Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about growing from $1k to $5k MRR, projecting SaaS revenue growth, refining your sales process, and more listener questions.
Items mentioned in this episode:
Transcript
Rob: In this episode of Startups for the Rest of Us, Mike and I talk about growing from $1,000 to $5,000 of MRR, projecting SaaS revenue growth, refining your sales process, and more listener questions. This is Startups for the Rest of Us episode 343.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products whether you built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike: I’m hoping that in another week or two, I’ll have my completed self sign up process in place. It’s been rather painful to rework those pieces of code just because it’s core to somebody signing up so it has to work properly. I’ve found places where if the signup process previously had failed, at some point along the way, it left a bunch of orphan data and I’m like oh God. And then you start over and then it leaves all these things in the database and I’m just like, “Alright, I got to start refactoring some of that stuff.” The cleanup is kind of a pain in the neck but things are progressing pretty well at this point. I’m hoping to have that cleaned off of my plate in the next week or two.
Rob: That’s nice. One thing that we do, we have a two step sign up process for trial. If they do the first step but don’t enter their credit card, we cookie them. If they come back, we just present them with the credit card. We don’t want to make them do the first step again.
Mike: That’s sort of what I’m looking for right now but I’m looking for ways to create the account and have it as a placeholder without also creating a subscription inside the system. That’s the part that’s hanging me up a little bit. I’m trying to figure out exactly how to do that. The cookie idea is interesting but at the same time, I don’t necessarily want to leave their credentials sitting there in a cookie or someplace either.
Rob: Oh yeah, no. We store it in the database and then cookie them with an account ID or at least a user ID. We wouldn’t store that in a cookie. It’s just an idea. It’s a nice elegant way. Some people will come back and be like, “I can’t believe it. I didn’t have to enter my stuff again to get in.” It’s like a usability thing for people who get stuck in the middle with the credit card and then come back a few hours later and see that it’s already there at the credit card screen.
Mike: Yeah, that’s exactly what I’m looking for. I’m looking at trying to get around because like I said, data structures don’t really support that just yet.
Rob: Got it. That’s a bummer. For me, you probably hear, I’m sick this week. I’ve been working but I just kind of feel hazy and everything is just taking longer to get done. I hate being sick a lot because I feel like I have a bunch of work to do. I got things to do. Who’s got time to be sick these days?
Mike: My son was sick this past week so he was out for one or two days at school.
Rob: That’s crazy. We went to California last weekend for Memorial Day and pretty much my whole family got, it’s just a head cold, we all got it. I don’t know. We had it within the first day we were there so I feel like we caught it before we left. I don’t think you catch it on the plane and then the next day you wake up. I think there’s a longer incubation period for most colds so the timing was kind of bizarre but it seems to be hitting each of us in its own way right now. But the show must go on. Am I right?
Mike: Yes.
Rob: Every week. Every Tuesday morning, we get this podcast out. Apologies in advance if my voice grates on people, I am heavily using the mute button to cough while you’re talking right now.
Mike: What are we talking about this week?
Rob: We have a nice backlog of listener questions once again and so I wanted to run through some of those. Actually, there are a couple that really aren’t questions. They’re just comments and accolades for us. This first one is a voice mail about growing from $1,000 to $5,000 of MRR.
Bryan: [Voice mail] Hey Rob and Mike, Bryan Fleming from Detroit City here. I just wanted to call and say thank you so much for the podcast you guys put out. Being here in Detroit, you just don’t talk to anybody who’s doing the SaaS stuff. It is so goddamn hard.
I’ll tell you what guys. A year ago, I was listening to your podcast, struggling along my SaaS business, doing about $1,000 a month. I listened to an episode where you guys were talking about how to know if your business is viable and sketching out your lifetime customer value on a napkin. I did that and it’s like a lightbulb went off. I moved to a yearly re-bill. I increased my prices and here I am a year later, my business went from $1,000 a month to $5,000 a month. I know you guys have seen ones that have grown better but I’m pretty proud of it.
Again, it’s all from listening to your guys’s episode, that was one in particular. I appreciate everything you guys do like I said. You’re the first one I go to on my podcast, really looking forward to it every week. Keep up the great work guys and when I do have a question, I’m going to call back in and hit you up on it. Take care. Bye.
Mike: That’s good to hear. It’s always nice to hear from listeners who listen to an episode and that are able to act on that advice or the commentary that we give and be able to take things to the next level and really move their businesses forward. I really appreciate hearing that from you, Ryan.
Rob: Yeah, that’s awesome. That’s really why we do it. The fact that anyone ever gets value out of anything you and I say, Mike, it’s just a miracle at this point. Our next question is about how to project revenue growth? It’s from a friend of the show, Craig Hewitt. He’s the founder of Podcast Motor at podcastmotor.com.
He says, “Hey guys, after launching my first SaaS product last week, I’m wondering what realistic ranges for growth scaling are. Heard Mike talking about doubling Bluetick revenue from $1,000 to $2,000 in a month on the last episode, it seems like a great goal but is that kind of expectation realistic? Does the same growth curve slope apply at scale? For instance, did Drip see 100% growth months after you were doing mid five digits a month? Be interested to hear your thoughts.”
Mike: For mine, I looked back over the revenue numbers for Bluetick after I started officially selling it to people. There were a couple of months where I did 100% month over month growth but it was not common. It was like I would get 100% one month and then I would double it and then the month after that, I get like 50% or we just stay even in terms of growth.
There is this exponential curve that you end up getting. Depending on which numbers you’re specifically looking at, whether it is growth from one month to the next versus your total size, those are two entirely different things. What I was looking to do was originally, I was saying, “Okay, I want to go from $1,000 to $2,000.” But even a couple of days later, I looked to that and said, “You know what? That’s actually not very realistic.” Because in my mind it was like, “Oh, I’ll be doubling my customer base.” But the reality is that doubling the customer base is not realistic because it took me x months to get there.
What would more realistic is if I were to say, “Look, I want to double the number of customers that I got last month.” That jump is probably too large. If it takes you four months to get to 20 customers, you’re probably not going to be able to add 20 customers in the next month barring some major marketing strategy that you do or a big launch or something like that. That’s not what I had planned. I realized a couple of days later that that was not going to be a realistic goal.
Paul Graham has some advice about the growth rates for Y Combinator start-ups. They’re looking for 5% to 7% growth per week and he says if you can hit 10% a week, you’re doing exceptionally well. If you can only manage 1%, that’s a sign you haven’t yet figured out what you’re doing.
In the early days, I think it’s a lot easier to get those higher percentage growth numbers just because adding 1 person if you’ve got 10, then that’s a 10% growth rate but once you get to 100, adding one is only 1%. Again, you have to look at both the total size that you’re trying to grow and then back track a little bit and look to see how long it has taken you to get there in order to be able to start projecting forward and establish more realistic goals.
Rob: Yeah, there is kind of early stage growth where you’re just scrapping for every individual customer and it can be a little harder to project at that point. But if you have a nice source of folks that you can bring in almost by hand where you have that 300 person launch list or something and you’re kind of individually choosing people out of that, then you kind of get a feel for how many you can logically bring in in a month.
Once you’re past that, let’s say you’ve launched and you start marketing. You have content marketing. You have Facebook ads. You have SEO. You just have all the channels. You’ll start to see that the numbers just pan out. Depending on the number of unique visitors you get to your site, what percent convert to trial or a customer and you can just look at those numbers and that will allow you to start projecting how in a month, two months, three months and then you’ll be able to see which levers you need to pull in order to increase that. This is where it becomes easier to project but harder to make a dent because adding one, two, three customers doesn’t make a dent when you’re going $5,000 a month MRR.
Now, to really dig in on Craig’s question. He’s asking, “Can you have 100% growth once you’re already doing $50,000 a month?” The answer is not typically. That’s not really a sustainable growth pattern. Don’t think of it in terms of percentages. Think of it in terms of flat dollar amounts.
In the early days, I would shoot for if you can get into four figures of monthly MRR growth, you’re doing okay. Early days is like sub 10,000 or 15,000 of monthly recurring revenue. If you can grow at $1,000 or $2,000 a month during that time, I don’t think of it as a percentage. I just think of it as getting the $1,000 or $2,000.
If you can get to that and make it sustainable so that it’s a flywheel in essence that grows at $1,000 to $2,000 a month, that’s a pretty decent start. If you look out a year, then you think, “Wow, I’m going to have grown $12,000 to $24,000 MRR.” And then what you do is you look at how do I know get to $4,000 or $5,000 MRR and then how do we get to $10,000 MRR growth.
The sooner you can get there, your growth will be huge at first. Let’s say you get to $20,000 MRR and you’re growing at $5,000 a month, man, you have a 25% growth rate. But then next month, you’re going to have a 22% growth rate. And then the month after, if your growth stays flat, you’re going to be at 18%. It’s going to get smaller each month but if you’re still growing at $5,000 MRR, that’s actually a pretty damn good bootstrap business. The percentages start having less of an impact at that point or I should say less meaning because if you continue to grow at $5,000 MRR every month, that’s a good business.
At a certain point, your churn will make it so that your $5,000 MRR growth will get smaller and smaller over time. That’s really a whole separate conversation. That’s when you hit a plateau and there was an episode we recorded probably 100 episodes ago with Reuben Gomes about how to see plateaus coming and how to get over them.
I guess what I’d encourage you to do, Craig, when you’re thinking about this is think about it in terms of absolute dollar amount. People say percentages because A, it sounds impressive or B, they want to not give absolute revenue numbers in public. When I used to talk about Drip’s revenue growth on the podcast, I didn’t want to say we’re growing at $5,000 or $10,000 a month so I use the percentage instead.
But realistically, the absolute dollar amount especially for a bootstrapper in my opinion is what counts because that dollar amount is what allows you to hire people, it’s what allows you to buy Facebook ads, it’s what allows you to run the business whereas percentages really have just such a smaller meaning. You do hear about Y Combinator start-ups or even some bootstrap start-ups that get really good traction.
Growing 20% to 40% a month for a while is totally doable. It’s hard work and you really need to catch a flier. It’s a Cinderella situation but it is possible for the time being but growing 100% month over month for more than just a few months is unheard of. I think you would literally need to be like an Uber or something to be seeing growth like that. I hope that helps, Craig. Thanks for the question.
Our next question is from Chris from vendorregistry.com. He says, “I’ve been thoroughly enjoying your new podcast. I heard you were looking for some questions. Vendor Registry’s SaaS platform and marketplace streamlines the $250 billion dollar local government purchasing market by standardizing and centralizing traditionally paper intensive workflows. Since we have so much green field ahead of us, coming up with new ideas takes only 10% of our time. The other 90% is spent debating which ideas to execute first. Ideally, we stop debating. We let the market decide through AB testing however, implementing AB testing requires money for the tools dab time to build out two versions of everything and enough users to generate actionable data. All of which are in short supply. How do you recommend we get started with AB testing given the resource constraints?”
Mike: I think the resource constraints that you mentioned are probably the place to start because you’ve talked about how there’s a couple of different places where you have these resource constraints. There’s time, there’s money, and then there’s the low numbers of users. I think the low number of users is the thing to really focus on just because it’s really difficult to do AB testing if you don’t have a large number of people that you can put through a particular part of your sales funnel and get the results that you need in a short enough time span.
If you’re running an AB test and it takes you 12 months to get a result, there are two problems to that. The first one is that it takes you 12 months to iterate and do any sort of testing to move you to the next level. The second part of that is that because it’s such a large time span, those results are probably not really statistically relevant anyway.
Even if you go through those calculations and you think to yourself, “Oh, well yeah, this is statistically relevant.” It’s probably not just because of the seasonality of that stuff. It may be statistical over the course of another year but it’s not helpful. That’s the root problem. It’s just not helpful for your business to figure out really what’s going on. I would not really look at AB testing at all.
I would probably look at other areas of your business and try and find places where you can really drive the business forward whether that’s content marketing or advertising. You could try various different advertising channels. You could try face to face meetings.
For this particular industry, it seems to me like it’s very much relationship driven and yes, there are certain lists and stuff that you can get on but having relationships with people who can recommend your services, that’s really what tends to drive business in a larger enterprise environment which is kind of what the Vendor Registry falls under.
Rob: I’m not sure how much I have to add to that other than it doesn’t sound like split testing is the way to go for you. You just need a lot of traffic to do it and it does take a lot of time. It’s easier to split test things like headlines, pricing page. I would not build out two versions of anything.
I think this is much more about talking to customers, potential customers and getting a small sample size but getting real feedback, whether that’s in person at conferences, or trade shows, or Skype calls, or emails, or whatever it takes. That’s going to be a faster and more effective way to try to figure out what to build next.
This is the conundrum of being a good product person. It’s figuring out what to build next. I think there’s a big element that your vision of what it should do is a big part of gut feeling based on your experience in the space. You take a method of landscape. Part of that in my opinion should not be the over riding part is talking to customers and getting ideas and getting a sense of where the market wants you to head.
I don’t think split testing is the way to go. You think about how we decide on what’s the next feature to build in Drip. We don’t build two different features and split test them. We make the decision. It’s based on a bunch of factors that we combine and have honed over the past couple of years. Thanks for the question. I hope that was helpful.
Our next question is from a listener who asked to remain anonymous. He says he’s been following the podcast for a few years, can’t get enough of it. He’s a self funded a B2B SaaS startup for about two years. He says, “I have dozens of potential customer interviews and have been quite involved in helping beta users and testing the product myself. It touches on a sensitive business process that impacts other processes so potential customers are on a certain level of configuration and they are very afraid of bugs. I’ve had a few bad experiences with some beta users who keep asking for improvements and never sign up for the product. To be fair, the app has had some bugs here and there as we were in a hurry to push new features. We may have gone too far in the opposite direction asking customers to sign up first a statement of work contract before doing any implementation. It is really slowing the intake of new customers even if they are enthusiastic after we show them the demo. Now that we can slow down on new features, I’m hesitating on the priority to pursue. I have a number of things we’re looking at. Do you think we should remove any barriers from the sales process for the time being, focus on removing all bugs, and send the message that the app will have to be used mostly as is or do you think we should make Screencasts, write tutorials, etc. to let users start on their own? I’m hesitant to do this because based on their objectives and on their existing processes, they will have to use the app in different ways. For what it’s worth, the cheapest pricing tier is $300 a month and the medium tier is $900 a month.” What do you think, Mike?
Frankly, I don’t think we need to stay within this. He said should I do this or that? I’m not sure that either of those is the right choice. I don’t think we need to stay within the boundaries he’s laid out.
Mike: I think this is an interesting question. The problem here is I think that you’re unsure of how to proceed and it partly depends on where your revenue is and I think at those price points, you’re probably at a point where if you’ve been working on it for a couple of years, my guess is that it’s probably profitable.
I think that given that, you probably want to put yourself in a position where the app is making enough money that you can pour additional money from the business back into it and reinvest those profits to build not just the business but also go back and address some of the quality issues or the bugs and stuff that are in there. That’s just going to take more resources, more engineering time, and to get that stuff, you need money. I would probably focus on anything that is going to be bringing in revenue.
It doesn’t seem to me like that’s doing screencast and tutorials. Those are things that are helpful for users but they’re not necessary to get somebody in the door as a paying customer. You can deal with a lot of issues like that that come up on an ad hoc basis or during on boarding sessions. There are ways to get around that without actually having to do the work.
Basically, do whatever that needs to be done in order to drive those sales through, if people need personal demos or hand holding during a personal walkthrough or something like that. You can use those as well. The price points, my guess is you’re probably talking to people directly for most of your sales especially if you’re going to do any sort of annual contract or anything like that. Those are the places where I would focus and then once you have that money coming in the door, then turn around and start deciding where that money should be allocated to help build the product in the right direction.
For people who are coming in, I think the interesting piece about that was that flip flopping back and forth between, “Oh, there’s some bugs. We should get them taken care of.” Versus going to the other extreme because people aren’t actually signing up for it after you go in and address the issues that they brought up. What I’ve been doing is telling people, “Look, if you sign up, then I will look at that as kind of a higher priority.”
I typically track feature request during a demo and I’ll write down some of these name or tag it on a bug in an open case inside my bug tracker and put the person’s name on it. But if they don’t sign up, automatically, it becomes a lower priority to me because it’s not a paying customer. They didn’t sign up for it. But if I get enough of those onto a particular case, then I can probably justify spending time and effort because then it looks to me like it’s impacting sales.
It doesn’t sound like you are tracking any of that information right now. You’re really just micro focused at the individual person who you’re looking to onboard. I’ll back off from that a little bit and try take more of a macro view to it and say is this a big enough problem that we should deal with it or is this something that we can just log and come back to in the future?
Rob: My sense is it sounds like you have a couple of issues. If you have bugs in the app right now, that’s the first thing you need to take care of. I would put the brakes on everything and fix those because if you get a reputation in this space, and it sounds like it might even be a small space where people know each other and are talking, if you get the reputation of being buggy, that doesn’t go away. It’s like your credit score. Once you jack that score, it is really, really hard, if not impossible to get that back. That would be the first priority of all this stuff that I would basically buckle down.
It’s kind of like having performance problems. It’s like we halt almost all feature development if we find that we’re running into performance problem because you just can’t let that stuff go. It’s only gonna get worse and it’s going to tarnish your reputation. As that’s in process, it sounds like you had folks who ask for improvements and never sign up. By improvements, if you mean bug fixes, then that’s fine. I would do that.
But if they’re asking for more features, something that I would do in the early days of Drip, is if someone asks for a feature, I would say, “Is this the one thing that you need us to implement to be able to use Drip?” If they said, “Yes.” Then I said, “Great. Sign up for a trial and we will have this implemented by the time your trial expires. If we don’t, I will comp your account until this feature is built.” We don’t do that anymore. Tens of thousands of users, you can’t. But in the early days, when we were scrappy, that’s the kind of stuff I was doing to try to get.
If someone had a list of 10,000 or 15,000 people, it’s going to pay us a couple of hundred bucks a month. That was a big deal and it sounds like for you, it’s totally worth doing. It’s interesting. I don’t know about a statement of work contract or any of that stuff. That to me, feel a little cumbersome and a lot of overhead but just having them sign up, put a credit card on file, is a step and you’ll find that some people will balk and they don’t sign up and that’s fine. That’s fine. They were never going to sign up. The ones who do are committed to it and then you implement their features. I just found that that’s a good way to do it.
Given your price point, personally, unless you have a lot of inbound interest, I would personally be hand holding and doing very much one on one sales. The fact that between $300 and $900, I’m assuming you have a higher end tier, your monthly average revenue per user is going to be let’s just say $400 or $500, $600 range. That’s a nice chunk of change. That is definitely worth your time or someone you hire’s time to handle, focus and get them started.
I would not tend to go towards the self on boarding at this point just because of the price point and the value. I think that the value the customers bring to your business is worth the time to spend especially in these early days, to do the learning and to handle everybody into the app. I hope that helps.
Our next question is actually not a question. It’s a compliment for us and the podcast. It’s from Alex Summerfield. He says, “I’ve been listening to your podcasts for about three years. I remember when I first listened to the episodes, just thinking about it, part of your intro really fit for me. I tried a couple of ideas but they never took off. After switching a couple of jobs and getting too busy to work on side projects, I finally got sick of my job and started consulting and working on a startup on the side. I listened to your latest episode and heard that just thinking about it part, and it finally hit me that I’m no longer just thinking about it, I’m actually doing it. I just want to say thank you for the impact you’ve had on my life. All the advices helped and I really enjoy hearing the updates on your businesses.”
Mike: Thanks for the compliment, Alex. I do think that it’s really hard to get started and I think a lot of it has to do with barriers that we encounter as we’re going up in the social environments that we either come out of or immerse in on a daily basis. Breaking away from the things that the people around you are doing is just really challenging, to be honest.
If you don’t interact with the people who are starting their own businesses, or entrepreneurs, or even doing software on their own, it could be very difficult to break the mould and people look at you funny and say what is it that you’re doing because you’re the oddball at that point. You’re weird. It’s nice to hear from someone like you who’s gone out there and actually started working on side products with the intent to move forward and start your own thing.
Rob: A couple more questions. Our next one is from Rob. He says, “I’m part of an early stage bootstraps startups company in the UK with two other co founders. We are between three to six months from launching a product and having any revenue. One of my co founders is pushing for job titles/corporate roles to be assigned like CEO, CTO, etc. Is it important to allocate corporate titles/roles? Is it best to get this sorted early in the life of a company or is it just a distraction?”
Mike, as you think through this, I think corporate titles versus corporate roles is two totally different questions so maybe we can tackle each of those individually.
Mike: I was going to mention that because when you’re doing customer development, it seems to me like CEO and CTO, when you’re talking to a prospective customer, you may think that that sounds impressive but for the most part, especially if you’re early on, you don’t even have a product yet, those titles, I feel like they detract from whatever it is that you’re trying to do because they say, “Oh, you’re the CEO of this company that really has nothing.” And you’re asking people for help. Versus if you are the CEO of a company that has a full blown product and it’s been in the market for three or four years, that has weight behind it.
That early on, I would just say founder or co founder. I wouldn’t even worry about those corporate titles when you’re talking to customers or prospective customers. They’re basically meaningless at that point. In terms of roles though, that’s what people tend to think about when they think of titles like, “Oh, the CEO does this. The CTO does this.” Really, internally, that’s where that matters but externally, it doesn’t.
You want to have a clear expectation of each other and what it is that you’re expected to do inside of the business. And then externally to your clients and customers, I would just say you’re a founder or co founder. I wouldn’t go into what it is your actual title is because it really doesn’t matter. But internally, you do need to be clear on what is your responsibility versus what your co founder’s responsibility is so that each of you know what they’re supposed to working on and when they should be getting guidance and input from the other person into the things that they’re doing.
Rob: I don’t have much to add to that. I think that’s a very good summation of it. There are certain things that are distractions. I found that using the phrase co founder is really helpful especially in the early days when folks know that you’re still being scrappy and doing customer development.
Last question for the day is about sending promotional emails to existing customers. It comes from Bruce. He says, “Thanks for the great show. I have a simple software product I’ve been selling online for several years. My customers all need to provide their email addresses so I can send their payment confirmation and so I can authenticate them when they log in to use my product. I don’t state on my signup page anything about what types of communications the new customer should expect to receive from me when they provide their email. I’m releasing some improvements and new features. Some of these improvements will benefit existing customer with no additional payment. Some new features I intend to sell to existing customers as add ons. Is it okay to email my customers to tell them about the new features? They haven’t given explicit consent to receive email from me. I noticed that whenever I send a SaaS part because I’ve received a lot of emails providers even though I don’t recall opting in to any mailing list. If you guys think it’s ethical, legal, or wise to send emails to my existing customers, would you recommend I add an opt in checkbox or some small print stating the customer is going to expect to receive occasional information/promotional emails and only send only send emails to customers who opt in or have had the chance to read the small print? Thanks in advance for your advice on this. This app is called countingdownto.com.”
I like the way he phrases it. There are legal implications and then there’s ethical. That seems a little strong but your own moral compass is how it feels. What are your thoughts on this, Mike?
Mike: I think we have to provide the standard podcast disclaimer that we’re not lawyers and you can’t rely on us for legal advice, especially given that this business is based in Canada so laws there are different than they are here in the US. Given that, my thoughts on this are that if somebody is signing up for your SaaS product, there are a couple of different types of emails that you could send to them.
When they purchase it and then you send them a receipt, that’s what’s considered to be a transactional email. They purchase something from you, you send them a receipt. That’s completely legit. You are almost expected to send that email and that does not fall under any sort of spam laws that I’m aware of. When you get past that and you start talking about newsletters, and product updates, and things like that, that’s where it gets into the gray area which I think that you’re a little concerned about.
If you’re running a SaaS, it seems to me like you almost have to have people on a newsletter of some kind or a product updates email list of some kind. That said, I would default to adding them to it but I would explicitly give them the ability to opt out at any time. Even if they are an ongoing customer, you might want to segment that list a little bit to give them a profile page that says only email me about product updates and include me in my newsletters. Two different options and then you segment your list based on those two things.
That way, if somebody wants completely out, and they only want the receipts from you, you can still send those email receipts to them. But if they also want to receive your newsletter and the product updates, you’re still going to be sending those to them. Again, just segmenting between those two types of people or if there are other segments that you want to include in that, I would do that but I would opt them in by default and them let them choose otherwise if they want to. That’s probably the way that I would approach it for that.
But again, there are obviously legal implications as well. As to what Rob said about the moral implications of it regarding your moral compass, if you sign up for a SaaS, you expect to get email and told like, “Hey, this is how this product can provide additional value.” I think what you’re probably seeing is when you sign up for new products, people are sending you a lot of onboarding emails. I think that those fall into that grey fuzzy area where a SaaS vendor could easily overwhelm you with a lot of email to the point that you start to consider it spam more than anything else, especially if you decided to not use the product.
There is a difference between those emails that are being sent as onboarding emails where you don’t have the opportunity to opt out because some vendors will send those and you can’t opt out. That’s part of their on boarding process. Depending on whether you allow them to opt out or not, that factors into it.
Rob: Yeah. In the US, CAN-SPAM says if you have a commerce relationship or customer relationship with someone that you can send emails to them related to the business transaction and I think otherwise, there’s always this grey area. It’s like if you read the verbiage exactly, you could interpret it one way or the other. But in general, you do see SaaS apps. If you sign up, they don’t explicitly make you opt in and they send email and people are not being investigated by FTC or FCC or whoever would investigate that. I think the precedent is that this is generally considered a legal thing.
Like Mike said, your moral compass is going to vary. There are people who will say, “Oh, I should explicitly opt in for every single email you’re going to send me.” People get so far into the protection of your email address and your inbox and that no one should ever email you and then on the other end of the spectrum, there are spammers. You gotta ask yourself what’s it worth. There’s some business value to you.
People genuinely do generally really want to hear about feature updates, specifically feature updates to the app. Absolutely! Who doesn’t want to hear that? It’s pretty rare that people unsubscribe. Like Mike said, you should give them the opportunity to do that. Even if you’re sending things that are up sells, my guess is that’s going to be pretty valuable information for people because if it’s an up sell, it’s likely going to have some value that a good chunk of your list is going to at least be interested in and interested in hearing about.
Everything you’ve mentioned in terms of content, it’s not like suddenly you’re taking customers and just starting sending random blog posts with some content. These are really applicable to what they’ve signed up for and what they’re paying you money for. I don’t personally have any kind of issue with you doing that. It sounds like you’re not going to be overly promotional based on how careful you’re thinking about this, which some people don’t do.
Anyways, that’s my take on it as well. It sounds like Mike and I are pretty much in line on this. I think that’s the general consensus of the industry and where it’s at today.
Mike: Yeah. Coincidentally, it’s the first that we’re recording on and I’m getting ready to send out an email to the people who are current subscribers for Bluetick to tell them like, “Here’s the list of all the different updates that have been added over the past four to six weeks that you might be interested in hearing about or maybe you didn’t know about this feature or this was something that was requested by a couple of people.” Just to let them know because there’s a difference between features that a specific person requested and you can let them know when those things go in but you still have to let the rest of the customers know that that new feature has been added. Otherwise, they won’t know anything about it.
I’ve seen a couple of support requests come in and say, “Hey, is it possible for us to be able to do this?” I’m like, “Yup. I actually just added it a week ago and I haven’t gotten around sending out basically the product updates over the past month.” I do think that it’s a good practice to get into. Just be sending those out especially if you’re running a SaaS where it’s regularly changing and the expectations of the customers are that over time, that SaaS app is going to get better.
That matters a lot more I think in the early stages than when you’ve got a late stage SaaS where it’s like you’re not really adding a lot of features. You’re adding scalability and things like that. But if you’re adding features at a very fast pace, it’s probably best to email them on a monthly basis and say, “Hey, here’s all the new things that are going in that you’re getting essentially for free just for being a paying customer.
With that, I think that wraps us up for the day. If you have a question for us, feel free to 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 342 | SaaS Development Shortcuts
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about SaaS development shortcuts. They discuss the gap between what you think needs to be done versus what really needs to be done and give you tips on how to move faster.
Items mentioned in this episode:
Transcript
Mike: In this episode of Startups For the Rest of Us, Rob and I are going to be talking about SaaS Development Shortcuts. This is Startups For the Rest of Us episode 342.
Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you built you 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: It’s been a good week and it’s memorial day weekend coming up so we are flying to California for a couple of days, just like a three or four day trip to see some folks, just looking forward to it. We haven’t been on a trip for I guess since MicroConf which is maybe six weeks ago, it’s not that long ago but looking forward to getting some sun and it’s also nice and warm up where we’re going. Kind of just easing into it. How about you?
Mike: I have to go see a specialist and have some x-rays taken because I might have a torn rotator cuff.
Rob: That is such a bummer, man.
Mike: I know. It’s not bad. If it’s a tear, it’s really small. I think it’s not bad enough where they look at it and say, “Yes, this is obviously a tear. It might just be inflamed and some other stuff.” They’re going to start with some x-rays and see if there’s any fluid buildup or some bone spurs or something like that. If that comes back kind of inconclusive then they’ll move on and do a whole shoulder MRI and see what comes out of that.
Rob: Yeah, that’s a bummer. If they find it then they have to do surgery and then you’re not able to type with that arm for a while.
Mike: Yeah. They also said that because I still have good range of motion, it just hurts when I move in certain positions that physical therapy might be something that they could work with, anti inflammatories or various other things but I’m hoping that I can dodge that surgery bullet. To be honest, that’s not something I want to go through.
Rob: Yeah, totally. It’s always a bummer to get hurt. Nowadays, when I get injured, it’s not like we’re that old but it’s like I remember getting injured running track when I was 21 and you just heal quick, your body is in really good shape and you’re younger. These types of things now, it’s going to take you awhile to get over that. You’ve also had back issues. You just don’t heal as well as you did 20 years ago or whatever.
Mike: Yeah. That actually came to mind like, “I’m not as young as I used to be. I just don’t heal as quickly.” Back then, in your 20s, you can take the bumps and bruises and shake them off and you’ll be back at it the next day. This is just like that dull ache and I’m like, “Oh, this is just going to go on and on.”
Rob: Yeah, totally. Cool, what else? What are we talking about this week?
Mike: Today we’re going to be talking about SaaS Development Shortcuts. I pulled some of this from my MicroConf talk. The basic idea is that there were some parts of my talk where I highlighted where there are gaps between what we think needs to be done versus what really needs to be done. In these places, there are some shortcuts that you can take to avoid doing work now that you can presumably do later. Some of it, you can just avoid indefinitely but there’s other pieces of it that you can push off to the future because it’s going to either take a lot of work or there’s going to be a long time for you to see any results or benefits from doing that work.
There’s workarounds that you can put in place to avoid doing it now. In some cases, you’ll take on some technical data or some other types of work data that you just have to defer really. But by doing so, it allows you to concentrate on the more important things now versus delaying your launch or delaying getting sales or just delaying moving your product further than it would if you took the month or three months or whatever to implement the things that you were looking at.
Rob: Yeah. There’s a lot of these tradeoffs that go into building any type of software, that go into building any type of business. A lot of things that you have to think about and think to yourself, do we have to do this now? Can we push it off? If we push it off, does it create more of a hassle later on? Does it create more debt later on? Not monetary debt, obviously, but technical or business debt. Or is it the same amount? Is it the same amount in three months if I build the knowledge base today, if I build the knowledge base in six months, is it the same amount of work versus when you’re in code, if you take a shortcut, we all know that technical debt will actually get worse over time. There are some of these that get worse if you don’t do them and some are the same or maybe it’s a linear progression. These are the kinds of things you have to think about as you’re trying to figure out what you can delay.
Mike: What we’re going to do is we’re going to walk around some of the different things that we might think that we need but could be delayed with various workarounds and we’ll talk about what some of those workarounds entail and then we’ll talk about some of the things that are really difficult to find workarounds for. And then we’re going to dive into some general guidelines for deciding how to push things off and whether or not you should do them now or schedule them in the near future, kind of how to prioritize them.
To kick things off with the things that we might think that we need, the first one is a sales website. It’s interesting that I ran into this where my traditional thinking all along has been, “You need a sales website in order to sell your products, to tell people what it is, what it does, how it works, how they would use it, what the value is.” What I realized is that if you’re doing direct sales with people, you don’t have to do any of that. You can get away with a lot less than you need to.
For example, I’ve got Bluetick up over 20 customers, around 20 to 25 right now. I still only have I think 3 pages on my website. One of them is a privacy policy, another one is a terms of service and the third one is just the landing page where basically it gives you an overview of what it does and asks you for an email address either to signup, to get an invitation code or to join the mailing list and go through a five part email course. That’s it. I’ve got to this point really without having a website.
Rob: This is an easy one when you’re doing direct sales. With Drip, I wasn’t even doing direct sales but it was onboarding, it’s really what I think about it as. It’s like people wanted to try, always doing emails back and forth and all we had was still that landing page from months and months of onboarding and we did the same thing, got into the high teens, low 20s in terms of customers that way.
Given that you’re still probably trying to find a product market fit at this point, it almost doesn’t makes sense to build a website because you don’t really know what your positioning is, you don’t know what your feature set is, this is still early customer development. I think there are a lot better places your time can be spent than going and trying to hack together some entire website.
Mike: The interesting part about all the stuff that you just said is that because you don’t know what to put on the website, most of it is probably going to be wrong anyway. Going that direct sales route allows you to have the conversations and get people’s feedback and understand truly what it is that they are trying to solve for and what the terminology is that they use and what resonates with them.
Once you’ve done that enough, you get to a certain point where then it makes more sense to build the sales website because you have enough information from those conversations to be able to build something that is going to be effective and pitching towards people that don’t know who you are and you haven’t had a referral or had no conversations or had nothing explained to them, that’s really the position that it puts you in. That really leads into the second one which is marketing automation.
I think people look at marketing automation as a panacea for all types of sales problems but the reality is that it’s very difficult to automate a sales process when you don’t even know what it is that people think yet or what they’re really looking for and that’s what that direct sales approach is going to solve for you.
Rob: Yeah, I agree there too. As much of a proponent as I am of email marketing and marketing automation in general, which is more advanced form of email marketing, it’s just too early at this point. Until you hit the point where you really do feel like you have a good idea of your positioning, you’re going to start to feel like you know what content people need in order to understand your product. There are questions about how you use the product but there’s also questions about the higher level architecture like, “What are best practices for sales nurturing?” That’s what you’re going to get, Mike.
We kept getting what are best practices for email automation or marketing automation? How do I structure my tags? What should I use custom fields for? How is this different than email marketing? It’s a higher level stuff, that’s the kind of stuff that you’re going to either be sending to people via email or you’re going to start pushing some blog post out at some point. That’s at the point where I think you should tip into now I’m going to actually add lead nurturing stuff and build some workflows and start doing behavior tagging because at that point you just have such a better idea of where your business is.
It’s almost a waste of time if you only have 100 website visitors or you only have 20 customers. You really need to get to the point where you’re getting 500 or 1000 uniques a month to where you’re getting at least a handful of new subscribers to go through that stuff.
Mike: The caveat here is that marketing automation is a very broad term and it doesn’t mean that there aren’t certain tactics that you can pull out of the marketing automation playbook that would be beneficial for you. For example, I just saw that Drip sent out an email with a pointer to a mechanism used by Christoph Englehardt who’s a good friend of the show, comes to MicroConf Europe, has taken notes for MicroConf Europe as well. In that article, he went over the idea of using Drip to send an email to people after you’ve captured their email address to pull them back and help with abandoned shopping cart emails. That’s a tactic that you can use to help pull people back to your website.
I actually use it for Bluetick right now where if somebody goes in, they request an invitation code that pops them over to a survey page. If they don’t fill out the survey page, it sends them an email from Drip about 10 minutes later. My hope and intent is that they will fill out the survey because they’re right there. But if they don’t, then they get a follow up email from Drip a little while later. Interestingly enough, I got an email earlier this week from somebody saying, “Hey, how did you do that? Because I’d love to know a little bit more information about it.” We actually have a demo scheduled here pretty soon. It’s tactics like that that can really help. You don’t have to go out and implement everything that’s marketing automation related but there are certain tactics that you can pull from it.
Rob: Another thing that I tend to push off, because it doesn’t get harder to do this in three or six months, it doesn’t build debt, is documentation. At first, when you’re doing hand onboarding, you’re doing direct sales, really the documentation that I had was the emails back and forth with people. I just started gathering those up. First it was an FAQ doc and then I realized some of them needed to really be flashed out. That was the best way to kick off our knowledge base.
First there was nothing. As soon as we get to the point where I knew we’re going to be emailing several thousand people on our launch list, I knew we needed something. What I did is knowing that writing documentation was going to take forever, I went in and I recorded about maybe somewhere between eight and a dozen Screencasts. Three to five minute Screencast where I walk through. This is what a campaign is. This is just basic stuff. This is what this setting does, there wasn’t a ton in the app.
I just slapped up again, that was 8 to 12KB articles. It was in a WordPress, there’s a WordPress theme, I think, that allows you to make a KB and I just put up there and that’s it. We had 8, 9, 10 KB articles at the start. Screencast or not, the ideal way to consume that, it was very fast for me to make them but within the first few months people are saying, “I really want to be able to read through them. I was at the airport, the WiFi was bad and I couldn’t play them.” Overtime, I actually paid someone to turn those Screencast into documents, like actual KB articles.
That’s the progression. You don’t need to write all the documentation upfront. It would be great if you could but you just don’t have the time. That’s the idea, you start with nothing and it really is just manual and you’re going to have more support upfront because of that but then you move into something lighter, for me that was Screencast, for you it may be something different and then ultimately you build that out over time.
Mike: The next item on the list for something you can push off until later is a billing system. It sounds like a billing system is probably not something you want to push off because you want to be able to start getting revenue as quickly as possible. There are hacks around having a billing system in place. Instead of having an automated billing process in place, you could send people manual invoices. There’s tons of different pieces of software out there that allow you to send somebody an invoice and then have them pay you, you could easily do something like that through PayPal, you could send them a PayPal invoice once a month.
Yes, that doesn’t scale but that’s not the point. The point is to allow you to avoid building out that billing system until you get to a point where it is difficult for you to keep up. Another thing that you could do is you could manually enter people’s credit cards in Stripe using the backend. There’s a WordPress plugin called WP Simple Pay which is from Phil Derksen who’s also a MicroConf attendee and friend of ours. That WordPress plugin can be used to capture those credit cards and help you with that stuff without you being involved directly and taking the credit card and entering it in.
If you want to automate some things a little bit, as Rob said, there’s that natural progression. Over time, you can add more and more things into it until you get to a point where it is fully automated and it helps you move things forward. But until you need it, there’s no point spending a lot of time doing it because a billing system can be very, very complicated. At the start, you don’t need all that complexity.
Rob: With Drip, we didn’t actually use any of those approaches, we just had a little Rail script that Derick cranked up. I think it took him less than a day. We wind up building that five days before the first billing was going to run, we were signing people up and I think we got 30-day trial so we got 25 days into the trial and I’m like, “Alright Derek, we got to get something that’s going to bill people on a couple days.” It was super simple at first, it was literally this is an amount and this is how much you’re getting billed.
Again, over the coming month, you have to upgrade and automatic downgrade and prorating and whatever else goes along with it. We built that into it but we started pretty simple. I agree, you don’t need as much logic as you think you do in the early days in billing.
Mike: One of the more common things that you probably need to implement in a SaaS application is permission system. Depending on whether you’re going to do it like a single tenant or multi tenant model on the backend, you may need to implement permissions inside the system to allow certain people access some resources and then prevent others from accessing those same resources.
This can get very, very complicated, especially if you get into the idea of having group accounts and some people with certain roles or permissions. Again, there are lots of white papers and documentations you can read out there about different ways of implementing the permission systems or claim system and it does get complicated. But in the early days, you really don’t need any of that. All you need is the ability for somebody to login and see their data and not see somebody else’s. You don’t need to create all this additional complexity with groups and roles and permissions and stuff like that, you could really get started with one user.
To Rob’s point earlier, there are certain types of debt that you’re taking on. In this case, it’s a technical debt and that can be difficult to get around. But in the early days, if you need to get around that just to help prove out the idea and make sure that things are working and people are getting value out of the app, this is one of the shortcuts that you can take. You have to be forewarned that it is technical debts you’re taking on when you use this approach but it could be what you need to do.
Rob: Yup. When we first launched Drip, it was just one login and then people wanted to invite whatever teammates and so then we had to add the ability to have additional folks. The only thing we had was owner and I think we called it an admin or something was the other role. 6, 12 months down the line, we kept getting requests for like, “I don’t want some people to mess with our settings.” We added a member, there is three tiers, owner, admin, member.
We have been able to maintain that. We are tens of thousands of users and four years into a pretty substantial SaaS app. We do get periodic requests to add more granular stuff and we started talking about that internally, what that would look like. But the good thing is now, we really understand our customer, we really understand our audience and we have had enough request for it asking in different ways. I want people to be able to come in but not export anybody or not be able to view my subscribers or not be able to send anybody. There’s all these different things.
We’re not making it up in a vacuum, it’s not like we just dream up how we think that they might use it, we have real usage patterns and real feature requests. I’m very much in agreement with you on this one. If you need multiple logins, that’s fine but as soon as you get to anything granular at all, I would pump that so far down the line unless that’s a core, core competency of your app which I’m guessing it’s not going to be.
Mike: One thing that I recently did was I repurposed our impersonation mechanism and applied it to people’s accounts to let them have multiple users inside the same account. It works fine. It’s not great, there’s certainly a lot of work that needs to be done there but for the time being it allows people to use the products and have different logins physically associated with the same account. Like I said, it’s a tradeoff but it does work. Early on, your customers are probably going to be pretty understanding about that stuff.
Rob: Another one is password reset and account management type stuff, it’s a lot of time to implement versus the actual number of minutes anyone is going to use it or the number of times someone is going to use it in the first three months of your app. I know that pretty sure we had a reset password button and I think it may have fired off an email to us or something that’s like, “Reset my password.”
Again, this is very, very early on, you’re at 20, 30, 40 customers, you’re going to get one a week and you can just do it manually and people understand. It’s not until you go a little broader and again you’re going to have to really start to scale up that you need to build this out.
Mike: Funny enough that I had mentioned this is my MicroConf talk as well but the password reset in Bluetick did not work at all for nine months. We implemented it probably six months ago but it did not work for the longest time and we would just go in and manually do if somebody came back and said, “Hey, my password reset didn’t work.” There was literally only three people who would ask in those nine months. It’s one of those really low frequency things that is important and needs to be taken care of but you can manually handle it if need be. I did have a manual backend where I could go in and I could reset somebody’s password, they just couldn’t do it themselves.
The next one is a big thing which is reporting. I think in most cases, the challenge with reporting is that unless your app is specifically designed to provide reporting services for somebody, then you can probably get away with very little reporting in the first version. Most of the reason that you would want to pump this down the road is because you don’t necessarily know what people want to be reporting on. As you have conversations with people, you’re going to learn more about it. When you are initially looking at building reports, you’re guessing what people want and it’s just not going to be helpful to you because you’re going to build a bunch of things, people are going to say, “Hey, could you do this instead?”
Now you’ve built a bunch of things that essentially you have to support longer term because you’ve already built them and put them in the app and people are expecting that those things are probably going to stick around but now you’ve got all this legacy code there and it wasn’t really what people were looking for anyway. I think that in most cases it’s best to just put this down the road and not bother with the initially. [00:19:13] had done a recent episode in the Startup chat where they talked about killing features. You can kill features like this but if you only have two reports, it’s really hard to take away one of them.
Rob: Another thing you can push off to get further down the road is the classic marketing strategies, the ones that require long iteration cycles, higher workloads like SEO and content marketing. These are things that take a long time to ramp up to, it’s not something you should push off so long because it’s not like you’re going to launch a blog and then start getting traction with either content marketing or SEO immediately.
Again, when you are under that 50 person mark, it’s just not something that you want to scale to. If you are not doing these other things of building a password reset and building a billing system, you’re not there yet, you don’t actually want to drive this type of cold traffic to your site and stuff. Everyone talks about it, they talk about this, they talk about split testing, these are things that you need to do later on, you need to wait until you’re starting to scale up marketing and you feel like the app and your team is at a place where it can really onboard people, you have documentation and you’re ready to start dealing with really new users to see how they come in and how they get onboarded and how they convert.
Mike: The next one is new feature development. The rule of thumb that I’ve taken lately is that unless I get a certain number of people asking for something or saying that that’s important, or if they’re not a customer yet and they say that, “I need this in order to be able to sign on.” It’s a deal breaker to them, I generally push that off to the side in favor of other things that more people have asked for or are higher priority because it’s not something that is being asked for a lot, therefore, it’s just less important than those other things. I’m not going to spend my time building something that very few people are going to use or it’s not going to be used very often. Instead, I’ll spend my time working on those things that people are going to use a lot, that are getting asked for a lot because those are clearly most important.
The other ones are stuff that they’re nice to have sometimes, it’s just people are asking a question because they want to know the answer to it, not because they’re actually interested in using it. That’s an interesting side note that I’ve discovered is when somebody asked you something, a great way to deflect the question is to ask him if it’s important to them. Sometimes they’ll just say, “No I was just asking, I was just wondering.” If you have that developer mindset where how do I solve problem X that somebody just presented me? You can very easily find yourself going off into the weeds and trying to do something that’s going to take you a while to do when the person was just asking, they just wanted to know because they were curious, not because they needed it.
The last one is being able to provide real time results for people. This delves partially into reporting but also if you need to do any sort of complex calculations or you’re not sure how you’re going to get the data from one place to another and it needs to be done manually for the time being until you go to a point where you automate it.
This could be any sort of situation like if you have to deal with a government website, for example, and you have to feed data into it, those are notoriously terrible when it comes to APIs and being able to send data into them. A lot of times you have to resort to various hacks like using Selenium to automate a browser, to go plugin all the different fields and stuff. Instead of doing that, hire somebody to go in and type in stuff that customers have entered, you’ve made it easy for them to either import the data or put stuff in in a way that makes sense and then you have somebody that go in and type it all in.
Most people would say, “This is a SaaS application and that should be real time.” But it doesn’t need to be, most of the time when you’re looking at those types of things, there’s customer expectations about how long it should take and then there’s also what they really needed return to them. If the time period is a 24 or 48 hour window, it’s probably not that big of a deal. Unless your whole value proposition is that it is automated and very fast, in those types of cases you probably have to do all the leg work and automation upfront. But a lot of times you can get away with just pushing it down the road. Once it gets to a scale where you can’t handle it or it is causing you far too much to not have it automated, that’s when you go down that path.
Rob: Let’s take a look at three things that are difficult to get around, things that you’re going to have to implement upfront and the things that you should be focusing on. The first one are the core parts of your value proposition. Things like features, reports, if they’re absolutely needed, automation, if that’s really what your app does. Without this, you don’t really have much value. This is probably the core piece of finding product market fit and building something people want, you should be focusing on the features that are driving value for your prospects and customers.
Mike: The next one is probably a judgment call but I find that user impersonation is really difficult to get around. You can use screen sharing, so if somebody runs into a problem, you can get on a call with them using a variety of different tools and share their screen and look at what it is that they’re seeing. That type of thing is impossible to do without the other person being present and allowing you to essentially watch them as they login and go do whatever it is.
It’s a lot easier in many cases to have an impersonation mechanism in place so that you can flip a flag on your account or in the database directly and just say, “Hey, log me in as that person.” Then you will be able to see exactly what they would see. If they come back and they have questions about how do I do this or how do I that or why is this showing up in my account this way, it allows you to go into their account, take screenshots and then send them those screenshots or do a Screencast and explain to them what it is that they’re seeing. If you’re seeing data that shouldn’t be there, then it’s a lot easier to do it without the customer present and having you say why is this there? I don’t understand myself, we wrote it. You’re in a much better position if you have that impersonation ability.
Rob: By impersonation you mean like being able to login as one of your customers, is that right?
Mike: Yes.
Rob: I totally agree, this is a huge one. We call it ghosting, you ghost in as them. But it’s incredible to be able to see the app as your customers see exactly what they need. If you don’t have that ability, it’s like you’re digging through raw data that’ll send you a bug and you can’t reproduce it but as soon as you can login as them, that’s a big deal. This is something I would build very, very early on.
The third one that’s difficult to get around is not having any type of sales channel. You need to be able to get to customers somehow. Referrals can be one, this direct sales model, you could be doing outbound cold outreach, you could just have an email list of 50 people and you email them one at a time and you’re bringing them in. You need some type of sales channel to be bringing people in for this to be worth it. Until you get the feedback, you can get a little bit of revenue and you can start building something that you hope a broader audience wants.
Mike: Actually, emailing them individually, that’s what Bluetick does. It allows you to iterate through those people and email them individually as if it was coming directly from you and you can very quickly go through large numbers of people, personalized automation at scale. But I agree. It’s difficult if you don’t have a sales channel at all, you can’t do that with five people.
Rob: That’s Bluetick.io ladies and gentlemen.
Mike: Now we’re going to move on to general guidelines for deciding what to push off. There are a couple of different criteria you can look at. The first one is is there a manual workaround of some kind? It doesn’t need to be something that is quick and easy or automated. If it takes writing sequel and running against the database manually for an individual customer to do those types of things, then it counts as a manual workaround. It doesn’t mean that it’s easy but if it’s easier to do that than it is to spend a week or two writing code, then chances are good that you can start with that and not have to go through that couple of weeks of writing code that may not be used very often.
That leads directly into the second thing which is it’s not something that you or a customer would do very often. If it’s not used very much, then there’s no real point in automating it and writing the code to do those operations.
Rob: Another guideline for thinking about when to push stuff off is if it’s going to take a long time to automate. There are even things that happen fairly frequently that if it’s like two or three months of dev time to implement, you might still be doing manually or having someone on your team do manually a year, two, three years into your business. It’s always a balance. If you can build two killer features in two months or you can build this one background task that only happens once a week or once a day or five times a day, there really is a balance to human automation versus code automation.
Another guideline that leads right into is you’re not really sure what to automate. If you have some stuff that seems like it takes manual time but maybe you don’t know how to automate it or you’re not sure exactly how that would work, then it’s a good reason to push this off. What I found is things do become clearer over time. The more people you get, the more customers you get and the further along your app gets, things just mature and it becomes easier to tell how to automate things and what you should automate.
Mike: The last situation where you should consider pushing something off is if it’s a feature or a task that different customers are going to want different things or are probably going to want different things. This is where reporting falls square into this bucket but there are certainly other things where if there’s a presentation layer over the top of the data that customers might say, “I want to see these columns versus those columns. I want to be able to filter certain things out of the data right on the screen.”
Those are the situations where you can take the stands, here it is out of the box and we will get to those things down the road when they become more important or when enough people ask for them. But because different customers are going to have those different requirements or different needs around it, you can build a lot of customization around presenting data but people are going to want different things and it can take you a long time to build even just those individual pieces.
Rob: I think that about wraps us up for the day. If you have a question for us, you can call our voicemail number at 888-8019-690 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. Thank you for listening. We will see you next time.
Episode 341 | How to Deal With Toxic Customers
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to deal with toxic customers. They give you some warning signs to help predict if a customer is turning toxic as well as some strategies to help deal with them if they do.
Items mentioned in this episode:
- Spark
- Laravel Spark
- Delicious Brains post
- Future Hosting Post
- Rob’s “How to Detect a Toxic Customer” Post
Transcript
Rob: In this episode of Startups For the Rest of Us, Mike and I talk about how to identify and deal with toxic customers. This is Startups For the Rest of Us episode 341.
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’s the word this week, Mike?
Mike: A couple of things. I’ve just pushed a major UI release for Bluetick to address some usability questions and stuff that kept coming up for people. It’s a massive improvement but it took forever to get it done. It was like a week and a half to get everything finalized, tested, and pushed out the door. It’s over and done with so I can move on from that side of things at this point.
Rob: Congratulations. That’s a big deal. It’s over and done with for three to six months until more usability stuff comes up.
Mike: It’s done for like three days. That’s what it really boils down to.
Rob: That’s a big deal. Congratulations. I know that this kind of stuff, it nags at you because you know it has to get done but it doesn’t exactly move things forward. It’s better than like doing taxes in terms of moving things forward for customers but it’s also not a new feature. It’s that balance of I got to push this.
Mike: Right. I think the part that made this piece so difficult was the fact that this was one of the areas that I knew needed to be rewritten for the past six months, to be perfectly honest, and I just didn’t get into it because I knew that it was going to be a hornet’s nest and didn’t want to deal with it at the time. But with that said, it’s like, I went through it, got most of the things cleared away, got all the code organized and commented properly.
Everything’s much more tested now more than it ever was before. It’s just so much easier to work with. I can go in and make changes now whereas before, I was afraid to touch anything because it might fall over and break.
Rob: That’s good. It’s nice to refactor as well. It sounds like it was a UI improvement as well as a code refactor. That’s two wins.
Mike: Now that that’s out of the way, now I can move onto more important things like the website and getting the signup process working.
Rob: Cool. For me, the only thing I have this week is we got a nice email from Victor Perolnick. He had listened to our previous episode where someone asked a question about resources for the engineering side of launching a SaaS. We had given a couple but it was mostly blog post and such. We did specifically say, “I know there’s going to be some out there for specific languages like if you want to do it in Rails, you’re going to find stuff. If you want to do it in PHP.
Victor called out Spark which is from Laravel which is a PHP framework for building a SaaS app. It’s spark.laravel.com. He also talked about Laracasts has a bunch of Spark screencasts if you want to see something really quick. And then link to a couple of blog posts that talk about it.
It gives you a head start if you’re going to build a SaaS app in PHP. Anyways, I wanted to call it out. We’ll link those up in the show notes. If you happen to be building in PHP, that’s probably where I would start.
Mike: I looked through some of those links that he had sent over and we’ll link them up in the show notes. The Spark system looked really nice for getting a SaaS app up and running and not having to deal with a lot of the fundamental plumbing that you would typically have to work with, the billing accounts, subscriptions, impersonation, and things like that. It looked like it was all kind of cookie cutter which is really nice.
Rob: This week we’re going to be talking about how to identify and deal with toxic customers. I wrote a blog post back in 2010, looks like December 2010 that we’ll link up. It was called How to Detect a Toxic Customer. It actually got a lot of traction on I think it was Hacker News at the time. It has like 72 comments or something on it.
I basically walked through a case study of what I had experienced with an invoice and a customer who is quite demanding and was just really combative. I talked about how to identify them and what to do. I find that this type of thing, it comes up every 6 to 12 months. If you’re running a SaaS app, if you’re selling software, it can be a challenge. You talk to anyone who’s been selling software for any length of time and they’ve run into something like this.
We’ve talked a little bit about this in the past on the podcast but I just want to walk through these steps of how to identify really early on, because one of the keys is being able to see it ahead of the actual person getting in and starting to use your app. Because once they’re using it, it actually becomes harder to force them to switch. It’s a really tough decision to do that. Maybe not at the same level of firing an employee that you mis-hired but it is in that spectrum of like, “Man, if someone gets in and they’re really using it and being a pain in the butt, it’s hard to make them switch.”
That’s where we want to start, early signs if you’re in conversation with someone that they may not be a good fit for you even before they ever get into your app. I have a big list here, mostly culled from this blog post.
You know what the first sign is that they view their “vendors” or they view you as like, it’s this weird attitude that you’re like somehow a servant or a slave to them. They’re extremely demanding. They treat everyone they speak with as if they’re an idiot. They talk down to your support people. They talk down to you whether you’re the founder or the salesperson, just this very demeaning tone. It’s like they expect everyone to bend at their will. It’s like they’re doing you a big favor for being their customer.
Mike: I think there’s a few different pieces to this part of it. Most of the time, you can identify this type of thing in the language that they use or how they reference the types of problems that they’re running into. Whether they say, “Oh, this is a massive problem in your app.” Or “Why doesn’t this work?” They get very angry and frustrated very, very quickly and things just escalate fast to the point that they see even just little, minute problems or UI glitches and things like that as a massive problem that calls into question everything that’s underneath the cover.
Most of the time, that’s just not the case. There might be a color that’s off or something is mislabelled or the documentation isn’t quite up to date and they’ll just blow things out of proportion and what you’ll find is that the language or the tone that they take with either the support emails that they send in or the calls that they make or even just the way that they get in touch with you.
If they send you an email and then five minutes later send you another one, that’s a classic sign of a toxic customer. The way that they communicate to you is heavily indicative of how they’re going to be to work with long term.
Rob: Yeah. I have that as a warning set number four in this article. This was an actual sequence of emails that I got from someone again with .NET invoice years ago. Warning set number four is unrealistic expectations. I got an email in support. It says, “Is your software localized for Australia?” And then literally, 10 minutes later, “I wanted to make sure you received my previous email. Is your software localized?” And then 30 minutes after that, “Hello, is anyone there? I haven’t heard back.”
It’s been 40 minutes since you emailed. This is insane. And then 20 minutes later, it was like an all caps thing of like, “Why aren’t you answering?” It’s like I have a feeling maybe I shouldn’t answer this one. If I answer the question and they spend the $300, how much more of a pain are they going to be later on? It’s unrealistic expectation, expecting everything to be answered or done yesterday.
Mike: I wonder if there’s a way like Brennan Dunn as you know is working on RightMessage.io, I wonder if you could somehow flag them and just jack up the price by like 10x to account for that kind of thing.
Rob: Yeah, that’s awesome. I think you make a good point about little things. You’ll have thousands of customers using an app and no one complains about a bunch of stuff and then one person will just have this such an issue and like, “This is a major issue.” Like you’re saying, it’s like all caps subject lines. Everything’s a bug instead of a feature request. It’s like, that’s actually the way you think it should work but everyone else is fine with the way it works. Or it’s like this fixed rigid mindset of you should do it this way because the only way to do it or that’s the way my old system did it.
It’s a bug since you don’t match the way my old system did it but it’s like that is a point of view but your point of view isn’t necessarily the right one. Again, telling back to toxic customers tends to think that way, the language they use early on and maybe the expectations that they have.
Another thing that I’ve seen and it was funny because I used to man support with .NET invoice and so I would answer a response and then I would get this threat to escalate like, “Can I talk to your support supervisor?” “Can I talk to the founder?” “Can I talk to the CEO?” Or “I demand to talk to the CEO is another one.” It’s like, “That happens to be me. How can I help you?” That would be my response but there’s always like really? We’re going to do this because there’s one misspelling or whatever it is. Like you said, the button caller doesn’t agree with how you want it to be.
To threaten to escalate, again, not always and each of these on its own isn’t the end of the world but it’s when you start seeing multiple of these go on over the course of a few interactions, your red flag should be going off.
Mike: I think the other interesting thing about these is that sometimes, it is just one thing that you can see and say, “This person is going to be a toxic customer.” And then there are other times where it needs to aggregate. You need to have several different data points.
If your first interaction is why doesn’t this work and it’s all in caps, it’s kind of a giant red flag but then, there’s other more subtle things that you get into and they add up over time. Sometimes, you don’t see them until much further down the road. As you said earlier, that’s when things become a problem because then they’re probably already in your app, or already using it, or have already paid for it. It becomes much more difficult to cut them off as a toxic customer.
Rob: Another potential sign of a toxic customer is that they provide way too much feedback. Every interaction with them is just a stream of consciousness of how they feel things should be different. We had people tell us like, “This word doesn’t make sense. You should rename that everywhere in your app to be this other thing. It should just say emails up there instead of broadcast or something like that.”
It’s like, “Okay, thanks for the feedback. We have four years of history of this being broadcast everywhere and that’s what all our documentation says. That’s what all of the marketing says.” It’s like everything calls it broadcast just because right now, you don’t understand that yet. In a week, you’ll know what that means and changing it to emails is actually more confusing.
I guess what I’m saying is it’s fine to get feature requests and it’s fine to get some feedback from someone but if every phone call you’re walking away with 10 different things that someone is asking for, there’s a potential there that that person may take their opinion a little, too seriously is not the right word, but it’s like they value it over your own or over the opinion of your company or your product.
Mike: The specific example that you just brought up about the name of a particular field, or a drop down menu, or just something that is presumably really just a label in the app, it brings up an interesting sideline about the fact that some people would go and say, “What can I implement and put in as a technical solution to this thing that keeps coming up where people wants to use different terminology?”
The thing I have seen a lot of apps do is allow you to rename things throughout the apps. So that instead of calling something emails for example, they’ll call it broadcast. If a customer comes in and says, “Hey, this should be called x.” You can go in and you could presumably change that inside of their user account, they would just propagate it throughout the entire app. But then, it makes it more confusing. It’s a little bit harder to support because all your documentation is probably not going to line up directly with that.
I think that you have to be a little bit careful about whether or not you put technical solutions in place for problems that are actually warning signs of problematic customers.
Rob: Totally, it’s like if everyone request that, then that might make sense but that’s a heck of a lot of work to do for one customer. If literally you have thousands of customers, no one ever complained about the naming thing and one customer gives you 10 things and a bunch of them are naming things, it’s like, “Really? Are you going to change that?
Everyone has an opinion and you’re building for the masses and a single customer coming in doesn’t understand the context, and they don’t understand that you do have thousands of other customers. I think that’s another kind of mindset thing with the hard customers that you deal with is they don’t have any context for the thousands or tens of thousands of other people who are already using it. I think that comes back to that fixed mindset thing I talked about earlier. That there’s only one way to do it and it’s the way that I think it should be done.
Another thing that I’ve seen is someone raising the same issues over and over. I guess it comes back to that email that I kept getting about the Australian dollar. They’ll just email back with the same issue everyday or every week even if you say like, “We’re working on it.” It’s like they feel somehow this anxiety or this sense of urgency and they need to, I don’t know, continue to force it on you.
I’ve also seen multiple contacts with the same issue through multiple channels. They email you. They call you on the phone and they chat. You’re like, “You’re actually making this harder on everyone because that mixes things up. Please don’t submit the same questions.” Something about urgency and expectations. It’s expectation of turn around.
If you’re a consulting firm, then maybe they’re paying you $50,000 or $100,000 and you have someone dedicated to them. If you’re a SaaS app and you have 10,000, 20,000 customers, even big customers, they likely will not be getting that level of turnaround time on their feature request. Again, if they were a consulting firm, then yes, they’re going to build what you say. If you’re a SaaS app, you’re not necessarily going to build everything everyone suggests.
Some folks have a hard time understanding that. Those tend to be the ones with misaligned expectations that turn into toxic customers.
Mike: The other thing that sometimes you’ll see is that they will, after a very short time period with your app, they will have several pages of “suggestions” for you to change. It’s partly just a lack of education on their part because they haven’t taken the time to learn how your app works and how it compares to things that they have used or done in the past, but they feel like they know better than you do about how this particular app should be built.
There are certainly exceptions to the rule here but generally speaking, you probably know the market way better than they do especially if you’ve been doing this, running an app, for any length of time and it’s a profitable app. They’re going to come in and they’re going to base all of their thoughts and ideas around their previous experiences.
A lot of times, you’ve designed around those because they weren’t good experiences or those other apps that you were competing against weren’t doing things in a way that made sense for most of the customers and really you’ve just been pushing yourself in a position to put in bad features because of their request. Those are the customers that you’re trying to avoid.
Rob: That’s a really good point. It’s a trip to see if you’re competing against apps and some of them will make what you see as poor design choices. Over time, you’re like, “Man, that’s pretty hacky.” Customers coming from those apps think that as the “right way” to do it even though it’s not. It tends to be a bad user experience for new customers but since they’ve been using something, they expect that to be the way, that’s the way things should be named, or that’s how it should work.
We see this with Infusionsoft to be honest. There’s just a lot of I would say questionable UX and design decisions but if you do it different than them, even in a what I would consider more modern or better way to do it, that’s much more efficient, it can confuse people who are used to thinking in the Infusionsoft mindset.
I think the last one for perhaps identifying toxic customers early is that they can expect a lot of special treatment. They’ll ask for extra services get thrown in and they’ll ask for almost always a big price break like they’re doing you a favor for being their customer. They get a price break that no one else asked for without giving a reason. There are just a lot of special favors that they can call in.
Again, if this is the only thing a customer does early on, alright that’s fine but if it’s coupled with these other things, it’s something to really be aware of and watch out for.
Mike: The big one here for like a SaaS app would be phone support or direct access to the founder which is justifiable especially in the early days when you’re the only one who is running everything or maybe you have somebody who’s doing some part time support. But it becomes a problem over time that can get bigger if you leave it unchecked. You have to cut those things off early if you can possibly help it but the people who have that expectation going in, that’s where you start running into the problems.
Rob: Now, we’re going to switch gears a little bit and talk about potentially how to handle this. Whether you detect it early or you get down the road a bit some strategies on what to do as this type of thing unfolds. I think I’ll start by saying that hard customers, toxic customers, they will by nature just absorb and suck away an enormous amount of your time. There’s someone out there who calls them time vampires.
I’ve seen folks that will literally just demand dozens of hours a week of your time based on the number of request and the number of the hand holding and the phone calls and all the stuff. It can really be chaotic especially if you’re running SaaS. If you’re selling downloadable software, I’ll tell you something we had to do with .NET Invoice a few times. It wasn’t often but it was maybe once a year, we would refund them. Tell them to keep the software, we refunded them and we basically ran away.
We told them, “Look, for $300, one time, we cannot provide this level of support.” And then let them be on their own. But with SaaS, it’s harder because if they’re already using you platform and you didn’t turn them away in advance, you have to force them to leave, to migrate away, which is a bit harder to do. We’ve only done it a very, very few times in the life of Drip. It really sucks, to be honest.
Like I was saying earlier, it’s close to but it’s not nearly as bad as hiring the wrong person but it can be a real drag which is why you’ll want to learn to identify these folks in advance, to see the signs early on in the sales conversation and try to cut them early because you have to ask yourself, is this going to be worth it in the long run? Trust your gut. If you see a bunch of these signs, it’s easy to talk yourself into, “We can work with it.” Or “We can manage expectations.” It’s likely going to get more complicated than that.
Mike: I think there’s an important distinction to be made here between the customers who are taking up a lot of your time because they have legitimate issues versus the ones who are being difficult. I’m in a situation now where there are certain issues that are taking up a ton of my time and there are some customers who are coming to me and saying, “Hey, can you do this?” Or “Can you do that?” I don’t want to say constantly but I’m getting fairly regular emails from them.
If you go through this list, you can say, “These people are problematic customers.” At the stage that I’m at, that’s actually not the case. It’s the opposite. I’m actually appreciative that I’m getting this feedback and these people are saying, “Hey, could you do this?” Or “Could you do that?” Because it gives me ideas and yes, I’m spending a lot of time on it but it’s also pointing me in the right directions. I need that right now.
If I were 100x where I’m at right now, that might be different but I’m not, so there’s a very big distinction between where your business is at in terms of how much time you’re probably going to be spending with the customers and whether or not they are problematic customer.
I don’t have any of those right now but you could certainly potentially mistakenly view some of those customers as all of these are problematic when the reality is your app is just not quite there yet and it still needs more work and there’s still a lot of effort that you need to put into it on the front end in order to be able to cut those issues off on the back end.
Rob: Totally. I am glad you called that out because especially in the early days, getting a lot of feature request feedback input, especially, there’s a tone element to it, if it’s not demanding. If it’s like, “Hey, have you thought about this?” Or “Hey, this would really help me out or this would be a great feature to build.” You’ll get emails like, “How have you not built this yet? I am shocked and appalled at the catastrophic way that your app does not do x, y, z. yet.”
It’s like it’s being shocked that it doesn’t, versus suggesting it as an improvement and realizing the software, especially SaaS, is an ever evolving thing, that everything is not perfect all the time, going to work exactly the way everyone wants 100% of the time. There’s a difference in tone. I agree with you. We’ve had a ton of people who give us a lot of really good feature suggestions.
You look at Brennan Dunn, he does it publicly. He does it via email. He gives us a ton of feature request, suggestions, ideas, and they’re damn good. These are things that really have leveled up Drip over the course of years. But he’s never been on that other side where he’s like, “I can’t believe Drip doesn’t do this.” I never heard the out of his mouth. It’s just this difference in attitude and tone.
Mike: A tell tale sign that they’re trying to be helpful is that if they apologize for sending feedback over. I’ve gotten that from several people where, “Oh, I’m sorry to keep bothering you with this stuff but it’d be great if you could do this or can this be done?” If they’re apologetic about writing into you for email support or anything like that, that totally puts them in a different category. They’re certainly not a problematic or toxic customer at that point. They’re the opposite.
But as Rob just said, it’s the tone of voice. You can tell from that whether or not that’s the case.
Rob: The thing to remember here, if you do have a really hard customer who’s demanding, is you have to keep your cool, you have to be kind, you need to be honest with them, and you need to be firm. The more you give in to irrational demands, irrational feature requests, there are actually things that makes sense, and you say, “Look, we are going to build that. That’s a great idea. Let’s do it.” And the person backs off, then you’re cool. You fixed the thing.
If they continue to still email everyday or every week like, “Why isn’t this done?” Then you know, maybe you’re tipping in that other direction of it being hard. If it’s rational stuff and you’re building it, then keep going. If it’s not rational stuff, if it’s stuff that you know is incorrect, bad for the product, bad for other customers, you’ve already tried it, it doesn’t work for whatever reason, that’s where you do have to be firm and you have to separate your emotions from the conversation.
If you can’t do it, you need to have someone like a support person or customer success person who can do that. Someone who is exceptionally good at this is Anna on my team. She would handle angry customers. She would handle toxic customers. Those two are different.
Mike: She’s talked to me a bunch of times.
Rob: Yeah, nice. Well done, Mike. But you know, you’ll have angry customers who are just angry about one thing. They get frustrated. You can smooth that over. Toxic is when they’re angry all the time. It’s the way I would put it. But Anna is really good at it. If you remember, I interviewed her, it may have been on ZenFounder actually, it was maybe 6 to 12 months ago, but we talked about dealing with negative emotions and how she was able to separate herself from the emotions coming from customers who are frustrated.
Like I said, this is by far the hardest thing to do especially if someone is making sweeping insults about you, your team, your intelligence, your application, but this is where you have to be kind, be honest, be firm, and not lose your cool, this is going to be the hardest thing to remember, and not let it derail you. Once you know that a customer is being particularly difficult, don’t let it derail your day, or your week, or your month because it’s so easy to do that.
In the best case scenario, someone who is difficult upfront winds up not actually being a toxic customer. Maybe they were just frustrated and they had several issues that you’re able to work with them, you’re able to fix them and they’re able to move on because there’s often this on ramping period where let’s say the first 30 days of using a new app, you’re confused by a lot of things.
Most of us go with it. We figure out how to use it. We don’t ask the app to change everything but some people are of that more fixed mindset. But if you handle a few of their issues and they like everything else, then it’s like you can move on and they really won’t be long term, won’t be that toxic customer.
I guess what I’m saying is often issues are clustered when someone first starts using your software. After that, they’ll calm down and people can understand how it works. That is the best case. I would say it’s not the norm but in the best case, if you do handle them with kindness, and honesty, and firmness, again, that’s the best case of coming out of this.
Mike: Something else to keep in mind with this is that dealing with customers is a learned skill. You might not be very good at it at first but you will get better at it over time. In addition to that, there are some people who just have a knack for this. Like you said, Anna seems to have a knack for it. She’s capable of separating herself from the problems and from the app itself and empathize with the customer.
Some people are better at that than others. Even if you train yourself and go through a lot of doing this type of support, and dealing with a lot of these types of people, it doesn’t mean that you’re going to be better than the next person at it or worse than them. Some people just have a knack for it and some people don’t. But with that said, if you don’t have a knack for it, you can get better at it. You can learn to separate yourself. It just takes time and practice.
Rob: To wrap things up, we talked about the best case which is working with them early on and then being able to transition them into a productive, happy customer. The worst case of course is that you find yourself and your team just living through ongoing stress for weeks on end. There are a couple of ways to approach this.
Firing a customer is not unheard of especially with larger SaaS apps. It depends on how you want to handle this. Sometimes, I’ve seen folks just plain ignore and just say, “Look, even if this customer sends 10 emails a day, we’re going to respond once a day or once every two days to all of them.” That is one way to handle it.
Or you can fire them. If they start being abusive to you or your staff, that’s not cool. You have to protect your people and your loyalty to your people in my opinion is going to go so much further than loyalty to one demanding customer. This is a hard decision because it’s not always black and white. You can have a toxic customer that’s not abusive. You can ask your support team, are they abusive? No, they’re just a little demanding and it’s like okay, then maybe it’s not time to fire them.
But if people are really shaking up, and you feel like things are rattling around, you have to evaluate at what point you let this single person have so much control over your team. Again, this is a hard decision. It’s always going to result in people being pissed off but if you find that you’re at that point, and you feel like you’ve done everything you can over the long run, frankly, firing someone who you think could cause this level of headache for you, for months or years on end, it’s the right decision.
Again, it’s like making a bad hire. It’s not as bad as making a bad hire but once you’ve made a bad hire and you know you need to fire someone, it’s a hard decision but over the long run, you always think to yourself, “Why didn’t I do that sooner?”
Mike: I was thinking about this and trying to figure out whether or not there’s a specific turning point or a hard benchmark that you can look at to determine whether or not you should just turn the tables and cut a customer loose because. Early on, you really don’t have any history with the person so you’re not entirely sure whether or not they’re going to stick around to begin with but you probably have an idea of what your lifetime value is for that customer.
If you’re looking at that and trying to track it back to how much time and effort you’re spending with the support, that’s not the whole picture. The whole picture is actually the impact to the rest of your day. I think that that’s not something that any of us would really be measuring. You might only take 15 or 20 minutes to answer a support request but if you spend the next couple of hours with that stuff turning at the back of your brain and it’s distracting you from doing other things, the time for that to cost you weren’t 15 minutes, it was 2 hours.
These things can be exponentially more damaging than you initially realized and in some cases, you have to be able to identify those people as early as possible just because you don’t want it to get to that point where it is causing you 5x, 10x, or 50x what it is that they’re paying you or would even potentially pay you if they were to stick around for 10, 20, 30 months.
Rob: To circle back, we’ve talked about some signs to look out for. We’ve talked about what to do. Hopefully, you’ve heard that the best case is that you can actually work with someone and help turn them around. I guess that would be hopefully something you can shoot for if you do find yourself amidst “toxic customer.”
Mike: With that, we’re going to wrap up for today. If you have a question for us, you can call in our voicemail number 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 340 | Hiring VAs, Struggling with Engineering, Bootstrapping vs. Raising Funding, and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike take some listener questions about hiring VA’s, struggling with engineering, and bootstrapping versus raising funding.
Items mentioned in this episode:
- Gofccyourself
- Dear FCC
- Fearless Salary Negotiation
- Virtual Staff Finder
- Upwork
- Scaling SaaS
- Meet Edgar
Transcript
Rob: In this episode of Startups For the Rest of Us, Mike and I discussed hiring VAs, struggling with engineering, bootstrapping versus raising funding, and more listener questions. This is Startups For the Rest of Us episode 340.
Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike: I have a website for you. It is called gofccyourself.com.
Rob: Really, I’m clicking on it right now. That sounds dubious. Is this safe for work, as they say?
Mike: It is safe for work. This is actually created by the Last Week Tonight show with John Oliver. The idea behind them putting together this website was that there’s some pending discussions inside the FCC about whether to deregulate certain parts of the internet specifically as it relates to internet service providers. It allows them to essentially self police themselves in a way that they decide whether or not what they’re doing is morally correct and net neutral, which is obviously not a good thing for net neutrality in general.
The FCC has made it very difficult to get to the page where you can actually leave comments in support or against this particular piece of decision making in the process. John Oliver and his team put together this website. It’s essentially just a redirect that takes you directly to the place where you can fill out the form and leave a comment.
If you’re interested in contributing your voice to that net neutrality legislation, then go over to gofccyourself.com. I’ve already done it. It does take a few minutes. I thought it would take two minutes so I’m hesitant to say that because it took me like 10 but I think that it’s well worth putting your voice into for them to hear it.
Rob: It looks like there’s another URL, dearfcc.org.
Mike: It’s the same type of thing except that, I believe, it sends a physical letter as opposed to just commenting directly on the FCC’s website.
Rob: Got it, very cool. Hey, we had a comment on last week’s episode. I thought it was a pretty thoughtful comment. I appreciate it. It was from a guy named [00:02:17]. He said, “Hey, first time commentary. Congrats Mike on reaching your MRR milestone. What makes it more impressive is you did it in spite of all the armchair criticism. All the more power to you.” I didn’t even read that part. That’s funny. He said, “I did want to say that hearing Rob talk about hiring an in house nanny and how everyone should get hired help was a little bit perhaps insensitive. Not sure if that’s right word but Mike’s response pretty much sums it up. Similar to a guy who could afford to fly first class and tells everyone they can’t imagine flying economy again and that everyone should fly first class.”
I appreciated his comment. A couple of things, first of all, I felt like the first class analogy was a little, maybe didn’t translate to what I was saying because flying first class is like 5 times, 10 times more than normal flights and the only value is comfort and perhaps snobbery whereas I was genuinely saying outsourcing stuff. It’s not about having a live in nanny. It’s about not mowing your lawn. That’s really what I was talking about.
I had switched topics by this point to if you’re a founder and you’re still mowing your lawn, and you’re pressed for time, and you don’t have time to spend with your kids or work in your company, and you’re still mowing your lawn, or shoveling you snow, or cleaning your own house, that’s not a money decision at that point if you’ve got any type of success.
I used to pay $55 every 2 or 3 weeks for a house cleaner. Most of us can swing that. None of this is stuff that I started doing after I sold my company. I started hiring small amounts of outsourcing over 10 years ago when I was literally making just a normal salary gig but I was trying to do stuff on the side. I wanted to clarify that and also say I apologize if I came off insensitive. Did you feel like I did?
Mike: I don’t think so. I actually thought it was kinda funny when you said I’m not advocating outsourcing your parenting of your kids and I was like, “Why not?” Isn’t that the point?
Rob: Mike’s like, “I am advocating outsourcing raising your kids.”
Mike: I was like, “When did we decide to go against that idea?”
Rob: Totally.
Mike: I could definitely see what you decide could be misconstrued. I don’t think that that was your intent. As you said, the conversation had shifted from one topic to another in the middle of it.
Rob: Right. I don’t think everyone by any stretch should have some type of live in nanny. Sherry and I have been talking about that for five or six years. We haven’t been able to do it. We just didn’t have the house that it worked for back in Fresno. It really doesn’t have anything to do with suddenly having more money. I’m not advocating everyone should get a live in nanny. It’s game changing for us but that’s a personal choice.
The part that I am saying entrepreneurs and founders should do if you’re strapped for time, and all of us are, is that you should be outsourcing more of your day to day groundwork. That’s a decision you’re going to have to make early on. It’s like hiring a VA, I’m going to pound that drum forever, but if you’re still answering your own email support and you’re more than about 3 or 4 months into your product, you’re making a bad choice.
You can try to tell me it’s not a bad choice but I’m going to tell you over and over based on my experience and the experience of everyone who I’ve told this to, who haven’t hired someone says, “Oh my God, why didn’t I do this years ago,” that you should be doing it. It’s a different thing but hopefully that clears it up and is a little more helpful who think I’m some type of pretentious d-bag.
Mike: Monster.
Rob: I’ve always tried to be on this side of that argument.
Mike: I do think that there are certain cases to be made where you don’t outsource that stuff. For example, like mowing the lawn. I find that sort of therapeutic because I listen to my headphones and podcast and stuff like that while I do it. That’s a regularly scheduled thing that comes up versus something like snowblowing the driveway and taking care of that where you’re much less in control of the weather and those things pop up and it needs to be taken care of. That is easier to make that decision on than something like mowing the lawn where it’s predictable, I’ll say.
Rob: Yeah. If you’re saying it’s relaxing for you, that actually is a good argument for it. I would say alright then, that’s not a bad choice. I actually cook quite a bit because cooking is not a chore to me. It’s actually something that I enjoy. I do outsource part of it. A lot of the prep, I use Hello Fresh or Blue Apron so I’m not going out shopping. It’s more expensive for sure but it saves me time.
Cooking itself, the act is similar to what you’re saying. I typically have a glass of wine and I have podcast playing and so it is actually relaxing. That’s a good point too to bring up. It’s only if this is something that’s detracting from your life.
Mike: I think that’s the point. If there are certain things that you can outsource because they are detracting from your life or they’re inconvenient, that was really I think the point that you were trying to make with the nanny. There are times where it’s inconvenient to drop what you’re doing to do something like picking up the kids at a specific time. You don’t have to be the one that does that. Again, that’s very different than being the person that are parenting your kids. Those are just two very, very different things. I think the distinction got muddled in a conversation, that’s all.
I just want to bring up a comment that we got. This one came from Josh Doody. Josh gave an attendee talk at MicroConf. One of the things that he talked about in his attendee talk was about SEO. This relates back to episode 338. He just said, “Hi, I just listened to episode 338. Summary of the Moz case study on ranking number one for competitive head terms. Really good stuff. I heard a couple of things that I’m going to try to keep improving the SEO on fearlesssalarynegotiation.com. I added the episode link in the case study that linked my MicroConf summary page. I think my talk in some of the links on that page could help people get started with SEO. My talk was a one on one level talk where I would say the Moz case study is 201 plus.”
He gives a website URL. It’s joshdoody.com/microconf. We’ll link that up in the show notes. Anyone who wants to go take a look at that, it’s a really good overview of what his talk was and it is some practical strategies if you’re not quite to the level of where that Moz episode that we did and all the different things that they did for SEO. If you’re not quite there yet, head over to this link. Again, it will be on the show notes. It gives a lot of the basic tactics and stuff that you can use to help your website rank in the search engines.
Last before we get started. I did not know this but apparently, for the past two or three years, there has been a Viking combat training facility here in my hometown.
Rob: Do they teach you to fight with the axes?
Mike: I think that they put stuff over the ends of them. I saw them training one day out in a parking lot. They have these giant bo staffs, they almost look like giant erasers or q tips or something like that. They are like padded on ends and they look like they’re ready to beat the snot out of each other in the parking lot.
Rob: That’s awesome. Your town is not that big so it’s kind of odd that you wouldn’t have known that.
Mike: I know. That was the part that struck me as odd. It’s literally called the Viking combat training center.
Rob: That’s fun. Last time we were in Italy, my son and I did gladiator training in Rome. It was like a one or two hour little adventure where we had foam swords and you wore the helmet. The stuff is bulky and heavy. It was super fun to learn kind of the different approaches to combat though.
Mike: What’s on the agenda for today?
Rob: Today, we are answering listener questions, trying to play catch up. I think we have one voice mail and a few written questions. Our first question is from Richard Gorbet. He says, “Hey Rob and Mike, love the podcast. Only one I have to auto download when a new one appears. A couple of years ago, there was a lot of chat about virtual assistants. Is it worth a new topic in one episode as I suspect the dynamics may have changed. I’m thinking from a help desk perspective but many, many uses for a VA. It’s come to my thoughts as my latest ideas about MVP in the next few weeks. Thanks.”
What do you think about this? I don’t know that it’s so much different than the previous thoughts we’ve had. Maybe the specifics of hiring have changed slightly but I think we talked about 15 ways to use a virtual assistant. I think all of that is still the same. That stuff hasn’t changed. What do you think?
Mike: I would agree. I think the specifics of how to go out and find somebody and vet somebody to do those things has definitely changed over the years but I don’t think that the types of stuff that you would have them do is going to change all that much. It’s probably going to be more of an evergreen topic to be honest. It’s just there’s always ways to save yourself time.
The one thing that I think that might change over time is that as the level of skills of people that are available at a certain hourly rate, that dynamic shifts over time. You might be able to find people who are more qualified to do things that are probably further along than what you would think that a typical VA would be capable of. Again, that’s going to be shifting the global economy in terms of who is available at what hourly rate and stuff like that. It’s not really a dramatic shift in what you would have them do. It’s just a matter of what people are skilled at, at a particular hourly rate.
Rob: I actually think the hiring process, at least the one I outlined most recently was through oDesk. That’s still where I would go today. I would use that or I would use Chris Ducker’s service, virtualstafffinder.com. It’s Virtual Staff Finder, that’s the URL. If I recall it was like $300 or $400 to pay them and they basically vet a bunch of candidates and then they give you the top three. They guarantee them, that if they don’t work out in the first whatever days, they’ll replace them and stuff.
If you have the funds, I would do that if you’re in a hurry. If you have less funds and more time, then the oDesk approach that we’ve outlined, I guess it’s Upwork now, the Upwork approach that we’ve outlined in the past is what I would go back to at this point. Thanks for the question.
Our next one is an anonymous question that he actually sent to me directly. He say, “Hi Rob, I’m in the process of creating a B2B SaaS app for universities but I’m struggling with the engineering of the application. What resources such as books, tutorials would you recommend for developing a SaaS app on the web? I’m a huge fan of the podcast and of your book. Thanks for all your help.” What do you think, Mike?
Mike: It’s funny, as I’ve been developing Bluetick, I‘ve come across various topics where this type of thing would be very highly relevant. I’ve looked around and depending on what you’re doing, it can be very difficult to find this type of stuff. It kind of actually spoke the idea of writing the technical side of developing a SaaS application, a book that basically covers that topic. The problem obviously, I just don’t have the time to do that kind of thing.
There’s also just a wide variety of topics that as a SaaS founder, you may run into them and you may not. It depends on the type of SaaS that you’re building and how data intensive it is, how much search you have to do, if you have to do data indexing. A lot of times, you can get away with just very basic stuff and then when it breaks, then you fix it.
I think it’s very easy to go down the path of trying to engineer something to work for the largest case that you could possibly envision your app doing and then get into it and realize that you’re not going to hit that for six months, or a year, or three years. You’ve over engineered the early stage stuff. There are certainly things in Bluetick where we’ve had to rewrite them two, three, there’s sections of the code where I’ve rewritten it four or five times just because the backend stuff has scaled to that point.
Had I sat down and just designed it on day one to try and reach that scale, it would have taken me so much longer to get something out there. I think you really have to just weigh what it is that you’re trying to accomplish and what those short term goals are which your primary ones should be get something working in front of people versus how do I make this thing survive in the long term.
Unfortunately, that’s something that’s sort of diametrically opposed to each other. You don’t want to have to rewrite code more than once or twice if you don’t have to but at the same time, in order to take those shortcuts, you almost need to build those sections of code as prototypes just to get to where you need to be and get that revenue in the door.
In terms of looking around and trying to find specific resources, I’ll be honest, I looked around and I could not find very many. There’s all the generic stuff on how do I build an application or how do I use this particular type of technology, and those are great and helpful but they don’t give you a much broader picture of how do I handle authentication or how do I handle permissions inside of a system.
There are different areas you can go into like claim space authorization and all these different things. At the end of the day, you got to pick what is right for your application and what is going to get you as far along as possible with the least amount of effort.
Rob: The hard part of this is if you get into like how should I do authentication, it’s going to depend from language to language. You should use the built in .NET stuff for .NET but in Rails, you should use the built in Rails stuff. You almost have to go one level higher and talk about concept.
I agree with you. I don’t know of a single good book or tutorial course about really the high level engineering side that’s not language specific. I went to Google and typed in how to build a SaaS application. There’s actually some decent stuff. There’s a good conversation on Quora. There’s a good article on Glenn Stovall’s blog. He’s a MicroConf attendee. He talks about all the technology he would use and it’s like 19 apps in a row. He made the list. Thanks Glenn. I haven’t even noticed that. That’s kind of funny.
That’s where I would start. Again, I don’t know of any tomes, any books, any dead tree of things that are out there. It’s much more going to be about blogs, article here and there. I do know that there are people out there like Derrick, my co founder, has a blog called Scaling SaaS. It’s at scalingsaas.com. He talks about challenges that he’s run into and how he’s fixed them but it’s not a step by step tutorial or a really deep dive into engineering a SaaS app. Perhaps, there is a gap in the market here that someone would be interested in filling.
Or if you have heard of some good resources for stuff like this, feel free to write in questions at Startups for the Rest of Us and we’ll be happy to mention them in a future episode.
Laura: Hi, this is Laura Roeder from Meet Edgar. Hey guys. I was wondering about Rob’s perspective on bootstrapping versus fundraising now that you are operating inside of Leadpages, a funded company. I’m a bootstrapper, I know you guys have been big proponents of bootstrapping over the years. What have you learned being inside of Leadpages about bootstrapped versus funded companies and has it changed your point of view at all about what you might like to do in the future? Thanks.
Rob: This is a really interesting question. The hard part is think about how I run a bootstrap company versus maybe how you run one versus Reuben Gomes versus Josh Pigford. I don’t know if you can say there’s one way to run a bootstrap company and so I can only compare the way I run them with the way that the Leadpages team runs them.
If you think about a funded company in Minneapolis run by Clay Collins and his two co founders, started as a distributed company and then raised funding and grew to 170, 180 employees at this point, it’s probably a different trajectory. They’ve always been profitable. Different trajectory than a funded company in the bay area that maybe B2C, has never been profitable and is hiring a boiler room of bros to make the phone calls.
There are a lot of different ways and thoughts around raising funding and different ways to run a company. I guess I want to couch that in advance by saying it’s only one person’s experience. It’s with basically two companies, comparing them to one another.
The base thing I’ve learned moving to a funded company is that it’s so freeing and amazing to not have to worry about resources, to not have to be concerned with adding a $200 a month server or upgrading the database over to a $2,000 a month box. You know it’s going to fix your problems but you just don’t know if you have the money to do it.
That is gone. I’m not saying money is infinite but compared to the bucket we were in a year ago, before the acquisition, money is essentially as close to that as you can get. Anytime we bring up a problem and we’ll say, “Here’s how to fix it but it’s going to cost this.” The cost is actually the afterthought in the conversation. That’s very freeing and it allows us to operate quickly. We can hire. We can pay market rates. It’s like having the resources, it’s crazy.
Especially because we’re not doing the crazy I’m going to raise $20 million and do the B2C shuffle where we just hire way out ahead of sanity. You hire 20 people before you hit product market fit. We’re not doing that. We’re literally hiring to scale. This is the perfect time at which I would have raised funding if we were going to. It’s a point at which you have product market fit, you’re growing quickly and you’re just pouring money into either scale the marketing or scale the engineering. That’s been cool.
The other thing I’ve learned is that specialization is amazing. The fact that they don’t have people who do support and customer success and marketing, we used to have a Drip when there were five of us. There was one person doing support. To be honest, there’s like eight people doing support for Drip. Marketing is divided into like some people just write blog posts. That’s all they do all day. And then there’s this person and all they do is all the social paid acquisition. There’s this other person and all they do is the search paid acquisition because they have the staff to do that.
Specialization is extremely powerful because you can get so good at stuff. This is when we see these case studies like we talked about last week. It was two weeks ago, about the SEO stuff, the reason those people are so good at that and can write that incredible case study is because that’s all they did. That’s all they did for 90 days straight, was work on that one problem and you can accomplish a lot doing that.
I think another difference and I don’t think it’s not a fun diverse thing but like Drip was an engineering driven culture because I’m an engineer and so is Derrick. Leadpages and marketing is different culture so it’s a different way to look at it, a different way to run a company but that’s not because they’re funded. It’s because they’ve always been that way. Clay, Tracy, and Simon bootstrapped Leadpages to, I don’t even remember what the number was, but it was several million dollars in annual revenue. They kind of are a bootstrapped company that then raised funding.
I think those are some cursory thoughts. I could probably do about a 20 minute rant, not even a rant, just a conversation of me talking about the differences but I think those are probably the most pronounced.
Mike: I think the only thing I’d add to that is that there’s this I’ll say sort of a pervading fallacy that when you start talking to not self proclaimed experts but the people who are leading the masses when it comes to startups, you look at them and your immediate thought is, “Oh, they know what they’re talking about and that’s the way to build a business.”
The reality is that that is true to an extent, however, there are lots of ways to be successful and there’s more than one path to do it. There’s no one true path. There’s no one silver bullet. There’s no one way to do things. There’s lots of ways to do it and be successful. Just because it worked for somebody else, it doesn’t mean it’s always going to work for you and that when you’re looking at those types of examples, that’s one path. There are lots of others that may or may not work for you. It’s about finding what will work for you.
Rob: It’s interesting. There’s always these big things about don’t raise funding because you’ll lose control, or you’re going to make bad decisions because you have too much money, or you’ll feel all this pressure from investors. I’m not the founder or the CEO of Leadpages but I don’t feel like I’ve lost control like we’re being pushed to make bad decisions because we have “too much money,” or that there’s all this pressure from investors. Perhaps the board or the CEO, Clay feels different than that.
It’s not this black and white dichotomy that so many people make it out to be. You and I have never done that. We’ve never been anti funding. We’ve always been anti the dumb B2C startups that have no product trying to raise all this money and go viral. It’s the stupid Silicon Valley stuff.
For 10 years, I’ve been saying there’s a right time and a right place to raise funding. I think it’s post product market fit. You bootstrap to that and then you add the fire to grow the company. Typically, it’s going to be more B2B although if you had a B2C that had hit, I think there’s a good time to raise it as well.
It’s really interesting. There’s a lot more to talk about. Maybe we’ll record an episode in the future and revisit that whole topic.
Mike: Yeah. I think you and I are more anti pipe dream where you have something that you’re putting out there but you’re not charging for it and you don’t have any way of making money. The reason you need funding is in order to increase your reach and get it in front of more people. And then, at some point down the road, you’ll figure out how to make money from it. If you can’t do that very early, then it makes it difficult to build a business out of it.
Rob: Right. We’re anti billing slide decks and asking for permission instead of actually building a company. You should be able to build your company to the point where people want to invest without any funding. It’s very, very rare exceptions. Maybe hardware, although even these days I would say do a kickstarter. Maybe there’s something with incredible computing power, something that you can’t have access to and I would say build something simpler first.
For the most part, most of what we all do, you can bootstrap that to the point where it becomes very interesting to investors.
Mike: I think that about wraps us up for today. If you have a question for us, you can call it into our voicemail number 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 339 | Updates on Bluetick, Drip and Other Madness
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike give updates on Blutick and Drip. Mike talks about some progress he’s made as well as his current MRR with Bluetick. Rob gives his update on Drip continuing to scale and fill new positions.
Items mentioned in this episode:
Transcript
Mike: In this episode of Startups for The Rest of Us Rob and I are going to be talking about updates on Bluetick, Drip and other madness. This is Startups for The Rest of Us episode 339. 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 1st product or you’re just thinking about it, I’m Mike.
Rob: And I’m Rob.
Mike: And we’re here to share experiences to help you avoid the same mistakes we’ve made, what’s going on this week Rob?
Rob: Well I’m back to feeling really good about Drip because for the last maybe month, prior to last week, which I talked a little bit about it. We just had you know scaling issues right, it’s like stuff comes up, you don’t know if it’s database, you don’t know if you can add more horsepower to it, code implementation, you know what it is. So, different times of day certain ques would back up and it’s like we’re shipping a lot of features, the team is kind of firing on all cylinders right now and I feel like we’re the most productive we’ve been in ages perhaps ever,
[00:01:00]
Rob: I mean just given that the time size is so much larger, we’re able to just ship stuff faster and yet, like every week was ruined for me because there would be this delay or whatever, this page load is slower, just whatever that like makes me feel like we’re aren’t living up to the promise that we make to our customers, but we turned like a big corner last week with it and I just feel great about everything. So that’s my week.
Mike: Yeah, I know what you’re saying. I think the best analogy, I might have heard this someplace but I kind of feel like I thought of it on my own at 1 point, is like when you’re working on a SaaS app like everything is in motion while you’re working on it, so it’s almost like being a heart surgeon like you have to make sure everything stays up and running while you’re still working on it.
Rob: Totally, that’s right, Reid Hoffman the founder of LinkedIn said building a startup is like jumping out of an airplane and assembling the parachute on the way down right, because you kind of in free fall and you’re burning through cash and the analogy works really well for running a SaaS app and having to do kind of performance improvements, refactors, anything like that that impacts a lot of things and this is where unit testing is such
[00:02:00]
Rob: a nice scaffold right, unit testing is like having good test coverage, it’s kind of like jumping out with the parachutes already half made or maybe the parachute is, I’ll just stop there because that was a really dumb analogy anyway.
Mike: I was going to point out, I wasn’t sure where you were going to go with that.
Rob: You’re like you’re really taking this too far, let’s ditch the parachute thing.
Mike: That’s almost like my analogy against a heart surgeon.
Rob: How about you, what’s going on this week?
Mike: Well minor champagne moment, I’ve recently crossed the 1,000 dollar a month MMR with Bluetick, so things are going in the right direction. Of course, because it’s the beginning of the month you look at the statistics for growth and stuff like that and they’re just tanked at the bottom which because it’s the beginning of the month instead of the end.
Rob: I know you’ve got preorders up front but this is active customers right, these are people that are actually using it and not people who have paid you and are planning to use it.
Mike: Yes, these are people who have paid me and are currently using it.
[00:03:00]
Rob: Sounds good.
Mike: Yeah, most of the people I had who had come in as preorders and then converted over into paying customers, a lot of them I had essentially applied credits to their account to give them credit for that preorder to some extent, mostly to kind of boost them over from being a preorder and kind of having an indefinite beta period over to like being a paid customer and those payments are I think going to be starting to kick in this month but even with all of that it’s still over 1,000 dollars a month and my goal for this month is to double it but we’ll see how that goes.
Rob: Wahoo, a 1,000 bucks a month man.
Mike: Yeah.
Rob: Are you going to Disneyland, are you going to go out and buy a new car?
Mike: No, I had a beer last night, that was about it.
Rob: Nice, that was your champagne moment, was to drink a beer.
Mike: Yeah, champagne, beer, I’m sure somebody’s going to have a coronary over that analogy.
Rob: Nice, do you feel like the pace is picking up in terms of how quickly you’re adding customers?
Mike: It is and that’s both intentional but also as a byproduct of people talking about it because they are
[00:04:00]
Mike: using it and they’re having good experiences so they’re turning around and referring other people to it and saying hey I’ve been using this and it’s been working really well for me, that and coupled with some of my outreach efforts, they’re either going on podcasts or talking to people who are on mail lists. It’s a combination of things but I’m definitely pursuing things a lot more in that regard as well and it’s unfortunately a juggling act too because there are things that come in and people say hey, can it do this or can this be modified, can we add a feature or a function over here that does X, Y or Z and it’s prioritizing those against all of the other things that are going on, it’s really pretty hard.
Rob: Yeah, that’s how it always is right, especially in the early days man, it’s tough. That’s why starting on your own and really being the single founder is such a hard road to go if you’re going to build an app like this that’s not in a small niche market where you can move slow and there’s no competition and you can kind of trudge along but building something like this, where there is competition and you’re going to have to be keeping up, you need to get to the place where you’re keeping up enough revenue to basically hire somebody
[00:05:00]
Rob: soon and essentially, Justin Calcian says hire your cofounders, right that’s what he does now. He doesn’t have cofounders but he hires really early because he races around and he has a little he can back it with and he’s able to give our less equity but he brings people in very early, you don’t see him building something solo or alone because there’s just too much to do when you’re launching something that you want to see grow pretty quickly and it’s in a big market.
Mike: Yeah, I meant there is definitely things that are kind of falling on the floor right now, I mean 1 thing that’s been sitting on my to do list for well over like a couple of months at this point has been working on the sales website and even people who come through the sales funnel when I start talking to them, the biggest chuck of questions that they have is kind of what does this actually do, because the website doesn’t explain it very well and really the website is just 1 page, so there’s not a whole lot of explaining that it can do on that 1 page, it doesn’t provide use cases or examples or screenshots really, I mean there is very little there to go off. Most people are really reliant on what they’ve been told by other people or what they’ve heard about either from me or from other places where I’ve
[00:06:00]
Mike: done like a podcast interview or something like that.
Rob: You know it’s really cool when you say that some of your new customers are coming from other people using like word of mouth was a big driver in the early days of Drip, not as much with hit tail but there was some but if you have that already, like if you have that when you only have low double digit number of customers, that’s a good sign, right it’s a really good sign because as you grow that’s just a snow ball that allows you to continue kind of leveling up and when you add 100 or a1,000 if you still get that same percentage of people, you’ll always be lower as time goes on right but if you can get folks talking about it, it’s a really nice way to be involved in every conversation right, you always want people to say remember how like infusionsoft and Ontraport, it was always just the 2 of them and just by nature of that fact Ontraport which is nowhere near the product that infusionsoft is, you know had all of this growth and then I remember when Drip started to be part of those conversations when they would say of infusionsoft or Drip and I would like see it, I would say it’s
[00:07:00]
Rob: not in every conversation about it, but I would see it in these online forms, these threads and then get thrown out and I remember when that started happening and it was gaming changing because you just become another viable option rather than a tool that no one has heard about.
Mike: Yeah, 1 of the things I do, I think it was 1 of the 1st questions that I ask in the survey when you go to Bluetick’s website and ask for an invitation code, 1 of the questions in there is where did you hear about this, so from that I’m finding out exactly who people heard about the product from, so it’s nice to be able to track it back to people who either placed preorders or are current customers, I even have 1 customer who like has a bunch of customers that he works with and he’s going to start recommending it to them because he’s had such a good experience with it and they wanted to use it internally 1st and things have gone well in that respect, so now they’re turning it around and going back to their customer base and say hey let’s get you on boarded with this so that we can help you more. So, what about you, what else is new?
Rob: Well, you know as I talk about most weeks most of my updates involve scaling
[00:08:00]
Rob: Drip and hiring people, right. That’s kind of a big focus of mine now, there is some other stuff, I might get into it later depending on how much time we have today but I feel you know we have been pretty consistently, just we’ve had an open job, at least 1 job opening since we got acquired and most times we have either 2 or 3, so we’re constantly, we’re hiring other new front end like IUIUX, new rails folks or new people to help with scaling and I feel like I’m kind of in the groove of hiring at this point, like I’ve gotten pretty good. You know it’s kind of this skill that you go in and out of because when you’re not hiring you forget how to skim through a resume really quick, how to do a quick phone interview, how to do a quick phone interview but we’ve just been doing so many recently that I feel like I’m kind of in the groove of it which I don’t know that I necessarily want to be, hiring people is not an aspiration of mine, like I think we’ve always talked about like my book start small stay small, the small was about head count, not about revenue right. I always want to grow revenue but it’s like I want to keep head count down, but
[00:09:00]
Rob: in this case it’s even just looking ahead as we’re Xing, 2 Xing, 3 Xing every so often it’s pretty frequent that we’re doubling our customer base, we just have to hire a little bit ahead of where we actually are, as well as like I said earlier, being in a competitive space we need to continue delivering features, which as we’ve talked about in the past is harder and harder to do the bigger you get because you spend so much time just maintaining what you already have right, making sure the database is ahead of everybody’s need and the code base and the ques and just all of the stuff that you’re running. So yeah, I guess to summarize we’ve been hiring a lot, I’m hoping we can slow down here pretty soon, we’ve found some really good candidates and I guess it’s getting in the groove of it. I do like doing a bunch of hiring and stopping so that I don’t have to constantly you know being doing it and can kind of focus on other things.
Mike: So, is that going to be the focus of your next book is how to hire people at scale?
Rob: Oh, my gosh seriously. No, it will
[00:10:00]
Rob: definitely not, and like I say it’s super cool when you get a new person on board and you get them up to speed and they start contributing and like Derek and I looked at each other and we’re like we are shipping a lot of features and it’s because there’s all these people you know doing things that used to be either in our lap or we just pull, hey we have a scaling issue so we’d pull 1 developer off of something and now we don’t have too, like we have dedicated people who that’s all they’re doing and I keep saying we’ve hit our stride. I hate to keep using that analogy but it really does feel like we’re getting the right people in the right roles and it’s kind of a good feeling when you do slot somebody in and you see them start shipping things, you’re like man I’m really proud of what we’re putting out even we’re not doing all of the work anymore because you think back when you’re crafting this software or you’re crafting the UI, with Drip that was really all Derek right, it was he and I deciding what to build and me handling everything else but for so long it was all bottle necked by 1 or 2 people’s bandwidth but now with the growing team it’s neat to see that
[00:11:00]
Rob: we’re able to maintain the efficiency and still continue that hiring more people actually means we can push out more software rather than in other companies I worked at where hiring more people actually makes things worse, you know it like slows everybody down.
Mike: Yeah, I definitely hear what you’re saying. Do you find that as you are adding more features that like the individual features that you’re adding tend to be more invasive throughout the entire course of the apps, so it’s not like a little surface thing that you can toggle here or add over there, it’s like you’re adding this feature that needs to be added throughout a large part of the pipeline of the applications?
Rob: You know that doesn’t come up too much to be honest. I think in the early days it did because you’re just trying to get to that point where you built something that people want, but I think these days our product is so much more mature that there are things we add now and again that impact everything but our architecture is really solid, so things are broken out into their own subsystems and such. While there certainly are some that come through for
[00:12:00]
Rob: the most part a lot of these things seem to be more self contained I’ll say, I mean it may impact 5 files or worst case 10 files and you have to go through all of these layers of something and those are the ones that get a little scary right because you’ve got to make sure you have unit test coverage like crazy on that but yeah, I would imagine you’re probably in that boat though right where kind of everything you add it’s like oh gosh I have to go rearchitect this thing in order to do it.
Mike: Yeah, and that’s kind of why I was asking because I find that a lot of the changes that I’m making tend to be stuff that have to be tracked down or tracked all the way through from the front end all the way through the API and then into the service layer and the security layer and then into the database and it gets to be, I don’t want to say frustrating but it takes a lot longer to get some of those things done than I would like especially because of all of the maintenance and ongoing requests or butt fixes and things like that, there are just tweaks and adjustments that kind of invade into that space while I’m trying to get those things done, it’s
[00:13:00]
Mike: just, it’s honestly like the juggling act right now is really pretty hard, so I was just kind of curious of whether or not you still ran into those things, so maybe there’s light at the end of the tunnel for me.
Rob: Yeah, yeah there is but it takes a while. I remember we refactored Drip, like major database refractor probably twice before we got to launch right, so Derek broke ground on code December of 2012 and we really launched to the world in November of 2013 but we had kind of our 1st group of 10, 20 customers coming on as early as June of 2013, so that was 7 months in and I think within that 1st 6 months before we really had people he had to do a massive rip apart of things we just had made decision to couple and they shouldn’t have been coupled and then there was another 1 when we launched, automation right so that was early 2014 as he was building automation that was just painful, it was like 2 months of standing still and then he built automation, once he had it done the automation stuff was actually not so hard to build but it was like we have to rip
[00:14:00]
Rob: separate these 2 database tables and you know as you’re falling down making your parachute and it was gnarly but after that like once we hit there, we’ve had limited need to do that because I think the building blocks got in place and the product was solidified. Now us marking automation and we’re not going to add on shipping cart landing page, affiliate marketing management, you know what whatever else, that would all I think impact some of this other stuff where as you’re still figuring out, like where I would guess at your stage, we were still figuring out I should say, so really trying to figure out should I build this feature, what is this product going to become, what is the vision for the product and is my vision still aligning with what the market is asking for and that makes things very fluid, I think is probably a good word for it.
Mike: Yeah, I’m having the same types of general conversations with most people when it comes to either features that they want implemented, like the road map that I have in my head, it’s obviously different than I originally started out with but over the past several months it really hasn’t changed a lot and most of my time is spent trying to
[00:15:00]
Mike: get those things done, so that’s more of the challenge, it’s not trying to figure out what to do, it’s figuring out what order to do it in and how to get it out as quickly as possible without wrecking things along the way because like you said, there’s that issue where if you go to roll out a new feature or a new piece of the code, if it touches a bunch of different pieces of the application and you don’t have as many unit test around it as you would like than it’s a little scary to hit that deploy button. So most of the time what I do is I deploy it out to my development server and I just try to beat on it a little bit to see like can I break this or is there any obvious things that I might have missed that may not be covered by unit tests because the front of the UI, like there’s very little unit tests are on the front end stuff, like the services and all of the back end stuff, like there is unit tests there but the front end is not tested well but that’s also because I know that the front end is changing a lot, so it’s much harder to put something in place where I’m just going to have to change all of those things anyway.
Rob: Right, and
[00:16:00]
Rob: you know the front end unit testing, which I guess now becomes what integration or system testing, there’s like a different name for it when you’re going all the way from the top down, that’s stuff runs super slow right and I consider it a more advanced method of testing, not a bad thing to have for some critical paths, I think it’s just my opinion, others may disagree with me but it’s like your sign up flow yeah you should probably have, it would be nice to have a nice UI test for that and maybe sending a broadcast in the sense of marketing, I mean it’s your basically fundamental things but A I would not be testing settings pages or like little corners of the apple out that people don’t use and I’ve heard of folks who separate those front end tests that hit that UI into a completely different test sweep because they can take 30 minutes to run or an hour to run, because they are so slow because they have to speed up browser instances and click on things. So, I don’t know, I would say at this point you will be better off annually QA your stuff and then just having unit tests below the surface, that’s probably what I would have. I don’t think I would spend a bunch of time doing UI tests yet. I actually don’t think the UI
[00:17:00]
Rob: testing suites are that still, they’re still not that great.
Mike: Oh, they’re terrible.
Rob: I know, I was using Selenium in 2008 maybe, 2007 to 2009 in there to test on an invoice and it was horrendous and I’ve heard there’s like another layer now built on top of Selenium and I heard it’s still not that great.
Mike: Yeah, I poked around it a little bit but realized that there was just too many things changes to really make any sort of difference and it wasn’t worth going down that road. I mean the API and stuff gets tested and some of the different layers but you know once it’s passed that, I mean the front end of the app, it’s all this massive Java script application because it’s all written in angular so there’s not much there other than the smoke tests in that if I make a change on the front end UI I can be reasonably assured that the APIs and stuff underneath are working but that’s no guarantee that if you click on a button it’s still going to do what it’s supposed to do.
Rob: Sure, and that’s where I think about having code that doesn’t have a bunch of side effects on it or places on it so if you’re working in a
[00:18:00]
Rob: certain part of code you know that you don’t have to go test all of these other things right, that you can test this 1 thing and be fairly confident that you’re not going to break something in the UI and do a cursory test as you deploy it and then just let your customer finds your bugs, no I’m only kidding. That’s like the worst, some of our competitors do that and it has tarnished their reputation.
Mike: Yeah if I can find and fix a bug before the customer ever sees it or knows that it was an issue than that’s the probably ideal scenario but it’s still hard, I mean I’m just constrained on resources and time and speaking of time, things have gotten even worse for me because as of 3 days ago my wife acquired a larger fitness studio here in town, so commence schedule craziness at this point. It’s just her schedule is all over the place and obviously, mine is pretty swamped as it is, so just kind of trying to overlap enough so that we make sure that the kids are taking care of and dinner is ready and all of the other stuff that needs to be taken care of
[00:19:00]
Mike: is done and out of the way is really been super challenging in the past couple of days.
Rob: 2 people running business in the house, that is tough. I can imagine that is really complicated and having flexible schedules sounds great until you realize that like 2 people with flexible schedules is chaos, like Sherry and I have run into that in the past where it’s like I think I have a flexible scheduled but like you said, you actually have kids and you have like some other responsibilities to get kids picked up and get dinner made and this kind of stuff, so I totally get it.
Mike: Plus our youngest was sick yesterday, so it was either yesterday or the day before, 1 of the days this week he ended up staying home from school and then last night he had a fever and we thought he was going to be home again from school today and it turned out he was fine, but it’s hard to juggle all of that stuff and then plus with her new business, I mean it’s a larger business so she’s got multiple contractors that she didn’t have before and there are scheduling issues, and moving to a new space
[00:20:00]
Mike: and new software and all of this other stuff that goes with it, it’s a pretty large learning curve is what it comes down too.
Rob: Yeah, I bet man. Well good for her, big congratulations to the both you I guess for her acquiring that studio, sounds kind of cool. I bet that’s a good move for her to kind of up her game, she’s leveling up, stair stepping up if you will, boom.
Mike: yeah.
Rob: how involved are you in her business?
Mike: You know I help look at the business financials and stuff early on but beyond that stuff and just kind of verifying hey is this a good move to make, I really try to kind of stay out of it. Just kind of point out here’s something that you might run into or here’s something else that could be an issue or just don’t worry about this over here, but just kind of try and stay aways from it. I mean that’s kind of her thing so I’m not trying to get in the way, is really what it comes down too, trying to stay out of the way.
Rob: Yeah, that makes a lot of sense. So, speaking of all of the scheduling madness and how to juggle that, Sherry and I made the decision early in the year actually, we were talking to
[00:21:00]
Rob: someone who said they had an au pair and an au pair is someone who is typically young woman who comes from oversees and wants to come to America and is basically like a live in nanny. So, we were talking to someone who had an au pair and said it was life changing and said it was the best decision ever and so I started noodling on it and we realized that we were both going to MicroConf and I was going to be gone for a week or like 6 days and Sherry was going to be gone for like 4 or 5 and every time we go away for overnights A, it’s expensive, really expensive to hire someone to watch your kids overnight and then there’s always they don’t know your routine and they don’t know your house and there’s just so much to communicate that it’s super stressful. So, we’re just like let’s hire a live in nanny, like let’s see if we can find essentially a local au pair, you know, someone who Sherry was like a young college student would be prefect right, and so we did. So, I interviewed, I don’t even know a dozen people here in Minneapolis and right before MicroConf, like the week before she moved in and she lives in, we have like a basement living suite, it has everything except
[00:22:00]
Rob: for a kitchen right, so it has a full bath or a 3 quarter bath and then it has laundry and a bedroom and then we share the kitchen but it has been game changing man and for exactly the reason you said, it’s like sometimes Sherry and I just are 30 minutes off of where we’re not going to be there and the kids are going to be there or sometimes we need to be in 2 places at once or Sherry goes out of town, she went out of town for like 4 or 5 days to Austin for a yoga, some training in aero yoga and it’s like during that time I could handle the kids but they get on the bus at 9 15 in the morning and so that would put me to work at 9 40 and now it’s like you don’t need to be around that much to watch the kids because they’re both in school but I can leave at 8 30 or whatever and someone is just kind of hanging out with them for 45 minutes, so it has been game changing for us.
Mike: Yeah, I can imagine. I mean that’s something that we’re kind of struggling with right now is just trying to manage schedules and it’s just really so early on, but you know hopefully that will straighten itself out but I would love to have a nanny.
Rob: I know, it’s something to think about long term
[00:23:00]
Rob: man, I mean especially 2 people running businesses right, the idea is your schedules are going to be gnarly and in the long run the business should generate a lot of cash, right. I mean it should turn out more money than you would make with a salaried employee and with those 2 things in mind it’s like all right, then we outsource as much as we can and that’s you know, if you’re still mowing your own lawn or snow blowing your own snow I think that honestly, I think that’s not a good use of our time as entrepreneurs. We moved to Minneapolis and 1 of the 1st things that I did, we already had a lawn service but I was thinking like I’m not shoveling walks and it’s not because I’m above it, I used to do it but now the time versus money trade off is insane. So anyway, that’s kind of my soap box about outsourcing stuff and of course I’m not talking about outsourcing someone raising my children of course, I know that’s probably the joke or what folks are thinking, but it is like outsourcing driving them from school to the house, or outsourcing our live in nanny like the kids go to bed at 8 or 8 30 and so she’s hanging out in her room reading and
[00:24:00]
Rob: Sherry and I are like it’s 8 30, we’re just going to go out for 2 hours and like have a late dinner and have drinks and talk and you don’t have to hire somebody, there’s no clock running where you’re paying somebody 15 bucks an hour while you’re sitting down the street at a restaurant. I think that about wraps us up for the day, if you have a question for us call our voice mail number at 1 888 801 9690. No one ever calls us anymore.
Mike: They don’t love us.
Rob: I know, we get like 1 call every 2 months. I tell you what if you want us to answer like go to the top of the queue of questions, just call it in because we get so few of them and they’re fun because you get to hear the person’s voice, you can remain anonymous, you don’t have to say your name or your URL if you don’t want too but it’s kind of nice to get those every now and then. You can also email us questions at questions at startups for the rest of us dot com. Our theme music is an exert from We’re Out of Control by Moot and it’s used under creative comments. Subscribe to us in iTunes by searching for Startups and visit Startups for The Rest of Us dot com for a full transcript of each and every episode.
[00:25:00]
Rob: Although you know what Mike, did you hear that our transcription service again, this is like the 5th 1 we’ve used, they just like disappeared. I know, this happens like probably once a year. I seriously think, we’ll we’ve been doing the podcast for 6 years maybe, 5 or 6.
Mike: Something like that.
Rob: And I literally think we’ve gone through more than a half of dozen of these.
Mike: Are we at 7 now, 7 years?
Rob: Are we? Was it 2010?
Mike: I think so, yeah it was.
Rob: Gosh, dude we are old.
Mike: I know, our podcast is older than most businesses who listen to us.
Rob: Yeah, I know our podcast is older than a lot of children. All right, so anyway transcription service I think Josh, our editor is looking for 1 right now, but it’s just funny how these things just come and go. I guess it’s just such a commodity you know, it’s tough to stand out.
Mike: Well I think that’s the issue with all of them and I think that’s why they come and go because you get the transcriptions and they go for a while and they have a really hard time raising the price because most of them tier their pricing
[00:26:00]
Mike: in terms of how quickly you get it, like oh if you need it in 24 hours this is what it will cost and it’ll be some outrageous number and then it goes down if you don’t need it for like a week or so and that’s the issues is that there’s that race to the bottom in terms of getting it transcribed and I think that most of them just can’t make ends meet and it’s not just because they don’t have enough business but it’s because they’re not able to pay enough for those people and the business just kinds of implodes at some point.
Rob: All right, back to the outro here. Visit Startups for The Rest of Us dot com for a full transcript of each episode. Thank you for listening and we’ll see you next time.
[00:26:36]
Episode 338 | How To Rank #1 for a High-Volume Organic Keyword in Under 3 Months
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to rank number one for a high-volume organic keyword in under 3 months. Based on a case study posted by Moz.com, the guys give their opinions on the eight steps listed in the blog post.
Items mentioned in this episode:
Transcript
Rob: In this episode of Startups for the Rest of Us, Mike and I discuss how to rank number 1 for a high volume organic key word in under 3 months. This is Startups for the Rest of Us, episode 338. 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 1st product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re going to share our experience to help you avoid the same mistakes we made. What’s the word this week, sir?
Mike: Well, I’m spending most of my time these days working on support issues and as I on board people more often, what I’m finding more often is that there’s certain usability issues that keep coming up and I have to keep going back and either help people get through them and then go see what it takes to fix them or just kind of implement the work arounds for them. Then on the other side of it is fixing some outright bugs that I found, which were not obvious. Most of them are just little things like
[00:01:00]
Mike: sorting issues or stuff like that that’s just affecting the UI, but it’s going pretty well so far. Kind of exciting I guess.
Rob: Yeah. There’s 2 sides to this, right? It’s like, on the 1 hand, you don’t want to be spending time working on this stuff and trying to work out kinks and improving usability and all that stuff because you just wish it was done. But on the flip side, you know that these are problems that, at scale, are going to be even worse, right? At 50, 100 or 1,000 users, you need to fix them now. There’s that needing to invest the time, but also it feeling really productive, you know? I don’t know. Like you’re ironing out the rough burs, the rough edges of the product and just smoothing it out over time. I think that this is where you want to be, right? You don’t want to be where you were whatever, 6 months ago and you have 0 customers and is there people using it? It’s like, you don’t know what you should be working on technically. You know? You’re kind of flailing around and it’s like, now there’s people using it and it’s probably pretty obvious what you should be fixing at what point in time.
[00:02:00]
Mike: Yeah. As you quoted, like the rough edges. That’s kind of what I’m spending part of my time on and then figuring out how to fix it. It’s 1 thing to know what is busted and where you need to spend your time, but it’s another to figure out how to do it, so that it’s clearer. Obviously, you wouldn’t design a product that you thought was confusing, but at the same time, when other people get in there and use it, they weren’t inside your head when you designed it. They don’t have the same perspective.
Rob: On my end, this actually is a pretty good week for us. We turned the corner on some scaling challenges that we’d been working on for well, I mean we’ve been working on them for years. You know? They just come back every 6 months. You get just enough ahead of them that you scale up again and then they rear their ugly head. Every time we, I don’t know. Maybe it’s 2 to 3 X, the user base, we see stuff again. In the early days like, well just add an index to the database or add more hardware. But you hit a point where you kind of start exceeding the physical bounds of a single database. You know? You’ll
[00:03:00]
Rob: get a quarter or a half terabyte of RAM and disc IOPS through the roof and it’s expensive. You still just, it isn’t making enough of a difference. We’ve had to circle back and we attack it from a bunch of different directions. We’ve re architected some things. We’ve actually piped some new relic stuff that allows us to really see some detailed traces and we’re seeing, you know? There are some query issues, but there’s also code issues that creep in as you write more stuff where you’re doing N plus 1 queries, in essence. So, we’ve just started to see those creep in and as we’ve been pulling them out, we’re seeing these incremental bumps. We’ve pushed like, 3 or 4 developers pushed 7 different performance improvements over the past maybe, there was a week where we did 7. Then this week, we’ve probably done 3 or 4. It just little by little, it is just making the throughput so much higher, so much faster. We’re sending between 2 and 4 times the volume of email right now than we were even 3 or 4 weeks ago. It’s pretty crazy when you think about it that way. It was
[00:04:00]
Rob: a bit of work to get there, but once this stuff started rolling, it really made a big difference.
Mike: Yeah, it’s funny you mention performance improvements and that. I just rolled one out this week where people can go through and they can identify who has sent them emails and who they’ve received emails from and how many of those in each direction. There was a performance issue earlier where it was just a little bit slower than it should have been and it wasn’t returning all results because there were so many. Just pushed out a fix this week where it’s lightning fast now. It’s amazing how much better the experience of the app is just from those little improvements.
Rob: Yeah. It’s super cool. Sometimes it’s noticeable by users and other times it’s not, but you know that even if users aren’t noticing yet that it’s eventually going to catch up with you. It’s nice to get that done. I remember the days where we’d have a customer with 3 or 400,000 emails in their account. They’d do a big send and we’d be like, man we can totally handle this, but as long as another big sender doesn’t send at the same time. Now it’s just common place. I mean, for 3 lists of 3 to
[00:05:00]
Rob: 500,000 to send within minutes of each other. We’ve gotten to the point now where it’s like, we can hammer through that stuff. It really is just like climbing that mountain and doing things that you never think you’re going to have to do. Denormalizing databases, starting to shard things. Right now considering stripping a table out and literally putting it into a different kind of data store. I mean, just crazy stuff you would never architect from the start when you’re building an app. It would be gold plating when you don’t have any users, but when you do hit scale and you have tens of thousands of people using your app, it is necessary.
Mike: Yeah. I was talking to somebody. I think it was Help Scout at Micro Conf and he was asking me about how some of the back end stuff of Blue Tick was done and I didn’t tell him because it just didn’t occur to me, but the back end data store for the mail, I rewrote it 4 times over the course of 8 months just because it needed to go bigger and faster and it just wasn’t doing it at the time.
Rob: Yeah. It’s crazy how the stuff that you need to do in order to make it work from an engineering prospective, you wouldn’t ever want to do because you’re like, I want to have referential integrity on these things. At some point, you realize that
[00:06:00]
Rob: speed trumps that.
Mike: Yeah. We interviewed a [UNKNOWN] architect this week. We have an open position for that right now to just help handle this because we’re trying to build the product and it just really is a completely separate discipline of being able to scale things to this level. One thing he brought up, which I hadn’t heard of, but as soon as he said it, it made sense. He brought up CAP theorem. C A P. C is consistency. A is availability and P is performance and you get to pick 2. He said, in most databases or most apps, you go for C and P and your availability is 99 point whatever percent and it’s fine because if you were to go down for like, an hour, it’s not catastrophic. But if you pick the other 2, it’s just trade offs, but he said at a certain point, once you scale, there’s a bunch of big companies in town, like Target and Best Buy who run these massive e commerce sites and he was saying once you scale one of those sites, you have to give up some consistency. You have to have availability because it’s millions of dollars per hour and you have to have performance because obviously being slow is costing money.
[00:07:00]
Mike: So, you give up consistency and you have to dealing with that. You have to start writing code and you have to start thinking about what happens when it all doesn’t sync up? There isn’t referential integrity in this certain instance and data consistency in the reports are just not going to be exactly matched across everything. It’s pretty fascinating. Today we’re going to talk about how to rank number 1 for high volume organic key word under 3 months and this is based on an article on moz.com, actually on their blog. It’s a case study that Pipe Drive co wrote with Moz and it was the former Director of Content Marketing at Pipe Drive is where the case study took place. This article is detailed. It’s very long. We actually won’t be able to cover in depth every step, but there are 8 steps that they talk about and we, at a minimum will cover the 8 steps and then go into as much detail as we can, given the time constraints. Then you, of course can come to the show notes at startupsfortherestofus.com. This is episode 338 and click on the link if you want to read the entire article. This thing,
[00:08:00]
Mike: I didn’t do a word count, but it’s got to be like 4 or 5,000 words. Pretty cool. The article starts by outlining the 8 steps and we’ll go through those 1 at a time. They talk about how much more difficult SEO has gotten and that SEO these days is much more about content and content marketing, whereas it used to be more about just straight up link building and it was a lot easier to game and Google has done a really good job of essentially closing those loopholes, much to the chagrin of a lot of marketers I know. Let’s dive right in with these 8 steps. They basically said they got a top search engine ranking position, which is a SERP spot. It was a focus of a 3 person team for a better part of 3 months to get this. It’s pretty crazy. They invested a lot of energy in it. Step 1 is to find a good topic, one that has significant key word volume and he goes right into the Google key word planner where he said when they ran the search, they picked a key word with 9,900 searches per month and we’ll go into why that’s enough later on. Now, the key word planner doesn’t even get you that close. It gives
[00:09:00]
Mike: you like, 1 to 10 K range, which is like, horrendously helpful. He said the same key word, how to search volume of 1 point 7 to 2 point 9 K in the Moz key word explorer in case you have a Moz account. They give you tools to help do this kind of stuff to help rank for key words. He looked at a chart that Moz had published and they said that if you ranked 1st for a term, you’re likely to get, it was like 30 or 32 percent of the clicks. If you rank 2nd, it’s about 14 percent and if you’re a 3rd, it’s about 10 percent. They figured that if they can rank 1st for this 9,900 search term, they would get around 3,000 visitors a month for a top position. If they could convert 5 percent into leads, which I’m assuming they are trying to email capture. I’m assuming they’re thinking about that. That would net them 1,800 leads a year, which they said it would justify the time. That’s kind of the 1st part of the 1st step of finding a good topic, is to make sure there’s enough volume that if you rank 1st,
[00:10:00]
Mike: given whatever it is you’re email capturing or trial rate or whatever it is you think you can do that it’s going to be justified time wise and financially.
Rob: I think the thing I take away from this, in selecting the right topic is more about doing the back of the envelope calculations to figure out what you should be going after based on what your return on that is going to be and it’s not so much about a specific raw number that you’re going for in terms of the search volume. It’s more about how many of those people you can convert to leads because if you’re conversion rate is higher than other peoples based on your content, then target search terms that have lower search volume because they’re going to be worth just as much or more to you than they would be to somebody else, assuming that you can convert them better. I kind of like that idea of starting from this side of it and not focus in solely on, what should we focus on for content or what should our ad line be or anything like that? It’s really about what your ROI is going to be on that.
Mike: Continuing with step 1, which was finding a good topic, the 2nd thing they looked at was to pick a winnable topic. This is actually where Moz is really handy. They said for example, if you’re trying for content marketing,
[00:11:00]
Mike: the 1st page is dominated by the Content Marketing Institute and they have a domain authority of 84 and that is very high. It’s a scale of 1 to 100. What they did is they looked at Moz Bar, which is just like a Chrome plug in and you can check domain authority and page authority on the fly. It overlays them in Google. There’s a screen shot of it here in the post. They looked at a bunch of different key words that had search volumes between, I think it was like, at least 3 to 10,000. That’s kind of where they were thinking. They were searching for like, sales management. They were using page authorities in the 30’s and 40’s. Domain authorities, there was 40’s, 70’s, 30’s and 20’s. Given that some of these 20’s and 30’s, they knew that they could kind of get in and then they used Moz key word explorer to look at the actual difficulty versus the potential scores. Then they kind of outlined some loose ranges. You want your opportunity to be above 50 and your potential to be above a certain amount. There’s obviously a bunch of different ways to do this. I have always used Moz for
[00:12:00]
Mike: this kind of stuff. I know there are other tools that do it, but their data is solid and they’ve been around a long time. At this point, they wound up with 4 key words. Sales techniques, sales process, sales management and sales forecast. One of them has 4,400 searches and then it goes up to in the 8’s and 9,000’s and they said any of the above would work for them, but for added impact, they added a 3rd and final filter to help them pick the key word and that is strategic relevance. If you’re going to turn your visitors into leads, they say it’s important to focus on key words that are strategically relevant to your conversion goals, and in their case, sales management is the optimal key word because Pipe Drive is a sales management tool. It described them perfectly. In contrast, sales techniques and sales forecast are key words a salesperson would search for, not a sales leader or a small business owner who would be a decision maker to decide to buy Pipe Drive. It’s pretty in depth here, but it’s something to think about, right? If you see a key word with low difficulty and high search throughput you think you can rank for, it may not actually
[00:13:00]
Mike: be that helpful, right? If it’s not strategically relevant to your business.
Rob: I like the fact that they point out in the article that you’re looking for a competitive score of under 50 and a potential or opportunity score of above 50. I don’t know if that side of it is so important to me or at least it wasn’t when I started out, but knowing that under a score of 50 for difficulty is a lot easier to rank for and it is possible to get it than going over that. I mean, even trying for things that are in the 50’s or 60’s, those can be very, very difficult to get, especially if you’re going against certain types of companies, trying to rank against them for those terms can be really, really hard, but anything below 50 is not actually all that difficult to do, especially if you are kind of limited in the amount of time that you can spend on it in your budget, those things are definitely attainable for the average person.
Mike: Step 2 is to write a bad ass piece of content. That’s the words they use in the article. Theirs is broken up into multiple parts. The 1st is extremely thorough research of the
[00:14:00]
Mike: existing ones that rank in the top and they kind of look through them and figured out what works, what doesn’t, what are they like both from a reader’s perspective and with an SEO eye in mind? When the pages had way too many headlines, it was over key word stuffed, basically. Then they looked for anomalies and 1 thing that caught their eye was 2 of the top 10 results were dedicated to the key word sales manager, so they realized all right, we know that we’re going to want to talk about at least sales managers in our article. Then this was 1 I hadn’t seen before. I went all the way down to the bottom of the SERPs and there’s a related searches thing that Google puts there. They looked through for those terms and they realized we probably want to include some of these in there. Part 2 of this, of writing the piece of content is the actual content creation. They say you don’t need to be a subject matter expert, but if you do a lot of research, you can put something together and they go through some steps on how to write, I don’t think it’s super relevant here, but it’s like, don’t multitask and work alone and put on some play lists and such.
[00:15:00]
Mike: Personally, I like Spotify’s Deep Focus. They have a different one. Then they talk about going through and adding images and adding headers, subsections and all that. That really caps out step 2. As I said, they go into more detail, but it’s almost like its own little article on just how to write a decent piece of content.
Rob: Yeah. The 1 piece that I took away from this is paying attention to the part at the bottom where it says, searches related to, in this case, it was sales management and you can use those for kind of off shoots. If you want to create dedicated pages for each of those. In this case, they’ve got objectives of sales management and sales management PDFs. Those are the types of things you could target as a secondary page with a different article and trying to drive related traffic to those pages as well. I think that’s a perfectly vital strategy, especially when it comes to things like where people are searching for PDFs and you can give them a PDF of, like a template or something like that. Lots of people have used that strategy where it’s like they drive people to that page
[00:16:00]
Rob: using SEO because they’re specifically looking for something that they can download. You give it to them in exchange for an email address and that’s one way to drive up the level of your email list.
Mike: Step 3 is to optimize on page SEO and engagement metrics. This is the steps they took to optimize the on page SEO. Number 1 is to fix the title. They wanted traffic from people searching for words related to sales management, such as sales management definition, sales management process, sales management strategies, sales management resources and so, their headline, their title and their H1 tag is Sales Management Definition, Process, Strategies and Resources. So, they covered them all right there in the headline. It says Google is now smart enough to know that a single article can cover multiple related key words. The common [UNKNOWN] to the list, they said should work for them.
Rob: I wonder how long it is before Google realizes that people are key word stuffing into headlines now.
Mike: I know. Well, it’s interesting because if that’s all you’re doing, it’s not going to work. You know? It’s all this other stuff they did that then propels that to work. You know?
[00:17:00]
Mike: It’s writing this massive piece of content, spending months doing all this optimization. So, part 2 of that is to fix section headings. One example is instead of writing Sales Management Definition as a header, they actually wrote the header as, it’s a sub heading, but it is, So, What is Sales Management, question mark. It’s an actual question a reader might ask. 1, it makes the article easier and better to read, but 2, it’s a natural question, which makes it more likely to rank for voice searches and for Google’s answer. This is good stuff. They also peppered related key words in the headers throughout the article. Later on, they realize they key word stuffed, basically. They actually go back and roll this back a bit. Then the 3rd step was to improve content engagement, like they have colons and line breaks and internal links and outgoing links. They just make things kind of easier to skim and easier to read. The 4th thing, I had heard this as kind of a rumor that this might exist in the Google algorithm, is to shorten the URL. There’s this graph they include where the longer your URL,
[00:18:00]
Mike: the less likely you are to rank for number 1. It’s fascinating. They have these really long blog URLs. They just shorten this way down. They essentially just have sales dash management, aside from the date in the URL. Then they improve the key word density. Obviously including the key word in the 1st hundred words of your content is kind of a well known thing, but then they talk about going through it and adding a glossary at the bottom, so they can include a few more key words. They do point out how important it is to make these as organic as possible because otherwise, it looks and feels like key word stuffing and Google and users are pretty smart about this stuff. They said, as a result of the on page key word optimization that their traffic went up and they have a screen shot of 19,000 page views. As they say, we over optimize key word density in the beginning, which slightly hurt rankings, but once we stopped this, we changed things around and saw an immediate improvement. We’ll get to that in a step or 2 later. They don’t show that 19,000 page views, they don’t show what the time frame is on that, but they did indicate
[00:19:00]
Mike: that this definitely had a positive impact on the post.
Rob: You know, I do wonder if adding, what is blank and adding in the key word is something that Google specifically looks for. The reason I think that is, or at least I kind of have an inkling of that is when I was doing Audit Shark, I had a bunch of pages that said, what is blank. So, for example, what is compliance management and if you would look around for compliance just in general, then that’s a very difficult thing to rank for just because there is all these different compliance institutions and it’s government regulations and it’s really difficult to rank against those, but if you go out and search for, what is compliance management, Audit Shark’s website actually ranks higher than the fdic.gov website for, what is compliance management system.
Mike: That’s crazy. Should you sell that? You should sell it to the FDIC. Hey guys. I have this site that ranks above you.
Rob: Right. But I wonder if that is something that specifically Google looks for. What is blank and whatever that key word is.
[00:20:00]
Mike: Yep. Totally. I would totally imagine that’s part of it, I think. More and more of these voice searches are happening in the Google answer stuff. I think it’s become more common for people to search like that as it has worked better. So, step 4 is to build internal links to the article and that means linking to this article from other articles that you have. It talks about how Google bot discovers your content by crawling your links and it also tells Google that this page is important if a lot of your pages link to it. You don’t want to just put a link in a header or footer. You actually want to link from individual pages in your site and kind of pick the right key words to link through. You look for high traffic. You look for high page authority and then they have a kind of site colon search you can do on your own website to find these key words that you want to use that appear in your other posts. You can link them out. This gives you just that basis of page authority on this new article.
[00:21:00]
Mike: Step 5 is stepping out and finding external link targets, meaning external links that will target you.
Rob: So, just to kind of clarify what Robert said, this is a little bit different than putting a footer on your website and having pages that you basically put a site map in place. This is specifically looking through your site where you refer to these terms whether it’s in your blog posts or in different articles or white paper pages, point those back to the page that you’re trying to rank for. It’s very slightly different, but it kind of achieves the same thing. It gets those internal links back and forth inside of your website.
Mike: And as I said, step 5 is finding external websites to link to this new article and they outline using open site explorer, which is a Moz thing, I think. They allow you to crawl the top 10 search results for this term and look at those back links. They dug through a few pages of that, built up a list of a few hundred prospect websites they thought might link to it and it’s a very raw list. Then they
[00:22:00]
Mike: only look at domain authority above 30. They eliminated sites that are free hosts, like BlogSpot and wordpress.com and put it in an Excel file. Then they go through finding the email addresses for people on these sites. They used Email Hunter, which is at hunter.io and they did their outreach. They don’t go through specifically what text they use or whatever. This is kind of a slog, right? It’s called outreach and I’m sure that most people, because I get these emails and I just delete them. But I think if you have a compelling case, apparently whether it’s the Pipe Drive name or whether it’s their approach, they said they just outreached like crazy. They used tools like, you could use one of these tools like Mix Max or Lead IQ or Tout, Perspectify. I suppose you could use Blue Tick as well. DO you allow outreach like this?
Rob: Yeah, it is because it’s going out through your own email server, so you could use that. I was actually going to recommend Links Spy, which is linksspy.com from Christoph Engelhard, who has [UNKNOWN] several times and been our scribe on a number of occasions and taken copious notes.
[00:23:00]
Rob: So, I would probably point to that instead.
Mike: Instead of open site explorer, right? Because Links Spy views your competitor’s back links.
Rob: Yes, it does. You could use it in conjunction with it as well, but Link Spy also has the built in capabilities to reach out to people who have those other sites, so you could use it to do that outreach step.
Mike: Yep. I’m glad you pointed that out. I remember him building that in. I think he has like, boiler plate templates and everything to make it super simple.
Rob: Yep. All the templates and stuff are there already.
Mike: Awesome. This whole outreach step, I’m actually going to skip. I’m going to say you can look at it if you like or you should just go use linksspy.com. That’s links with an S at the end, and then another S for spy. Step 7 of 8 is, they say be prepared to guest post. Guest posting and then when you guest post, you can link back to, within the content of your guest post you can link back to this article. I was doing a ton of guest posting with the aid of the growth marketer, Zack that I’d hired at Drip and it was doing stuff for us. It was sending traffic.
[00:24:00]
Mike: Traffic that converted. It was also building up some SEO juice in our blog and guest posting is most certainly not dead. I know at one point, Google said they were going to start penalizing guest posters, but high quality posts on high quality domains, we have never seen any negative repercussions from all of that.
Rob: Yeah. I’m not sure how they would really find out, other than a manual review that it was done by somebody else. It just seems kind of crazy. I mean, don’t get me wrong. Google has got some really smart people that are way smarter than I am.
Mike: Nice.
Rob: Yeah. I don’t know how you would do that at scale.
Mike: I think it’s like byline stuff, right? You can say, this post was written by blah or this was a guest article, this was a guest post. There tends to be certain phrases that are used. They use machine learning. They’re like, translating languages to hundreds of crazy, exotic other languages. I feel like this is a pretty solvable problem using technology like that.
[00:25:00]
Rob: All right. Well, let’s leave our idiocy in the dust and go on to step 8.
Mike: Totally. The 8th and final step is something I’d never heard of. They say fine tuning content with TF IDF. TF dash IDF, and it is Term Frequency dash Inverse Document Frequency. I won’t really go into what that means here, but basically it’s a way to analyze a document to figure out, what are the important terms based on how many times they’re used and in what context. They just simply counted up the number of times that sales management occurred in their article. They said it occurred 48 times and their article was 2,500 words and they thought that was just way too much. They hypothesized that they were actually being, not penalized, but they weren’t ranking as high as they should because they looked like they were key word stuffing. They backed it off to 20 and they replaced it with terms that have high lexical relevance to sales management, but were not the exact phrase, sales management. They said that it
[00:26:00]
Mike: bumped them up. Their organic page views went from 0 when they started, to over 5,000 in just over 8 months. So, they ranked number 1 for the term in 3, I guess based on the headline of the article and then got these 5,000 recurring page views in 8 months.
Rob: I think if you’re trying to be objective about this, it’s a little difficult to take every single piece of this at face value when it walks through and says this is what we did and this is exactly what happened because there’s so many factors that come into play. Over the course of 8 months, there’s a lot of different things that can happen. Even though they backed off the number of times that sales management came in to the article at a certain time and yes, the search volume went up after that, but it is hard to say that’s exactly why because if you look at the graph that they show, it went up for 2 months and then it went down. Then it kind of meandered a little bit and then it went back up. You know? Over that time period, lots of different things can happen and a lot of them are just
[00:27:00]
Rob: completely out of your control. You don’t have any control over the rest of the internet. It’s hard to say definitively like, hey we did X and Y happened, but there’s certainly correlations that you can make between them to say this is the general direction that we wanted things to go. These are the things we did and yes, it went that way. But you can’t put a velocity on those things or a hard metric on every single one of these things.
Mike: Yeah. I mean, that’s SEO. That’s been organic SEO since it became a thing. It’s gotten a lot harder over time. It used to be easier to gain, but you’re right. There is no way to know that this specific change actually did this or was it just coincidentally just something else? You know? So much of it is correlation and if you do it enough times and you can say I’m confident that it’s causation until Google does their next update. But yeah, you’re never going to know for sure, which is tough. That said, there are these best practices. I mean, there’s a lot of things in this article as I read through that I thought yes, that’s what I would do. That’s what I would do. Then there were a bunch of things that were, I kind of called them out. I was like,
[00:28:00]
Mike: I hadn’t heard this, but this must be kind of a newer thing. I haven’t been knee deep in SEO for, I mean it was 2 or 3 years ago. I was doing it for Drip. It was a couple years before that, I did it for Hit Tail and I tend to do it in little bursts of, I get up to speed and do it, make a bunch of decisions and then kind of move away and work on the product, but people like this who are literally doing it full time, they’re going to always have, doing so many experiments that they’re going to be kind of at the bleeding edge of these tactics. I think there’s something to be said here, like yeah. You could game Google and you could try to get a piece of crap article up to the top of the results, but it’s like, I’ve always felt like we should all be trying to make the internet a better place. Even when I have used SEO and I’ve optimized to get there, I always thought my content was amazing. Like, it was really high quality content. I would either write it myself or pay a lot of money to have a good writer do it. I feel like if you’re trying to push crap to the top of the results, don’t bother. Don’t do it. It actually makes us all, it makes the results crappy, right?
[00:29:00]
Mike: Then it makes the internet a worse place to be. I guess that’s kind of my recommendation. There’s certain people that say you shouldn’t do SEO at all because it just pollutes the internet and I believe that you can do SEO, but in an ethical and high quality way.
Rob: Yeah. That’s not really any different than how some people view marketing. I don’t want to do marketing because it feels sleazy or I don’t want to do sales because it feels scummy and SEO is exactly the same way. I mean, you kind of have to do some level of marketing in order to get your product out there. There’s wrong ways to do it and there’s right ways to do it. This article outlines a mechanism that works so long as you have content that is appropriate to be promoted. That’s it. I think we’ll wrap it up today. 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 of We’re out of Control, by Moot used under creative comments. Subscribe to us on iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
[00:30:05]
Episode 337 | Hacking (Customer) Acquisition with Sean Ellis
Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Sean Ellis, CEO at GrowthHackers, about hacking customer acquisition. Sean defines his coined term “growth hacker” and talks about some topics in his upcoming book that draws from experiences from past products/companies he’s worked on including Dropbox, Eventbrite, Lookout, LogMeIn, and Uproar.
Items mentioned in this episode:
Transcript
Mike: In this episode of Startups for the Rest of Us I’m going to be talking to Sean Ellis about hacking customer acquisition, this is Startups for the Rest of Us episode 337. 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 1st product or you’re just thinking about it, I’m Mike.
Sean: And I’m Sean.
Mike: And we’re here to share experiences to help you avoid the same mistakes we’ve made. How are you doing this week Sean?
Sean: I’m doing great Mike, how are you doing?
Mike: Good, I haven’t talked to you in a while.
Sean: Yeah, it has been a while.
Mike: I think the last time we were in a room in person it was back in MycroConf in 2001, is that correct?
Sean: Yeah, I think that’s correct and when in Vegas you don’t really remember too many conversations that you have because there’s so much stuff going on.
Mike: Do you remember the hot sauce incident?
Sean: I don’t.
Mike: Oh okay, Sean’s hot sauce flew from the stage, okay we’ll skip over that. So, I wanted to have you on the show to talk about a
[00:01:00]
Mike: new book that you’re coming out with and it’s called Hacking Growth, which I think it comes out pretty soon. This episode goes life on the 25th and it’s right about that time, right?
Sean: That is the day that it comes out, perfect.
Mike: Yes, so fortuitous Tuesday I guess we’ll call that. So, to give the listeners an intro to you though, you were the Growth Marketing executive at DropBox, Eventbrite, Lookout, LogMeIn, Uproar and you were like 1 of the 1st people hired in a marketing capacity each of those companies, is that correct if I remember correctly?
Sean: That is correct, Eventbrite would be the only 1 where there was actually somebody already going marketing when I got there but all of the others it was primarily engineers and I came in and started thinking about how to grow those businesses.
Mike: Got it and then you were also the founder of Qualaroo which you sold off last year, if I remember correctly, right?
Sean: That’s right. Yeah, we sold that February, March of last year and ha d a good run for a few years but really wanted to focus our efforts on Growth Hackers.
Mike: And that’s where you’re the CEO at today, it’s Growth Hackers dot com, there’s a fairly large community there and then you
[00:02:00]
Mike: also, coined the term Growth Hacker back in 2010.
Sean: Yeah, that was for better for worse, some people love it and some people hate it but I guess the good news there is that very few people ignore it, it’s evoking emotion.
Mike Yes, it does and I have heard mixed feelings on that, so I guess straight from the source, how do you find Growth Hacker, like what does it mean to you and how do you explain it to people?
Sean: Yes, so for me it’s about rapid experimentation across all of the growth levers. So, it’s really those growth levers sit across the customer journey where to contrast that against just marketing, marketing is generally externally focused. So, it’s looking only at acquisition and marketing is about just anything that’s important for driving growth in the business, you’re experimenting in those areas and the fact is that most of the really powerful levers actually sit in the product team’s area and so that’s what I think 1 of the big things that differentiates compared to marketing.
Mike: So, if I understand that correctly, you’re really
[00:03:00]
Mike: looking at Growth Hacking as a mechanism for taking all of the things that you’re currently doing and optimizing them or making them better, is that a fair assessment versus something like marketing where you’re doing content emails, searching engine optimization and that kind of stuff, is that correct?
Sean: Yeah, well there is optimization is definitely an important part of Growth Hacking but discovery is also important, so it’s taking everything from discovering new channels which would normally fit into marketing, so that part is still I believe really important for growth and a Growth Hacker should be doing those things but you should also be experimenting with what is that 1st user experience in the product, what should that look like, how do you get them to a really valuable experience with the product, how do you drive continued engagement, what are your different monetization levers for driving revenue growth. So, it’s really looking about what are all of the different levers that you can pull to drive growth of both customers and revenue in the business.
Mike: Okay, so with that in mind what are some of the most common misconceptions that people have about
[00:04:00]
Mike: Growth Hacking?
Sean: I think probably the biggest 1 is just that there’s these magic silver bullet kind of growth hacks that you just go and pick a silver bullet of growth hackers, so that would be 1 or another would be that you kind of, it’s about trickery, it’s about coming up with ways to trick users to find up for products and sometimes it’s just described as really clever marketing. I think all of those really miss the mark. What I was going for when I coined the terms was, I was looking at Dropbox where I was getting all of these resumes in with people having a kind of traditional marketing backgrounds or even online marketing backgrounds and they were so focused on everything a marketer could do or should do and I knew from my own experience that there was a smaller set of things that really impacted growth and then there were a lot of things that were just ignored by marketers or marketers didn’t have the access to them, they just didn’t have the right sort of influence in the organization that are also really important, so I was really trying to carve out a description
[00:05:00]
Sean: of what is really important for driving growth in business based on my own experience and when I looked at companies like Facebook and LinkedIn that were also growing quickly, what were they doing differently and how can we kind of make a description of a role that is more aligned with what really matters for driving growth in a company.
Mike: So, it’s really about for those high value multipliers so to speak, right?
Sean: Right and you can chaste that where I had a lot of startup CEOs at the time that were reaching out to me and saying hey can you maybe come and help us get some awareness in our company and you know I think that’s kind of the 1 big misconception of a lot of people in the startup world that’s like oh if people only knew if we could just some awareness we’d be killing it but the average person sees 3,000 advertisements a day. Nobody with a little start up salary is going to be able to get any meaningful awareness off of just running a few advertisements and having people see them, you build growth
[00:06:00]
Sean: through experiences and through a return on investment where you’re actually tracking your ability to convert, generate revenue and that was another big part of it, was marketers were kind of thinking like the CEOS and CEOs who were hiring marketers were looking for those types of marketers and you know in both cases they were really disappointed with the results most of the time, so you had this really high turnover with startups among marketers who were trying to take a traditional marketing play book to growing a business, a startup and just not very effective.
Mike: So, is that the core audience for this book, is it people who are coming in from a marketing position or would it be useful to developer slash CEO or just at like an engineer inside the company?
Sean: So, I think the reality of how growth works, whether people want it to kind of cohort it this way or not, it’s the collection of kind of all of the things that people are doing in product, which includes the engineers, which includes sales people,
[00:07:00]
Sean: which includes marketers and really they should be obsessed around that kind of journey that the customer takes to becoming a valuable customer of the business and so everybody who participates in that growth or in that value creation process should be interested in this book and CEOs in particular should be interested because how do you coordinate those efforts across a group and we’ve really distilled that down to a process where you can effectively manage growth across the really powerful growth levers to expand customers and revenue in a business.
Mike: I did notice when looking through the book that you did have sections in there where it was really aimed at people who were trying to implement it and some of your comments around that were specifically that you really need to have that executive level or management buy in order to make this stuff happen. Talk a little bit about that because I’ve seen things in larger companies where to get anything done almost requires CEO approval but is that the same thing in smaller companies as well??
Sean: Well so yeah, the bigger the company gets
[00:08:00]
Sean: or the older a company gets the more set in their ways they are and they’re not going to be able to kind of break down some of those functional silos that are just kind of historically how companies have been built without the CEO really playing a big role in that and so I think that’s what’s prevented a lot of bigger companies really embracing growth hacking as an effective way to growing their business. It’s really powerful so I think overtime they will make the transition to more of a cross functional full customer journey and work all of the levers of growth but in the short term it’s really what holds it back is basically a lack of kind of buy in necessarily from the CEO and then there’s a lot of things that you can do once you have that to make it effective and that’s a lot of what we cover in the book.
Mike: So, I guess to start with the outline of the book, you’ve got it broken down into 2 parts, the 1st part is the method of implementing it so it’s more or less a process and it talks about building the growth teams, determining what your type of product is, whether it’s a must have product
[00:09:00]
Mike: or something else and identifying the different growth levers in the business and then it talks about testing it and then in the 2nd half of the book you refer to it as the growth hacking play book where you talk about hacking customer acquisition, activation, retention, monetization and then bringing all of that collectively together to help create a cycle. Could you talk just briefly about what you mean about having that cycle in place and how that all ties itself together?
Sean: Yeah, so what you see in really effective growth organizations and growth companies is that they end up really building a rhythm around growth where they understand sort of how growth works within the business, what are the key drivers of growth within the business and they manage those and continue to optimize them but as a team they’re constantly figuring out new ways to enhance growth, so it’s basically analyzing the situation, prioritizing all of these ideas that they can generate to improve that situation and then running those tests and through the tests they learn and so continuing
[00:10:00]
Sean: to just run this process that helps them learn new, more effective ways to drive growth in the business is ultimately the outcome that everyone should be shooting for and what we’ve gone through in the book is how to really get all of the pieces in place to where you can get into that really high testing tempo rhythm as a team that’s a common element that you see across all of the really fast growing companies.
Mike: So that’s really like a systemization of growth hacking, so that you put all of these different pieces in place and then you just repeat them as quickly as possible, right?
Sean: Exactly and you’re just accelerating that fly wheel of growth and that comes from a deep understating of how growth is working and through testing you’re just keep learning new, more effective way to drive growth and you also learn what doesn’t work through the testing because not everything is going to be successful when you’re testing it but every test that you run you get smarter about what it takes to grow your business.
Mike: Could you talk a little bit more about the types of things that fail and 1 of the things that I’ve heard from people or their criticizing of the whole
[00:11:00]
Mike: concept of growth hacking is that they’re like oh there is not silver bullet, you know you can’t just growth hack your way out of anything, it doesn’t work that way and I think to some extent the critics are right when you phrase it in that particular way but I also think it’s important to realize not everything is going to succeed or there’s going to be situations where you don’t have a clear understanding of whether something is even working, if it’s moving the needle for you. Can you talk briefly about those types of situations and how do you recognize those?
Sean: Well so the 1st part that we really cover in the book that’s a critical prerequisite for growth is making sure that you have value in the 1st place, so if growth hacking doesn’t work or if you get kind of fleeting spikes of growth and then it comes crashing down it’s usually because the finish line for the customer is not a worthy finish line and there’s no reason to sticking around and keep using the product and if you can’t retain users it’s very hard to grow a user base, you’re basically just replacing customers month after month and in a SaaS
[00:12:00]
Sean: business you really see the pain of that, other businesses it might be less clear. So that’s the starting point, it’s just making sure that you have a product that’s a must have for users and then once you understand that, it’s about breaking down that path that gets people to that spot of becoming a must have user and then figuring out ways to improve the journey from consideration all the way to saying gosh I can’t life without this product. So, when you talk about silver bullets and hacks along the way, we definitely are not recommending that, here’s 6 things to do that are going to work every single time. I think there are certain principles that help govern what’s going to work and what’s not going to work. So, like if you read [UNKNOWN] there is some really good kind of examples of just human behavior but the individual programs and experiments that you run, you don’t know if they’re going to work until you run them and so you need a really good process for prioritizing which ones you’re going to
[00:13:00]
Sean: run and be focused on the area of your growth engine that should have the most focus because you have the most opportunity for improvement.
Mike: That makes a lot of sense, so the thing that I really wanted to drill into with you on this episode was the idea of hacking customer acquisition and you and I talked before on the podcast about identifying something that our listeners are probably not going to hear in other places. So, in digging into the hacking customer acquisition, 1 of the examples you threw out was Dropbox, that was kind of the 1st example that I came across in that section and the commentary in there was that there were initial cost of acquisition was around 400 dollars but they were only making about 100 per user each year, so clearly, they need to find some other acquisition strategy to make that type of business work. Can you talk a little bit about that process of identifying what was going to work for them, because you were there very early on in the process for Dropbox, so it’s not as if you weren’t directly involved in this, it’s not as if it’s a historical look from an external source?
[00:14:00]
Mike: I mean you were right there.
Sean: Right and that’s one of the great things about the book is we do bring in a lot of examples from other companies and you know talking with other growth leaders but a lot of it is based on my own experience and what I’ve done specifically in these companies to drive growth and Dropbox in particular, what we wanted to do with Dropbox was kind of explore the edges of possibilities around different channels and so we did do some exploration in basically the Google ad words, kind of paid search marketing just to see what the economics look like there and we quickly saw that the economics were not good in that area but at the same time we saw that there were all of these other great opportunities for growing the business and the 1 that was working literally, so I started the week that Dropbox launched at Tech Crunch, kind of the equivalent of Tech Crunch Disrupt, I think it was Tech Crunch 50th at that time but they launched the product, they got some good momentum, they had a pretty good user base during the beta but this was when it 1st became available to
[00:15:00]
Sean: the public and what I saw was there was a lot of passion for the product in that early user base and so that was 1 of the 1st things we did, was how can we tap into that passion to grow the customers and really trying to just break down how is growth happening already and what 1 of the thing we did was we found that growth was coming through a number of channels, so like if somebody wanted to share a file inside Dropbox, that was pretty effective. Somebody would share a file, the person on the receiving end would click on a link to get the file and they would be able to lightly experience Dropbox, so there was a small flow of people coming in from there, there were people coming in from shared folders and then there was just a lot of natural word of mouth was well and so it really started with trying to understand what the motivations were behind those people, ultimately people who love the product and were sharing just through word of mouth about the product, trying to understand those people and then kind of connecting the dots. How do we
[00:16:00]
Sean: get someone who discovers through a file share to actually, eventually understand the 360 view of what Dropbox could do for them and then end up loving Dropbox. So a lot of it was documenting initially and then really capturing what was our data around each of those on boarding flows and then a lot of surveying I think I probably had feedback from you know hundreds of people every single day through different surveys I was running, just to figure out what were the motivations and ultimately perceptions that people had throughout their journey, depending on each of these paths and then that informed our ability to prioritize where should we experiment 1st to try and increase those flows. So not just increase people coming in through those flows but how those people actually convert and become those active users on the product.
Mike: So, what were some of the leading indicators that you used to determine that you wanted to hack the acquisition process versus like activation or
[00:17:00]
Mike: retention or monetization, because I mean you said you experimented with the acquisition through paid ads and clearly it wasn’t going to work but what was it that pointed you in the direction of acquisition versus those other channels?
Sean: So we really didn’t just focus on 1, we were optimizing across the full path but the starting point was just figuring out how are they discovering this product and depending on the path that they came in, understanding what were their motivations on that path and it just seemed like the good opportunity initially was what could we do to, so in a sense you actually could say that we were more focused on activation for those channels initially and then as we improved that activation, then we started to think how can we get people to share more files, how can we get people to do more folder sharing and ultimately we built in a incentivized referral program so that people even started to just do natural word of mouth more often but we built
[00:18:00]
Sean: kind of incentives across each of these paths that were already happening and that really helped to accelerate them.
Mike: So, you just talked about how you had done like a lot of surveys and you had hundreds of them coming in everyday that you were looking at and trying to parse through. What was it that you were trying to find with those surveys?
Sean: So 1st thing I’m generally trying to figure out is intent, so like intent is this really powerful force for a marketer to work with and marketers have their own agenda. They’re like love me for this, but the other person is like in strong momentum looking for something specifically and so it became really important to understand what that intent was and then we were also trying to figure out at which point did they realize that they wanted the product more, it was more than just wanting the file that somebody had shared with them, but they wanted the product for sharing files and so really trying to understand what that transition point was and kind of crowd sourcing it with people who were making that
[00:19:00]
Sean: discovery on their own and the more that we understood those people, that gave us a clear picture of what was happening. So, 1 of the things that we kind of experimented with early on was very quickly, depending on whatever their intent was, telling them about all of the benefits that they could get from Dropbox and when you think about it, like probably the biggest barrier to the adoptions of a technical product is complexity. That’s probably more of a barrier than even price and so just like giving them a list of all the things they could do with it was actually causing a lower conversion rate than when we really kept it focused around what their intent was and trying to convert their intent 1st and then ultimately give them more of a 360 degree view of the product once they were more locked on than what their initial intent was.
Mike: Is it something that you would generally recommend for most business, especially when they’re starting out because it seems like to me the place most people start out when they’re launching a new product is there focused on the features page
[00:20:00]
Mike: and everyone is like no, no, no you don’t want to do that, you want to pitch the benefits and of course from there’s it’s like okay well now instead of the benefits what is it that the people are actually trying to accomplish.
Sean: Yeah, so again it’s this idea of test, test, test, experiment, experiment, experiment. That’s what you see kind of through this whole process, so initially what I’m trying to do in a company is like kind of get out of my own head and just get enough people coming through the funnel so that I can try to figure out who is going to stumble in to what the product does that’s really valuable to them and get outside of those assumptions because I think it’s really hard to guess that ahead of time. You can have a bit of a vision as you build the product but a lot of the most successful products end up being valuable for unintended reasons, we definitely saw that at LogMeIn for example. So, the best benefit that I had with DropBox was through the beta, the team had done such a good job to build the flow of traffic coming in there that I didn’t have to focus on building the initial flow, I could right out of the gate
[00:21:00]
Sean: focus on understanding the flow. So the place where I actually start, like at the heart of things is I find that people who absolutely love the product, and I’m able to uncover that by just asking existing users on the product that are using it pretty regularly how they would feel if they couldn’t use the product anymore and I’m trying to hone in on the ones that they would say they would be very disappointed without the product and when they say that, that tells me like they’ve discovered something so valuable that they’re not going to churn and they’re telling me that they consider this a must have, if they would be very disappointed without it and so understanding that, that’s going to be the key to basically being able to build an overall benefit or promise of what the product will do for people that sets the expectation on what the product is truly great for and I think that’s 1 of the mistakes that a lot of marketers make, is that they initially kind of build that promise just on their own guy or own the founders vision
[00:22:00]
Sean: or whatever it might be but if it’s a promise that’s not aligned with what the product is truly great at delving it’s going to attract the wrong type of people who aren’t viscerally passionate about the product. So, start with understanding what that must have experience is, figure out the benefit that reflects that experience and then working externally to get hat into the message to set the right expectations goes a long way in just building a more passionate customer base and it starts to inform those customer acquisitions efforts as well.
Mike: So, when you’re trying to I guess hone in on what that compelling message is, is that the place where most people should be focusing their efforts early on?
Sean: So, it really depends, like I said I had the luxury at Dropbox of already having a decent flow of customers, so early on for most companies it’s that the initial efforts are how do I actually get any kind of flow of customers into the product and so that can be a really manual process. I wouldn’t obsess over ROI at that point, I think that’s another mistake that
[00:23:00]
Sean: people make in the very early days is they’re trying to tweak the economics of that customer acquisition, I would essentially say this is my learning budget originally and sometimes you don’t even have to spend anything at all, you can get more through just manually going out and recruiting users but it’s not about trying to find that big scalable challenge that’s going to pay, you know give you a great return on investment. Early on you’re just trying to convince some people to come in and experience the product or you can figure out if you have something that’s worth them sticking around on and then if you don’t you have to hit the reset button in the business and kind of go back to square 1 where you’re working on product market fit, but assuming that you do have that. Then what I would do from there is then to start to optimize that 1st user experience just enough so that by the time that you’re focused in trying to get the economics right in some channels that you don’t have something that it’s like it’s just
[00:24:00]
Sean: so, convoluted to get started with a product that you’re going in and you’re trying to do those ting with both hands tied behind your back and your odds are stacked against you. So, you want to get the basic kind of low handing fruit out of your on boarding funnel so that by the time you’re starting to do some channel testing where you’re actually trying to find that scalable way of trying to find customers it has a fighting chance of working.
Mike: Yeah and I think that’s sometimes pretty difficult to go through that process and realize how I spent all of this time building this product and working on it and it’s really not making any money and I would like to get to that point quickly and the solution is not necessarily a ton of traffic at it because if it’s not, when it converts everybody’s going to fall out and you’re just kind of spending a lot of money and a lot of effort for not good reason.
Sean: Right, so you go from this kind of period of when you’re trying to get product market fit, that’s a super patient process, so until you’ve created something that people care about, that’s where you just kind of blasting a little bit of traffic at it and those people don’t seem to care and
[00:25:00]
Sean: and then you’re sending more, you make some iterations, you send more but once you get that signal that it works, you do start to get some more urgency once you get the signal that somebody considers this product a must have, then you do have some urgency about pretty quickly trying to run some experiments through your funnel to figure out where it’s broken and so things like user testing dot com can be super valuable at this time of just giving someone a task of trying to come in and sign up and use your product for the 1st time and being able to watch videos of them coming in, super insightful. You can make a lot of really easy usability fixes there and then over time you want to start to AB test kind of different paths to go in there, but that requires a lot more traffic so some of it’s going to be more the usability testing to get those initial lists and then once you go out and you start to build traffic and you actually have volume coming into the funnel, that’s where it’s a little bit of a back and forth between the acquisition and activation, so if you’re really having a hard time with your acquisition
[00:26:00]
Sean: channels, maybe you need to work a bit more on the efficiency of your conversion and your funnel and then go back and then work the challenges again but it’s a little bit of back and forth but you usually at that point you’re back and forth between activation and acquisition.
Mike: So, if I were to ask you what sorts of examples of acquisition hacks that you’ve seen or that you’ve used before or that you found to be extremely helpful in the early stages of the business, like what sorts of things would fall into that category and I realize that these things are probably not going to be able to apply across the board to every type if business but I think there are probably some common ones that I think most people could start out with. So, let’s kind of break it down and say look okay if you’re just starting out what sorts of things would you try 1st?
Sean: So, the 1st question I would ask in any business is there active intent for this product? Do people know this category exists and they’re looking for solutions or am I doing something that’s really innovative that kind of nobody knows it exists? In that case, you’re not going to get any benefit from like going to
[00:27:00]
Sean: Google and starting to buy some search keywords for example just because no one even knows to search for it. So that would be the highest level, is just are there people looking for this type of solution or are they’re not? If there are, usually a good place to start is trying to kind of tap into that existing intent, if there’s not then you need to get into demand generation mode and it gets a little harder on the demand generation mode what’s, again, very category dependent as you were saying. It’s going to be different for companies but like in the marking technology space a lot of times a good place to start in that case, if a demand generation of people aren’t looking for it would be with constant marketing where you’re really writing your vision about how this enhances the life of a marketer or whatever it might be, but if there’s kind of some education where you have to set the context for your product then content marketing can be pretty effective but you can’t expect that you
[00:28:00]
Sean: can just write that content and people are going to stumble upon it so then you still need to market that content, so it’s this idea of you ultimately need to start to stack some of these things on top of each other, so probably the staying with the kind of frame work part that I was talking about initially. Initially you’re really trying to get that birds eye view on what types of channels might be useful for this business and there are so many choices that you need a pretty good process for figuring out where am I even going to start with this. 1 mistake that I do see with a lot of people is that they kind of try to test all of them and most of these channels are too hard to figure out if you’re just testing it like, oh I’m going to spend 15 minutes to try and figure out this channel and oh I’m going to run 1 ad in there but that didn’t work, I’ll move on. You really want to narrow it down to 1 or 2 that you really think will be effective, work that for a while, if it’s not then you have your back up channel and then your back up channel after that
[00:29:00]
Sean: you are kind of working across to, just ultimately your goal is to find 1 single source of customer acquisition that’s going to work for you and ultimately scale.
Mike: So, when you say work that for a while, kind of what is your mental benchmark for how long you should be spending on that or how much effort you should put in, because I think most of the people listening to this are probably not in a position where they can spend 40 hours a week on something. So, let’s say you’re spending 10 hours a week on it, like how long should you be running some of these experiments?
Sean: So, if it’s search, you can generally figure out if it’s going to work for you pretty quickly, if you feel like you’ve got a better mouse trap in a category where people are already searching or maybe not even a better mouse trap but just an additional mouse trap, if they’re searching for it then that means that they don’t necessarily a great solution and so like for example at LogMeIn, search was a great lever for us. So, we had a competitor go to my PC at the time that was spending hundreds of millions of dollars essentially promoting
[00:30:00]
Sean: their solution that was a pretty expensive solution and so we were able to basically draft off of that, spend that they had and we had a premium solution that was half of the price and then we actually even had a free version that could soak up some of that demand that they were creating that their high price wasn’t able to absorb. So, let’s say they had a 10 percent conversion rate to a purchase on their sign ups, that meant 90 percent of the people were interested in the category, they just the value proposition wasn’t strong enough and so there was a lot of search volume around remote access to your computer, you can control your computer from anywhere, so just being able to buy those keywords, we were able to get some good initial traction doing that. At Dropbox, it was a lot harder, like we did try to test some of the keywords as we talked about, like maybe well Dropbox is kind of like Backup but when we went and tried to buy the Backup keywords you’ve got these big enterprise backup solutions that we’re paying
[00:31:00]
Mike: a lot of money to generate a click and they had a high enough price point on their product where they could actually do that in a cost effective way. So, a premium Dropbox product just really couldn’t compete on those keywords. So that’s kind of that initial part is you just, I think in the case of search you can generally figure it out pretty quickly. Facebook is a channel that tends to work for a lot of companies, mostly because if you think of Facebook there’s like 1,000 or more targeting combinations that might work for your business. So, people in this city that are this age, that are this gender, that like this product, that generally if you test enough combinations you’re going to find something that works but even knowing how to test those combinations requires some familiarly with the platform itself, there’s a lot of kind of complexities and tricks within Facebook to really kind of make things work for you. So, your question
[00:32:00]
Sean: of they don’t have 40 hours to invest in figuring it out, then they’re going to be competing against people who do have 40 hours a week to figure it out, so that’s going to kind of be the trade off there.
Mike: Right but it sounds to me like your general strategy in those cases is just to drive enough traffic and enough eyeballs so that you can get the conversations going so that you can ask people questions and start honing in on that message and then from there, that’s like your optimization strategy is figuring out what the message to those people is, what will actually resonate and then that allows you to drive your cost of acquisition costs lower because you’re able to be more targeted.
Sean: Exactly, so you’re just looking for signals early on, my gosh for every dollar we spend on this channel in this pretty narrow targeting we’re generating 90 cents back on that dollar, like that’s pretty close. We haven’t done a lot of optimization of the landing page or maybe even the ad in there and you know if you see that kind of signal
[00:33:00]
Sean: that might be a channel to keep working, where gosh I’ve invested 150 dollars into this channel over here and we don’t have a single person who’s signed up for our product or even visited our website, like you could have such low signal at that point it doesn’t make sense to keep investing but that’s part of the balancing act that you’re playing is that if you don’t figure this out you’re going to fail. If you don’t figure out how to acquire, convert and monetize customers you’re going to fail and so it is a high stakes game that you’re playing in figuring these things out but you have to be pretty driven and experimental in getting the formula right.
Mike: So, when you’re experimenting the different things to try, how do you decide which ones to go after 1st, like what’s a prioritization strategy that people can use?
Sean: I think 1st thing you want to do is list out all the channels that you think could be potentially useful for you and we have a couple of good templates in the in the book for helping you
[00:34:00]
Sean: pick channels and prioritize them but basically the main thing that’s in the template that we have in there for this is essentially look at the channel across a number of criteria, so cost, targeting, control, so like is it something that you have to do weeks of advance, like looking at the control did you kind of weeks of advance and planning and once it started you can’t stop it or tweak it, that would be a low control channel. A high control channel would be something like Facebook or AdWords where you can hit the pause button, make a change, restart it, hit the pause button, you can do that over time. Similar to the control would be your input time, so if you wanted to test television it could take months to produce a television ad that you would have to put on the television, so that would be a really high input time where even if you were going to test a banner somewhere it’s still is a pretty high input time to design a banner that kind of that looks good enough that somebody might click on it versus if you’re going to do a Google ad, you can literally
[00:35:00]
Sean: write a Google ad in 5 minutes or even a Facebook ad that’s pretty easy to pick an image and build a Facebook ad in just a few minutes, so that would be a really low input time and that’s important. Then output time would be how long until I know that, that channel shows some promise. So how long does it take to start to read the potential of that channel and then the final criteria would be scale, so if this thing works is it something I can continue to invest in and scale a lot, like radio would be an example that if you can get radio working in 1 market, there’s a gazillion radio markets and there’s a gazillion radio stations and so you could really make that work effectively if you could get it working but you’re going to miss some of the control and maybe the targeting pieces that we talk about on these other criteria.
Mike: Won’t using these types of prioritizations kind of drive most people who are in similar places in their business into the same areas?
Sean: IF there’s an opportunity in those areas to generate a positive
[00:36:00]
Sean: return on investment, they’ll be fine. What I would weigh it towards is whether it’s a new emerging platform, what you’re not going to have in those platforms like say Snap Chat been around for a while now but the early days of Snap Chat, you’re not going to be able to just go download 6 articles on great ways to make Snap Chat an effective customer acquisition channel, you’ve got to literally go in there and kind of invent it. So, in that case it’s going to be hard but if you can invent it then you’re going to have a bit of a much less competitive environment in there because other people haven’t figured it out where if you compare that to Facebook, yeah you have massive scale on Facebook, it scores well across each of these but the down side of this is that there are super sophisticated marketers in there that are going to be hard to beat and so that’s again, part of the trade off that you’re making.
Mike: Yeah, I think the 2 things that kind of stand out for me from all of these things that you’ve just kind of touched on is the fact that iteration time alone is almost worth its weight in
[00:37:00]
Mike: gold when you’re trying to figure out what your marketing message is and you’re trying to drive eyeballs to figure out what’s going on and why people are using your product and why they would and what resonates with them and then the 2nd thing is that those emerging platforms, partly because they’re so low cost at that point, people aren’t really tapping into them and I can think of a specific example of somebody who literally doubled their revenue from 1 to 2 or 2 and half million dollars basically overnight on Instagram marketing, it was just insane looking at the graphs, it was just crazy how much.
Sean: That’s awesome, yeah because there’s not that many people that can effectively grow off of Instagram so that it makes sense that if you figure it out you’re going to have a pretty unique opportunity there.
Mike: Right and this was about a year before Instagram had any sort of paid advertising, they’d like figured out their own system and they had all of these spreadsheets. It was really quite interesting.
Sean: I have 1 quick example that really highlights the importance that you just touched on why you need to get your activation right in some of the lower funnel things to make your channel work,
[00:38:00]
Sean: we touch on it in the book but when we 1st were investing in search for log in it worked pretty well, like I mentioned there was a lot of intent for that type of solution and we were able to scale to about 10,000 dollars a month with a positive return on investment but I couldn’t scale beyond that and when I looked at what was outside of my control as a marketer I could see that 90 plus percent of the people who were signing up through my marketing campaigns were never using the product, so if they didn’t use the product they weren’t going to pay us any money was so I wasn’t going to get that return on investment. They’re not going to tell their friends so we’re not going to get any of the organic growth that is really important in companies, so just basically everything that is based on them using the product so I presented that data to my CEO, my CEO said oh my gosh you’re right, we’re going to have a really hard time growing the business if we don’t get this 1st user experience figured out and he put the overall product road map out on pause, put every product person, every engineer
[00:39:00]
Sean: on that 1st user experience to get it right and then within a few months we were able to 10X the number of people who signed up and actually used the product and what that meant from that channel in Google that had scaled to 10,000 dollars to a month now scaled to a million dollars a month, so if you think for like every dollar I was investing on some key words if I’m only getting 90 cents back I would cut them, now I’m getting 9 dollars back on that key word if you just take that increase in conversion rate to usage and assume that follows through to revenue and across all of these channels suddenly search became this massive channel for us and again now that I had people using the product they were going to talk about it, refer the product and because we have a freemium model that’s 1 of the big factors in a freemium model is that people should be spreading the word about this great deal on this free version and so by the time I left LogMeIn a few years later we had about 80 percent of our new
[00:40:00]
Sean: customers were coming in through word of mouth and so you take this million dollar plus a month being spent and that’s only account for a small fraction of the users and everybody else is coming through this word of mouth, so that’s really what we kind of talk about in the end of the book where it’s this fly wheel of a bunch of stuff really going well and that’s the goal that you need to get too but it’s the interdependency of these different growth levers and how they work together to ultimately build a really powerful growth engine.
Mike: Yeah, and I will say like I’ve looked through, I haven’t read the entire book but I’ve looked through a large amount of it and it’s extremely dense, there is a lot of information in here.
Sean: Yeah, my recommendation is somebody not try to read it cover to cover but instead really kind of try to get the big picture of the book, the beginning really kind of gives you a pretty good big picture and then just do deep dives on a few of the chapters, like just really try to like now I’m going to be all about acquisition and then really like absorbs and read that chapter 2 or 3
[00:41:00]
Sean: times and study the graphs and study the other parts and then after that, and put it into practice as you’re reading it, like use it as a kind of study guide as you’re working that part of the business and do the same thing for activation but like the more that you can kind of repeat this, repeat and really drill down into the chapters you’ll actually get a lot of value from the book. Just cover to cover it is so dense that it might be actually hard for a lot of people to read it that way.
Mike: So, I think that’s probably a good place to leave off. Do you have any other closing thoughts for the audience?
Sean: No, probably the biggest 1 that I would just say is again, this is super experimental just be prepared to test a lot and focus on learning from every test whether it works or it doesn’t work in the way that you intended, get smarter about every part of the growth kind of function in the business and if you do that you will figure it out if you’re like dedicated to it and you absorb what you’re learning through each test and just keep working to increase that cycle of testing, then that’s really critical for growing a business.
Mike: Awesome.
[00:42:00]
Mike: Well thank you very much Sean, I really appreciate you coming on today. In the show notes we’ll have a link to the book over on Amazon and it’s called Hacking Growth. If you have a question for us you can call it in on our voice mail number at 1 888 801 9690 or you can email it to us at questions at startups for the rest of us dot com. Our theme music is an exert from We’re Out of Control by Moot and it’s used under creative comments. Subscribe to us in iTunes by searching for Startups and visit Startups for The Rest of Us dot com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
[00:42:28]
Episode 336 | Key Takeaways from MicroConf Vegas 2017
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike reflect back on MicroConf Vegas 2017 and give you their key takeaways from both the starter and growth edition talks.
Items mentioned in this episode:
- MicroConf Recap
- DigitalMarketer
- Rubberstamp.io
- Smart Marketer
- CartHook
- Thoughtbot
- Giant Robots Podcast
- Startup Event Solutions
Transcript
Rob: In this episode of Startups For the Rest of Us, Mike and I talk about our key takeaways from MicroConf Vegas 2017. This is Startups For the Rest of Us Episode 336.
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’s the word this week, sir?
Mike: I am still dehydrated and hoarse from last week. At the moment, I’m not sure if it’s just from being in Vegas for seven days or if it’s combination of that plus the pollen and stuff that I came back to in New England.
Rob: Yeah. Yeah, it’s crazy, the dehydration ability of Vegas. Right when I landed, I pull out the ChapStick. I was wearing ChapStick the whole time this time so my lips never got super raw. Yeah, I was drinking a ton of water. I didn’t stay up too late any night this time either. That was good. I think that helps.
Mike: Yeah. I tried to avoid that as well but I think there were couple of times where I was in bed sometime after midnight. I don’t think it was several hours late, it’s like one or two except for the very last night. Going to bed early certainly helps.
Rob: Yup. It also helps that we start the conference now at 10:00AM instead of 9:00AM. It’s just that extra hour gives you time to have a good breakfast and wake up slow. I didn’t feel tired at really any day at the conference, which is interesting considering that we basically had four days of back to back conference.
If you’re new to the show or you haven’t heard, we split MicroConf. Normally, we do two days and this time we did two back to back two day conferences. We did growth edition which started with a welcome reception on Sunday evening, and then we did two full days of talks, and then hanging out on Monday and Tuesday. We did starter edition which is for people who aren’t yet making a full time living from their business. That’s the differentiator between starter and growth. If you’re already making a full time then you should come to growth. Starter ran on Wednesday and Thursday. I was in Vegas close to a week by the time we took off.
Mike: You and I haven’t really talked about this. How did you feel about running the two of them back to back?
Rob: I have to admit, the fact that we’ve sold both of them out, heading into it made me think it was probably the right decision, because it really was a gamble. We decided to do this six months ago, realizing that we preselling the conference out too quickly. We didn’t want to grow it. There’s always the struggle of do we just keep raising prices till we just make the conference super big, make it a 400 person conference, 500 person conference. We’re trying to figure out how to do that. We eventually decided to split it up this way.
I was hoping that it would work well but I was, with any new thing, I’m always a little concerned about what could go wrong. Given the fact that we sold both of them out, my expectations were high that we made the right choice.
Once we arrived there, I pretty much heard almost exclusively positive feedback about the split, both from the growth folks and the starter audience. How about you, how did you feel?
Mike: Xander had asked us, it was Tuesday night, how we felt so far and whether or not we were going to be able to do it again. My mindset coming into Tuesday night was just, “Hey, we’re coming up on the halfway point.” It’s not like it was running two conferences back to back. It really felt like one giant conference just spanned four days. I think that from that perspective, it was more about mindset shifts.
I was also cautious about having this idea in my head that, oh yeah, I’ve talked to people here and they’ve said that they thought it was a really great idea because I feel like the people that don’t think it’s a good idea, or are not happy with it, or were uncomfortable with it, are probably not going to tell you basically to your face. Some people will but I feel that’s the stuff that’s going to come out in the reviews afterwards. You’re not going to find out right away. I don’t know, I was a little cautious about it just because I was hearing from people, “Hey, I really like the fact, this split.” Like I said, they’re not going to tell you necessarily, “Hey I really hate this.”
Rob: Yeah. I could totally see that. In the feedback though, in the survey we gave afterwards, people seem to have generally, a positive outlook on it as well. I think it really helped that we’re able to target the talks so well. We’re going to talk through some handful of a growth talks and a handful of the starter talks. Obviously we can’t talk through everything we did. Over the course of 4 days, we had 18 talks, 10 attendee talks, which are the shorter 12 minute talks given by attendees, two Q&A sessions, and two workshops. There’s a lot to pack in there. We obviously can’t cover everything in the span of a single show.
You’ll see as we talk through the topics that the growth ones are definitely more oriented at existing products, trying to scale up, or trying to stay sane while you’re doing it. And then the starter stuff is a lot more focused on these very first steps. That was the goal from the beginning, it was to be able to target the content specifically at the audience so you didn’t have someone coming feeling half the talks weren’t aimed at them.
Mike: Yeah. I think we did a really good job at that, in terms of splitting the content between those two. Going back and looking at the reviews, I think you’re right. As I said, Tuesday, I was cautious about just accepting things at face value but even in the reviews as you said, there’s a lot of good feedback there about how they liked how targeted everything was directly at where they were. Of course, we did see this from some of the reviews. People like, “How I wish there is a little bit more commingling of the two.” There’s always going to be a suggestions of, “Hey let’s do a two track conference or something like that.”
That’s really hard to pull off, especially if you’re trying to manage everything all in the same venue. There’s a lot of logistical stuff there but I think generally what did went over really, really well.
Rob: Yeah. The two track thing has only been success to the few times over the years but it’s tended to be something that we have intentionally, very deliberately avoided. I don’t know, we should probably crack that open again and just talk through and spit ball what it might actually look like to do that, to have a single conference for the starter track and the growth track.
Mike: Right. I figured in the past, all of our thoughts about that particular thing had been geared with the idea of having the entire conference aimed at one audience. And then of course, that’s where you do get in the logistical issues of let’s say, just for raw numbers. You’ve got 100 people coming and let’s say 70 go to one, and then 30 go to the other. If you’re really targeting two different audiences, then the two track conference idea kind of makes more sense. It’s easier to manage those logistics instead. I think you’re right, I think we just revisit it and think about it and see if it would work or see if it’s something we want to try.
Rob: The interesting thing is the cross growth and starter if you include the attendees, the speakers, the sponsors, and then we sold better half tickets where people can bring their significant other to evening events. Across all that, I think there were something like 420-ish attendees across both.
Actually day to day attending, growth was about 230, 235, and starter was around 165 or 170. Definitely healthy numbers but a good size in terms of manageability. I felt I was able to talk to a lot of people and it didn’t feel a sea of people to me.
Mike: Yeah. It’s hard once you get up to those numbers to be able to talk to every single person there but I do feel like I got to talk to it a decent chunk of people. That size is nice because everyone is still approachable. It’s not like I’ve talked to people while we were there and they said that they’ve been to a couple of other conferences where there’s 3000, 4000 people. It’s really hard to I guess maintain and establish relationships with people there but at the size, it’s a lot easier.
Rob: Yeah. Let’s dive in. As I said, we won’t be able to discuss all the talks but we do just want to take some highlights based on feedback that we received in the surveys we sent out at the end.
Russ Henneberry from a Digital Marketer made his first MicroConf appearance. He appeared based on a recommendation from Ruben Gomez, who said this guy is super sharp. He knows what he’s doing. He has a really unique insights on content marketing.
We had him speak on the first day. I instantly started hearing people being blown away. His talk was The Perfect Content Marketing Strategy. He talks a lot about misconceptions that content marketing is blogging. He looked at the seven characteristics of perfect content marketing.
This is a guy who’s been doing this since before it was called content marketing. He knows what he’s doing. Right in the hallway when we left, I heard some people saying, “Boy, that blew my mind. I’m going to change up my content marketing strategy because of it.”
Mike: What I really like was the way he identified specific pieces of the content marketing strategy and called them assets. I heard that from several other people as well, referring to the pieces that you plug in as an asset. We could give us an idea that you can reuse those assets in other places but by what referring to it as an asset and treating it as such, it gives you a more focus clear idea of exactly what you’re going to be doing with that particular asset or that piece of content and gives you the ability to build it in such a way that it’s not templatize but it’s got a specific purpose and that’s what it’s for. It was an interesting way to look at that that I haven’t really seen or heard before.
Rob: By the way there are summaries of all the MicroConf talks. If you go to microconfrecap.com. Thanks to Shai for taking notes and they’re very detailed outlines of what speakers were talking about.
Next talk I think we should discuss the same to have an impact was James Kennedy’s talk. It was how to stop giving demos and build a sales factory instead. I was super into it even though I’m not giving demos. I have noticed, I ought to give demos but he just had this whole process of how he grew Rubberstamp.io and how they’ve been growing it using essentially sales demos.
What was funny is I walked out at that talk and Anna on my Drip team, she came up and she said that talk made me want to do demos again. You know it’s having an impact when it makes you miss doing demos.
Mike: Yeah, that’s funny. I really liked how he’d laid out the entire process, the follow ups, what they do, how do they get people to the demos, how do they follow up with them to make sure that, “Hey, you have this demo coming up.” The foreshadowing aspect, the letting people know, “Hey, this is going to be the next step. This is what we’re going to do next.” So that it’s not a surprise to people so people aren’t wondering, “Okay, when is this person going to call me again? Are they going to send me an email or am I going to get a reminder?” It’s all about foreshadowing what those next steps are. I really liked that aspect of it.
Rob: I rounded out the day with a modified version of the talk that I had done in Europe about selling Drip and it was called 11 Years to Overnight Success: From Beach Towels to A Life Changing Exit. I tweaked the talk quite a bit for the growth audience. I just thought through some more aspects of it. Also, I have so much more distance from the sale now. A lot of it was about the Drip acquisition, the thought process, and the mindset behind that.
I definitely enjoyed talking about it. Since it was essentially the second time I’ve given the talk, I find that my second, third, fourth times of giving talks are always better. You just have more of an idea of what resonates with people and it’s better practice and that kind of stuff. I felt like it came off pretty well.
Mike: Yeah. I think in your talk, one of the things that you pointed out, this is not a surprise to anyone but the fact that it takes a long time to get to that point, there are all these different missteps or places you go where it’s either just the learning opportunity or you feel you’re making a lot of progress, if you take it as a whole then you get to see that entire journey. It’s interesting to see that. I saw in Europe as well. I do think that you gave a better talk here in Vegas than you did in Europe. It probably is a direct result of hearing yourself give that talk on a stage, and then talking to people, finding out what resonates, then plug in those things back into it. It’s nice to get that feedback and be able to incorporate it later on.
Rob: On the second day of growth, this would have been Tuesday, we had Ezra Firestone from Smart Marketer. He talked about the exact formula they’ve used to generate $5 million in revenue from software in the past 3 years. It’s pretty obvious that Ezra does a lot of speaking because he commanded the stage and really kept people captivated.
Mike: Yeah. As you said, he obviously speaks a lot. It’s nice to be able to see somebody get up there and be able to just do things off the cuff. It’s clearly not rehearsed. Clearly, he has the ability to get up there and speak to things from the audience. Almost like a comedian when you see them perform and they’re able to either deal with the hackler or comments from the crowd and incorporate that into what it is that they’re talking about. Ezra definitely had that ability. It’s clearly a direct result of being up there in front of a lot of people and talking to a lot of people. Some of that could just be the personality in terms of being what appears to be a strong extrovert. I think that being able to incorporate those things really helps to send the right message when somebody is up there on stage like that.
I do like the fact that he went into some detail. For example, the multi-touch marketing and creating multiple touch points in your sales funnel so that people are hearing different messages along the way through that sales funnel. They might hear one message and then they hear a different one. In some cases, they’re getting reiterated to them so they are essentially strengthening the original messages.
Rob: That afternoon, Sherry Walling talked about understanding your past, current, and future self. Really kicked off with how founders view their startups as they do their children. That there is a study done that was doing brain scans of founders as they showed pictures of children they didn’t know versus their own children and it showed parts of their brain activating. It was people seeing companies that were there versus other people’s companies in that sense. It was showing that the brain activity when you see your children is very similar to when you see your own company.
She talks about the pluses and the minuses of this. She looks at how your past contributes to who you are, what to do in the present, and then looking ahead, asking yourself, “What will my future self want me to do about this decision right now?” I was pretty fascinated by it.
Mike: Yeah. I thought that when she dove into that part of the talk, that was kind of fascinating to me just because when you’re building a product, you’re working so hard on it and you’re pouring all of your energy into it. It’s not something I think that most people think about in terms of what would my future self think of me doing this or what would my future self want to be the result of this. She really dug into that and tried to portray it as a situation where you do have to think about those things and you do have to let things grow on, in some cases on their own, without too much input from you, whether it’s hiring people to take over certain pieces of it or just being cognisant in other fact that what you’re doing today is not always going to be correct but you have to make the best decisions that you have with the details you have right now.
Rob: Lars Lofgren wrapped this up. He finished off the growth speaker docket. His talk title was 2 Inbound Engines that Drive 30,000 Leads Per Month, actually more than that. I think he said they’re collecting more than 40,000 emails a month, which is just fascinating. He runs marketing for Ramit Sethi.
He really talked about the two engines are one, ramping volume and two, split testing your choke points. He talked a lot about going really deep on one thing and how they’ve spent a year just going after, they started going after SEO with the ultimate guide and then that wasn’t working so they switched it up. He said he’d rather have 49 amazing blog post and one PDF than 50 amazing PDFs because he need the blog post to drive the organic traffic, so that people will download PDF and become a lead.
He has talked a lot about how he doesn’t do any campaigns. He only puts in systems that he doesn’t want to go from marketing campaign to marketing campaign. I thought was a really interesting look attitude. It’s a very long term way to think about it but it’s also the way to think at scale in terms of really scaling up sustainable traffic.
Mike: I thought it was really interesting that even given the size of the team that Lars runs, that they really are only focused on one channel at the moment. I guess I would have thought that they would have done more or I would have thought they were been going after two or three. In the context of this talk and looking at it retrospect, it does make a lot more sense as to why they’re going so deep on one particular channel. It’s because it’s working well for them. You really want to double down on those and optimize everything you possibly can until you get to a point where it’s no longer working or you’re longer getting the gains that you could be getting.
I think you and I have talked about similar things in the past where people have said, “Oh, I want to take my app and go multilanguage with it or localize it for different places.” The reality is most people are not at a point where they’ve saturated the market. This is the same idea. It’s really going so far deep until you get to the point where the diminishing returns are so little. That’s when you would start focusing on something else. It’s amazing with 40,000 email addresses acquired every month, they’re still not there.
Rob: Tuesday night, we had the closing reception for growth and we had that opening reception for starter. That was a time for people to mingle and have S’mores, and an open bar.
Mike: You’re not kidding about the S’mores either.
Rob: I know. There were fire pits in the back and people are making S’mores. That was a lot of fun, though. I see everybody mix in together. It was a big group and that allowed the starter folks to meet some of the growth folks, and then the growth folks to do their last hurrahs before they kicked off for home.
Like I said, starter was around 165, 170 people. We did something interesting. For those who don’t know, we worked with a conference coordinator who handles a lot of the logistics. His name is Xander. He suggested that you and I not try to emcee two conferences back to back. I think his original phrase was consider getting some fresh blood on the stage. Just someone new with a fresh voice who maybe could our starter audience could really relate to.
We invited Jordan Gal to do it this year. I think our plan is that every year, we’ll either do it with ourselves or we may bring in a different guest emcee. I thought that went really well. My thought, it was nice to not have to be present and constantly thinking about what was going to happen after the next talk and what we’re going to say. I think it took definitely took a load off of me.
I’ll toss it to you in a second here if you felt the same way. I thought the feedback was generally positive. I didn’t really hear anybody who was surprised or shocked that you and I weren’t up on stage all the time. Even then, you and I, were introing some things and you were handling sponsorships so it wasn’t like we weren’t present.
Mike: Yeah. It definitely felt some of the load was taken off for the starter edition just because with the growth edition, there were so many things going on. You and I were back and forth on stage pretty much the entire time. I felt I couldn’t concentrate as much on the talks during the growth edition as I could in the starter edition. It was really nice to be able to I’ll say step back a little bit but still be pretty heavily involved in all the stuff that was going on.
I think that I agree. I’ve heard from some of the different attendees that they thought that it was interesting that we did that. I didn’t really see any negative feedback on that particular piece of it. I think there was maybe a little bit of disappointment that people, they don’t get to see you as much up there because you spoke a growth but not at starter. I think there was maybe a little bit of an expectation of that. But generally, it was pretty positive feedback.
Rob: Yeah, that’s interesting. You know about half way through starter, I started thinking to myself, “I think I should speak. I think I should have spoken this year.” I think neither you nor I knew how challenging that it would be to run these back to back conferences and so didn’t want to commit ourselves to speaking at both, which is why we divided and conquered. I spoke at growth and you spoke at starter.
Given how things went and how I felt it was fairly smooth and I wasn’t exhausted. I don’t know if I could have written two talks from scratch but certainly I might have some material that I could have pulled together for starter.
Mike: Yeah. I think for this year, I think it was definitely the right decision to have you speak at growth and have me speak at starter just because there were so many unknowns. That’s really the issue. With MicroConf, you really only get the one chance of that specific event, whether it’s MicroConf in Vegas or MicroConf in Europe. You can’t just do it over again. It’s not something that you do every week. You don’t want to go too far in a direction that is going to be difficult to manage moving forward or for the rest of that week.
I think for this year, it was definitely the right choice. Whether we change that in the future is up for debate or discussion but I don’t think that we made the wrong choice there.
Rob: Jordan Gal also kicked us off and did the first talk of starter. He talked about all the mistakes that they made along the way with his startup Carthook. You know how they’ve continued to grow during that and the learnings that came from it. When we originally talked, we talked about him doing the same talk he had done in Europe but he basically just wrote a completely new talk for the Vegas audience.
Mike: What I really liked about Jordan’s talk was the fact that he showed all those different failures along the way, at least the ones that he felt were failures but if you looked at how things were going for the business, things were still generally going up into the right. It’s interesting to note that your own personal viewpoint of how things are going, are always going to be worse than how things are actually going. Not always I guess. There are some exceptions where things are just tanking and you have no idea. I think at the back of our mind we know that things are going in that direction.
From external, you look at the business saying, “Oh things are going fantastic, things are going great.” But the founders we’re like, “Oh man, we screwed this up or we screwed that up.” It’s a very different viewpoint when you’re talking to somebody about, “Hey, we’ve made this mistake, we made that mistake.” Externally, people have a different view of what’s going on inside the business than you do as the founder.
Rob: Another notable talk from that first day was Ben Orenstein. He works for thoughtbot and he’s a co-host of the Giant Robots Podcast. He was another one who had obviously had quite a bit of speaking experience. Just really nailed the audience engagement part. I thought he did a very, very good talk. He had actually surveyed the starter audience in advance and he had rewritten his talk multiple times to try to really nail exactly what they needed.
When he surveyed the audience, he found out that about half of folks, it’s starter edition so it makes sense they seem split about, but about half of folks had basically $0 in revenue and then half had in the hundreds and on up. He actually just had two parts to his talk. It was like, “If you have $0 in revenue, do this.” It was super prescriptive and it was really good. I think it hit home with people. It gives a good message to have. If you are over that, then he had these 10 tactical wins that they had implemented over at Thoughtbot because they have a couple different SaaS apps that he runs over there. I thought it was pretty fascinating.
Mike: I think part of what resonated with his talk was that he zeroed in on those tactical pieces where it’s essentially a switch or a lever that you can use to get more out of your business and move things forward faster. Some of them are not necessarily obvious. Some of them that are obvious like for example, created an email course. Then there are other ones where integrating and partnering with other people that’s not quite as obvious but in retrospect, it makes a lot more sense that you can leverage those partnerships to grow your business because you’re essentially leveraging other people’s audiences. If you’re starting out and you don’t have a lot of discussions with other founders, that might not come to you as an obvious tactical piece of advice.
Rob: Rounding at that first day at starter, it was Sujan Patel, who many of may know as a growth marketer. He worked for When I Work and has a number of SaaS apps that he runs now.
He talked about from idea to launch your first 1,000 customers was zero marketing budget. He broke it up into three separate sections. The first was about prelaunch marketing, the second was about nailing your launch, and the third was about scalable marketing approaches.
I really like that differentiation. I think folks who are just starting out often get confused of, “How do I fill my email list?” And that’s your pre launch marketing stuff. “How do I market once I’m out and I’m trying to grow?” They are highly related but they are different. I like that he differentiated that. And then he just kept throwing out ideas that they had tried, things that had worked, things that hadn’t. Again, I took away a lot and I think the audience probably did as well.
Mike: That’s something that I saw from the survey results is that people really liked the speakers who dug into things that didn’t work because it was easy for them to look around and find examples of, “Oh, somebody did this and it worked for them. Somebody did this other thing and it worked for them.” The thing that stuck out in people’s minds was the fact that some of the speakers talked about, “Hey, I tried this and it didn’t work.” Or “I was going to go down this path and we backed off because of X, Y, and Z.”
It was interesting that that piece of it, not even just failure but the pieces that resonate with people were the ones where the speakers started to go down a particular road and pulled back because those are not the things you typically hear about on blogs. You read about the success stories but not necessarily the failures or the missteps. People really found that those aspects of the talks were really helpful to them.
Rob: On the following day, one of the notable talks was Mr. Patrick Mckenzie Patio11. He dug into basically a paint by numbers approach to productized consulting, which is a pretty good option for folks just starting out, wanting to get their first dollar. He broke down an approach of how to build that up. I think he said within 12 months you could be a $12,000 MRR in terms of a productized consulting business and then he laid out the steps to do that.
Mike: I think it was probably surprising to people that when he laid out that approach that he was talking in broad strokes numbers about, “Hey, you could charge $800 to a large business for just taking out the trash for example.” That’s not a huge amount of money to them because companies with more than 20 employees pay way more than that sometimes.
I’ve seen business plans or businesses for sale where that’s exactly right. I’ve seen literally that line item before. It can be fairly high. You don’t really think about it but there is all those business problems that larger companies have. By larger, I mean 20 employees and up that is a genuine business opportunity. You just don’t typically think about it unless you see what those line items are. That’s difficult for most of us who are developers or just not involved with any sort of budget discussions for a larger business.
Rob: Another talk that I heard positive feedback about and I thought he did a good job commanding the stage was Justin Jackson talking about the freedom ladder, financial independence through products. He talked about a lot of different ways that he had tried over the years to make a full time living. In essence, he said January 1 of 2016 is when he finally was able to make it from his own products and he didn’t have to consult anymore.
He talked about many different ideas but one that was interesting and seem to resonate with a few people that no one else has talked about was just doing workshops, like in person workshops. He says yes, it’s super scary and yes, he has given a workshop where it was just him and two other people but he said, “That’s how you’re going to learn. If you can’t get a couple people to get into a room in your local town, how are you going to get folks on the internet to pay you any money?” I thought that was cool way to think about it.
Mike: I think that’s one of the fears that people have about running those workshops, is that you only get one or two people there. I talked to somebody who had given a talk at a conference where they said they were expecting a couple of hundred people in the room and it was multitrack conference and they ended up with eight or something ridiculously small like that. One or two of them got up in the middle of the talk and left but at the same time those are the places where you learn, those are the places where you figure out what’s going to work and what’s not.
What we all want is to be able to go in and run a workshop like this. We get 30 or 40 people. The problem is at that point, you are essentially performing in and front of a group of 30 or 40 people and you’ve never really performed in front of group of 5 for example.
What you’re doing is you’re making larger mistakes in a larger environment. It’s intuitive that you want the smaller ones first. Those are the ones that help you get the experience so that when you go those larger environments, you give a larger talk or a larger workshop that is not as scary. You’ve got the butterflies out, you’ve been able to answer the exact same questions in that larger workshop that you have in smaller ones. You can refine your answers from there as well.
Rob: You mostly rounded out the day and rounded out starter. You actually interviewed John Collison, did a moderated Q&A with him. For those who don’t know, he’s a co-founder of Stripe. Xander was saying he’s the youngest billionaire, either in America or in the world. Because I think he’s what, 25? Stripe is now worth $9 billion and he owns a big chunk of it. That was cool. How did it feel to be up on stage with him?
Mike: That was interesting. I wasn’t necessarily nervous from that regard because I don’t think that Xander had mentioned that to me. It was interesting looking at the schedule and how things were going to be going for the rest of the day. I realize that I was probably going to be up on stage for a good chunk of that last day.
I think that the Q&A session went well. We took some questions from the audience and let them. There was a list of questions that we had, that we want to get out there and then ask. A lot of the audience asked questions. I thought that was a good split.
Of course, obviously, I’ll say a little bit risky because you never know what somebody is going to ask. I thought that John was very honest and upfront. He just said, “Look, if I can answer the question and help you out, I will. If there’s something I can’t talk about it, I’ll just tell you I can’t talk about it.” I thought that that was very humble of him. I really liked talking to John both before, during, and after the conference just because of how he carries himself. He’s obviously a very skilled and intelligent person. I think he makes for a good founder that is a good fit with our audience as well.
Rob: The last talk of starter was your talk. It was idea validation and customer development. It’s pretty self-explanatory what you went through. How did it feel? What feedback did you get and how did you feel on stage?
Mike: After the talk, I got some good feedback from people. It was odd because the workshop that I did was also on that. That was I’d say pretty well attended. Even during the workshop that I did, there were a lot of questions that I got. I took some of those questions and I went back to my talk and rearrange things a little bit. May or may not have been the best idea to make some of those changes in the middle of it or just before I was going up there but I also think that some of those things are really important to cover in terms of, “Hey, if you do this, this is what can happen.” Going out there and showing a specific idea, that was something else that people are pointed out to me like, “Hey, I thought that that idea had legs and it’s really interesting you showed that hey, you got these data points and were able to prove like hey, this idea is not going to work or it’s not going to work for you at least.”
Rob: Overall, I think MicroConf this year, the MicroConfs in Vegas were quite successful. I had a great time and we’ve already gotten a lot of positive feedback about it. Keep plugging along and we’re looking at doing one in Europe here in late fall.
I did want to give a shoutout to our sponsors, to the speakers that flew in, very busy people coming in to give back to the community, as well as Xander. Xander helps us run the conference. If you have an event that you need help with, even meet ups, product launches, and conferences, Xander really works a lot in the startups space and the techs space. He’s at startupeventsolutions.com.
Mike: I think that about wraps us up for this. If you have a question for us, you can call it in our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com.
Our theme music is Next for Periodic 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 335 | Lessons Learned from Unbounce’s 5 Split Tests Across 2.3M Exit Overlay Visitors
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk through an article by Unbounce about split testing their exit overlays. The guys give you a full walk through and their opinions on the findings of the article.
Items mentioned in this episode:
Transcript
Rob: In this episode of Startups for the Rest of Us, Mike and I talk about lessons learned from Unbounce’s five-split test across 2.3 million exit overlay visitors.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products whether you’ve built your first product or 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’s the word this week, sir?
Mike: Well, we are in sunny Las Vegas as people are listening to this, and right now outside it is raining.
Rob: Is it supposed to rain on Tuesday?
Mike: No, I’m still in New England. We recorded a week ago early. Come on, man! Get with the program!
Rob: We’re time warping here. Yeah, so we record just a few days early, and I take off for Vegas in a couple days, and it’s supposed to be what? 70s and 80s? Pretty sunny there?
Mike: Yeah, I think I saw like 84 or 85, something like that last week when I looked.
Rob: It’d be nice. I’m looking forward to getting out and seeing the folks, you know, seeing the speakers, meeting the new speakers, and hanging out with people we haven’t seen for six to twelve months. It’s always exciting to kind gear up for that.
Mike: Yeah, it’ll definitely be interesting this time around just trying to keep up and pace ourselves for the two conferences. I know in years past every single year without fail, my voice starts to fail at about the second or third day. So I’m going to have to be a little careful about that.
Rob: I agree. The good thing is we’re not emceeing the Starter Edition, so we should have less talking. Although, you’re doing a talk there, so you’re really going to need to keep your voice going.
Mike: Yeah, my talk is the last slot on the last day so four or five days of talking and hopefully my voice will still stay with it.
Rob: Indeed. On my end, not too much new this week. Wanted to look at a couple recent iTunes reviews, and we’re up to 517 worldwide iTunes review. This one- I love the subject- “Best podcast ever” from John Turner, and he says “best podcast for anyone looking to start selling software or a SaaS product.” And we have Ray223 who says, “The oldest and the best. Thanks Rob and Mike for all the insights. Keep up the great work.” We have another from [Ludwig?] from Denmark, and he says, “If you’re considering have a startup, listen in here.” Really appreciate these reviews. If you haven’t left us an iTunes review, it goes a long way towards helping us to reach new audiences, to grow the show, and frankly, just keeps us motivated and keeps us from crying ourselves to sleep at night. I know Mike, you often pull up the reviews and read them to feel good about yourself, right? Oh, is it just me?
Mike: I think it’s just you, yeah.
Rob: Cool, so let’s get into the topic this week. We’re going to be talking through an article that’s on Unbounce.com’s blog. And the title of the article is “Lessons Learned from 2,345,864 exit overlay visitors.” And what they did is they ran split tests and some observational tests, which we’ll talk about in a second. They ran five of them over the course of two years, and it’s about 2.3-2.4 million visitors during that time. And so they just outlined the tests they ran, and with the results you would expect, and what actually happened. And I like how detailed this post is, and I like that some of the assumptions that we will make- when I say the split test you’ll think “I know which one is going to win.” Sometimes that’s correct, and other times it’s not. And so it’s kind of a fun walkthrough of people who are doing a lot of pretty sophisticated testing.
Mike: Do you think that that’s an exact number or just kind of a ballpark estimate of the 2,345,864?
Rob: I think they went into Google Analytics, you know, and just pulled up the number from the date of the first split test until today or whatever so I imagine it’s pretty exact.
Mike: So one of the things we wanted to mention before we kind of dive into this particular episode is the fact that there is a certain kind of minimum threshold you have to kind of be at in order for split testing like this to work. And I think Rob, you said the minimum you would even consider doing these kinds of split tests is when you get to about 30,000 uniques a month, right?
Rob: Yeah. You and I were talking before the show, and I ran some loose math, and let’s say these guys have 2.4 million unique visitors to their blog over the course of this 2 year thing, which is what they’re positing. So back of the napkin, 2.4 million is about 100,000 visitors a month, and at that rate, think about if you’re using exit overlay you’re around 1% to start with in terms of converting people to subscribers. So 1% of 100,000 is about 1,000 new subscribers a month. If you split test you could very likely get to 2% and that’s 1,000 to 2,000 and that’s a big difference. That moves the needle. As you start lowering the number of visitors you’re getting, let’s think about 50,000. That number’s going to move from about 500 to 1,000 new emails a month, and that’s still for me, still moves the needle. But as you start dropping down- 30,000? It’s like well, I’m going from 300 to 600. That’s cool. That’s about as low as I would go. If I have 10,000 and I go from 100 to 200 subscribers a month, I actually think at that point you should be focusing more time on generating traffic rather than split testing the traffic you have. So my mental math is somewhere in the 30-40,000 uniques a month if you’re going to start running experiments like this to have it actually move the needle.
Mike: So with that in mind, let’s start digging into these experiments. Let’s see what they found out.
Rob: Yeah. So they say back in 2015 they launched their first ever exit overlay. So it’s an exit intent popup that only appeared when you tried to leave the site. And the idea was they just wanted to collect more email addresses. And when they first started their conversion rate with the very first one, and it says “Conversion optimization tips you’ll actually use. Subscribe to our blog.” There’s no lead magnet, there’s no mini course, it’s just subscribe to the blog. And they were at 1.25% from the start, and we should probably take a quick break here. Some people hate exit intent popups. Some people love them for how well they convert. I think Unbounce takes a pretty good approach to it, and they actually write custom code to assure that you only see one even if they have a bunch running in different categories as people hear later. They were very specific to not hose the user experience because that’s the thing that sucks with exit overlays. If they keep popping up and you’re trying to read and you’re trying to go to another tab to do something, so this is a place where you can listen to these ideas, and you don’t have to do this with exit overlays if personally you don’t want to. This could just as well be a little Drip widget in your lower right, this could be a lead box, this could be embedded form in your website- all the stuff they do could still be applied to that, but they just happen to do it using exit intent.
Mike: Yeah, that kind of applies across the board to a lot of different marketing efforts. If it’s something that you’re not particularly enthralled with when you come across it- if it’s something that you just say “Aw, I can’t stand these things,” and you just keep closing them and they keep coming back, that really turns you off from trying them to begin with. But there’s also a difference between your experience on your website and the visitor who’s coming to your website. So you have to keep in mind what your end goal with these is and whether or not it even makes sense. Obviously you’re not the one browsing your site, but at the same time you are not necessarily representative of the person browsing your site. They may not care nearly as much as you do about it.
Rob: So we’ll kick into first experiment here in a second. In the post they say there are a few testing conditions they want to lay out. Number one: all overlays were triggered on exit, which means they were launched only when abandoning visitors were detected. Number two, they say for these first three experiments they compared sequential periods to measure results rather than true A-B tests. So they do say this is less scientific, more observational because you run them for thirty days and then run them for thirty days and compare the two time periods. They say that when comparing these sequential periods testing conditions were isolated by excluding new blog posts from showing any of the overlays. Conversion is defined as either completing the form, meaning they enter their email or later on they try something where it’s just a click, and we’ll get into that later. And lastly, it’s from January 2015 and ended November 2016, so almost two years. So that’s setting the stage. The first experiment they ran was to go from their generic signups which I talked about earlier which just said “Conversion optimization tips you’ll actually use.” and “Subscribe to the Unbounce blog” button. If you compare that with actually giving away content, the hypothesis is if we give away an e-book it’s going to generate more opt-ins. Both Mike and I would agree and most listeners that you’re going to increase your conversion rate if you do that. So they gave away an e-book called “23 Principles for Visually Designing More Persuasive Landing Pages.” And what happened, Mike?
Mike: Well, it looks to me like the conversion rate doubled from 1.27% to about 2.65%. Now the interesting thing here is you kind of mentioned this upfront- this wasn’t a true split test. The duration for the test itself was about half the time of the stuff they had running. So they ran the initial one for 170 days and then the split tests or the tests that they ran was for 96 days to offer this e-book.
Rob: The variant or the challenger, if you will.
Mike: Yep. And the conversion went from 1.27% to 2.65% so almost half the time and twice the conversion rate which kind of translates to the fact that they got about the same number of conversions in half the time. That’s a phenomenal increase to be honest.
Rob: It’s really cool. Yeah, this is good. I feel like this supports a lot of stuff that we’ve talked about over the years and what you would naturally think so that’s good. Their observation on this is offering tangible resources versus non-specific promises compositively impact conversion rates.
So experiment two gets a little more complicated. So they went from their single field- meaning just getting an email address- and you think about at this point they’re at a 2.65% conversion rate, they’re giving away an e-book, they’re asking for an email. They said that data people always spoil the party and someone internal to Unbounce wanted to get more information, not just the email. So they added three other form fields, so instead of just email they asked for a first name, do you work for an agency, and your company size, and they knew this was going to tank when they knew it was going to tank conversion rates, and it’s exactly what I thought would have intuited as well. Every form field you add from 1, 2, 3, and up, you are going to almost in all cases a decrease in conversion rates. And this once again confirms that. Take us through the results.
Mike: So the results basically went in the opposite direction. Just to point this out as Rob said at the very beginning, these were all run against different people, so it’s like somebody saw one and they ended up seeing another one. It’s really different segments of their audience that were seeing these, so again, the time periods were different that they used. And it looks like they did not want to run this one for very long just because the results were so bad, but the conversion rates went from 2.65% down to 1.25%.
Rob: D’oh! Right back to where they started. They’re still giving away that resource but just adding the three fields just tanked them.
Mike: Yeah, so it’s pretty obvious that even just looking at it you probably don’t want to fill out that form. If it’s in exiting intent and you are already inclined to leave, making it more difficult to send them information is just not going to work out in your favor.
Rob: I like the quote the post author says, “I knew this was for a good reason. Building our data warehouse is important. Still, a small part of me died that day.” And then it got worse. Basically since they added all the fields to it they had to expand the size the overlay and they just made it bigger so it could hold the form fields and then they realized that they had made it so big that the size was too large for many people’s browser windows. So the overlay only fired two out of every three visits. So not only did they have a lower conversion rate, but they cut their potential audience by a third. So then they redesigned the overlay to make it smaller and fit, but internally they decided that even though it was a lower conversion rate, they needed that data. And so now their new baseline is back to 1.25% which is kind of hard as a conversion rate optimized to make that much of a gain to double and then have to go back.
Mike: It depends on your situation because this is one of those places where you really need to make a judgment call about whether you need that data or not and whether you need it now. I think it’s this case with the types of questions they’re asking, I think they could probably get away with not asking certain things. But they went from asking just an email to first name, email, do you work for an agency, and company size. And those individual things really let someone on a marketing team target down and send a highly specific content to those people. You’re not going to send something about a freelancer to somebody who’s running an agency with thirty-five people. So it allows you to target the content you’re sending them and make sure that it is speaking their language and talking directly to their pain points because they’re going to have different pains than a freelancer. And if it’s important to have that information now, awesome. But I would also question whether you need to have it on that page. So one of the things that I’ve seen is that you can do this type of thing where you ask for a very limited amount of data and then on a next page you ask for more because they’ve already bought into the premise at that point. Let’s say they give you an email address and then it flips to another page and says, “Hey, thanks for that information. Can you tell us a little bit more info so we can more specific about the things we send you?” And at that point you can ask them, and if they don’t give it to you, you can follow up later and try and get it later or there’s different ways down the road that you can get it. But the question is do you need that information right now?
Rob: Yeah, and that’s called progressive profiling, if people are curious. There’s a really good tool that actually has a tight integration with Drip that does exactly that. You can set up all these fields and you can progressively over time- the first time you visit it’ll ask you for email, and then the next time it knows it already has your email so instead of doing nothing it’ll adjust for your first name or it’ll ask for something else. It’s pretty sophisticated stuff. That tool’s called Convert Flow, if you’re interested.
Alright, onto the the third experiment. I like this one. It starts off with the quote “It seemed like such a good idea at the time…” So the third experiment is challenging one overlay like they have now, just the one overlay giving away the e-book with the four form fields versus ten different overlays. And the ten different overlays are highly targeted or hyper relevant to each of their ten blog categories. So you can imagine on a blog you might have categories and one of them is split testing, one is copyrighting, one is email, one is paper click, one is social. So creating a separate overlay for each of those with hyper relevant headline/pitch, all that stuff. And so they did this and they said it took three hours maybe to do this, and then they have a table, and the results are kind of crazy. The email category result was .45%. So remember their baseline is currently at 1.25%. So their email is at .45%, their legion and content marketing is at .85% so there’s kind of the bottom end ones. And then their copyrighting one is at 3.22%, and their landing pages and mobile optimization is at 2.46%. So huge range now, but having that more granular data is super more interesting because now you know you have some big wins and some big losers you can just focus more on the losers rather than trying to do it across the board. They only did it for ten days. They said their conversion rate was a combined 1.36%. So it is slightly higher than the 1.25%. They said it eventually crept up to 1.42% after an additional quarter million views, but it didn’t do anything as much as they had hoped. So to take a step back, if you take a look at their copyrighting category they say “How to write killer landing page copy” versus their conversion rate optimization category was “How to Get Started with A-B Testing” and then the next one is UX and so the headline was “The Seven Deadly Sins of Landing Page Usability.” And so I don’t know that these were e-books, and they don’t say that each of these was as effective as that 23 Principles of Design e-book they originally gave away, but that was the idea here. That’s how they were trying to target to the specific category.
Mike: What I find interesting about this is that they decided to just go back to the baseline and use the average of all of these because it seems like there are certain cases where the targeted headlines work a lot better. So for example the copyrighting and the campaign strategy and the mobile optimization- those things have a much higher conversion rate. But then if you look at the other ones, like the email category or the social category, the conversion rate on those is less than 1%. So it makes sense to at the very least go back to the baseline but I kind of question why they didn’t go with those specific ones in those particular categories that were overperforming 2-3x what the baseline was.
Rob: Yeah, I agree. The average was a little weird, and I think they’re doing that just to kind of give you a general idea because now that you have this data, what would you expect is the next thing to do? It’s to keep the ones that are at 2% and above and only try to optimize the low performing categories, and that’s exactly what they did. They were going to test new offers over five categories that had low conversion rates and reasonable enough traffic volume to make it worth the test. Because some of these, now that you’re getting more granular, some might only get 1,000 views in a month so it’s not really worth diving in. What they did is they were then doing resource versus resource, and so they were basically trying a different headline to give away an e-book.
Mike: One thing that comes to mind now that you mention that that kind of leads into the next experiment they did, is if they start changing that and they start running different types of ads in some categories versus others then it changes a lot of the math around and it becomes a lot harder to test that stuff.
Rob: Oh totally. Yep. And so the result of this one, they don’t really go into much detail. They just say they saw a slight improvement in one of them, in a couple of them they saw a dropoff, but in legion and content marketing there was a dramatic uptick, and the results were statistically significant. So they’re making progress. They had five low-performing ones, and they basically knocked two of them out, so really they just have three low-performing ones.
And so for their fifth and final experiment as of this writing, they wanted to test legion overlays, which is what they’ve had the whole time asking for email and first name, etc. versus click through overlays. And so they talk about have an exit intent popup that basically has a headline and then a button that says either “get the video” or “get the e-book”- they’re still giving something away, but then that takes you to a landing page. And that landing page has a lot more text and a lot more conversion-oriented stuff. And so that’s what they tested.
Mike: So to contrast this experiment versus the other ones: the other ones were tweaking the headlines, they were asking for more or less information. And in this particular experiment what they mean by “click through” is they would make an offer to them, and the person did not have to fill anything out. They could simply click on a button that would take them to a landing page that would then ask them for information. So essentially they were providing a mechanism for them to say yes, I’m interested or not, and they could quickly answer that. And when the person clicks on the button it takes them to that landing page and then they can fill out that information so it becomes a two-step process instead of a one-step process.
Rob: Right. And this is actually something Clay Collins has talked about for years, and I heard about his podcast he used to have called The Marketing Show, and then when he came on our show a couple years ago well before the first [?] thing happened, he talked a lot about not popping something up and asking for information and they go with this juiced up opt-in where you can click a button and then the next step was a form and it just feels more- it tends to have better conversion rates and tends to make people feel more welcome and like you’re not just asking for something right up front.
So for this experiment they point out for this to be successful, the conversion rate on the overlays would need to increase enough to offset the dropoff that they expect by adding that extra landing page step. Because you figure 1.25% of people might submit one with the form fields in it, and then maybe after two or three times of having to click the button but now you need to get a lot of those folks to actually fill out the form on the landing page. So not surprisingly engagement with the overlays increased amazingly the ones with the buttons. And engagement is just clicks. And so the one with the form fields was .79%, and the ones with just the button click through was 3.62% so that’s about 4 1/2 times better. So that was just getting click throughs. In the end in their CRO category, the overlay with the button where you click through to the landing page, that essentially netted them twice the leads. So they had 100% improvement in terms of the net leads they received by having someone do a two-step opt-in instead of just popping up a form field in front of them. And in their legion category (they have this category on their blog) it was about a 50% (it was from 45-56) so little under 50% increase. And so they only did it in two categories and their next step would be applying the same format to all the other categories and measuring the results. So two-step opt-in for the win.
Mike: Yeah, so if it’s confusing, to kind of consolidate that, it is a two-step process versus a one-step process, so depending on where you calculate the conversions for that you have to take those into account. And not just the percentages but also the net result of it. So it’s not just about the people who click on that link and go to the next page, it’s about who clicks on the link and goes to the next page and submits their information. And what is the net result of that versus the original. And in both the cases here they had either a 100% or a 50% increase. Both of which are pretty significant especially considering the volume. And they took the time to say okay, this makes sense for us to kind of expand this and go out through the rest of our categories and implement it across the board.
Rob: And so that’s where they leave off. They’re kind of summarizing stuff that ended three months ago, and I’m sure they’re running their next tests as we speak. The nice part about this, I like their concrete examples. There’s so much that you read about split testing that can be vague or rule-of-thumb, and these- your mileage my vary, but a lot of the stuff they intuit really comes to pass, and I think it’s always helpful to get ideas for your own split tests. You may not have time to create ten different overlays, and unless you have 100,000 uniques a month to your blog, I wouldn’t create ten overlays. But especially some of those earlier tests were pretty big wins for not a ton of effort, for writing a new headline and giving away a resource you already have on your hard drive.
Mike: You know, Quickbooks is going to love you for saying “Intuit” all the time.
Rob: Yeah, I know. For using their intuition, yeah. I’m going to come up in their Google Alerts a bunch.
Mike: Yep, their SEO guys are going to start calling you. Interesting side note here, one of the things that Unbounce talks about is that they also have a list of what they’re going to be looking at next. The first one is a charter test which is what happens when they test their on-exit trigger. I guess there’s a 15-second time delay. And then there’s a referral test, which is what happens when they show different overlays to users from different traffic sources. And then the third one they’re looking at is new versus returning visitors. Do returning blog visitors convert better than first-time blog visitors? And I think those are all going to be interesting tests. If you’re interested in taking a look at that, go over and check out Unbounce’s website, subscribe to their blog, and I’m sure they will post out the results when they get those, and we’ll be sure to check it out.
Rob: While you’re at it, go to the lead page’s blog and subscribe too. They turn out good content like this as well. Got to plug the company man.
Mike: I get it. Well, I think that about wraps us up. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt for ‘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 334 | Why some products fail and others succeed
Show Notes
In this episode of Startups For The Rest Of Us, Mike and Rob talk about why some products fail and others succeed. Based on a listener question they lists reasons for both sides while also revealing some old failed product ideas of their own.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of ‘Startups for the Rest of Us,’ Rob and I are going to be talking about why some products fail and others succeed. This is ‘Startups for the Rest of Us’ episode 334.
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 [00:26]: And I’m Rob.
Mike [00:27]: And 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 [00:30]: Kind of the same old stuff. Just hiring a few more folks. We had two new developers start last week, and I think we have two or three open job recs right now. Doing a little bit of MicroConf prep with yourself and Zander. Kind of finalizing the schedule and some sessions. And, you know, fighting the good fight.
Mike [00:49]: It’s amazing how much the little things for MicroConf eat into your time. I mean, there’s all these little things that you think will take five minutes or something like that and they end up eating through twenty or thirty.
Rob [00:58]: Right. Yeah. There’s been a little bit of evening work and some thought and schedule crafting that’s gone on. But, overall, can’t complain given that we’re basically putting on two conferences back to back. I don’t feel like it’s anywhere near even the same amount of work that we used to put in five years ago on the conference.
Mike [01:16]: Right. It seems like it’s not twice as much work to hold the two conferences back to back either. At least not yet. I mean, we haven’t been onsite for it so that could certainly change things.
Rob [01:23]: Yeah, that’s true. And what’s nice about that is, like we’ve talked about in the past, we opened enough tickets that we just about sold out of both conferences but not quite. And I think that’s exactly where we want to be. I think we’ve sold four or five tickets in the past week across the two conferences, and that’s the ideal pace I feel like. Is that last minute folks who want to come who hear about it late I would really like for them to still be able to buy tickets and we’ve never had that really at any MicroConf in the past. So, it’s been kind of nice to see that.
How about you? What’s going on?
Mike [01:55]: Well, kind of related to MicroConf. I’ve been working on my working on my MicroConf talk a little bit. And outside of that, I’ve obviously been putting time into Bluetick and right now I’m working out some UI and workflow issues related to allowing people to self-onboard just because there’s certain parts of the setup process in onboarding that are a little bit more complicated. So, we’re reworking the UI a little bit to make it easier for them to do that and just kind of give them a wizard to walk them through it and anticipate where they’re going to run into issues. Because we’ve seen enough demos in onboarding sessions where this is obviously a problem and getting it the point where people can do that without our help and assistance is definitely going to be worthwhile.
And then kind of related to that is I’m working on recording some video walkthroughs of different parts of the application to show people how to use it so that I don’t have to walk people through those demos myself. Just based on stuff that I’ve learned that people have asked about and said, “What does this do?” Or, “How does that work?” And looking at places to key those videos in so that it’s obvious that if you need help here’s a little button just click on that and it will walk you through this particular piece.
Rob [02:55]: Yeah, that’s a really good way to go. I think that’s kind of become the blocking and tackling template. For this I know it worked really well for us in the early days of Drip. And it still does. I think the videos I recorded two years ago are still live. Or someone may have re-recorded them because we changed our top nav and we were like they get out of date.
And that’s the one bummer with videos is you have to re-record the whole thing as soon as you change one part of the app. You can’t just edit text or replace a screenshot. But recording a sixty- or ninety-second video that’s really tight can go a really long way for brand new people just getting oriented with a specific feature. And in Drip we actually embedded it right at the point they needed to consume it. They were also in the KB but there were only three or four constructs in the beginning. It was broadcasting campaigns and I don’t remember what else. But right as you got into a broadcast it’s like, “What’s a broadcast?” And then there was a sixty-second video of me talking about it. How to use it, how to set one up. Boom. Done. And we got some good feedback about that early on.
Mike [03:48]: That’s basically the approach that I’m using. It’s like right at the places where they need that information, that’s where the videos are and you’ll just be able to click on a little button that has the video embedded into it and it’ll just pop up over the page or something along those lines. We’re still kind of working that out. But, as you said, the one concern that I have is that there’s still parts of the app where the UI is changing and I know that those pieces are going to get out of date and it’s like, “Do I really need to worry too much about that?” Right now, I’m just going to say heck with it and record them and if they get out of day, they get out of date. And if we need to go back and re-record some of them then we will. Or I will.
Rob [04:23]: Yeah, that’s the way to go. One piece of advice there is I would consider only having the videos easily accessible during the blank slate phase. That’s where there’s zero data on that page and that’s when someone’s just trying to get started. They can watch the video or they can dive right in. Once they have one or two of these things set up, the odds of them needing to watch that video drop dramatically. At that point, you could potentially have a little link out to a KB or something.
I don’t know that you need to go so far as to – for the rest of the time that someone uses the app, you always have some link available for them to drop it in. Because you only need that the first one or two times tops that you’re going to set this up.
Mike [05:04]: That’s an interesting approach. I can certainly embed it on certain pages directly where if the page loads and there’s no data behind it, then show that video. And then otherwise up in the top corner or something like that, have a little help icon that they could click on.
That’s something I have to think about whether or not having that extra button there that’s kind of hidden or out of the way where people can just click on that and say, “Get help for this page,” for example. I wonder how much value that adds.
Rob [05:29]: Yeah. You could throw it in and then you could instrument it just to say, “How many clicks does this get?” Throw it into Mixpanel or Google Analytics or something. It’s just a javascript action. And then you could always remove it if people aren’t using it.
We found that the blank slate approach has worked really well. We got a lot of positive feedback about it. And then it kind of goes away once you’re past the blank slate which tends to be when you don’t need it anymore. So, that’s one way to do it that we’ve found to be quite good.
Mike [05:52]: Cool. I’ll definitely take a look at that.
Rob [05:54]: So, what are we talking about today?
Mike [05:55]: Well, today’s episode is based on a listener question from Matesh. And there was a conversation that kind of went back and forth so I’ll sort of paraphrase things here. But essentially he was asking about why some early ideas failed, specifically related to us. But I thought that it might useful to listeners for us to address that in a broader sense and talk about why different products fail and why different products succeed. And different ways that you can mitigate that and identify whether or not you’re on the right track or the wrong track.
Rob [06:23]: Sounds good. Let’s dive in.
Mike [06:25]: When you’re looking at the success and failure of different products, I think that there’s two very broad categories that things fall into. And the first one is whether you launched it or not. Clearly, if you never launched something then it’s not going to succeed. And that’s kind of a whole bucket of failures. There’s plenty of hard drives out there that are probably just littered with projects that people have started and then never finished. I think it’s pretty clear that there’s tons of reasons why those things failed. Most of it’s just people didn’t spend the time on it and follow through with it. But I think that we just kind of ignore those and move on to ones where people have launched it but, for whatever reason, it didn’t succeed.
Rob [07:00]: Okay. But before we do that, I have to tell you about at least one of my projects – it was probably circa 2005, 2006 – and I never launched it. But I still think this idea is as bad as it was the day I conceived it.
I always wanted to be able to follow artists and bands and directors and writers. Like I love Aaron Sorkin’s writing. And I wanted to go to one place to paste them all in or select them from a list and then, whenever they release something new, I would hear about it. You would think this would be fairly easy but I found myself keeping this big text document of all these band names and then these writer names and authors. And then I would periodically go through it and past them into Amazon and look and then I’d past them in here and there. And then I was just like I don’t think there’s really a good service for it. I think Bandsintown may do that now but I’m not sure it tells you about CD’s.
But anyways, I went through and I built the dot net and I hooked it up to the Amazon API and I did all this stuff. And then I realize this is an awful idea. This is something that some big venture funded company would do and try to create a big buzz around and raise a bunch of funding and then they’d go out of business and someone would come and pick up the scraps. Although I wish this existed and in a really palatable format.
Mike [08:10]: I think what you’re looking for is indieshuffle.com.
Rob [08:13]: Yeah? Does it do it for all the things I mentioned?
Mike [08:16]: I don’t know. You’d have to probably look at it and figure out whether or not. There’s probably little things that you were looking for that either are there or are not.
Rob [08:24]: Got it. So, this is cool for music?
Mike [08:27]: Yep.
Rob [08:27]: But it doesn’t have any of the other stuff. I follow authors who write fiction and nonfiction. And I follow, like I said, writers and directors so I would need film. Mine was going to be all that because you could, of course, use Amazon to look for those as new products came out. A new book or a new DVD at the time because there wasn’t streaming.
I’d imagine there’s either a service out there doing this now or there’s three different services. One for each genre.
Mike [08:52]: Yeah. Indieshuffle, I believe, is primarily aimed at music only. But there’s probably ones out there that are similar for those other spaces.
Rob [09:00]: Totally.
Mike [09:01]: Interestingly enough, I have an idea that I started back in 2005. I wrote out all the designs for it and it literally became a multibillion dollar business. It was named Lighthouse but the idea was essentially file sharing made easy so that you could just drag stuff into a folder and it would automatically share it on other machines. Sound familiar?
Rob [09:19]: Dropbox.
Mike [09:20]: Yep.
Rob [09:21]: Yeah. Now to be fair there were like 30 Dropbox competitors even when Dropbox came out. So, you could very well have been the 31st. Because obviously, the idea was one thing but Dropbox getting out ahead, raising the $10 million and execution is what took it ahead.
Mike [09:36]: Oh, totally.
Rob [09:36]: But it is fun to know. I almost acquired a business that did exactly – this was a Dropbox competitor – and the guy wanted a crazy multiple. But it was basically that. It had all the apps and all the stuff. It was kind of like a virtual thumb drive is what we were thinking of at the time.
Good thing you never launched that one because without raising a bunch of funding I’m not sure that you could have ever gotten that off the ground to the extent that they did. Because it’s the freemium model that allowed them to really get the traction, right?
Mike [10:00]: Right. It was 2005 when I wrote the design document for it and it was like an almost forty-page design document for it. But I never followed through and actually wrote it. I still wanted to tweak things out and figure out whether it was going to work or not. And at the time I was transitioning over into doing consulting because I’d left my full-time employment at the time. So, I was doing a lot of consulting and traveling and I just didn’t have the time to work on it.
Then fast forward like two or three years to 2008 is kind of when I went back to it. I started working on it and I think I probably wrote like a code for a week or two, and then I stumbled across Dropbox. And I’m like, nope, that’s it.
Rob [10:37]: Let’s say you had tried to build it in 2005. Do you remember how expensive servers were and storage and all that crap? It would have taken you literally millions of dollars to build it to any type of scale that would have paid. It was not a bootstrappable business even if you were ahead of Dropbox. Just purely for the cost of everything.
Mike [10:58]: The market that I was specifically looking to serve was magazines where they need to collect digital materials and files from graphic artists and they need to get those to their office. The problem was that most of those people had to use FTP servers and a graphic artist just does not know how to use FTP. They had problems with it. So, I was trying to make it easy for them to share their files. And there’s a general use case scenario that Dropbox came out and addressed at the consumer market. It’s interesting how that whole thing ended up playing out.
Rob [11:31]: Totally. What do you mean they don’t know how to use FTP? I think your wife takes offense at that.
Mike [11:35]: No. The thing is, she was actually the one who enlightened me to the problem because she was working with all these people who needed to send files to her. And they couldn’t figure it out. She was working at the magazine and they were trying to send her files and they just couldn’t get them or they didn’t’ get them in time. There was a lot of issues with FTP. You send the file and there’s no notifications behind it either. So, obviously, Dropbox has the notifications and stuff built into it.
There were all these ancillary things that went into that in transferring the files and making sure that people knew about them and there were deadlines and stuff like that. But, I don’t know. It’s interesting to look back on that stuff.
Rob [12:11]: For the listener wondering what we’re talking about, Mike’s wife used to be a graphic designer for a magazine. It was obviously a problem within her purview there.
Cool. So, let’s dive in. I totally sidetracked this whole episode so we could talk about these old, crappy ideas. Well actually, your idea was a good idea. Just one that would have taken a different approach.
Mike [12:30]: It kind of leads back to some of the reasons why something doesn’t get off the ground. It does relate to the episode, both of those things do. But I guess to kind of step back and go back on track, there’s a difference between launching and not launching. Once you’re past that, things also break down into a couple of different categories. And the first one is, did you get any paying customers or not? Because there’s a big difference between a product that gets zero customers and gets at least one. And there’s a lot of reasons why something might get no customers. Obviously, the most prevalent one is probably you didn’t do any marketing or you weren’t able to talk to people.
There’s also the quality problem issue. Your product has to be good enough for people to want to pay for it. Has to have the features that they need. Had to be solving a problem for them. And if it’s not doing any of those things then you’re not going to get any customers.
Rob [13:15]: Yep. Isn’t this startup founding 101 these days? Product building. The first step is figuring out what the problem is to be solved. So, there should be some conversations. And this only became popular really around 2007, 2008. Before that we just went off and everybody just built stuff and hoped people would use it. And then Steve Blank really bringing his customer development approach to the forefront. And that was the first time I heard about asking your customers in advance. And it was like, “Whoa, you can do that? What does that even look like?” And then there were several books written for our work group because one of them where Tim Ferriss did the ad words in advance of offering the product for sale. But there were six or seven books that had talked about that before that came out. And that was when it was like this really makes a lot of sense to try to do as much validation as possible up front to ensure that you are in fact solving a problem.
Mike [14:08]: That’s the first bucket of potential failures. The next one is: if you’ve achieved paying customers but the product is still losing money. Essentially you’ve got negative margins. And there’s a bunch of different reasons for products that fall into this category. They could range from your infrastructure or your hosting costs being too high. Your cost of acquisition is too high compared to your lifetime value. That means that your cost to acquire a customer is more than they are worth. It may cost you $50 to acquire a customer but if they’re only going to give you $25 over the course of the lifetime of that customer, it’s really not worth being in that business. You can’t sell at a loss and make it up on volume.
There are other situations where if it’s a product high service, for example, you might be selling something for $100 and then you’re farming out the work, but it costs $150 in labor to deliver whatever that is to the customer. And, again, you’re in the situation where’s you’re trying to deliver something, and you’re just simply not charging enough. And even in those situations, you can’t necessarily just raise prices and expect the problem to be solved. There’s certain types of problems or situations where the customer is simply not going to be willing to pay more money for something. They have this in their head that they can afford “X” and if you go to “X+5” or “+10” they look at that and say it’s not worth it to pay to have that problem solved at that price point.
Rob [15:27]: This is where I would guess if you had actually launched that Dropbox competitor, this is what you would have found if you tried to bootstrap it. You would have had to charge enough that you wouldn’t have been able to get – well, if you’d gone after magazines that’d be fine. That’s a whole other issue. But let’s just say you had gone after the consumer market like Dropbox did, you would have probably wanted to charge $5 a month or whatever. $40 or $50 a year and you wouldn’t have had the organic growth and the big exponential growth curve that Dropbox did have because they were doing that freemium model up front.
So, one thing to think about here is if you do raise a big bucket of money and you decide that you want to grow this thing super-fast and get the volume, it’s a lot more of a riskier bet because you’re not getting your money up front. But that’s how these companies get to the $100 million and eventually the billion dollar valuations.
With that said, I’m doubting – if you’re listening to this – that that’s where you want to go. So, you really do need to pay attention to unit economics. I heard someone at one point say that they wanted to start a competitor to Kissmetrics and Mixpanel. And I told them, “Do you realize they spend” – I forget what the amount was. It was like a quarter of a million dollars. It was more than a quarter of a million bucks a year and this was in the early days. This was before they scaled up. It was a quarter million a year just kind of table stakes just for all the hardware. Or even the EC2 credits. Or whatever it was they were doing because it’s just such a resource intensive business. So, diving into these analytics platforms or something with a lot of queues where you’re sending email – as I know all too well from having worked on Drip all these years – there can be real infrastructure costs. There’s a difference between a crud app like Basecamp or invoicing software or something and switching over to something that really gets a lot of requests per second, 1,000, 2,000, 3,000 request per second. There’s a true marginal cost per customer that you add.
It’s not something you’re going to be able to predict exactly. But it is something to keep in mind and do a sanity check of like, “Is there anything here that’s really going to scale up exponentially in terms of server load or in terms of support costs as I grow this app?”
Mike [17:25]: And sometimes those aren’t very easy or straight forward to calculate. I remember some offhand comment about it was either Kissmetrics or Mixpanel where one of the early versions of the app, they had 25 servers running in order to support nine customers. Which is more than one server per customer. And if you look at the price points that they’re charging you really can’t afford to have two to three servers per customer at the price points that they currently had. It’s just simply not possible. So, if you’re trying to develop a competitor to it, your hosting costs alone are going to kill you. There’s no way that you’re going to be able to make that work.
That said, they did get funding, and they’re able to scale it based on the fact that they’re able to drive those prices down. It’s a starting point. But, again, not everybody’s going to be able to be in a position where they can get that money and invest it to be able to drive those costs down as far as they need to go in order to make the business work long term.
Rob [18:16]: So, you’ve talked about the first step was never launching. The second one was zero customers versus one or more customers. This third one is getting paying customers but realize that it’s losing money. I think we have two others that we want to cover in terms of the ways that products can fail. What’s the next one?
Mike [18:32]: The next one is you have what I would call a mediocre success. It has paying customers but it’s got a marginal profit. And by marginal, I mean it’s almost not worth your time to do. The product is at least break even and it is making money but maybe it’s only making a couple thousand dollars a month. Maybe it’s $2,000 or $3,000 but, again, even if it’s making $3,000, if you’re spending thirty hours on it, is that worth your time? I think that’s an individual question you have to answer but if it’s paying you $10 an hour for your time then it’s probably not. If it’s paying you $50 or $100 or $200 an hour for your time then I would consider that probably more than a mediocre success. But there’s also overhead associated with running more than one product at a time and having each of them be a mid-range success that is simply not meeting your needs full-time. And the context which in it’s going to be harmful.
But, going back to the products that are a mediocre success, there’s problem solution fit. If it’s not a problem that people really need solved or it’s a nonexistent problem, chances are good that you can get some people to pay for it. But you’re not going to get large scale numbers of people. You’re going to get those people who it’s a really painful problem for and they’re willing to pay for it. But that could just be because they don’t know what some of the alternatives are out there or they haven’t done their research. And you can very quickly fall into a situation where people are using your product for something it simply wasn’t designed to do.
Rob [19:54]: Another thing that could be wrong when you have some paying customers but essentially a marginal profit and you’re not growing is you don’t have product market fit. So, you’ve built a product but you’re offering it to the wrong market or audience or there is not market or audience for this. And a related piece of that is market positioning where it might be related to your pricing or how you’ve portrayed it against competition but you really need to dig into why is your product better and for whom. And it might not be differentiated enough against the competitors and new products really need that.
People need to be able when they hit your website to think, “What bucket does this fit it? Is this invoicing software or proposal software or email marketing software?” And if you have just a description that is what the product does, everybody’s trying to figure out what bucket you fit into. As we’ve talked about in the past, creating a new bucket or creating a new product category is very expensive. HubSpot kind of did that and I think they might have said it took them $5 million before they were able to – he said they had to raise millions and millions of dollars before they were able to really define that product category. And I think that it’s a common mistake people make and one that I made with Drip in the early days was not wanting to position this against other competitors. Or just put it into a specific space like this is email marketing software but here’s why it’s better. Or this is marketing automation but here’s why it’s better.
I kind of wanted to be this new unique thing and all the headlines were just so vague and nondescript that people were having a tough time understanding. So as soon as we went with the, “This is marketing automation but it doesn’t suck,” That was the headline for so long. That really put us in a good position because people then realized, “Okay. So, you’re not going to own this entire market but you are going to own this portion of people who hate the other providers that are there.” So, that was a big product positioning fit for us. And I’ve seen other products be able to do that as well.
Mike [21:44]: The other thing that what you just talked about does is that it allows people to mentally identify who your competitors are because if they can’t do that then it’s going to be difficult for them to compare and contrast what you offer versus what some of the other ones offer. And sometimes you want to be able to specifically define who your competitors are and you can use market positioning to do that. But you can also take a particular market and either go upscale with it or down scale with it.
With Drip, for example, it was essentially pitched as Mail Chimp but more advanced. It was not quite advanced to the level of Infusionsoft or Marketo or things like that. It was more for a small business scenario then for a large enterprise or for somebody who’s just working out of their home office. And, obviously, that has changed over time but that was the position that you started in and that served Drip, obviously, very well.
Some other reasons you might be having some mediocre success is that you have poor design, which if your UI is not very good, it can affect some of your adoption rates. If somebody hits your website and they look at the screenshots of the product and it doesn’t look very good, then they are probably less inclined to purchase it. Even if you’ve gotten a base of customers who used it and the reason they used it is because they were experiencing the pain so much that they just had to have a solution. And they didn’t really care what it looked like. But, as you start to expand your customer base, people are going to care. They’re going to start taking those things into account. If you have misspellings in your UI, for example, that’s going to reflect on them. They’re going to say, “If you can’t get even just these basic things right on the surface, if it’s a complicated product in any way, shape or form, what sorts of problems are going to be underneath the covers?” So, you have to keep those types of considerations in mind.
Poor design decisions can lead to essentially a high churn rate which high churn is simply a symptom of something else. It could be support, it could be onboarding, it could be poor design, it could be quality, it could be downtime issues. There’s lots of different things associated with that. But at its core, high churn rates are associated with some other problem. And it could just not be even a technical problem. It could be that you are marketing to the wrong people and those are not the type of people that are going to stick around. It could be a symptom of a market targeting problem.
Rob [23:54]: Right. Back to poor design. You can point to apps that are successful that have poor design, and I will tell you, yeah, they were early. They were the only choice at the time. Or they really did a lot of heavy outbound sales, and the people who they talked to didn’t know any better. So, a lot of the email marketing or marking automation or big sales like sales force CRM stuff, yeah, the UI’s aren’t great. But you’re not them. You didn’t start ten years ago. You’re starting today. And today UI is a huge deal unless you’re in a very tight niche where you’re kind of the only player. So, this is something that you definitely need to pay attention to.
And in regards to churn, you’re right. It is a symptom of something. It’s often a symptom of crummy support or no product market fit or there’s a bunch of reasons that can happen. But all of this stuff is going to keep your grown flat. And that’s exactly a good way to have paying customers but essentially marginal profit assuming you are working on this a lot.
If you think about the micro-businesses I used to run – like DotNetInvoice or beach towels or apprentice line jobs – those had paying customers but they were highly profitable in the sense that the money that came in, I spent almost no time maintaining things. It was really all work done up front, and the money that came in was mostly profit. Maybe it was only a couple grand a month like you said but I wasn’t spending thirty hours a month on it. So, if you cobble a few of those together, you can actually kind of nice little lifestyle making $10,000 a month with a handful of these small apps not investing the time.
But that’s not really what we’re talking about here. We are talking about you having the intent of growing a SaaS app and working on it most of your free time and getting it to ten, twenty or thirty thousand because we’re guessing that, probably if you’re listening to this, that’s the goal that you have.
Mike [25:31]: The last one we’re going to talk about in this particular category is the high cost of acquisition but also a corresponding high lifetime value. Let’s say that your cost of acquisition is $1,500 and your lifetime value is $2,000 but you’re getting $100 a month from each person. Well, it’s going to take you fifteen months to get back the money that you’ve paid to acquire that customer which means that you have to spend a lot of money up front to get a return that is going to put you $500 in the black but it’s not going to start until another fifteen months after you acquire them. And that’s a very difficult position to be in. That’s why some companies go out and they raise funding to be able to start putting money into that funnel to help them figure out how to move that up, how to lower their costs of acquisition. And they’ve proven that it’s a profitable business model. They really just need to make the numbers work.
And if you’re in a position like this, it’s very difficult to do that because it’s going to stunt your growth. It’s going to make it a long slow slog in order to make that into a profitable product which defines this as a mediocre success.
Rob [26:32]: There are a lot of hurdles that you have to get through if you look at this list that we’ve just talked through. Just getting something launched is a pretty big deal. I know that we used to always talk about on the podcast how that’s not the finish line like most people think. That’s maybe the 40% marker and these days, the further things get and the more competitive they get, I think that may be even earlier. It’s so much easier to get to launch today than it was five years ago just given the tools that we have and all the resources and things like Heroku the platforms as a service. I used to have to spend a lot more time doing that stuff even the marketing tools as well. And then just getting zero versus one customer is a big hurdle. And then getting to the point where you’re marginally profitable. I think we’ve seen a lot of folks get there these days. It’s a hard place to be in because it feels like by that time you’ve worked so hard on the app and you’ve spent so much time building and launching and promoting and then you get to the point where it’s making $1,000 a month top line and it’s $500 a month in hosting costs and you’re still spending twenty hours a week developing on it. It can be tough. It can be a long slow ramp of death, if you will.
I think there are a bunch of other potential reasons that an app can fail but once you make it past this point where you have customers and marginal growth, if you can make it past that, those are the apps that we hear about. Those are the apps that we talk about. Those are the folks that do the attendee talks or the main stage talks at MicroConf. Or that you hear interviewed on podcasts. That’s kind of that final hurdle. I shouldn’t say final because, obviously, there’s so much more beyond that. But it is a point where you just feel like you’ve done something that so few people have done. It’s a big bridge to cross to get past that product market fit or get to that point where growth really does start coming easy. And it’s almost magical when that happens and you see that growth curve go up. And you think to yourself, “Oh my goodness. How did we get here?” Suddenly you go from scrambling from customer to customer to the point where 7K MRR growth per month. You look at that and you say, “Yeah, that was an okay month.” Or you can be disappointed with that. It sounds insane when you say that out loud but you do get to the point where that is the norm or less.
I just want to encourage you. If you’re listening to this, it does sound like a long road, but there is hope. There is a point where you get there and it just feels like everything’s hitting on all cylinders. You’re always going to have stress; you’re always going to have the next feature you need to get out or the competitor that’s ripping you off. But there does hit a point where you’re going to feel proud of yourself. You’re going to feel like you’re kicking ass and that’s where you want to get to. That’s the goal.
Mike [29:01]: That sounds like a pretty perfect place to stop for today’s episode.
Rob [29:04]: Thanks again to Matesh for writing in. And if you have a question and you’d be interested in hearing us discuss it on the show and maybe even turn it into an entire episode, call our voicemail number at 888-801-9690. You can email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt. It’s used under creative comments. 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.
