just not making enough money. At that point it costs you more to spin up the company and then shut it down than it did for the amount of money that you gather from customers.
Rob: Yeah. I think that’s a good perspective. I think in a perfect world, the corp would match the product name but I don’t think it really matters that much honestly because the only confusion I can imagine is the credit cards. When you get a credit card statement and it’s going to have corp name typically and not the product name, that’s the time where you may get confusion. I’ve seen folks set up their corp.com and all it is is a page that says confused about a charge from us? You probably use one of our apps, and then it has a few of them. I really don’t think it’s that big of a deal from a branding perspective.
One thing to think about is the liability, well, two things, one is liability. If you mix your consulting firm with a product, if one of them were to get sued or something then they are both in the same bucket and there’s no firewall between them. You have to use your judgment as to how big of a concern that is for you. For me, when I had a bunch of products, they were all under the newer group umbrella and that name didn’t match any of the products. That was never an issue for me and I wasn’t concerned about the liability so it’s a bunch of small products that really weren’t likely to have a lawsuit come in. Again, it’s risk tolerance there.
And then the other aspect of it is if you ever want to sell it, if you just sell the technology, that’s one thing but if it ever gets acquired and people really want the financials broken out and if it’s a startup acquisition, strategic, like we did with Drip, they bought all the assets in the company, it would’ve been a disaster. It would’ve been a disaster if Drip was still under the group. I spun it out maybe a year before the acquisition because it was just growing so much that I knew it needed to be its own company. At that point, I started realizing we’re probably between $30,000 and $50,000 MRR. I would hate for liability of Drip or of the group to spill into one another and then there needs to be a firewall.
The process of ripping that out was a pain in the butt. It took several months and I paid a lawyer several thousand dollars to write up all the paperwork and try to make sure everything was transferred. I had to set up separate payroll. The group had to let go all of us, had to fire the employees and then hire them, through Drip. It was pretty crazy. I had two Gusto accounts, two different corporate credit cards, two bank accounts, two stripe accounts, too many things is what it was. But it was the right call. You got to think about that. If you’re just plugging away and starting something you think you’d get to a few grand and hope to eventually sell it, personally, I’ll probably just throw it under the same corporation assuming that you judged the liability and how much risk you’re willing to take on.
Like Mike said, setting up the entire other entity and then never getting the product off the ground, or never getting it past of couple grand in revenue, it is a lot of expense, you don’t think there’s that much expense but there is setting up upfront, if you’re on a state with an annual fee like California charges $800 a year just to have a corporation there and then you need separate software for the books, and then the CPA is going to have to file separate tax return. That’s an extra cost. There’s a lot to think about there, but I do think you’re thinking about it right.
And then his second question was, “Is it worth going through any steps for the legal protection during your early development stages? Specifically a trademark on your app name.” What do you think about that?
Mike: I don’t think so. If you’re not making any money from it, it probably doesn’t make a difference. It’s funny I did recently see this lawsuit of a company called TWiT versus Twitter.
Rob: Yes. TWiT is This Week in Tech, it’s Leo Laporte’s company.
Mike: Yeah, something along those lines. I think that previously they had taken the standpoint oh this is just a couple of techies in the garage building this app on the side for some sort of social things, it’s not a big deal. Now it’s suddenly a big deal.
Rob: TWiT is a podcasting network in essence, video and audio, and they’re located Northern California. Leo Laporte has long time been basically a tech newscaster for decades. He has his network, and maybe 30 shows in there, few dozen employees, and they have a studio up there North of San Francisco. As these guys were coming up, he has the trademark and the stuff for TWiT, and I don’t know if he has Twitter or not but he certainly has things that I think that early on he and Evan Williams had talked. He has some type of written agreement but it’s not super ironclad, and then he definitely had verbal agreements he has talked about on the show before that hey as long as they stay out of streaming audio and video, that we’re in separate areas, but Twitter’s now getting into that.
For Twitter, you know what they’re going to do? They’re going to settle, right? They’ll pay him some money. I think, I don’t know. They’re big enough, they’re a public company. It’s not that they’re doing great but this type of thing is not catastrophic at their scale. These lawsuits are things that you just throw some lawyers on it and then eventually you settle in and you pay someone $5 million or $10 million and it goes away.
Mike: The point is that they got the app to that point without having had all that stuff. And yes, it’s going to cost them, as you said, maybe it’s $5 million or $10 million which sounds like a heck of a lot of money but how much does Twitter pull in in a year. At the end of the day, it’s not really that big a deal to them to have not have that trademark from day one, or have registered it, or have gone with a different one. It’s really just like you’re trying to solve for a problem that you don’t have and you may never have. Because I don’t think that most of us are going to be in a position where we have a business as large as Twitter and are defending against the trademark because we never filed it or we never acquired it very early on in the startup.
Rob: Right. I think I have mixed feelings about this one. Filing a trademark is a couple hundred bucks. It’s not very expensive, it’s not like a patent. Software patents are $15,000-$30,000 if you file one. Whereas a trademark is inexpensive, and it’s fairly easy to do. You can go to LegalZoom or there’s a bunch of services that do this, and it’s pretty straightforward. Now if you do it and you get rejected, then you have to go and justify and do all this stuff.
I’ve only filed for one trademark. Of all the apps and all the stuff that I’ve done, and it was for Drip and I got rejected the first round. I was like, “Oh, good grief.” I don’t know. I wouldn’t say don’t do it, I do think that if you don’t have an app yet, it’s probably jumping the gun. But it isn’t that much time or money to do it. You just got to weigh it out. I don’t know if there’s a right or wrong one here, right or wrong answer.
Mike: I think it depends on how much money you are actually making from it. Because if you haven’t made a dime from it, probably not worth filing the trademark but when you get to the point where you’ve made maybe $1,000 or $2,000, at that point you might consider it once you’ve made $10,000, $20,000, $30,000 maybe really consider it. You can always push it off too because you could file it based on prior usage. There’s that as well. I think with the Twitter issue, Twitter didn’t do it first, it was the TWiT Company. They didn’t file for a trademark until it was a year after Twitter was founded but they had been previously using it. I think that’s why they have that trademark.
Rob: Yeah, you’re probably right. If you haven’t made any money from it, you probably shouldn’t file it but there’s a resonance thing there but I hear you. Cool. I think that wraps us up for the day.
Mike: Yup, I think so too. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 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 a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 375 | How to Evaluate Per-Seat and Tiered Pricing Models
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to evaluate per-seat and tiered pricing models. They give you their definitions and a list of pros and cons to each model.
Items mentioned in this episode:
Mike: In this episode of Startups for the Rest of Us, Rob and I are gonna be talking about how to evaluate per seat and tiered pricing models. This is Startups for the Rest of Us Episode 375. 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 Mike.
Rob: I’m Rob.
Mike: We’re here to share our experiences to help you avoid the same mistakes we’ve been. What’s the word this week, Rob?
Rob: Well, my first ever angel investment in 2011 was Jason Cohen’s WPEngine. They just passed $100 million in annual revenue and they secured $250 million investment from company, a private equity firm called Silver Lake and it bought out the series A and B investors. It’s my first exit, as they say.
Mike: Awesome.
Rob: I guess it’s my second exit because Drip and HitTail before that, but you get the idea. My first angel investment that has paid back any money, how about that?
Mike: Well, I’ve got a napkin folding company, if you want to invest in it.
Rob: Really? What’s the value? If it’s low in valuation, I think I could do it.
Mike: I don’t know, that kind of reminds me of the joke I just made. I think that it was Jason Fried who had put out a tweet a while back about selling a small piece of Basecamp to somebody for like a dollar, and he gave him 1/1,000,000 of a percent of the business in exchange for that dollar which may have valued at, I forget what it was, it was like $300 billion or something like that.
Rob: Oh, yeah. Right, right. Yeah, I remember reading that article just about how you reduce the numbers and it doesn’t make any sense when you’re raising a lot of these VC rounds, they’re just stupid, valued at whatever it was, 50 billion or just crazy, crazy numbers. But it doesn’t mean you’re actually worth that.
When I was sitting down to consider raising as Drip was growing and we were kind of bursting at the seams and we needed cash, we were evaluating raising an angel round versus an acquisition because we were being approached pretty regularly by folks who wanted to buy us. One of the struggles I had with raising that round or considering the round is the valuation that you’re gonna raise that right now given our growth rating, given our revenue, is gonna be high, it’s gonna be a lot of money.
In order to then do, in my opinion, to do right by those investors, you have to sell for at least twice that. Getting to a purchase price that’s 2x to 10x what your funding valuation was is hard. I’m gonna make up numbers here, but if you can raise at a $10-million valuation, you can’t sell at a $10 million valuation, you could probably sell for $1 million or $2 million, the actual cash sales prices are substantially less than funding valuations because funding is driven by the market and by FOMO, and by all this stuff, people making bets. Whereas someone putting cash on it, they really do look at more financials, they’re just more picky about things because they’re not making a bet. They are really trying to do something, do right by their business.
All that to say, if you raise at a $5 million or $10 million valuation, but you’re only worth in cash, if you could sell at a million today, you have a hell of a lot of work to get to that $20, $30, $40 million mark and that was a big question in my mind, like again, those are made-up numbers. Those are not the numbers that we had but I kept thinking are we in it for that many years or is it better to take some money off the table?
Mike: Yeah. I think that’s a big challenge not just for you at that time but for anyone who’s considering going down that road because if you do take that money, you’re basically committing yourself to down the road not just selling the business but putting the business in a position where you have to grow to that point in order to be able to get anything out of it. I think in most cases, the investors are going to need to be paid back their money first before you get anything or before you get anything substantial. Even if you sell it, as you said, if you’ve raised it at a $10 million valuation and you sold it, let’s say, for $12 million or whatever, they’re gonna make their money. Even though you sold the business for $12 million or $15 million, you’re probably not gonna make very much at all just because of the way that those numbers work out, which kind of sucks, you built that business, and yes, it was with somebody else’s money, but you just don’t get nearly as much out of it as you probably could’ve if you bootstrapped it. The flip side of the coin is if you didn’t get the money, would you have ever been able to get to that point?
Rob: Right, that’s always a challenge. I think we’ve been clear in the past that we’re not anti-funding, certainly not anti. As someone who is now investing in businesses, I believe that there’s a time and a place and there are rational and good reasons for raising fund. We did an episode on this, probably a hundred episodes ago where we really talked through the difference between Seed Funding and Angel Funding versus Venture Capital, and kind of the pros and cons to that. I think we talked about fund strapping during that time and about companies like Card Hook and Lead Fuse and Term Buster that I’m invested in. They don’t necessarily wanna do the implied series A. They really are raising that round up front to move quicker, but to get to profitability, and then to build an actual business that will either exit someday or will throw off cash in the form of dividends. It is a challenging question.
I think I’ve publicly stated several times that I have no plans to do another one. I don’t plan to do another startup, I just don’t feel like I have it in me at this point. But if in some theoretical world I were to do it, I would probably raise a round. I would either raise a round for myself and self-fund it but with a substantial chunk of money, or I would go to my angel network and the people that I know and get some money into it because it just makes things so much easier if you’re an experienced, knowledgeable founder and you know the path, it can get you there quicker.
Mike: The Bitcoin rage, I think right now the initial coin offering, you could do an initial [walling 0:05:44] offering.
Rob: Oh, my gosh. Oh, my gosh. The ICO stuff is so ridiculous. That’s a whole other show. If you wanna hear about that, go to https://p.nomics.com, that’s Clay Collins’ blog about Cryptocurrency and he has a podcast now, and he’s dived into that stuff. Yeah, there’s some serious insanity going on there. I think the SEC is going to crack down on people offering these – essentially they’re securities, they’re selling securities without vetting the people on the other end, and there are laws against that. I think it’s going to become a mess for some folks.
Mike: Yeah. I’ve seen some crazy things like some companies lately that are publicly traded companies where they have a price on the New York Stock Exchange, or on Nasdaq, or something like that. They come out with a press release or an article that says that they’re going to be creating their own digital currency of some kind, and then suddenly, I think it was Kodak, it was just last week and their stock price went up by 50%. I was like really, are you kidding me? This is Kodak. Yeah, I don’t know. Having spent a long time in Rochester, New York, Kodak goes through a cycle, every three years roughly. It’s Kodak and Xerox. It’s like one year a bunch of people are laid off and then the other company is hiring, and it’s just people bounce back and forth between those two companies like clockwork and it’s ridiculous. But neither one of them either really does anything.
Rob: Cool. Enough about ICOs and Angel Investing. What’s going on for you?
Mike: I had a bunch of customers to Bluetick this week. That’s a good feeling to get back on track and kick things off in the New Year. Right now, I’m dealing mostly with support issues and finalizing the website design I’ve been working on and the email course redesign. I think my biggest challenge right now is troubleshooting large numbers of requests that are coming into my server on occasion, so we’re trying to figure out either what’s going on and why certain things are being throttled. I’m sure it’s a configuration issue at some place, but I just don’t have the logs because it looks like certain things are just not getting through and I don’t see what’s going on, so that came up this morning.
Rob: Dude, if you have a segment.com integration, they have [00:07:50] so many time, accidentally. Someone hooks it up and they don’t respect our rate limits, and we’ve had extensive conversations with them and I’m just shocked that business at large, it’s 429 response that we give back and we say, “This is the rate limit. The next time you can send is in this many minutes.” It’s all in there, Zapier has rate limits and we parse them, we actually respond to them but Segment said they’re working on it, but man they have taken the RAPI down multiple times in the past year.
Mike: I’m the only one who’s like I’m getting API requests coming in and I’ve never really looked at the API limits in the past because before it was just my app and now as I’m starting to integrate into other things, as you said, you’re basically accidentally getting [00:08:33]. I’m seeing the logs, I’m responding to dozens of requests per second, but if something gets dropped, I don’t necessarily see it in those logs. I would just have to go poke around and see like are there other logs that I can go look at on the system itself.
Rob: Yeah. Once you have customers going and you start scaling up, these things take more and more of your time. Before we dive in, I had a couple of books that I want to just circle back on. As I say, I listened to a lot of audio books during the year. I recently finished WTF, What’s The Future and Why It’s Up To Us, and that’s Tim O’Reilly’s book.
I mentioned that I was maybe a third of the way through and was not digging it a few weeks ago. I came at it with a new mindset and I do think it’s a good book, but it didn’t blow me away. He analyzes how the future is gonna be. He looks at certain companies and how they’re operating and he did this back in the 90s. He did in the early 2000s with Web 2.0, and now he’s doing it here. He says, “Certain companies embody what’s going to happen, where the puck is going. He looks at several companies, Uber, and he talks about Amazon, he talks about a few companies that do it. It definitely got better for me towards the end, but not a resounding. It was good. It was just 6 or 7 for me out of 10, but it didn’t blow me away like I thought I would.
Another one is called Make Your Kid a Money Genius Even If You’re Not. I always like books that help me raise my kids better and give me advice about that stuff. Though I liked it, I think it’s worth listening to or reading. My one complaint is that it’s so much focused on teenage, college, and later. Since my kids are 7 and 11, there was a little bit on that topic but it was very, very limited, so I started skipping chapters towards the end about saving for college and all this stuff that I already have done, how to manage your money during college, how to do credit cards, and all that kind of stuff.
Then, the last one is a really interesting book I stumbled on, it’s called Accidental Superpower. This is if you want to feel good about the future of America. Not in like a nationalistic way, but in a, there’s always the thought or the threat of like, “Well, you know, India, and China, and Japan, and everybody, they’re just gonna eat our lunch and all of the jobs are going overseas,” and all that stuff. Read this fascinating book, it’s by a guy with a PhD in Geopolitics.
Geopolitics is how geography shapes the political climate and how it shapes our country and how it develops. It’s just a fascinating look at all the advantages that really North America has as this place that’s separate from Europe, about the navy, about the natural resources. I mean just on and on and on and it keeps going through if you really look at this, at least from his perspective that America’s gonna be fine, that United States is gonna be fine, and that there’s always gonna be challenges, but then it’s not as dire as so many people make it out to be.
Mike: Awesome. While you’re talking about that, it actually reminded me of something else. Do you watch Netflix at all?
Rob: Oh, absolutely.
Mike: Yes. There’s a new series on there called The Toys That Made Us.
Rob: Yes.
Mike: If you haven’t checked this, it’s awesome.
Rob: I have.
Mike: There’s only four episodes for it, so for the listeners, it basically goes back to the 80s and 90s and takes a look at some of the different toys that became huge and really, really popular during that time frame. Obviously, some of them came about before that, but it goes through some of the history of toys like Star Wars, Barbie, He-Man, and GI Joe. Those are the four that they have. I don’t know if they’re gonna do another season or anything like that, but it’s a really fascinating look at the toy industry and how people weren’t marketing these toys, how they were getting them out in front of customers.
In some cases, it was the psychological hacks that they used in order to figure out what was gonna make a toy resonate with people and some of the struggles that they had to overcome in order to get the product out to market. It blew me away. It was awesome watching all four of them.
Rob: I’ve only done the Star Wars one, but definitely, I’d recommend, have the other three in my queue. What are we going to talk about today?
Mike: Today, we’re gonna be talking about how to evaluate per seat and tiered pricing models. This comes up, because yesterday I was talking to an entrepreneur about this exact topic and we also have a listener question in our queue about SaaS pricing models.
The short version of his question is that, on apps and services the post multiple projects, is project-based pricing a thing? What are the pros and cons and why would you not go down on one of these paths? He has a much longer version which I won’t get into but I thought that we could dig into the differences between per seat pricing versus tier pricing, talk a little about the pros and cons of each, and then also point people to a resource over on the cobloom.com website where they have what’s called the Ultimate Guide to SaaS pricing models, Strategies and Psychological Hacks. They dig really into I think about seven or eight different pricing models. Some of them are just variations on others, so instead of per user pricing, for example, there’s a per active user pricing model that you can look on. I thought that that’d be a good place to start our discussion.
Rob: Let’s dive in.
Mike: The first thing to talk about is what exactly is per seat pricing? The basic idea of per seat pricing is pretty straightforward. Each person that is using your software you’re going to charge the customer for. If they have one user, you’re going to charge them for one. If they have 25, you’re going to charge them for 25 users. Typically, each user has a given price for it, maybe it’s $5, maybe it’s $50 a month. But you can also have I’ll say a little bit more complicated model where you have different tiers for the users as well. Let’s say you have one set of features, it’s $5, or different set of features, it’s $10 per user and $15. I think that it gets really, really complicated, at least it has the potential to get really complicated, but at its simplest form, you have per seat pricing as just a set dollar amount per user that’s using the software.
Rob: Yup. Do you remember the rule for, I think we’ve talked about this, the rule for when you should use per seat pricing.
Mike: Yes. You mentioned it a couple of episodes ago, I think.
Rob: Yup.
Mike: If I remember correctly, if somebody is going to see a different set of data or have a different view of what’s going on, then they should have a per seat pricing model versus a tiered pricing model.
Rob: There you go. Two examples is if you’re using a CRM system, then each sales person will obviously see different prospects and different flows and that’s why per seat pricing makes sense there. But if you’re using an email marketing system such as Drip or Mailchimp, typically, you don’t see anything different if you login. Limiting the number of logins or managing by users doesn’t really make sense because people will just share logins if they wanna do it.
I like per seat pricing a lot, but you should only use it when it fits that role, and if it doesn’t fit that role, then avoid it and do one of these other purchases we’re gonna talk about. It feels weird when it’s bolted on. It’s really obvious. It’s something like why are you limiting by this? It doesn’t make any sense.
Mike: Can you give an example of where somebody might try to bolt that on and it doesn’t make sense? Because honestly, it sounds like you’ve got a couple of examples in your head.
Rob: There’s 500 or 600 ESPs that we’ve kind of run across over the years, and I’ve seen ESPs, again, something like a Mailchimp or a Drip have maximum, you can invite users in, up to five users to this tier, and then if you have more than five logins, then you have to jump up to a higher tier. It just doesn’t make sense, your customers are not getting value out of that, they’re getting value out of either how many subscribers they have, how many emails they send, how much money they make, there are other things to base your pricing on that are not a number of logins. Whereas, if you have something like pager duty where it’s monitoring software that pages your DevOps team or a CRM system, the more people you have on there, the more value you’re getting and be the more kind of willingness to pay that you should have. Those are kind of two examples both against and for per user pricing.
Mike: A couple of different cons for the per seat pricing that you already called out was that people will share accounts if there’s no real value associated with having a dedicated log-in for them. I think the other thing, and I’ve personally seen this as well is, if you are charging on a per user basis, it in some ways limits the adoption of that particular product, because then you’re basically forcing the company or the customer to make a decision every time they have either a new employee, or a new contractor come in, do we create a user account for this new person because it’s going to cost us money to do that. By pushing that decision on them, a lot of times the answer’s gonna be, “Well, no, we can get away without it.” Or, they go towards what you had pointed out, they just start sharing logins and it becomes a detriment to you because then you have to just evaluate, are you gonna enforce the logins on a per user basis, or you’re gonna make sure that the only one session is connected at a time, or you’re just gonna ignore that issue?
Rob: Another con to per seat pricing. Again, per seat pricing works, but these are some potential negatives. You do have a potential for increased churn as a result of fewer people in an organization using it if they are trying to save money by not having everyone login. It’s one way that people might churn out of your app.
Mike: If we look at the benefits of the per seat pricing, it’s really easy to understand. It’s x-dollars per user, per month, and there’s really no complicated explanation for it. Another nice side of it is that it does scale with usage, you are not really leaving money on the table if somebody has 5 people signed up, you’re gonna get paid for 5 people, if they have 500, you’re gonna get paid for 500. You don’t have to worry as much about whether you’re leaving the money on the table or you’re selling yourself short inside the app.
Then, the last thing is that when you have a number of users who are using your product, the revenue itself is generally predictable, because you can see, not just that you have that number of users and it’s a month to month subscription of some kind, but also you can see when people are not using the product. If they’re not using it, chances are good that you can forecast a little bit and say, “Well, how long after they stop using it does this particular user or account fall-off, and then we no longer start getting revenue from it?”
Rob: That’s where this variant of per using pricing started to come about, it’s called per active user pricing and we’re not gonna dive totally into this but Slack does this. If you have a team of 50 people, 50 logins into Slack, but five people don’t use it at all during a month, they actually don’t charge you for that. That’s kind of cool way to do it.
Mike: Yeah. That is kind of a cool way to do it, and I think if you’re large enough where you don’t necessarily care whether all of your users are on the system or not, then that’s fine. But I think for a lot of smaller companies, that also creates some pain points around when you like somebody says, “Hey, can you cap on Slack and go take a look at this?” “Oh, I didn’t get that.” Or, “I haven’t logged in.” Then, they log in to check one thing and now you’re getting charged for them, it’s like okay, well, if they didn’t have the login to begin with, then you wouldn’t have to worry about that.
But, I don’t know, I think for smaller businesses, if you’re between one and five people, it can be kind of painful, especially if the price point is more than like $5 a month. $5 a month is not a big deal, but if it’s $50 or $100 a month per user, and suddenly you have two or three people log in extra just to check something, now you’re getting charged for them because they’re considered an active user
Rob: Cool. What’s next?
Mike: The next one to talk about is tiered pricing. I think that if you look back historically, I think it was Hiten Shan with Crazy Egg, they’re the company that I think you can kind of point to as putting together those different tiered pricing models, another one is Basecamp obviously with all of their different pricing tiers that they have. Being able to maximize revenue inside of their apps by offering a tiered pricing model.
The whole concept of the tiered pricing model is that within a given pricing tier, you have access to a certain set of features, and a certain number of users, maybe you have features in between the tiers, or maybe you have the tiers based on number of users, combination of those things, but essentially it allows you to put those things in different pockets, so to speak, and let people self-select which one is the most appealing to them. I think that this is interesting from the standpoint that you can allow the user to select those but the downside is that because you’re allowing them to select it, they could easily select the wrong things or they may have problems deciding because you didn’t put the gates between the different tiers on the thing that is most important to them, so there’s pluses and minuses to this approach.
Rob: Yeah. I would say when I think of tiered pricing like a strict definition, I think of it being based on a single metric or maybe two. An example to come back to ESPs is Mailchimp and Drip charge on the number of subscribers. That’s all the tier. The tiers go up and they go down based on that, and it’s not also based on features because I see feature dating as a separate or a more complex version of tiered pricing. True purest tiered pricing, remember Kissmetrics was based on, I think, it was the number of events in a given a month. Segment used to be based on the number of events, and I think it’s actually different now. They changed it. Zapier was like that. It’s not metered because meter would mean like AWS where you get charged for exactly what you’re using but it’s these tiers up to 100 subscribers and then 1,000, and then 2,000, and then 3,000.
Mike: I think the interesting thing is that if you go over to Basecamp’s website right now, the only pricing that I see listed is it’s $99 a month all inclusive. What used to be when you went to Basecamp and you sign up for their product, you get X number of projects and let’s say it was up to 10 projects and unlimited users, but then you had a limit on the file storage, for example, with limit on the number of active projects that you can have at one time. It’s just $99 a month flat rate as many users as you want, as many projects as you want, and they’ve gotten away from all of the pricing tiers. I think it’s interesting to see the evolution that they’ve gone through for their pricing.
Rob: Yeah, and that’s something that’s really common. If a founder comes to me and says, “Look, I’m just launching, or I have 5, 10, 15 customers, how should I structure my pricing?” My advice would be go as simple as possible to start with and if you’re gonna do per seat, then just do per seat. Don’t do tiers to start with and do $10 per seat, or whatever you’re gonna charge, or if you’re going to meter it, then do your tiers and see what happens.
Get 50 customers going and see what the complaints are, see how the revenue stacks up, see if there’s an opportunity to make it more complicated, but don’t start out with complicated pricing because it’s hard to simplify things. It’s easier to make it more complicated. Easier to add a V2 Pricing that has some differentiators once you have the data. That’s the thing, when you have no data or very limited data, it’s really hard to make choices and you’re likely to make the wrong choice the more complicated you make things. I do think that pricing should evolve overtime. If you look at like I said segment.com, pricing is way different than it used to be. It’s not even based on the same metric it used to be. As you said, Basecamp is different.
Most SaaS apps, if you look five, six years ago, their pricing is probably substantially different than it used to be. Even Mailchimp used to have a fairly linear pricing model, but now if you look at it, it’s a very choppy thing that it’s linear and then it flattens out for several thousands subscribers. Then it goes up linear and then it flattens out. I’m sure that they’re really smart over there at Mailchimp. I’m sure there’s a reason that they did that and it’s probably based on data.
Mike: Yeah. If you look at even at the bottom of Basecamp’s pricing page, it shows how many subscribers or how many customer they’ve had over the years. Back in 2004, it was 45, and then 2006, it was 100,000, and now it’s up to 2.5 million. I would imagine they have a lot of data to be able to back up their justifications for making some of these decisions. It’s not that they really need the money either, so sometimes it could be just that they got no point where they don’t necessarily care about it as much and they just want to attract as many users as they can especially on the higher end because if you’re only charging $100 a month, then it makes it very easy for larger companies to justify it and say, “Oh, let’s jump on this because it’s only $100 a month.” Then you just get it for the entire company.
Rob: Yup, makes sense.
Mike: If you look at a company like Crazy Egg, you go to their pricing page, they still have four different pricing tiers. This is what I was talking about where they will segment based on a couple of different metrics. There are two lower ends plans that’s visits per month, and then active pages, so it’s 25,000 visits and 20 active pages for their standard. Then below that, it’s 10,000 visits and 10 active pages. Depending on which of those two metrics you need to pay attention to, you’re gonna have to choose either basic or standard. If you go over one, you’re probably gonna have to switch over there. Then their plus and pro-plans, there’s also advance features that they use for that as well. Instead of daily reports, you can get hourly reports, and then there’s advanced filtering, mobile heatmaps, etc. You can get more complicated but as Rob pointed out, you have to have the data first. At the beginning, you’re just guessing and throwing things at the wall and seeing what sticks, and sometimes that’s what you have to do, but that helps you get the data.
One thing about tiered pricing that had come up at Microconf, Patrick McKenzie had mentioned this where he was working with the customer and he ended up sending out an email on their behalf to their customer based and had offered them an upgrade. Essentially, he looked across the customers’ customers and said, “How many of these people are close to the limit?” When he found that information, he sent out an email or helped him send out an email that basically said hey, “Hey, you are close to the higher end of your pricing tier, why don’t you upgrade and give yourself a little bit of headroom?” That was a very clear upsell to the customers and that consulting client of his ended up making a, I don’t know exactly how much revenue was from it, but it was sizeable enough that it made a difference and helped them justify bringing him on and moving the business forward.
Rob: Yeah. I always felt like that was an interesting tactic. I’ve never used that. If I got an email like that, I would think to myself, “Aren’t they gonna be auto-upgraded anyways?” But apparently, it works and it’s something that I know Patrick did with his consulting gigs and got the people to upgrade. Looking at this Cobloom article, they have I think six or seven types of pricing models.
One is flat rate pricing and that’s essentially what you said with Basecamp. Most companies, that’s not gonna be what you wanna do. You’re gonna probably wanna do a per seat or do a tiered model that’s based on one metric to start with. Another type is usage based which is pay as you go. Think of this like Amazon AWS or Google Cloud Hosting and Microsoft Azure. This is not something that I’d recommend for bootstrapped startups frankly because hearing winds up being a better way to go, it will make you more revenue and revenue, so critical for you at the time.
Of course, there’s tiered pricing, there’s per user pricing which we talked about. There’s this per active user pricing they have and then they have per feature pricing which can be done totally separately from tiers but I’ve typically seen it as you have tiered pricing based on a certain metric and then you also start sprinkling per feature pricing in there. I think kind of think of who, I know Zapier has done this. They used to have number of event executions per month and then if you wanted to use Drip or Hubspot, then you had to move up to a higher tier even if you had a small amount of events because they figured that if you’re using those tools, that you’re a more sophisticated marketer and you have a bigger budget. That’s one example.
The last one is Freemium, although I see Freemium as working with any of the above. You can have tiered pricing and then just have a forever free plan that is below those. Those are the seven models that they threw out just for completeness.
Mike: Yeah, I forgot who it was who was talking about Freemium and then referred to it more as a distribution model, not necessarily a pricing model.
Rob: Right, yeah. That’s how I feel about it and it’s a marketing approach more than anything else. That’s where my quote is that the Freemium Pricing model’s like a Samurai sword; if you know what you’re doing, you can wield it with great expertise, but if you don’t, you’re likely to cut your arm off. That’s how you see a lot of bootstrapped startups that just launch with Freemium because that’s what the big guys do, and then boom, that goes away, they shot their free plan down. I’ve seen dozens and dozens of companies, including Basecamp used to have a free plan, and they do not.
Mike: Cutting your arm off sounds like a great place to leave off this episode.
Rob: It sure does. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 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 a full transcript of each episode. Thanks for listening, we’ll see you next time.
Rob: I’m Rob.
Mike: We’re here to share our experiences to help you avoid the same mistakes we’ve been. What’s the word this week, Rob?
Rob: Well, my first ever angel investment in 2011 was Jason Cohen’s WPEngine. They just passed $100 million in annual revenue and they secured $250 million investment from company, a private equity firm called Silver Lake and it bought out the series A and B investors. It’s my first exit, as they say.
Mike: Awesome.
Rob: I guess it’s my second exit because Drip and HitTail before that, but you get the idea. My first angel investment that has paid back any money, how about that?
Mike: Well, I’ve got a napkin folding company, if you want to invest in it.
Rob: Really? What’s the value? If it’s low in valuation, I think I could do it.
Mike: I don’t know, that kind of reminds me of the joke I just made. I think that it was Jason Fried who had put out a tweet a while back about selling a small piece of Basecamp to somebody for like a dollar, and he gave him 1/1,000,000 of a percent of the business in exchange for that dollar which may have valued at, I forget what it was, it was like $300 billion or something like that.
Rob: Oh, yeah. Right, right. Yeah, I remember reading that article just about how you reduce the numbers and it doesn’t make any sense when you’re raising a lot of these VC rounds, they’re just stupid, valued at whatever it was, 50 billion or just crazy, crazy numbers. But it doesn’t mean you’re actually worth that.
When I was sitting down to consider raising as Drip was growing and we were kind of bursting at the seams and we needed cash, we were evaluating raising an angel round versus an acquisition because we were being approached pretty regularly by folks who wanted to buy us. One of the struggles I had with raising that round or considering the round is the valuation that you’re gonna raise that right now given our growth rating, given our revenue, is gonna be high, it’s gonna be a lot of money.
In order to then do, in my opinion, to do right by those investors, you have to sell for at least twice that. Getting to a purchase price that’s 2x to 10x what your funding valuation was is hard. I’m gonna make up numbers here, but if you can raise at a $10-million valuation, you can’t sell at a $10 million valuation, you could probably sell for $1 million or $2 million, the actual cash sales prices are substantially less than funding valuations because funding is driven by the market and by FOMO, and by all this stuff, people making bets. Whereas someone putting cash on it, they really do look at more financials, they’re just more picky about things because they’re not making a bet. They are really trying to do something, do right by their business.
All that to say, if you raise at a $5 million or $10 million valuation, but you’re only worth in cash, if you could sell at a million today, you have a hell of a lot of work to get to that $20, $30, $40 million mark and that was a big question in my mind, like again, those are made-up numbers. Those are not the numbers that we had but I kept thinking are we in it for that many years or is it better to take some money off the table?
Mike: Yeah. I think that’s a big challenge not just for you at that time but for anyone who’s considering going down that road because if you do take that money, you’re basically committing yourself to down the road not just selling the business but putting the business in a position where you have to grow to that point in order to be able to get anything out of it. I think in most cases, the investors are going to need to be paid back their money first before you get anything or before you get anything substantial. Even if you sell it, as you said, if you’ve raised it at a $10 million valuation and you sold it, let’s say, for $12 million or whatever, they’re gonna make their money. Even though you sold the business for $12 million or $15 million, you’re probably not gonna make very much at all just because of the way that those numbers work out, which kind of sucks, you built that business, and yes, it was with somebody else’s money, but you just don’t get nearly as much out of it as you probably could’ve if you bootstrapped it. The flip side of the coin is if you didn’t get the money, would you have ever been able to get to that point?
Rob: Right, that’s always a challenge. I think we’ve been clear in the past that we’re not anti-funding, certainly not anti. As someone who is now investing in businesses, I believe that there’s a time and a place and there are rational and good reasons for raising fund. We did an episode on this, probably a hundred episodes ago where we really talked through the difference between Seed Funding and Angel Funding versus Venture Capital, and kind of the pros and cons to that. I think we talked about fund strapping during that time and about companies like Card Hook and Lead Fuse and Term Buster that I’m invested in. They don’t necessarily wanna do the implied series A. They really are raising that round up front to move quicker, but to get to profitability, and then to build an actual business that will either exit someday or will throw off cash in the form of dividends. It is a challenging question.
I think I’ve publicly stated several times that I have no plans to do another one. I don’t plan to do another startup, I just don’t feel like I have it in me at this point. But if in some theoretical world I were to do it, I would probably raise a round. I would either raise a round for myself and self-fund it but with a substantial chunk of money, or I would go to my angel network and the people that I know and get some money into it because it just makes things so much easier if you’re an experienced, knowledgeable founder and you know the path, it can get you there quicker.
Mike: The Bitcoin rage, I think right now the initial coin offering, you could do an initial [walling 0:05:44] offering.
Rob: Oh, my gosh. Oh, my gosh. The ICO stuff is so ridiculous. That’s a whole other show. If you wanna hear about that, go to https://p.nomics.com, that’s Clay Collins’ blog about Cryptocurrency and he has a podcast now, and he’s dived into that stuff. Yeah, there’s some serious insanity going on there. I think the SEC is going to crack down on people offering these – essentially they’re securities, they’re selling securities without vetting the people on the other end, and there are laws against that. I think it’s going to become a mess for some folks.
Mike: Yeah. I’ve seen some crazy things like some companies lately that are publicly traded companies where they have a price on the New York Stock Exchange, or on Nasdaq, or something like that. They come out with a press release or an article that says that they’re going to be creating their own digital currency of some kind, and then suddenly, I think it was Kodak, it was just last week and their stock price went up by 50%. I was like really, are you kidding me? This is Kodak. Yeah, I don’t know. Having spent a long time in Rochester, New York, Kodak goes through a cycle, every three years roughly. It’s Kodak and Xerox. It’s like one year a bunch of people are laid off and then the other company is hiring, and it’s just people bounce back and forth between those two companies like clockwork and it’s ridiculous. But neither one of them either really does anything.
Rob: Cool. Enough about ICOs and Angel Investing. What’s going on for you?
Mike: I had a bunch of customers to Bluetick this week. That’s a good feeling to get back on track and kick things off in the New Year. Right now, I’m dealing mostly with support issues and finalizing the website design I’ve been working on and the email course redesign. I think my biggest challenge right now is troubleshooting large numbers of requests that are coming into my server on occasion, so we’re trying to figure out either what’s going on and why certain things are being throttled. I’m sure it’s a configuration issue at some place, but I just don’t have the logs because it looks like certain things are just not getting through and I don’t see what’s going on, so that came up this morning.
Rob: Dude, if you have a segment.com integration, they have [00:07:50] so many time, accidentally. Someone hooks it up and they don’t respect our rate limits, and we’ve had extensive conversations with them and I’m just shocked that business at large, it’s 429 response that we give back and we say, “This is the rate limit. The next time you can send is in this many minutes.” It’s all in there, Zapier has rate limits and we parse them, we actually respond to them but Segment said they’re working on it, but man they have taken the RAPI down multiple times in the past year.
Mike: I’m the only one who’s like I’m getting API requests coming in and I’ve never really looked at the API limits in the past because before it was just my app and now as I’m starting to integrate into other things, as you said, you’re basically accidentally getting [00:08:33]. I’m seeing the logs, I’m responding to dozens of requests per second, but if something gets dropped, I don’t necessarily see it in those logs. I would just have to go poke around and see like are there other logs that I can go look at on the system itself.
Rob: Yeah. Once you have customers going and you start scaling up, these things take more and more of your time. Before we dive in, I had a couple of books that I want to just circle back on. As I say, I listened to a lot of audio books during the year. I recently finished WTF, What’s The Future and Why It’s Up To Us, and that’s Tim O’Reilly’s book.
I mentioned that I was maybe a third of the way through and was not digging it a few weeks ago. I came at it with a new mindset and I do think it’s a good book, but it didn’t blow me away. He analyzes how the future is gonna be. He looks at certain companies and how they’re operating and he did this back in the 90s. He did in the early 2000s with Web 2.0, and now he’s doing it here. He says, “Certain companies embody what’s going to happen, where the puck is going. He looks at several companies, Uber, and he talks about Amazon, he talks about a few companies that do it. It definitely got better for me towards the end, but not a resounding. It was good. It was just 6 or 7 for me out of 10, but it didn’t blow me away like I thought I would.
Another one is called Make Your Kid a Money Genius Even If You’re Not. I always like books that help me raise my kids better and give me advice about that stuff. Though I liked it, I think it’s worth listening to or reading. My one complaint is that it’s so much focused on teenage, college, and later. Since my kids are 7 and 11, there was a little bit on that topic but it was very, very limited, so I started skipping chapters towards the end about saving for college and all this stuff that I already have done, how to manage your money during college, how to do credit cards, and all that kind of stuff.
Then, the last one is a really interesting book I stumbled on, it’s called Accidental Superpower. This is if you want to feel good about the future of America. Not in like a nationalistic way, but in a, there’s always the thought or the threat of like, “Well, you know, India, and China, and Japan, and everybody, they’re just gonna eat our lunch and all of the jobs are going overseas,” and all that stuff. Read this fascinating book, it’s by a guy with a PhD in Geopolitics.
Geopolitics is how geography shapes the political climate and how it shapes our country and how it develops. It’s just a fascinating look at all the advantages that really North America has as this place that’s separate from Europe, about the navy, about the natural resources. I mean just on and on and on and it keeps going through if you really look at this, at least from his perspective that America’s gonna be fine, that United States is gonna be fine, and that there’s always gonna be challenges, but then it’s not as dire as so many people make it out to be.
Mike: Awesome. While you’re talking about that, it actually reminded me of something else. Do you watch Netflix at all?
Rob: Oh, absolutely.
Mike: Yes. There’s a new series on there called The Toys That Made Us.
Rob: Yes.
Mike: If you haven’t checked this, it’s awesome.
Rob: I have.
Mike: There’s only four episodes for it, so for the listeners, it basically goes back to the 80s and 90s and takes a look at some of the different toys that became huge and really, really popular during that time frame. Obviously, some of them came about before that, but it goes through some of the history of toys like Star Wars, Barbie, He-Man, and GI Joe. Those are the four that they have. I don’t know if they’re gonna do another season or anything like that, but it’s a really fascinating look at the toy industry and how people weren’t marketing these toys, how they were getting them out in front of customers.
In some cases, it was the psychological hacks that they used in order to figure out what was gonna make a toy resonate with people and some of the struggles that they had to overcome in order to get the product out to market. It blew me away. It was awesome watching all four of them.
Rob: I’ve only done the Star Wars one, but definitely, I’d recommend, have the other three in my queue. What are we going to talk about today?
Mike: Today, we’re gonna be talking about how to evaluate per seat and tiered pricing models. This comes up, because yesterday I was talking to an entrepreneur about this exact topic and we also have a listener question in our queue about SaaS pricing models.
The short version of his question is that, on apps and services the post multiple projects, is project-based pricing a thing? What are the pros and cons and why would you not go down on one of these paths? He has a much longer version which I won’t get into but I thought that we could dig into the differences between per seat pricing versus tier pricing, talk a little about the pros and cons of each, and then also point people to a resource over on the cobloom.com website where they have what’s called the Ultimate Guide to SaaS pricing models, Strategies and Psychological Hacks. They dig really into I think about seven or eight different pricing models. Some of them are just variations on others, so instead of per user pricing, for example, there’s a per active user pricing model that you can look on. I thought that that’d be a good place to start our discussion.
Rob: Let’s dive in.
Mike: The first thing to talk about is what exactly is per seat pricing? The basic idea of per seat pricing is pretty straightforward. Each person that is using your software you’re going to charge the customer for. If they have one user, you’re going to charge them for one. If they have 25, you’re going to charge them for 25 users. Typically, each user has a given price for it, maybe it’s $5, maybe it’s $50 a month. But you can also have I’ll say a little bit more complicated model where you have different tiers for the users as well. Let’s say you have one set of features, it’s $5, or different set of features, it’s $10 per user and $15. I think that it gets really, really complicated, at least it has the potential to get really complicated, but at its simplest form, you have per seat pricing as just a set dollar amount per user that’s using the software.
Rob: Yup. Do you remember the rule for, I think we’ve talked about this, the rule for when you should use per seat pricing.
Mike: Yes. You mentioned it a couple of episodes ago, I think.
Rob: Yup.
Mike: If I remember correctly, if somebody is going to see a different set of data or have a different view of what’s going on, then they should have a per seat pricing model versus a tiered pricing model.
Rob: There you go. Two examples is if you’re using a CRM system, then each sales person will obviously see different prospects and different flows and that’s why per seat pricing makes sense there. But if you’re using an email marketing system such as Drip or Mailchimp, typically, you don’t see anything different if you login. Limiting the number of logins or managing by users doesn’t really make sense because people will just share logins if they wanna do it.
I like per seat pricing a lot, but you should only use it when it fits that role, and if it doesn’t fit that role, then avoid it and do one of these other purchases we’re gonna talk about. It feels weird when it’s bolted on. It’s really obvious. It’s something like why are you limiting by this? It doesn’t make any sense.
Mike: Can you give an example of where somebody might try to bolt that on and it doesn’t make sense? Because honestly, it sounds like you’ve got a couple of examples in your head.
Rob: There’s 500 or 600 ESPs that we’ve kind of run across over the years, and I’ve seen ESPs, again, something like a Mailchimp or a Drip have maximum, you can invite users in, up to five users to this tier, and then if you have more than five logins, then you have to jump up to a higher tier. It just doesn’t make sense, your customers are not getting value out of that, they’re getting value out of either how many subscribers they have, how many emails they send, how much money they make, there are other things to base your pricing on that are not a number of logins. Whereas, if you have something like pager duty where it’s monitoring software that pages your DevOps team or a CRM system, the more people you have on there, the more value you’re getting and be the more kind of willingness to pay that you should have. Those are kind of two examples both against and for per user pricing.
Mike: A couple of different cons for the per seat pricing that you already called out was that people will share accounts if there’s no real value associated with having a dedicated log-in for them. I think the other thing, and I’ve personally seen this as well is, if you are charging on a per user basis, it in some ways limits the adoption of that particular product, because then you’re basically forcing the company or the customer to make a decision every time they have either a new employee, or a new contractor come in, do we create a user account for this new person because it’s going to cost us money to do that. By pushing that decision on them, a lot of times the answer’s gonna be, “Well, no, we can get away without it.” Or, they go towards what you had pointed out, they just start sharing logins and it becomes a detriment to you because then you have to just evaluate, are you gonna enforce the logins on a per user basis, or you’re gonna make sure that the only one session is connected at a time, or you’re just gonna ignore that issue?
Rob: Another con to per seat pricing. Again, per seat pricing works, but these are some potential negatives. You do have a potential for increased churn as a result of fewer people in an organization using it if they are trying to save money by not having everyone login. It’s one way that people might churn out of your app.
Mike: If we look at the benefits of the per seat pricing, it’s really easy to understand. It’s x-dollars per user, per month, and there’s really no complicated explanation for it. Another nice side of it is that it does scale with usage, you are not really leaving money on the table if somebody has 5 people signed up, you’re gonna get paid for 5 people, if they have 500, you’re gonna get paid for 500. You don’t have to worry as much about whether you’re leaving the money on the table or you’re selling yourself short inside the app.
Then, the last thing is that when you have a number of users who are using your product, the revenue itself is generally predictable, because you can see, not just that you have that number of users and it’s a month to month subscription of some kind, but also you can see when people are not using the product. If they’re not using it, chances are good that you can forecast a little bit and say, “Well, how long after they stop using it does this particular user or account fall-off, and then we no longer start getting revenue from it?”
Rob: That’s where this variant of per using pricing started to come about, it’s called per active user pricing and we’re not gonna dive totally into this but Slack does this. If you have a team of 50 people, 50 logins into Slack, but five people don’t use it at all during a month, they actually don’t charge you for that. That’s kind of cool way to do it.
Mike: Yeah. That is kind of a cool way to do it, and I think if you’re large enough where you don’t necessarily care whether all of your users are on the system or not, then that’s fine. But I think for a lot of smaller companies, that also creates some pain points around when you like somebody says, “Hey, can you cap on Slack and go take a look at this?” “Oh, I didn’t get that.” Or, “I haven’t logged in.” Then, they log in to check one thing and now you’re getting charged for them, it’s like okay, well, if they didn’t have the login to begin with, then you wouldn’t have to worry about that.
But, I don’t know, I think for smaller businesses, if you’re between one and five people, it can be kind of painful, especially if the price point is more than like $5 a month. $5 a month is not a big deal, but if it’s $50 or $100 a month per user, and suddenly you have two or three people log in extra just to check something, now you’re getting charged for them because they’re considered an active user
Rob: Cool. What’s next?
Mike: The next one to talk about is tiered pricing. I think that if you look back historically, I think it was Hiten Shan with Crazy Egg, they’re the company that I think you can kind of point to as putting together those different tiered pricing models, another one is Basecamp obviously with all of their different pricing tiers that they have. Being able to maximize revenue inside of their apps by offering a tiered pricing model.
The whole concept of the tiered pricing model is that within a given pricing tier, you have access to a certain set of features, and a certain number of users, maybe you have features in between the tiers, or maybe you have the tiers based on number of users, combination of those things, but essentially it allows you to put those things in different pockets, so to speak, and let people self-select which one is the most appealing to them. I think that this is interesting from the standpoint that you can allow the user to select those but the downside is that because you’re allowing them to select it, they could easily select the wrong things or they may have problems deciding because you didn’t put the gates between the different tiers on the thing that is most important to them, so there’s pluses and minuses to this approach.
Rob: Yeah. I would say when I think of tiered pricing like a strict definition, I think of it being based on a single metric or maybe two. An example to come back to ESPs is Mailchimp and Drip charge on the number of subscribers. That’s all the tier. The tiers go up and they go down based on that, and it’s not also based on features because I see feature dating as a separate or a more complex version of tiered pricing. True purest tiered pricing, remember Kissmetrics was based on, I think, it was the number of events in a given a month. Segment used to be based on the number of events, and I think it’s actually different now. They changed it. Zapier was like that. It’s not metered because meter would mean like AWS where you get charged for exactly what you’re using but it’s these tiers up to 100 subscribers and then 1,000, and then 2,000, and then 3,000.
Mike: I think the interesting thing is that if you go over to Basecamp’s website right now, the only pricing that I see listed is it’s $99 a month all inclusive. What used to be when you went to Basecamp and you sign up for their product, you get X number of projects and let’s say it was up to 10 projects and unlimited users, but then you had a limit on the file storage, for example, with limit on the number of active projects that you can have at one time. It’s just $99 a month flat rate as many users as you want, as many projects as you want, and they’ve gotten away from all of the pricing tiers. I think it’s interesting to see the evolution that they’ve gone through for their pricing.
Rob: Yeah, and that’s something that’s really common. If a founder comes to me and says, “Look, I’m just launching, or I have 5, 10, 15 customers, how should I structure my pricing?” My advice would be go as simple as possible to start with and if you’re gonna do per seat, then just do per seat. Don’t do tiers to start with and do $10 per seat, or whatever you’re gonna charge, or if you’re going to meter it, then do your tiers and see what happens.
Get 50 customers going and see what the complaints are, see how the revenue stacks up, see if there’s an opportunity to make it more complicated, but don’t start out with complicated pricing because it’s hard to simplify things. It’s easier to make it more complicated. Easier to add a V2 Pricing that has some differentiators once you have the data. That’s the thing, when you have no data or very limited data, it’s really hard to make choices and you’re likely to make the wrong choice the more complicated you make things. I do think that pricing should evolve overtime. If you look at like I said segment.com, pricing is way different than it used to be. It’s not even based on the same metric it used to be. As you said, Basecamp is different.
Most SaaS apps, if you look five, six years ago, their pricing is probably substantially different than it used to be. Even Mailchimp used to have a fairly linear pricing model, but now if you look at it, it’s a very choppy thing that it’s linear and then it flattens out for several thousands subscribers. Then it goes up linear and then it flattens out. I’m sure that they’re really smart over there at Mailchimp. I’m sure there’s a reason that they did that and it’s probably based on data.
Mike: Yeah. If you look at even at the bottom of Basecamp’s pricing page, it shows how many subscribers or how many customer they’ve had over the years. Back in 2004, it was 45, and then 2006, it was 100,000, and now it’s up to 2.5 million. I would imagine they have a lot of data to be able to back up their justifications for making some of these decisions. It’s not that they really need the money either, so sometimes it could be just that they got no point where they don’t necessarily care about it as much and they just want to attract as many users as they can especially on the higher end because if you’re only charging $100 a month, then it makes it very easy for larger companies to justify it and say, “Oh, let’s jump on this because it’s only $100 a month.” Then you just get it for the entire company.
Rob: Yup, makes sense.
Mike: If you look at a company like Crazy Egg, you go to their pricing page, they still have four different pricing tiers. This is what I was talking about where they will segment based on a couple of different metrics. There are two lower ends plans that’s visits per month, and then active pages, so it’s 25,000 visits and 20 active pages for their standard. Then below that, it’s 10,000 visits and 10 active pages. Depending on which of those two metrics you need to pay attention to, you’re gonna have to choose either basic or standard. If you go over one, you’re probably gonna have to switch over there. Then their plus and pro-plans, there’s also advance features that they use for that as well. Instead of daily reports, you can get hourly reports, and then there’s advanced filtering, mobile heatmaps, etc. You can get more complicated but as Rob pointed out, you have to have the data first. At the beginning, you’re just guessing and throwing things at the wall and seeing what sticks, and sometimes that’s what you have to do, but that helps you get the data.
One thing about tiered pricing that had come up at Microconf, Patrick McKenzie had mentioned this where he was working with the customer and he ended up sending out an email on their behalf to their customer based and had offered them an upgrade. Essentially, he looked across the customers’ customers and said, “How many of these people are close to the limit?” When he found that information, he sent out an email or helped him send out an email that basically said hey, “Hey, you are close to the higher end of your pricing tier, why don’t you upgrade and give yourself a little bit of headroom?” That was a very clear upsell to the customers and that consulting client of his ended up making a, I don’t know exactly how much revenue was from it, but it was sizeable enough that it made a difference and helped them justify bringing him on and moving the business forward.
Rob: Yeah. I always felt like that was an interesting tactic. I’ve never used that. If I got an email like that, I would think to myself, “Aren’t they gonna be auto-upgraded anyways?” But apparently, it works and it’s something that I know Patrick did with his consulting gigs and got the people to upgrade. Looking at this Cobloom article, they have I think six or seven types of pricing models.
One is flat rate pricing and that’s essentially what you said with Basecamp. Most companies, that’s not gonna be what you wanna do. You’re gonna probably wanna do a per seat or do a tiered model that’s based on one metric to start with. Another type is usage based which is pay as you go. Think of this like Amazon AWS or Google Cloud Hosting and Microsoft Azure. This is not something that I’d recommend for bootstrapped startups frankly because hearing winds up being a better way to go, it will make you more revenue and revenue, so critical for you at the time.
Of course, there’s tiered pricing, there’s per user pricing which we talked about. There’s this per active user pricing they have and then they have per feature pricing which can be done totally separately from tiers but I’ve typically seen it as you have tiered pricing based on a certain metric and then you also start sprinkling per feature pricing in there. I think kind of think of who, I know Zapier has done this. They used to have number of event executions per month and then if you wanted to use Drip or Hubspot, then you had to move up to a higher tier even if you had a small amount of events because they figured that if you’re using those tools, that you’re a more sophisticated marketer and you have a bigger budget. That’s one example.
The last one is Freemium, although I see Freemium as working with any of the above. You can have tiered pricing and then just have a forever free plan that is below those. Those are the seven models that they threw out just for completeness.
Mike: Yeah, I forgot who it was who was talking about Freemium and then referred to it more as a distribution model, not necessarily a pricing model.
Rob: Right, yeah. That’s how I feel about it and it’s a marketing approach more than anything else. That’s where my quote is that the Freemium Pricing model’s like a Samurai sword; if you know what you’re doing, you can wield it with great expertise, but if you don’t, you’re likely to cut your arm off. That’s how you see a lot of bootstrapped startups that just launch with Freemium because that’s what the big guys do, and then boom, that goes away, they shot their free plan down. I’ve seen dozens and dozens of companies, including Basecamp used to have a free plan, and they do not.
Mike: Cutting your arm off sounds like a great place to leave off this episode.
Rob: It sure does. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 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 a full transcript of each episode. Thanks for listening, we’ll see you next time.
