Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about back of the envelope business model test. This episode is loosely based on chapter 2 of the book, Scaling Lean: Mastering the Key Metrics for Startup Growth. Some of the points discussed include defining your minimum success criteria and converting revenue goals to customer acquisition.
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Transcript
Mike [00:00]: In this episode of ‘Startups for the Rest of Us,’ Rob and I are going to be talking about back of the envelope business model tests for revenue. This is ‘Startups for the Rest of Us,’ episode 294.
Welcome to ‘Startups for the Rest of Us,’ the podcast 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 [00:25]: And I’m Rob.
Mike [00:26]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Rob?
Rob [00:30]: I’m doing pretty good. I’m coming off a series of split tests that we’ve been running on the homepage of Drip. And actually Zack on my team took that over recently. And after I had run a couple split tests with – basically the normal result of a split test is that you’re not going to have an improvement. If you run ten split tests you’re going to get improvement on one or two that’s significant. And so, my split tests were just chugging along and just taking forever to run. And then the first one Zack runs, he made some more dramatic changes, he saw a 41 percent improvement in the click-throughs. And so now we’re taking it another step and we’re actually installing – something we should have done from the start – but we’re installing the pixels. So we actually know if it’s not just click-throughs but it’s actually leading to trial sign ups and that kind of stuff. But it was pretty cool to see that kind of jump because that’s definitely a notable percentage.
Mike [01:19]: Nice. Now that you’re doing that and when you go back, are you going to track everything through because obviously you have to have some sort of a benchmark, right?
Rob [01:25]: Yeah. We’re going to track it through. We didn’t talk today about whether we’re going to rerun the same test now that we have the revenue pixel in place, or if we’ll just use this as the new benchmark and start from there. But either way this stuffs always fun. I geek out on it because it’s like the engineer – this is engineering marketing. Nowadays it’s called growth hacking but this is what we’ve been doing for ten, 12 years, where it’s like applying the engineering mindset to marketing. Which isn’t something that was commonly done, or maybe it just wasn’t talked about very much, except for by direct response guys before a few years ago when kind of this growth hacking thing became popular.
Mike [02:03]: Cool. Well, I just recently kicked off my Twitter ads for Bluetick again. And I’m hoping that they aren’t completely messed up like they were the last time. I think that I talked about that a little bit on the podcast, where just before MicroConf I had put a bunch of new ads out there on Twitter and people were tweeting back to me and commenting to me like, “You’re doing it wrong”. And I was just like, “What ae you talking about?” And I didn’t really think to go back and look to see what it was. I just thought it was people trolling a little bit. I got enough of them that I went back and took a look at it and, of course, the Twitter lead cards were all screwed up and it was like people had to click on them and then click on them again. It was just messed up so I had to redo not the entire campaign, but at least different parts of it. Hopefully things will go well this time.
Rob [02:42]: Good luck with that. It’s always touch and go when you first start any type of ad campaign, especially if it’s not proven because you just have to monitor it really closely. Once you get to that point where you have something that’s working and you have history behind it and numbers behind it, it’s so much more – I don’t know, comforting. Or it’s just less nerve-wracking I guess when you start it up. Because you generally know the range that it’s going to fall into. But at the start, man, you can turn it on and be paying crazy click amounts or you can just get no impressions and not know why and stuffs always frustrating when you’re trying to figure it out.
Mike [03:11]: What happened before was I was getting lots and lots of impressions but very few click-through rates. So I wasn’t actually paying for very much, which on one hand that was nice, but on the other hand I just wasn’t seeing any sort of results that I was looking for and I just hadn’t had time to go look at it at the time. At least now I have a benchmark of what I should not be getting.
Rob [03:30]: For sure. Cool. So what are we talking about today?
Mike [03:32]: Today what we’re going to do is we’re going to go through back of the envelope business model tests. And this is loosely based on chapter two of a new book that just came out called Scaling Lean: Mastering the Key Metrics for Startup Growth. And this is by Ash Maurya. And he’s written a couple of other lean startup books or at least books that are in that particular realm or genre so to speak.
But what I wanted to do was go through chapter two specifically and take a look at what some of the different thoughts are from him about how to look at a business model and determine what the forward looking plateaus are going to look like. And you can use this either for an existing business or for a brand new business that you’re getting off the ground. Some of the calculations that he has in the book are especially relevant just because they greatly simplify what he calls ‘customer throughput,’ which is your customer acquisition. And it kind of measures that against your customer churn rate as well, on a yearly basis. So taking those two things into account, you can sort of look at where your business plateaus are going to be and figure out whether or not you’re going to be able to have enough of a customer acquisition channel or channels in place in order to be able to just maintain the business – whatever your revenue goals are for the business.
Rob [04:43]: And keep in mind that unless you’ve run a business before and you kind of have some loose rule of thumb numbers that you use, some of the stuff we talk about today is going to be less applicable if you have no business at this point. Because you’re just pulling numbers out of the sky and you’re going to find that you’re pretty far off. But if you’ve already started and you have at least a few thousand a month in revenue, you have some numbers and you know your kind of trial to paid, and you know how something should go, you can be much, much more accurate with these calculations because you just have a concept of where you are and where you need to get to. Realizing that the numbers will change but in much smaller increments than if you’re just kind of throwing darts at a dart board as you would if you really do have a business with no customers to date.
The other thing I wanted to mention is keep in mind with books like this that they are written for a broader startup audience. And so not everything – if you do go buy the book, which I’m guessing is pretty good – if you do go buy it you got to take some things with a grain of salt. And we’ll try to point some things out specifically with chapter two, here, that I think may apply more to bootstrappers or ways that these could be shifted to people who are self-funded rather than the examples of the ten million dollar ARR after three years. It’s like that’s just so irrelevant to our audience in particular. We’ll try to call that out as we go through.
Mike [05:55]: Let’s dive right in. And the first step of chapter two is to take a look at the business itself and define what you would consider to be the minimum success criteria. And as I said before, the business model that’s shown in here can be applicable to either an existing business or to a new business that you’re trying to get off the ground and you’re trying to figure out whether or not it’s going to be a viable business. Take a look about three years out and try to think about what the business looks like specifically in terms of revenue. Now those two different things are extremely important. The first one is that you’re looking no more than three years out. And the second one is that you’re looking specifically at a revenue dollar amount so that you can make some sort of calculations.
If you try and go out further than three years, you’re probably not going to be nearly as accurate. And in addition, if it’s a business you’re trying to get off the ground, three years, trying to look beyond that and plan beyond three years is not going to be helpful to you because the business may just not be there or you may have a really hard time getting the customers. So looking at those in a much shorter time period, essentially time boxing your problem so to speak, is going to be really helpful.
The other side of it is being able to take a look at a firm dollar amount. You can adjust that later on, but the idea here is that you want to have a dollar amount in terms of the yearly recurrent revenue that you want to shoot for, that you can base most of your other calculations on. And we’ll talk a little bit more about how you can play with the numbers to kind of reach that revenue target based on lifetime value, customer acquisition rate, how long those customers stick around, etcetera. But those are just the two basic things that you need to think about when you’re talking about the minimum success criteria.
Rob [07:24]: And I’ll admit, to even think about thinking three years out feels crazy to me. It feels very MBA to even be talking about 36 months out because so much is going to change after you launch. When I’m first starting a business I tend to look six months out and think what can we get there. And if we hit product market fit where can we be at 12 months. With that said, this exercise, by the time we get to the end of it, it gives you a cool formula that I’m impressed with. It’s a high level way of trying to find plateaus and figure out where the business is going to plateau based on lifetime value and based on how many customers you think you can pull in.
So there’s a give and a take here. I don’t love the idea of looking three years out because I just think that you’re going to be way off. Even with the business as consistent as Drip, if I looked three years out I’m going to be way off and I know the numbers like the back of my hand. Take that with a grain of salt and realize that if you are projecting out and you’re thinking I need 120k per year, and maybe you want that after the first 12 months and you want that to be you quitting your job. But then you want the business – you’re thinking you want it to go to maybe double in the next year, and then go to 360 of 500k, kind of in that range is ambitious but I’ll say it’s not impossible for a bootstrapper to get there. Those are the kind of numbers that you should probably be thinking about in terms of this exercise. Assuming that you’re not going to have funding at the start and then you’re not going to try and grow a seven, eight figure business super-fast in the style of Silicon Valley; that you’re going to build it like a real business and hire based on profit and that kind of stuff.
Mike [08:56]: The second step is to take that revenue goal that you came up with and convert it into what he calls customer throughput. And this is your customer acquisition rate over time. And there’s a number of different steps to doing this. And the first step of that is if you’re building a new product you have to come up with some sort pricing on it. And if you don’t know what your pricing is, the recommendation is to use some sort of value based pricing to estimate the base price. This is essentially pricing your solution on the value of what it provides, not on what it costs to build and deliver. So that’s a difference between the solution value to your customers versus the cost structure on the back end to you.
Something else that you might look at is using cost based pricing, which is essentially taking your costs to deliver the solution, and then adding a margin on top of that. There’s a lot of business models that fit this particular mold of a service based model of any kind; productized services. Those tend to fit that. But those tend to fit that particular type of model. But if you can get away with it, if you can provide some sort of a value based pricing, you’re much better off. And going back to what we said before, if you have an existing business in place, you already have your pricing. You can essentially just use that number.
Rob [10:02]: For SaaS, I’d say it goes without saying that you’re going to want to shoot for value based pricing. That’s just kind of the way it’s done. You look at the value you’re providing, figure out if there is any competitors that are doing similar things and you either price above them if you want to be premium, or you price similar to them if you just want to be a better product. And I think another example – you mentioned consulting and such of using cost based – another example of that is kind of metered pricing, like how Amazon EC2 does it. I’m sure that they just look at their costs and then add some kind of margin on it. So, I think for the purposes of bootstrappers and folks listening in this, value based is 99.9 percent going to be the direction you want to go.
Mike [10:39]: The second step is to calculate the total number of customers at the end of the time period that you want in order to identify what your active customer base needs to be in order to make your ends meet for the revenue target. So let’s say that your revenue target is $180,000 a year, if you’re charging $30 a month then you need 500 customers in order to be able to reach that revenue goal of $180,000. That’s the kind of calculation that you need to be able to do. And this is why it’s so important to come up with not just the time periods but also what you are selling your product for and what your average price point is going to be for your customers. Obviously, if you have different pricing tiers then you kind of have to guess a little bit. So if your pricing tiers are $50, $100, and then $200 a month, your average price might be something like $75 a month or $90 a month. It really depends on where in the pricing spectrum the largest number of your customers fall. And obviously it can go in the other direction, too. You might have an average price point of $175 even though you have a bunch of people on the $50 a month plan. So take those things into account, but you’re trying to get down to an average price point per customer, and a lifetime value.
Rob [11:48]: Lifetime value is very hard to calculate if you don’t have a product. I think we’ll come back to that point. If you really are spit balling this, you’re going to have to use some rules of thumb and you’ll be off by a factor of two or three. If you already have a product this is much each because then you should know this like the back of your hand.
Mike [12:03]: I think if you don’t have a product at all, then using benchmarks from other similar companies to get to an estimate or just using what their pricing models look like – again, going back to what Rob said about determining whether or not you want to be a premium priced product or commodity based product or something along those lines. Just use a conservative estimate if all else fails. If you’re really not sure, come up with some sort of a conservative estimate for most of these numbers.
Now that said, once you have the numbers for your lifetime value and for the yearly target that you’re trying to reach, the calculation that he offers up is to get your customer throughput. And to do that you would take your yearly revenue, divide it by the customer lifetime value. And this comes out to the number of customers per year that you need to add into your business in order to be able to maintain the business at that level, at that point in time. Now that’s not on day one. It’s not on the 12 months in. It’s at that multi-year mark that you came up with in the beginning. So the recommendation was three years, if you’re using three years. And for sake of an example let’s go through that. If you’re trying to get to $500,000 a year at year three and you have a $50 a month product with a two-year lifetime value, your lifetime value is very easy to calculate, it’s $1200 lifetime value. But your customer throughput is that $500,000 divided by your lifetime value. And that comes out to 417 new customers per year that you need to add.
Now again, this assumes that your business is at year three. And if you just look at the raw numbers of the customers who are paying you on a monthly basis, your business would need 833 active customers to get to 500k in yearly revenue. But if you also take a step back and you look at that lifetime value, you’re churning out 417 of these customers every year. Which means that at 500k a year you need to add 400 every single year in order to just maintain the business at that level. And this is really where those calculations start to come into play and you can start figuring out where your plateaus are if you’re going to hit them at that particular level.
Rob [14:00]: And when I first saw this calculation, which again is called customer throughput, and it’s your yearly revenue target. So, like Mike said, that 500k divided by your lifetime value. And when I saw that my first question was why are we dividing by lifetime value? Shouldn’t we be dividing by the annual revenue per customer? And as Mike and I batted this back and forth offline, and in fact this formula works, the one that he’s given works. And he’s doing some clever math and canceling some things out, but suffice to say we tweaked around with different lifetime values, different lifetimes and different monthly price points and in all of them the math works. So, what I like about this is it’s a high level thing. Don’t get me wrong, this is not something that you’re going to sit down on day one and it’s going to dictate everything about your business. But what I like about this is it’s pretty fast to calculate.
And based on when I’ve launched products, you have a general idea of what your price is going to be. You know it’s going to be maybe around 30 bucks, or around 50, or around 75. You know that your average revenue per year should kind of be that based on what you’re launching into. And then you can always take a guess at your lifetime. When in doubt go with 12 months. That’s kind of been my rule of thumb for people who are starting a new business. You’re going to start off way lower than that when you kick off because you’re not going to have product market fit, your customer lifetime’s going to be like four or five months. But as you improve it you’re eventually going to hit that one-year mark and move beyond it. So a one-year lifetime is reasonable, and a two year means you’re doing pretty well.
In certain spaces like, let’s say Web hosting, where people just don’t churn out nearly as much, you might have a four year LTV or even a five year LTV. And big enterprise software is also like that. Maybe a HubSpot or a Salesforce, those guys have these really long customer lifetime values. And with lower price point software, typically let’s say average revenue fees are 20 to 99 bucks a month. You’re just going to have higher churn, you always will. So you’re going to have between, let’s say a one and three-year customer lifetime. So it’s pretty easy to kind of run a couple different scenarios on this. If it’s 50 bucks a month and you’re doing one year, then it’s $600 lifetime. And if you’re doing three years then it’s $1800. And then you can pretty quickly get an idea of how many customers you’re going to need to bring in each year in order to replace the people that are leaving and to maintain that revenue level.
This is not a projection of where you’re going. That’s a whole separate conversation. To project where you’re going you want to sit down with an Excel spreadsheet and it’s a whole different set of numbers. But what this is telling you is where the business is going to plateau based on your customer acquisition. So if you see this number of 400 new customers per year, if you’re already in your business and you’re trying to grow this thing, it’s going to be pretty obvious to you whether or not you can bring in 417 new customers per year. Because you know your numbers. And you know your traffic sources. And you know your trial to paid. And you know how many trials you get based on unique visitors and you can pretty quickly see you’re either going to be above that or below it and where you’re going to plateau. That’s the fun part.
From here I would actually take this estimate – it is a higher level, more ballpark estimate – and I would dive into real numbers so to speak, of like your exact churn rate. Because I have a big Excel spreadsheet that I use to do this but anyone can put this together if you have your true trial to paid and your true visitor to trial and your true first 60-day churn and post 60-day churn. It’s just much more complicated though, and it’s going to take you a few hours to put together. And you’re going to see an exact projection. But the cool part is that this one that you can throw together in like five minutes is going to be within the ballpark. Close enough that it’s a nice first cut to give you an idea of where your business is going to plateau if you’re accurate enough with your churn and your lifetime value numbers. So this could be more useful when you’re first starting out if you do use those benchmarks of other existing businesses you might be competing against. If you can get any idea about their pricing and their churn and that kind of stuff this can give you an idea of how many customers you need to acquire right up front. And just give a sanity check on, “Boy, can I really bring in 4,000 customers a year if that’s what it takes to maintain that revenue level?” It just stands as a decent five-minute sanity check, I think.
Mike [17:47]: The other thing that I think that this is really helpful in showing you is that because you have that high level number of – whether it’s 400 or 4,000 new customers that you need to add per year – you can backtrack a little bit and say let me divide that by 12 and figure out how many new customers I need to add per month. And let’s say that if comes out to 100. If you’re only adding two customers a month or three customers a month right now, then you know that looking forward to that particular point in time that it’s probably going to be really challenging to find enough customer acquisition channels to get from two to a 100. So it does give you that ballpark sanity check that you may need in order to be able to determine whether or not this is a business that is going to take you to where you want to go. Or whether it is something that you should probably offload and go look for a different business or just try a completely different business to start with depending on whether or not it’s an existing business that you have or an idea that you’re trying out.
Let’s move on to the next step. Once you have this customer throughput number, then you can go back and take a look at revising some of your previous estimates. And the first one that you can obviously adjust is that high level revenue target. That’s probably the last one that you want to adjust but it’s the first one that shows up on the list because that’s the high level, big, hairy, audacious goal that you’re trying to reach. You can adjust that; you could up or down. Chances are probably good that based on your estimates it will most likely end up going down. But that is one option.
The other option is to take a look at the lifetime value and try and figure out whether or not there are ways to either increase the lifetime of the customer, which is going to raise your lifetime value. Or raise prices in such a way that it also raises the lifetime value. And those are essentially the two ways that you can adjust this number. It’s either adjust that revenue target or increase the lifetime value. And those are really your only two options available to you.
Rob [19:30]: And again, if you’re doing this on paper before you started a business it’s harder because you’re just guessing at the LTV. But if you are a year or even six months into a business, you’re going to have a reasonable idea of your LTV and probably some ideas about how to increase that, whether it’s by reducing churn or increasing prices.
Mike [19:47]: The one thing I do like about this particular piece of it though is that – even if you are at a pre-revenue stage and you’re trying to validate things – if you have to look at your lifetime value and ten X it or 20 X it, or raise prices by ten or 20X then chances are good it probably points to the fact that this may not be a viable business model at all for you. Obviously, there’s probably other costs and stuff that you’re going to take into account. But again, you want to be using conservative estimates to begin with. So if these numbers do not pan out on paper then they’re probably going to be significantly more difficult to make work in real life.
That kind of leads us to our takeaway. And that’s the first takeaway. If you can’t make this business model work on paper then you’re never going to be able to make it work in real life, barring some form of miracle in terms of doubling your LTV or quadrupling it. Because those things are going to be very difficult unless your initial estimates were way off. Which is possible, but you also have to take into account that when it comes to math like this, if you have a bunch of estimates – there’s various theorems out there that say if you have all these different estimates or a number of different data points – chances are really good that your final number, because it’s an average, it’s going to come out in an average range. It’s not going to be at one of the extremes.
Rob [20:59]: And to give you ballpark ideas about lifetime values, it ranges very broadly because if your churn is high and your price point’s low, you can pretty easily have lifetime values in the $100 range. Like if you’re charging, let’s say $9, $19, $29 a month, if those are your tiers, you’re probably going to have a lifetime value that’s between – assuming you don’t have just crazy churn – you’re going to be looking at around somewhere between 80 bucks and a 150 bucks because that’s just where lower prices apps tend to churn out more than higher priced apps. And getting something into that range, let’s say that the 150 to 250 range is harder to do than you might think.
Now with that said, if you’re able to build an app that businesses depend on and that they really are using as kind of a core piece of their business, you can pretty quickly jump that above $1000 to $2,000 is completely reasonable for a business or for a SaaS app that has a monthly fee. Maybe the tiers are 50, 100, 150 and even on up for enterprise. If you’re building something people are relying on and they’re sticking around for a couple years – two to three years – that quickly gives you a lifetime value in that $1000 to $3,000 range, let’s say.
And moving on up, of course, you get a Salesforce or a HubSpot of whatever, which have lifetime values of tens of thousands of dollars per customer. And some even into six figures. And that is because the price points are so high and because they lock them into annual contracts, and because their entire business if focused on it. And so that’s your real range.
But if you’re listening to this podcast and you’re just starting out, you’re probably going to want to think my LTV’s going to be between 50 and 100 bucks. 150 bucks once you know what you’re doing. But it’s going to start out really low. Unless I’d say if you’re a repeat entrepreneur and you kind of know more of what you’re doing, you’re going to be able to push it into the several hundred dollars and then potentially into the low thousands. These are kind of ballpark guesstimates based on all the apps that I’ve seen.
Mike [22:44]: Another key takeaway is that the calculation for the customer throughput is really heavily dependent upon the inputs and the outputs to the model. And those inputs and outputs help you to define what is and is not actionable. So when you’re taking a look at the lifetime value, for example, that’s one of the inputs into this. And you can take action on that. You can raise the lifetime value of the customer by either increasing prices or increasing the lifetime of the customer.
In terms of the outputs, the number of customers that you need to reach on a yearly basis, you do have influence over that, and it is dependent upon the types of marketing channels that you use, advertising, whether you’re doing some sort of affiliates or leveraging other people’s networks. A lot of those things you have some level of control over. But obviously the math itself has to work. If you can’t make those final numbers work for you based on the inputs and the output, then the business model itself is not going to work for you at that point in time.
Rob [23:36]: I think some other things to keep in mind are this type of calculation, it estimates the viability of a business. It doesn’t give you an exact answer but it does give you a ballpark sanity check on whether or not this thing’s going to fly. In addition, Ash points out that time-boxed goals are more concrete and thus better than kind of simple revenue goals of I want to get to 500,000. It’s like without it being time-boxed what does that mean? And that’s something that I’ve always liked. I look ahead, like I said, six to 12 months and have a spreadsheet that’s looking at that. Because without the timeframe, it has so much less meaning because you have no concept of how many customers you’re going to need and how low your churn’s going to need to be. And therefore, how many trials you’re going to need. And therefore, how much traffic you’re going to need. If you know one step to the next what the conversion rates are, you can just back calculate from a 12-month revenue goal, you can back calculate to exactly how many unique visitors you need per month in order to make that happen. And if you’re complex enough you can include things like churn and upsells and downsells, and upgrade revenue and downgrade revenue.
It gets complicated but the idea is that this calculation that we talked about is that first swipe at it to give you the sanity check, and then you can dig into it as you get numbers that are better and that are real once you’re into the business. And then you can start plugging those in and figuring out how to improve them and how close your original estimates really were.
Mike [24:56]: Now I don’t know if this is something that Ash covers in a different section in the book, but one thing I think that we should probably talk about is a little bit about the difference between something like this versus your growth targets and your growth goals and how to look at those. Because what this gives you is that back of the envelope test to say at such and such point in time what does the business have to look like, how many customers do I need to acquire and how many will be leaving at this particular time. But that can be heavily overshadowed by your growth or your current growth. So if you’re growing at a very fast clip right now, it can be very easy to be distracted and look kind of micro focused at the business itself right now; how it’s doing, how you’re acquiring customers, doing split testing on all these different things and onboarding customers, doing support. And not really think about this down the road because you’re so hyper focused on that three to six-month timeframe.
But if you don’t take a step back and look at something like this then you can easily run into a situation where your business essentially flip flops and you almost drive it into the ground because you’re not paying attention. You’re hiring ahead of the curve or ahead of the need because the business is growing so quickly and you don’t realize that 18 months, 36 months down the road you’re probably going to run into serious customer acquisition problems or business problems because your customer acquisition needs are going to become so high based on your lifetime values.
Rob [26:12]: That’s the key here. These are not growth targets we’re talking about. These are plateaus. This is a heads up about a potential plateau. And this is something you need to be looking ahead at constantly as a subscription business. We had Ruben Gamez from Bidsketch on 50 episodes ago, I guess, to talk about how to identify and overcome plateaus. And this is the biggest hurdle that I see new SaaS founders hitting is not looking ahead and projecting. Given my churn, given my average revenue per user where are we going to plateau and how do we get past that? And the answer can be add more trials into the funnel. Sometimes that’s what it is. Sometimes the answer is we know that our funnel has no optimization so it may be running a bunch of split tests because you should be, at that point when you’re projecting, that you should be at scale. And I don’t even mean big scale like venture capital scale, but even if you just have 10,000 uniques a month or something, you can start running some split tests or even just making improvements on conversions on the site.
So there are a bunch of different ways to do it, but the idea is that when you’re running this business you have to be thinking ahead and projecting when am I going to hit the next plateau? And that’s what this calculation is about rather than growth projections. That’s probably another episode entirely.
Mike [27:24]: Sure. And then once you’ve identified what those plateaus look like and where they are likely to occur, then you can backtrack to where you currently are, plug in your numbers into a growth model and say, “when do I think that I’m going to end up actually hitting that plateau?” Because the business model might say it’s two years out or three years out, but looking at where your business is right now, if you’re growth rate is much higher then you could very well hit it in 12 months. And you really want to be in a position where you are looking at how to adjust the lifetime value of your customers well in advance of that. As Rob said, if you’ve done all those optimizations and then there’s not really other ways to address that, then you can start looking at your lifetime values and say, “how can I keep customers on longer? Are there ways for me to raise my prices or offer additional services?” And what that will do is that will increase your lifetime value, which will essentially push out that plateau even further.
Rob [28:15]: That wraps us up for today. If you have a question for us call our voicemail number at 888-801-9690. Or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control,’ by MoOt. It’s used under Creative Commons. Subscribe to us in iTunes by searching for ‘startups,’ and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 293 | The 6 Biggest Email Marketing Myths
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about the six biggest email marketing myths. The episode is put together around an unbounce.com blog post. Rob and Mike discuss whether they agree or disagree with the myths mentioned in this article.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of Startups for The Rest of Us, Mike and I discuss the six biggest email marketing myths. This is Startups for The Rest of Us Episode 293.
Welcome to Startups for The Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing cell phone products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:28]: And I’m Mike.
Rob [00:28]: 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 [00:33]: I talked a little bit about it last week, but we’re finally putting the finishing touches and final testing on the huge code overhaul that we’ve been doing over the past several weeks. It’s been a long trying process at best, I’ll say, but it’s finally almost done. We’ll be able to go live with it in a couple of days. It’s prevented us from pushing new code live just because of the way that we did things. And we too had a couple of missteps along the way, but we didn’t push anything live to the production servers because we went through the testing process and it’s like, “Oh, this just doesn’t work,” or, “It’s broken in this way,” so we held off on some of that. But hopefully another 24-48 hours and that’ll be over with and then we can start moving ahead.
Rob [01:07]: Those are always super trying processes, man, trying to get all the code up to speed. Now why did you have such an overhaul this early? Typically, I’d imagine you get technical debt and then you’d wait a year and you really run into it, and then you come back and revamp. But why only you’re kind of still in early access at this point and a few months into development?
Mike [01:26]: So it had more to do with how things were interacting with the database, and the fact that it was just not easy to write unit tests. So we basically skipped a bunch of things early on in the development. And the things that we skipped made it really, really difficult to put automated tests in place. And we made the conscious decision to not do some of those tests, but we took a step back and there were bugs that were getting into production and things that were being broken. So, I took a look at it and we went through and tried to figure out, “Okay, well how can we write unit tests and make sure that this doesn’t happen again?” and it was actually not possible to write those unit tests because of the way that some of the code was structured. So, in an effort to get us to the point where we’re not incurring more technical debt every single time we had a feature, we did a code overhaul of some of the way that stuff accesses the databases and external resources and things like that, because we interact with the mailboxes and we’re heavily dependent upon the current time. So, because of those things you have to have an abstraction layer in the place that essentially mocks those things up and says, “Oh well, if you were to access this thing, this is what that would return.” But because we didn’t have any of those abstractions in place, you literally can’t test them.
So, there was just a lot of…it wasn’t really spaghetti code, it was just a lot of internal dependencies on things that we don’t really have control over and they were embedded in the code. So, just made it very difficult, like I said, bordering on impossible to test some of those things in an automated fashion. We bit the bullet now to go through that to get us to the point where we can do that. And it’s not to say that we’ll do it in every single case moving forward, but any time we come across a bug, I want to be able to be sure that we can write a test that will make it easier to filter those things out. So, when we run into things in production, we can get rid of them and test it locally and make sure that we’re not going to run into that again.
Rob [03:14]: Very cool. It’s always a bummer to have to do that upfront. It kills time but I think it’s probably the right choice if it’s allowing you to write unit test. Because I think I’ve said several times over the past couple of years that I will never build an app or work on an app again that doesn’t have extensive unit tests, because it has saved our bacon so many times with Drip. Obviously, it takes longer to build the feature. It’s incrementally longer especially in the early days, but over the long run, it will save you time. So, I think you’re making a good call there.
Mike [03:43]: Like I said, it wasn’t so much about writing the unit tests, it was having the ability to. So, when we do run into something, we need the ability to write those so that we can test it and say, “Okay, this is what’s happening in production.” And then we need to be able to replicate it locally and we couldn’t do that. So, there was one bug we run into, and I talked about it last week, where I literally could not replicate it locally because I couldn’t get everything set up and mocked up in a way that it was in production. So, I was just guessing at different things to say, “Okay, will this work? Will that work?” And I had to push several different variations of the code in order to ‘fix it’, so that was really the issue. It was just when we run into something; we need to be able to test it locally to make sure that we’re fixing it.
So how about you? What’s up this week?
Rob [04:28]: Things have been pretty good. They’re kind of busy and chaotic right now. With school ending, I’m sure you ran into having a lot of end-of-the-year presentations and awards ceremonies and plays and parties. And just so happens both of our kids have birthdays around this time. So, I’ve just felt like we’ve gone to a lot of performances and a lot of events recently. Which is fun to go to, but it does kind of fill up the time and mean we have less of our evenings and weekends free right now.
Mike [004:52]: My kids had a half-day of school yesterday, which you’d think with two weeks left that they would still have full days of school. But for whatever reason, they had a half-day of school yesterday. So, you have to deal with it.
Rob [05:01]: Right. And then we’ve had a transition. We had a friend of ours, a nanny in essence, watching one of our sons, and she transitioned into doing yoga instruction full-time. So, we’ve had to transition him on that as well as he’s now done with school as of last week. So, we’re really just rushing around, getting stuff done, in addition to some other chaos going on.
So, today we’re talking about the six biggest email marketing myths. And I put together the outline for this episode around an unbounced blog post. And it was published in mid-May, so it was a couple of weeks ago, and it’s called The Six Biggest Email Marketing Myths Debunked. I wanted to talk through it, because some of them I do think are pretty good points that we should discuss that people should or should not do. And then some of them I just don’t think are actually myths. They may be some light rules of thumb, but I don’t think they’re things that everyone proclaims are rules and the truth and going against them is a terrible thing. But that’s the fun part, is that we’re going to be able to look through this.
So, the article kicks off and it talks about how there’s over 205 billion emails sent and received through the Internet. And it talks about that one McKenzie study suggests that email marketing is 40 times more effective at acquiring new customers than Twitter and Facebook combined. And we’ve talked about that on this show here, right? I typically say it’s a 20:1; I didn’t think about 40:1. But this goes back to when I had an RSS feed on my blog with 20,000 people and I had an email list of about 1,000 and when I launched both of them, the email sold as much as the RSS feed did. Which was surprising to me, because I thought that a lot of people were reading the blog. But it turns out they were reading it amidst a bunch of other blogs, and so they didn’t really know whose blog was who, because in an RSS reader it kind of all blends together.
And then, of course, the whole thing of having 20,000 Twitter followers versus even 1,000 or 2,000 email addresses I would say still holds true. So, it’s neat to see that someone has actually studied that. That’s why so many people – like we had a question last week of a founder who is saying, “It seems like all the advice I see -” which I think is a bit of an exaggeration, but he said, “I think all the advice I see it starts with the presupposition that you have an email address. And I think the reason is because email addresses they just work so well. And so it’s basically everyone encouraging you to go start building your list.”
And so let’s dive into the first myth here. And again, it’s the myth according to this article. I think, Mike, you and I want to discuss whether or not we think these are myths, in fact. But the first one is that Tuesday is the best day to send marketing emails. The article says, you’ve almost certainly heard this one and from my rule of thumb, Mondays and Fridays are typically not very good days to send email because on Monday people are just getting back from the weekend and their inboxes are often filled with three days of email. And on Fridays, a lot of people wind up – they either take Fridays off, so then stuff would fall to Monday. Or people are just starting to check out for the weekend. And so Tuesday, Wednesday, Thursday, for me, have always been my rule of thumb. And I wouldn’t say these are hard and fast, but in general, that’s kind of what I lean towards.
Mike [07:55]: I think that for this you really need to figure out what your audience is like. Because I would suspect that there’s a huge difference between B2C versus B2B communication here. I think on the weekends, your B2Bcommunication is probably going to drop off a cliff. But depending on your audience in that B2B space, it might be appropriate to send them. So, if you’re sending emails to entrepreneurs or small businesses, your chances are probably decent of being heard above the crowd. Especially among entrepreneurs because they’re probably checking their email on the weekend or at least to some extent. Versus if you’re sending the emails to people who work at Oracle or Microsoft or any of the larger businesses, they’re probably not going to be checking their email on the weekends. I think that you have to take some of these data points with a little bit of a grain of salt and just understand that it is highly dependent upon who your target audience is. It’s not just that Tuesday is the best or worst day. It’s really relative to who it is that you’re communicating with.
Rob [08:51]: That’s a good point, and in fact I had a B2C eBook at one point. This is probably seven, eight years ago, and the emails on the weekends converted better. And I just guess because that’s what people were thinking about at the time. I never figured out why, I just knew that they did get higher click through rates on the weekends.
The other interesting thing or an interesting exception is when I still had our apprenticelinemanjobs.com, which was a job board, I would see big traffic spikes on Sunday. And so I started sending more emails on Sunday, and it definitely made a big difference. Because, you know, on Friday or even during the week, folks aren’t necessarily thinking about trying to find a new job, but when Sunday comes, they’re starting to dread the next day’s work, and they’re thinking about how they can get into another line of work. It was crazy to see the traffic spikes. The biggest day of the week every week was Sunday and it was like Sunday afternoon, Sunday evening. So, that’s good thing to keep in mind.
What the blog post here talks about is there’s a HubSpot science of email report and they looked at the impact of the day of the week had on email open rates – so it’s only open rates – and what they found is that it’s crazy how smaller lists versus larger lists, there was a different impact. So, for smaller lists, Tuesday was actually the worst day of the week to send. And it wasn’t until you get to the larger list which is more than 10,000, so it’s not that big. But then Tuesday was a reasonable day. But to be honest, it seems like the article concludes here that if you send on Tuesday, you’re probably getting lost in the noise of the other email marketers who are also using this best practice of sending on Tuesday.
So, that’s the problem with a lot of advice, is that once everyone starts taking it, it doesn’t work as well anymore. The same is true with any of the marketing approaches that you hear about or any of like a blueprint or a roadmap to starting a startup or doing the marketing tactic. It’s like once everybody is doing it, then it doesn’t stand out anymore. It’s not remarkable and so it just kind of blends in to the background and you have to find that next thing. And so, I could see this one – we see big spikes Monday and Tuesday at Drip with our sending, in terms of our customers wanting to send email. I could see maybe thinking about shifting to Wednesday morning, Thursday morning sends.
But number two is that you can only send a particular email once. And this blog post talks about how you wouldn’t want to send the same email to the same people. But they talk about the tactic that Noah Kagan of AppSumo and SumoMe, and it says it was actually taught to him by Neal Taparia from EasyBib. It’s a tactic that Noah popularized where you take the same email that you have already sent to a list, and you change the subject line and you resend it only to your non-opens, right? So it’s people who didn’t open the first one and you change the subject line. And we’ve actually found this to be so powerful that we implemented it in Drip as a feature. When you’re sending a broadcast, there’s a single checkbox you check. And if you checked to resend to unopened, and then you can just say how many days you want to wait and what’s the new subject line. And it’s just all built in and it happens automatically, and it’s linked back to the original. And we have consistently seen increases of more than – well, between let’s say 25 to 35%, so in the 30% range. And that is what Noah had mentioned too, is that they were getting greater than 30% increase in opens from this tactic.
Mike [11:58]: I was going to mention exactly that when you guys added that into Drip and made it easy to do. You look through if you send out a bunch of campaigns; you can look back through them and look at the stats for those people who have been resent a particular email. And it’s astonishing how many of those people who didn’t open it the first time will open it the second time and it’s the exact same email. The only thing that’s different is the subject. So it’s pretty amazing that this little hack works and gets such significant results out of it.
Rob [12:25]: And you might think that you’re going to get complaints, and we have never gotten complaints in our use of it, and as far as I know other customers haven’t as well. The only time that I got complaints, I think I sent to my Software by Rob list and I accidentally – this was before we had this. This made us put some code in place to prevent this, but I had scheduled a broadcast with a resend to unopen and then I unscheduled it to make a change, and then I sent it through again with resend unopen. So I resent it twice. And I’m pretty sure the second two I didn’t differ the subject line between the two, and so then people said, “Why did you resend this email to me?”
But aside from that, which again is now not possible with Drip, right. We eliminated that because I did it to my own list accidentally. But even that one, I only got – it was literally three or four people who said, “Hey, how come you sent this?” and didn’t seem that big of a deal. So this tactic, I’m a big fan of it and we’ve only seen positive results from it.
The third myth we’ll talk about is keep your marketing emails short. And this is one that I’m not so sure that I’ve heard this as like a hard and fast rule. I guess I’ve heard enough people talk about the exact opposite. Like Patrick McKenzie often talks about how he sends out these very long emails and that his audience likes it. And same thing, Joanna Wiebe is actually – I’ve heard her say this, but she’s quoted in this article about how it’s not about picking one length or one style out of a hat, because it’s going to depend so much on your visitors and your prospects. And I’ve often heard in the Internet marketing spaces – especially 10 years ago – the sales pitch thing was: the longer the better. The longer you make your sales page, the more you’re going to convert. And I have found the opposite to be true.
We have a long forms page on the home page of Drip right now as an example, and we’ve done split tests with shorter versions of it. And the shorter versions appear to be having more traction. And so we’re looking at making changes there, and this happened remember the Microprenuer website, the home page used to be a lot longer. That’s over at Micropreneur.com. And I ran several split tests and I had a long, a short, and a medium, and the medium one just cleaned house both times and the content was generally the same. Like the headlines weren’t different. It really was just the length and it was cutting some stuff out. So, I think the same applies to email here. I certainly don’t disagree with it. I just wonder if it is really a hardcore rule. I haven’t heard that many people talk about it, so I question if it’s really a myth.
Mike [14:34]: And I guess it goes back to what I had said before about knowing who your audience is and what it is that you’re offering them, and at what point in the sales process. There are certain times where a much longer email is going to be warranted, and then there are sometimes where you just want to send a quick one.
And I think I remember one time – and it’s kind of a little bit of an aside, but we made a mistake when we were talking about MicroConf in one of our emails that we’d sent out to the list, and we accidentally put in an unsubscribe link right up at the top and the subject was MicroConf and people saw it. And as soon as they saw the email, they just clicked on the first link that they saw because it said MicroConf. And had we obviously put that that the bottom or made it a longer email with stuff at the bottom, then they would have had to scroll a little bit. But I think that knowing what it is that you’re sending them and why it is that you’re sending them that email makes a huge difference in whether or not your emails should be short or should it be long. Are you trying to explain something to them? Are you trying to educate them about a particular topic? Are you trying to get them to buy something? If you’re trying to redirect them to another location, then chances are good you probably want a shorter email. But if it’s just an education email, then there’s no reason that I know of, to go with a short one. You couldn’t certainly embed all that information there.
The other thing that you have to think about, I think, is the reusability of that information. So, if you have a series of blog articles and you embed them directly into an email sequence, then that’s perfectly appropriated to do. But just keep in mind that it’s probably going to be a little bit unwise to be sending people who are in your email list links back to that blog post if the reason they ended up on your email list was because they read that blog post. So, just be a little bit aware of contextually where those people are in the sales funnel, and how they ended up on your list, and what the content is that you’re sending.
Rob [16:20]: You make a good point about really the purpose of the emails. Because well, what I’ve seen with our up front email mini-course – which is Why Marketing Automation is the Future of Email Marketing – we’ve seen really good read rates and comment rates and reply rates on that course. And I think one of the reasons is that the posts are very palatable, and you can read them – I say the posts. It was originally a blog post and we turned it into an email mini-course. The emails are short enough, but they’re super palatable. I do think like in this case, having shorter emails that aren’t impossible to read on mobile or just take forever to read – if Patrick McKenzie gets away with giving people 15 to 20 minutes to read because his stuff is – he’s got a warm audience who really likes him and they know he’s going to give really valuable stuff, when you’re first engaging with someone, they may not give you that much time. In fact, most of them are not. And so being able to pack some really powerful actionable stuff into a short email, I think, is a good way to get acquainted with someone. And then once you get deeper into your courses, I think having longer emails can work. But keep in mind that just trying to throw 5,000 words in that first email – a lot of people they aren’t going to be up for reading all that.
The fourth myth is to keep your subject line short. And in this blog post, they reference a return path blog post that talks about how a typical desktop inbox displays about 60 characters of a subject line, while mobile devices show just 25 to 30 characters. And so there’s been some general advice in the past few years of keeping your subject lines under 30 characters. But what the return path found is that the highest open rate – well, they call it read rate. But I mean I’m not exactly sure they would know that. It’s really more open rate – is between 61 and 70 characters. It’s 17% at that point.
Now, it’s a bit of an anomaly because they go in 10 character blocks, and like the one below it is 14 and then the three above it are 14. And so the 61 to 70 really is this funky anomaly that bumps up 3 percentage points and not exactly sure why that is, but what that’s indicating is potentially there’s some magic. You know, they did look at 2 million email subscribers from over 3,000 retail centers for the month of February. And so there’s a non-trivial sample size. We’re doing this with 10,000 people or something. I would say that this could be more of an anomaly, but it seems like they’ve actually done some reasonable research here to point out that you don’t necessarily have to be super short. I don’t think 61 to 70 is a magical number, but I do think this points out that maybe short email subject lines are not the end all be all that some folks recommend.
Mike [18:43]: I don’t know very much about this one way or the other. I think that you have to have a minimum number of characters just to convey what the email is about. That’s the purpose of a subject line. But you also don’t want to run a War in Peace book in the middle of the subject line either, because there are going to be things that are cut off. And if it’s cut off, then it’s interesting looking at the data and the graph here that they have. It says they grab the average read rate and then the messages with this subject line length. And there’s not really a drop-off in terms of the read rate after a certain point. But if the email client cuts it off at 60 characters, then it almost doesn’t matter whether you have 60 characters or 60 million in the subject line, because they’re not being read anyway. So, people are judging it based on those first 60 characters. It seems to me like the data itself is a little misleading because you really have to take those types of things into account.
Rob [19:36]: Our fifth myth is that unsubscribes are bad. And in essence, the writer of this post talks about how people who brag about not having many unsubscribes are incorrect. And that unsubscribes are good because they remove people from your list who are unlikely to buy from you. And I would say in general, I agree with that. If you are emailing on a reasonable schedule and giving good content and someone unsubscribes, then okay, they probably weren’t going to buy from you.
However, I have seen some people who literally email every day, seven days a week, and have let’s say an autoresponder sequence of 60 or 70 emails long. And maybe when people unsubscribe from that list, it’s not that they don’t want to buy from you, it’s that they don’t want to hear from you 70 days in a row.
I’m not saying that that’s a bad tactic by the way. I think for the approach that this person was using, it was actually a reasonable thing for the goal they were trying to achieve. But what I’m saying is that I think unsubscribes are fine. I think that if you’re getting half percent of your list or 1% of your list to unsubscribe within any given send, that’s not a red flag, in my opinion, because are just going to come in and out of your list. The two things to keep in mind are one, if you do get an unsubscribe rate higher than that, why is that? What have you been doing or what did you do in this email that is encouraging people to leave your list? And two, make sure that you’re building your list fast enough. That having a reasonable unsubscribe rate, an expected unsubscribe rate, is something that you can overcome because you’re gaining more people than you’re churning out, basically.
Mike [21:02]: I think there’s a big difference in viewpoint here in terms of looking at the fact that you have people unsubscribing versus having an unsubscribe rate that is sort of out of control. And you talked a little bit about it where the number of people that you’re adding to your list is not overcoming the number of people that are unsubscribing, then you probably have an issue there. You are sending out an email every single day and your email unsubscribe rates are pretty high but you’re still adding a number of people in that are going to overcome that, that’s not necessarily a good thing either.
I do agree with you that I think that having unsubscribes is not necessarily a bad thing. There’s going to be people who opt out, and you do want those people to opt out if they’re not a good fit. I’ve seen marketers out there who will tell you flat out, “Hey, if you’re not interested, click here,” and they will actively make efforts to prune their lists to some extent to get people off of their email lists. And there’s a number of advantages to that. One is that it helps them to not be inundated with data from people that are just not interested and are never going to buy. The last thing you want is an email list of 20,000 people where 15,000 of them just don’t want to buy from you and are never going to. And then you’ve only got this group of 5,000 people. Well, three-quarters of your list is crap at that point. So what happens then is you end up with a lot of misleading data about what you think people want versus what they actually want. And three-quarters of those people you should not be listening to. The problem is which three-quarters of them is it, and you don’t know.
So, taking steps at that point to get rid of those people at that point is a good idea, but it comes down a lot more to segmentation than anything else. So, unsubscribes are not necessarily bad, but you also have to take into account the context of where people are unsubscribing and why.
Rob [22:42]: And I take it a step further with pretty much all of my marketing lists, and we use the feature in Drip called List Pruning. And this actually will remove people who are not opening or clicking or engaging with your emails, because even if they haven’t unsubscribed, if it’s just going into their empty inbox, that’s not good. It’s not good for some of these could be honeypots, Yahoo, Hotmail, Gmail. A lot of these mail providers will look at – and this is all black box stuff. So it’s rumored that they look at if you’re sending domains or your IPs are sending a bunch of emails and none of them are getting opened or it’s a very low open rate, then they consider your list lower quality. And so, it can hurt your deliverability long term.
And so, we do list pruning pretty regularly, and this is why it’s so funny. Like our lists are smaller than they would be if we weren’t pruning, but our open rates are way, way higher as a result. Because we keep our deliverability up and we only keep engaged people on the list. We do some joint ventures and we’ll partner up on an integration or something and people will tell us they have a list of x-thousand and the first question is asking is, “What’s your average open rate on a broadcast?” Because that’s way, way more important, because we’ve literally had people say, “I have a 40,000-person list, and their open rate is like 10 or 11% on a broadcast. Whereas bottom end you want to be above 20, in my opinion, and you’re solid and have a really healthy list if you’re between 25 and 35 for the broader lists.
And it depends about the age and the size and a bunch of stuff. But when you first start out and someone first stops in, that very first email, you want to see especially if they’re opting in to get some information. I want to see like a 70% open rate on that first email and then 60% at the low end. I have seen some that are up around the 80% range. And then over time as someone receives 20, 30 emails from me, that’ll slowly tick down, right. And so if you get 10 or 20 emails into an auto responder campaign, you’ll see it drop down into the 50s and the 40s. And then when it gets in the 30s, it should typically level out in that range, assuming you have a decent quality list. But if you continue to drop and you drop into the 20s and the teens, you have an issue. And so, not even just unsubscribes here, but I think just getting rid of people from your list who aren’t engaging, it serves a lot of positive purposes.
And our sixth and final myth is that marketing emails should be branded and polished. And frankly, this is something that I’ve been reeling against for years, is the big glossy fix with email newsletters thing with the drag and drop builder that you build this big Microsoft FrontPage looking thing and then you send that out to people. I’ve just found, in my experience, that having really nice plain text looking emails that are responsive. And they’re not actually plain text because you need to have the image in there to see if people will open, and you want to be able to rewrite your lengths and stuff. So it’s an HTML email, but it looks like plain text. I’ve been doing that for 10 years and I think that is the way to go with few exceptions. I think ecommerce is one exception where the visual element really helps. I think if you’re a recipe website where the visuals of the food, that’s where you can have something formatted. But to do this multi-column newsletter-type thing if you’re just communicating with your audience and you want to build a relationship with them, or even if it’s your customers and you want to have a relationship with them, I really have not been a fan of that approach.
Mike [25:49]: Did you really just reference a product that was discontinued in 2003 to send emails?
Rob [25:54]: What did I say?
Mike [25:55]: FrontPage.
Rob [25:57]: I did, because you know why I was using it as an example, we all know that using Microsoft FrontPage, you just build crappy web pages. And that’s what I see coming out of these drag and drop email builders is unless you know what you’re doing, you’re going to build a crappy looking email. So yes, I did. I hope it put the image in your head of exactly what I was saying.
Mike [26:17]: Yes. No, it did, but it also points back to – I remember using FrontPage as well and I was like, “Wait a second. FrontPage, is that even around?” I didn’t think that it was, and I looked back and it was discontinued in 2003, so that’s kind of scary that we both remember that and both have used it in the past.
Rob [26:32]: Totally. Totally.
Mike [26:33]: I do generally agree with this. I’ve seen lots of emails that come in. Some of them are branded and some of them are not. And to me it means more that the content itself is decent and that the source that it’s coming from is somebody that I trust versus how good it looks or how polished it is. That stuff to me doesn’t matter nearly as much as it does that the source of the email itself is somebody that I actually want to hear from, because if I don’t want to hear from them, then I don’t care how polished the email is. I just don’t want to.
If you look at a lot of the marketing emails that come from the Fortune 500 companies, they’re very well branded. And it’s not to say that the branding doesn’t help them, because it certainly does – it makes them recognizable, but they’re in a position where that matters to them. Versus if you’re sending your own emails, the chances are good that having a lot of that additional branding probably has very little effect on your business and it’s more about are you optimizing for the right things in your emails.
One of the contention points that I have about this particular item here is that some of the data they give is about plain text emails versus having HTML emails that have gif embedded into them. And they claim that there’s a 37% decrease in opens if you’re adding images into them. And I question whether or not that is a valid data point, because how would you even measure the open rate if you’re not including some sort of a tracking pixel of some kind in there?
Rob [27:54]: Right. And you can’t include that in a plain text email. And that’s what I was saying earlier, that when I say plain text, I mean an HTML email that looks like plain text, so that it allows you to rewrite the links so you can track clicks, and it allows you to embed the image so you can track opens.
Mike [28:07]: I think what’s probably more important is trying to figure out whether or not having a lot of brand and polish in there makes a difference. But even something like that, you’re not going to know until you get a fairly massive email list and have the ability to do some split testing on it. And at that point, it’s not so much about the open rates as it is about what the conversion rates are and the action that you’re trying to get them to take inside of the email. So if you just want to get your emails open, that’s one thing, but if you want them to go into the email, read it, and then take some sort of an action after they get the email, that’s a completely different story.
Rob [28:41]: Wow, this HubSpot study is pretty intense. They say with statistical significance specifically that they tested it with such broad, or I guess a higher number of emails that it is true. They come to a lot of conclusions like it says people say they prefer HTML, so if you give them a choice they’ll choose that. But over and over in every AB test they ran, they preferred plain text emails. They said that the HMTL emails reduced open rates versus the plain text looking ones I’m assuming. They said HTML emails have reduced click through rates. And they don’t just mean HTML. I think they actually mean – they have these big design emails with a lot of – there’s a lot of flair in there basically. And images and formatting, and the fix with type stuff I was referencing earlier with my FrontPage comment.
This is why, to be honest, the one template built into Drip is an HTML template that looks like plain text, and you can of course embed an image in it or something, but we have not encouraged people to do the big fancy templates. Although some people do bring them in, and I’m sure if they’ve run tests, they might find out with your specific audience that they do like some particular branding. We do have people who have elegant – they’re nice well designed, elegant templates, and those, I think, can help keep your brand in people’s minds. And I think they’re tasteful, they work with your audience. But I think just going with big fancy HTML by default is a really bad choice.
Mike [30:00]: And looking through at the emails that they have in here, some of the ones that they have side-by-side, they’re not terribly long, and if your email has five or eight lines of content in it and two or three massive images in it, to me it seems like that’s a very different story than if you have a longer post or you are using those images to help convey some sort of a story. Because I think if you a thousand-word email or something like that with a bunch of images in there for illustrative purposes, I think that’s very different than if you have three or four lines of text that have these massive images in it. And the main content or main focus of that email is to show you an image. To me those emails don’t really resonate. I would rather see some content along with it. But again, it depends on what the purpose of those emails is.
Rob [30:45]: I agree. And as I said before, I think if you’re Pinterest or you’re recipe or food site or a real estate site, there are reasons where visuals really can light it up and they should be the focus of something. But I think in general, if people are consuming your content and they want to read your content, you should stick more towards plaint text looking and then have images as needed in the email to break up the text.
Mike [31:06]: So, I think the bottom line with most of this stuff is to whenever you see some sort of a best practice or a guide about, “This is the best day to do this,” or, “This is the best way to do that,” take it with a grain of salt and think about what it means for you and what it means for your audience. Because by the time something becomes a best practice, it is not going to stand out anymore. And that’s something that you have to keep in mind, and figure out whether or not it’s still relative for our audience.
Well, I think that about wraps us up for the day. If you have a question or comment for us, you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under creative commons. Subscribe to us in iTunes by searching for Startups and visit StartupsForTheRestOfUs.com for full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 292 | Moving from One-time to Subscription Revenue, When Your Core Product Has Variable Costs, and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions on topics including moving from one-time to subscription revenue, when your core product has variable costs, and how to disrupt the current payment method for a market. Mike also gives some updates and recent challenges with BlueTick.
Items mentioned in this episode:
Transcript
Mike [00:00:00]: In this episode of “Startups for the Rest of Us,” Rob and I are going to be talking about moving from one-time to subscription revenue when your core product has variable costs, and [more, some?] listener questions. This is “Startups for the Rest of Us,” episode 292.
[Theme Music]
Mike [00:00:20]: Welcome to “Startups for the Rest of Us,” the podcast that helps developers, designers and entrepreneurs be awesome at building, launch and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob [00:00:28]: And I’m Rob.
Mike [00:00:29]: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
Rob [00:00:33]: Well, MicroConf Europe is less than two months away, so if you’re interested in joining Mike and I in Barcelona with 100, 120 of your favorite bootstrapped friends, go to microconfeurope.com. We have a “buy a ticket” link in the upper right. We’d love to see you there. We have speakers that include Mike and myself and Steli Efti and Peter Coppinger from teamwork.com, and we’re currently working to recruit more speakers to the conference. We’re pretty stoked about it.
Mike [00:01:00]: Yeah, I’m definitely looking forward to it, although the time is going by really, really fast. I looked up the other day, and somebody had sent me an email: “Hey, by the way, see you in a couple of months,” and I’m just like, [groans] “Oh.” [Laugh]
Rob [00:01:09]: Yeah, it came up on us quick, so we have to get our other speakers in line pretty fast.
Mike [00:01:15]: Yeah. I think one of the downsides is just the timeline for us to sell tickets for MicroConf was pushed back a bit because of all the tax implications around accepting that for the conference –
Rob [00:01:25]: Yeah.
Mike [00:01:25]: – which, unfortunately, has to be also pushed onto the people who attend. We didn’t change the ticket pricing at all, but the tickets are priced higher now because we have to charge [VAT?] on everything.
Rob [00:01:35]: But then they can get refunds of [VAT?] –
Mike [00:01:38]: That is true.
Rob [00:01:38]: – so, ultimately, it won’t be more expensive. Almost everyone across the board will be able to get refunds, although I’m not an accountant. Don’t consider my advice concrete here, but that’s my understanding based on the consultants. It’s so complicated. We have to work with [VAT?] consultants. It’s crazy. You know you’ve grown up when you are hiring consultants just to deal with taxes.
What have you been doing the last couple weeks?
Mike [00:01:59]: Well, I’ve been working on on-boarding people into Bluetick, and I’m at the point where I’ve on-boarded over half of the prepaid customers so far. That’s good to see, but the downside is I ran into a bit of a minor setback. We ended up hitting a bug that caused a pretty major performance issue on my server. It was about three days or so – three, full days – and it was really hard to replicate in a local test environment, so we basically just bypassed the issue for a little while and said, “This functionality isn’t going to be available for you guys for a couple of days, or a week, or whatever until we get this straightened out.” We’ve had to refactor just a ton of code in order to get to the point where we can replicate those types of things locally. It just sucks to have to go through that, but I’d rather do it with under 20 customers than 200-plus.
Rob [00:02:49]: Yeah, now’s the time to do it. It is so painful early on, because you just want to move fast, because you’re just trying to prove things out and get that early revenue. But if you don’t make some good decisions here and eliminate that technical debt, not make the fast decisions where you have something hanging out there that later on can sting you, it’ll be brutal when you get into the hundreds; because having a major outage at that point sucks.
Mike [00:03:12]: Right. And it wasn’t even just that there would’ve been an outage. There’re things that, because of this bug, it just didn’t work. Or, at least there were parts of it that didn’t work. The rest of the application was still working, but it was causing certain jobs to be reprocessed over and over again, and it just pegs the CPU because of that. So, unfortunately, they just were never going to finish, which sucks. Having to take that step back and essentially put all forward progress on hold for close to two weeks – it really sucks, to be honest.
Rob [00:03:43]: Yeah, I know the feeling. It seems like with any app of any complexity these days, you’re going to run into this a lot in the early days because the code is just trying to ramp up. As you scale and you get more customers, we’ve found that about every – I’m trying to think. It’s probably every four to six months with Drip that we hit the point where we need to stop all feature development for a couple of weeks and just focus on fixing performance of individual – whether it’s queries, or whether it’s pages, adding caching, even upgrading the entire database to a bigger box with more RAM and all that stuff. We’ve cycled back on that to maybe three times a year, because you outgrow stuff. We’re not building these basic crud apps [laugh] like we used to be able to and compete. The stuff’s too competitive now. I think of a project management tool, or even time tracking, or invoicing software or something, you obviously want a lot of UX. There’s a lot that goes into building the product; but on the back-end the performance implications of it are really small compared to something that is sending a lot of email, or doing a lot of analytics, tracking opens, tracking clicks. Both of our apps do that, and any type of – I can’t even imagine what apps, like Mixpanel and Kissmetrics have to do on the back-end because they are the next level. Now I understand why those types of businesses had to raise funding. You just couldn’t get enough boxes and enough people to scale that up without having a big outlay in advance, even with a tool like Amazon EC2 or Rackspace Cloud.
Mike [00:05:12]: Yeah, I remember talking to Heaton at one point a while back about Kissmetrics, and one of the first versions of that that came out. I may have these numbers mixed up, but I think that he said that for 20 customers they had 12 servers, and it was just because of all the processing that they did.
Rob [00:05:29]: Yeah, I remember that. Obviously, they got better at scaling as it went out, but I do remember in some interview someone had said just the basic infrastructure, the fixed cost of their infrastructure – and I don’t remember if it was Kissmetrics or Mixpanel – was more than a quarter million a year. It might even have been half million. It was somewhere in that range just to keep everything running, and that wasn’t even to scale up as they got really big. That’s the kind of thing you have to think about. It’s getting easier and easier these days to build really cool tools, but the performance implications of those and the complexity of them as you scale up – it’s a real thing. I know that some startups have entire teams just devoted to keeping that stuff moving fast, and it’s a team of both Dev ops folks, DBAs and developers who are in modifying code just to keep things performing. You can imagine something real-time, like Uber, and how hard that would be since it’s worldwide and there’re so many incoming datapoints at any given time. The order of magnitude of complexity – that’s got to be incredible.
Mike [00:06:26]: The other side of that is that you have to have tools or systems in place such that you can test it and put it under artificial stress, and that’s something that we just haven’t really paid a whole lot of attention to because we were trying to move fast and trying to get the app out the door as quick as possible. We were able to do that, but the cost of doing so was that we didn’t have good mechanisms in place for us to be able to run absolutely everything locally and to integrate a lot of testing into the system. So, a lot of it’s been done manually, or there’re certain places that are much better-tested than others. It’s the places where we don’t have a lot of tests that really bit us, so right now we’re working on refactoring a lot of that code. Like I said, it’s been a full week. It’ll probably be another week before we get things settled down to the point that we can actually go back and start working on more features.
Rob [00:07:15]: Well, congratulations on getting half your folks on-boarded. I feel like this bump in the road that you’re hitting – that’s just the other shoe dropping. It had to happen eventually. You can’t get through this stuff without having something like that.
Mike [00:07:26]: Right, and these bugs are things that probably would have come up anyway. I would expect that the two we specifically ran into are ones that we would’ve come up with across other customers as well – eventually. Maybe not tomorrow, or the week after, but it would’ve been soon, and I’d rather find out now than later.
Rob [00:07:41]: So, what are we talking about today?
Mike [00:07:43]: Today, what we’re going to do is go through a bunch of listener questions that have come in. If you’re interested in having us answer any of your questions, you can email them to us at questions@startupsfortherestofus.com. Our first question comes in from Dan Gravel, and he says, “Hi, guys. I’ve been listening to the podcast since its launch, so thanks so much for all the tactical, actionable and practical advice you give. I’ve been running my business for almost seven years, and I’ve been full-time on it for six. The first product, called ‘Bliss,’ which you can find at www.blisshq.com, is still a bestseller, but it plateaued a few years ago. It’s a B-to-C, downloadable software product which automates the management of large music libraries. Arguably, the reason for stagnation is a drop in interest in self-stored music collections with the mainstream move to streaming. I’m considering moving all or most of the app into the Cloud and adopting a subscription payment model. I can’t move it 100 percent because a small software agent will always be required to perform the work on the music files. I think moving to the Cloud should lower friction in on-boarding, allow easier life cycle emailing and a higher LTV due to subscription payments that may enable a paid acquisition. How would you go about deciding whether to go ahead with this? Dan.”
What are your thoughts on this, Rob?
Rob [00:08:45]: Well, I think there’s two markets for moving to the Cloud. One is your existing customer base, and they’re easy because you can just ask them – right? You could do a survey, some one-on-one phone calls, and you could say, “Would this be of interest to you if we had a subscription version of this?” You can talk about the price point. You can talk about the benefits and find out if any of those folks are interested. Then the second market is everyone else – right? It’s all the audiophiles. You said you have an existing market. It’s some audio files, and there’s integration’s, and there’s certain customers who aren’t your customer yet, but who could potentially be. Those guys are a little harder to reach, but you could certainly survey your email marketing list. I’m assuming you have some type of list that is folks who’ve signed up to hear about updates, or maybe they follow some content you produce or something; and that would tend to be a much larger swath than folks who are actually paying you. That’s a good place to start.
[00:09:38] The other option is something I heard about from Patrick and Price Intelligently. He mentioned this in his MicroConf talk this year, and it’s a website called aytm.com. It’s AskYourTargetMarket.com, and you basically define all these demographics. I would imagine by this point you have a pretty good idea of where these folks live and if there’s any type of gender bias, if more of them are men versus women; what they do for a living; how they think about stuff. You can basically just define this at aytm.com, and then you pay per survey responded, and you could basically present the product as it is today and ask if they’d be interested in a Cloud version and try to do some market research that way. So, that’s the most data-driven way that I can think of and probably where I’d start to at least start getting some insight into whether or not this is a good move for you.
Mike [00:10:24]: Yeah, I’d have to agree with you that going back to your existing customers and asking them whether or not that’s something that they’d be interested in is probably a better bet, especially if you’ve been full-time and this has been the major source of income for the business for the past six years. The downside, I think, to doing that is that you have probably attracted a certain number of customers, or a certain type of customer because of the fact that it’s one-time, downloadable purchase and they can just buy it once, install it. Then they don’t have to worry about it ever again. There’s a certain profile of person you’ve probably attracted because of that, so I think that the data is probably going to give you at least some mixed messages there, because a lot of the people who fit that particular profile are not going to want to pay for a subscription service – not unless you can come up with solid justifications for what your service is going to allow them to do. Obviously, those are things that you’re going to have to work with those people to figure out what is it that they actually want and what would the Cloud service really do for them.
[00:11:18] One thing that I can think of off the top of my head is to be able to stream their music to any of their devices from anywhere; but then, of course, you’re going to rely on being able to take their own music and then replay it back to them through the Cloud, or through a streaming service of some kind that you would have to offer on the backend. I would imagine that all that’s possible. It’s just a question of whether or not the people actually want that and whether or not the existing services through Pandora, or Amazon, or any of the other ones already overlap enough with what you’re doing to be able to replace it and serve as a solid competitor; because they’re going to be heavily funded and already have access to a large market of people, but those types of people are probably not the same ones that are in your market.
Rob [00:12:00]: The nice part is that there are so many B-to-C services that are paving the way for you. As we know, B-to-C tends to be a tougher market, because you’re going to have lower price points, higher support, just a lot of things that aren’t as ideal with B-to-B market; but Apple, with iCloud and with iTunes Match and the Spotify subscription stuff; people are used to Netflix and Hulu. There’re just so many more subscription services than there were even two or three years ago, and consumers are getting more used to paying for these. I do think there’s at least some precedent for you to ride on the coattails as folks are getting used to more of these subscription pricing structures.
Mike [00:12:40]: So, Dan, hopefully that helps answer your question.
Our next question comes from Zachary Kesson. He says, “Hi, guys. I’m starting up a SaaS product and having a problem. I don’t have any traffic. My best day, I had 31 visitors to my blog, but they stayed an average of seven seconds each. It seems that all the sales advice I hear for SaaS founders assumes that the founder has a mailing list, and I don’t have one; and without some traffic to my webpage, I don’t see myself creating on in a realistic timeframe. At this rate, I should have a 5,000-person mailing list by September 2031, or something like that. I’ve put links in Reddit, tweeted them, put them in LinkedIn, but nothing seems to generate more than two to four clicks. Paid advertising is outside of my budget right now. What would you suggest? Zach.”
Rob [00:13:16]: This is saying, “How do I market a SaaS app with no audience?” The answer is you don’t want to. You want to have had a landing page up since you had the initial idea and to have at least been talking about it for a longer period of time so that you get some interest. Even an email list of 50 people is incredibly powerful at this stage. You don’t need 5,000, because having 50 people will allow you to get feedback and to do some type of customer research and figure out who wants to use it and for what, and talk to them about value propositions. That is much more valuable. I think that the fact, Zach, that you haven’t done that yet really puts you in a tougher position; because now you have to start from a dead-cold stop, and you’re saying paid advertising is outside your budget right now.
[00:14:11] AdWords is obviously very expensive, so you’re not going to do that, but you can get super-cheap clicks on something like You Tube; or, in Facebook you can get 10- and 20-cent clicks if you’re doing targeting. So, I would instantly put the Facebook retargeting pixel on your site even with 500 visitors per month. You said your biggest day was 31 visitors in a day, so if you do the math and it’s 900; and I’m assuming, since that was your biggest day, you don’t get that many every day. Even with 500 uniques a month, you can start some retargeting. I would also put an email capture widget on your blog. You’re not trying to build a massive list to market to, but you’re just trying to get some human beings that you can talk one-on-one with. You could test that versus, like, a Koalaroo survey box, or one of those other types of things. You’re trying to get information why are people leaving after seven seconds, because you have a problem if they’re leaving after seven seconds. Either your current traffic sources are garbage, or you’re not a fit for what people expect when they come to the site.
[00:15:08] You’re not going to get [out of this?] with split testing. This has to be a one-on-one effort, because you’re so early in the game. The fact that you don’t have a mailing list – and, again, even a mailing list of 50 or 100 – it puts you behind the eight ball. You have a product now, and it’s not going to market itself. You’re going to have to hustle. These days, you’re going to have to do everything under the sun that doesn’t scale just to get people using this app. So, putting a link on Reddit or tweeting it when you have 100 or 200 followers – that isn’t going to cut it. There’s too many people doing this these days to really be able to just do it with this kind of cold, random traffic. So, I would try to do a lot of one-one-one stuff to figure out who’s coming, why, what they expect, why they’re leaving quickly. That average number of seven seconds per visit is worthless. You don’t care about that, because a bunch of people are leaving after one second, and then some people are leaving after hundreds of seconds, and you want to focus on the people who are staying for those minutes. So, figure out how to differentiate those, whether you use Mixpanel, or whether you use Kissmetrics, or whatever it is you use – free trial of Crazy Egg, or Inspectlet. These are things that can show you what people are doing on your site, but don’t rely on the tools to do it. You’re going to have to dig in and do a lot of one-one-one stuff.
[00:16:17] The last thing I would say is if you have an idea of who should be buying your software, figure out where are they; because being on Reddit and Twitter is too generic. Using your tool relates to other CRMs, it looks like, so I’m assuming you integrate with something like maybe Salesforce, or Closeout iO, or [Bay?] CRM, or whatever. So, how do you get into those integration repositories? How do you get those guys to co-promote? You promote on your end when you finish integrating, and they co-promote to their audience via a blogpost. That’s integration marketing. Ruben Gomez was the first person I ever saw do it, and then I coined this term “integration marketing” and talked about it at a MicroConf talk a few years ago. It’s to get marketing done via these integrations, and in order to do that you have to hustle. It’s not going do it on its own. You need to communicate with them and convince them. You have to have some type of blog at that point if they’re going to blog about it, because you have to have something to offer them. They’re not going to email their list if you don’t email yours. Since you don’t have that, you don’t have that asset. An asset doesn’t build itself overnight. This is stuff that you need to be thinking about well in advance of when you need it. If you haven’t to date, then today is the day to start building that. It’s going to take you longer than if you’d gone about it in the correct order, or in a more optimal order; but you can’t really look back at this point. I think you’ve just got to get started building these assets as of today.
Mike [00:17:39]: I went over and took a look at his site. It’s yourcrm.link. It looks to me like the product itself is aimed at SaaS businesses who want to connect with CRMs, and that was just my initial idea of what the product does based on what I read there. If that’s the case, what I would probably do is move much more towards an [out?]-[?] model where you’re directly contacting those people that you think are going to be a good fit. So, sit down and make a list of the 25 companies that you think would be a good fit for using your product and then contact them. You just go through the list and talk to every, single one of them just to get a yes or no as to whether or not they’ll talk to you and see if it actually is a good fit. It sounds to me like if you’re not getting targeted traffic to your website, then you’re not posting things in the right places. If you don’t know what that target is going to look like, then it’s going to be very difficult to figure out where you should even post it. Is Twitter a good place to be posting those? I don’t know. It really depends on what the people who are interested in your product have to say and where they actually hang out. I can’t answer that, but I think that you should be able to after you have some of those conversations, and I think that’s the bottom line at this point. Because you haven’t had those conversations, it’s very difficult to figure out where you should be marketing your product to and who is an ideal customer for it.
Rob [00:18:55]: Yeah, that’s actually a really good answer. I think I may have liked your answer better than mine, because yours really is doing the one-on-one work and the outreach. It’s just a matter of getting in these one-on-one conversations and figuring out who can use it and why would they. His price point starts – I hadn’t even noticed that part, because I didn’t scroll down to the bottom. His price point starts at $149 a month and goes up from there. It’s like $149, $499 and up, so there’s definitely enough room to do some medium-touch sales and some high-touch stuff. I think that’s a really good start. The other stuff I talked about is probably as you want to drive more traffic down the line. I think these one-one-conversations are more critical up front.
Mike [00:19:34]: Yeah, and I think your point about not worrying about trying to do any sort of split testing or anything like that is also valid because of the fact that you just aren’t going to have enough traffic to be able to do that. It’s those one-on-one conversations that are going to be the single most valuable thing to you at this point. What I would probably recommend is visualizing what your sales funnel is going to look like just from a conceptual standpoint. You don’t have to be exact, but you could just set it up as a simple three-, or four-, or five-stage sales funnel where you say, “These are the 25 people that I would like to see as customers,” and they’re at stage 1. You haven’t even actually reached out to them. Then stage 2, you’ve reached out them. Stage 3, you’ve had a conversation or scheduled a meeting. Step 4, you’ve had the meeting; and then Step 5 is whether they are actually going to trial the service or sign up for it. At that point, if they pay for it, or they’ve decided that they’re going to evaluate paying for it, then they drop off that particular sales funnel right there; and then they maybe enter into another one.
[00:20:31] Those are the basic steps that you should probably go through. If you’re just doing things quick and dirty because you don’t have any of this traffic or any stats, just set up a Google doc or something like that, or a series of them. Every, single conversation that you have, you put that conversation into the Google doc. If you have a second conversation with somebody, maybe because they’re further down on your sales pipeline, you add that conversation into that Google doc. That way, you end up with a series of four or five different Google docs that are in line with what your sales funnel looks like, and you can always go back and you can refer to all the conversations that you had at stage 1 of your sales funnel, then at stage 2 and stage 3. It lets you look back at those down the road to see if there are any conversations that had a lot of overlap, or a lot of questions that specifically came up at a certain stage of your sales funnel. Then you can take that stuff and translate it back onto your website to help gather trust and answer questions for people that you are not directly talking to. So, that’s essentially the customer development process that I would go through for this.
Rob [00:21:30]: And if you need software to help you do that cold outreach, I would look at Bluetick.iO.
Mike [00:21:36]: [Laugh] Ah, yes, thank you for the plug there. So, Zach, hopefully that helps you out.
Our next question comes in from Corey Moss, and Corey’s been a long-time listener of the show. Corey left a message on our voicemail number, so we’ll play that for you now.
Corey [00:21:47]: Hey, guys. This is Corey Moss. Over the last year, I’ve stepped back from SaaS apps to concentrate on my Kanban board plugin for WordPress. You can check it out and the paid add-ons at kanban nwp.com. In the SaaS world, the holy grail is monthly recurring revenue, but in the WordPress ecosystem, most licenses are annual, and most don’t even auto-renew, if you can believe it. I want to apply SaaS best practices, but I’m nervous about doing things too differently from how people expect it. Mike, have you run into this in dealing with enterprise? Have either of you had experience with this disrupting the status quo when it comes to monetizing patterns? Thanks.
Mike [00:22:25]: Corey, if I understand you correctly, you’re essentially asking how to disrupt the current payment that a market is used to in standard practice today. So, your question to me specifically was did I run into that sort of thing in the enterprise market. Yes, I did. It was very difficult to get them to change their ways and, looking back on it, it was probably foolish of me to even try, and I would not recommend that somebody else try to do that. So, if you’re going after the WordPress space and you’re trying to convince them to pay for a subscription to something that they’re used to paying for once as a downloadable product, and potentially a yearly maintenance fee or something like that after that, I would be very hesitant to say that you should try and modify that model in such a way that they are not comfortable with or they’re not used to.
[00:23:10] I’ve talked to other people who are in the WordPress space, and they said that selling subscriptions in WordPress is a very difficult way to go, because people are just not used to it, so they don’t do it. I think Rob had one of his yearly predictions that this is going to change in the future, but I think that there’s also going to be a huge subsection of the market that is not willing to change, and it’s going to be years before they are convinced that that’s the only way to go because they are forced to do that. Even if you look at today, it’s 2016, and there is still a ton of downloadable software that’s sold out there. What we tend to see is mostly the recurring revenue, but there are huge number of downloadable products that are still available for sale; and people still buy them every, single day because they only have to pay for them once. I think that you’re probably going to run up against that roadblock in the WordPress space for several years to come. If I had to put a number on it, I’d probably say between five and ten. So, I would not bank on trying to do that overnight, and I almost certainly wouldn’t even recommend going in that direction if you can help it. I would probably double down on trying to figure out what people are willing to pay more for and try to increase your lifetime value that way as opposed to trying to change the way that they fundamentally buy their software.
Rob [00:24:19]: I know that there are some knowledgeable WordPress folks who are trying to attack this problem, and they haven’t really been able to break through yet. I don’t know of any WordPress plugins that don’t rely on an external service that are able to pull off a monthly pricing tier, because if you do have an external service – let’s say it’s backup to a Cloud server, and you’re maintaining the Cloud server, or it’s some other thing like – I think Jetpack doesn’t have external stuff that WordPress runs. They’d be able to charge a monthly fee. But in terms of just doing it for the sake of doing it and not having a strong justification? I agree with Mike. I think it’s going to be an uphill battle.
[00:24:53] I think the other thing to think about is, while monthly subscription is the holy grail of SaaS, that’s also its biggest drawback. It takes you years to get through the “long, slow SaaS ramp of death” – right? It’s just years of toiling away to build up any type of monthly, recurring revenue. The nice part about WordPress plugins is you can charge more up front. You do get a one-time fee. Let’s say you’re charging 49 bucks for the annual license, which a lot of people are doing. I think auto-renewing with advance notice – let’s say a five-day, or a three-day, or even a week notice before you auto-renew should be perfectly acceptable. I do know that some folks are moving in that direction. I think the more savvy WordPress business folks are doing that, and I would as well. The nice part is that, since most of the traffic that you generate will come from these recurring sources like a Google, or a WordPress.org plugin repo, you can ramp up your revenue to a couple grand a month really quickly; whereas SaaS is just going to take forever to get there. While SaaS will grow over time, I’m not so sure that’s what you want at this point. I personally would be going for that early revenue. Let’s try to get to between 2 and 5 grand a month as quickly as possible, and then you can start thinking about either adding add-on services that could potentially become subscription; or, using that money to stair-step your way up with either a second plugin, buying out all your time and then thinking about something long-term that is more of a monthly subscription model. Whether that’s in the WordPress space, or you just go straight for SaaS, that’s something to think about.
[00:26:21] But I am not bullish on the fact that, as a relative newcomer to the space, that you’re going to be able to come in and just charge monthly without a major justification; because so many WordPress users, the reason they’re using it is because it’s cheap and because there aren’t subscription fees. A lot of consultants use it because they know that their clients don’t want to pay subscription fees for things. They don’t want to pay for Shopify or Squarespace. So, if you come in and want to charge this 9 bucks a month or whatever it is that you could get for it, it’s going to be a deal breaker for a lot of folks.
So, that’s my advice as of now, the middle of 2016 here. I do believe that over time this will change. I think most things are going to move toward subscription. We see it happening in B-to-C entertainment, which was unfathomable a few years ago to think that millions of people would be paying for Spotify, for essentially music subscriptions; and even 15 years ago, to think that tens of millions of people would be paying for Netflix, for movies by subscription; but it’s happening. Do you think that WordPress will eventually go? I think it’s years out, and I think you’re ahead of the curve.
[00:27:22] So, my prediction Mike called out. As we’re talking through it, I’m realizing there’s just no chance that’s going to happen in this year. I think what my prediction was was that one person would figure it out pretty well; and that, of course, remains to be seen. I guess we’ve got another six months.
Mike [00:27:35]: I’ve seen one company that has done this, which I think they’ve done pretty effectively, Optin Monster. They have a little widget that you can install on your website, and they do charge a subscription fee for it, but they also have – as you pointed out, unless you have some sort of external service that integrates with, like for WordPress backups, or security checking, or things like that, where it needs that external service in order to function, and that external service needs to be up and running at all times, maintained and everything else. Optin Monster can do that because, one, the types of things that they integrate with are types of services that you’re going to pay for. So, it really sits on the front of that funnel and is aimed at those people who are used to paying for those things.
[00:28:16] The other thing is that I think they charge $50 or $100 per year, and it is that subscription fee; but they also keep the widgets up-to-date. So, if there are changes made in MailChimp, or Drip, or Aweber, or whoever, they will update the plugin so that when it comes down to your site, it is all up-to-date and you don’t have to worry about keeping your own plugins up-to-date. So, there are some advantages there, but they also made that switchover after they hit, like, 200, 300,000 customers or something like that. They’re not going from ground zero and trying to build a SaaS pricing model out of it. They already had a pretty substantial user base before they made that change.
So, Corey, hopefully that helps answer your question.
[00:28:54] Our last question for the day comes from Brian Kenry, and he says, “Hi, guys. Love the show, and it’s been a big help in getting my startup off the ground. I’m building a platform that will be monetized by generating leads and selling them to a private agency. I’ve assumed that I will partner with one agency and turn over leads at a cost per lead, but I’m wondering if I should consider a different dynamic. I realize this is a vague question, but is there any benefit to pursuing a subscription model or a marketplace for leads? It seems like a cost per lead is the most logical way to approach this, but I want to make sure I’ve considered all avenues. As always, thanks for your input.”
Rob [00:29:21]: I think I would stick with cost per lead, because that’s the most granular, and it’s the easiest to understand both from your and your customer’s perspective. Your costs are going to be variable, but you’ll be able to lock them down below a certain amount and then know what your margin is.
One thing I would consider is having customers – they could pay on a subscription basis so that they pay in advance. Here’s what I’m thinking. Instead of delivering a bunch of leads to them and having them pay at the end of the month or something, you really want to get that payment at the start of the month, knowing that you’re going to deliver those leads over time during the month. So, you could think about having tiers of, like, “Do you want 100 leads? Then it’s 1,000 bucks,” or whatever. If you want 200 leads, then it’s either $2,000, or you can give them some type of discount. Do $1,800 or something a month. The nice part about that is you don’t have to chase after them for money. They can either sign up for the PayPal subscription, or through Stripe, or whatever; and you’re automatically billing them, and you’re getting paid in advance. If their payment doesn’t go through, then you don’t deliver the leads. You’re not out the money. I think that is beneficial for you from a business perspective, and it’s going to save you time. That still works out to a cost per lead, but they’re basically committing up front to buying a certain amount of leads, and you’re getting that payment up front.
[00:30:34] Those are my thoughts off the top of my head. I can’t think of any way to get more complex without just making things hard to understand, and I know in the lead industry things are typically sold per lead. Do you have any other thoughts on it, Mike?
Mike [00:30:46]: I have a few that go into different places on this. As you said, the one that’s easiest to understand is just selling them directly cost per lead. The problem there is that you don’t know how much time and effort it’s going to take you to do the work to get a lead. As you said, if you do it enough, you’re going to able to figure that out and you’re going to be able to do some averages there and then tell people, “Yeah, I can get you X number of leads for Y dollars.” Then eventually, they’ll be able to make that mathematical calculation in their head or just look at it and say, “Yeah, that totally makes sense for us to do that.”
The other thing that I can think of that might be an option is to have them pay you for a specific service based on a flat fee. Whether it gives them results or not is a risk that you’re pushing on them. I don’t like this idea nearly as much because of that very thing, but you could say, “For $500 a month, we’re going to do X, Y and Z for you. We’ll reach out to X number of people with your emails, or with your script,” from whatever the call is, whether you’re doing cold calling or cold emailing. You can do something like that and put together different packages.
[00:31:51] I do agree that you should probably charge people up front so that you have the capital on hand to go do that, so that you’re not paying for or funding it up front only to have somebody cancel later on, and then essentially eat the costs associated with that. I’d definitely collect the money up front. Those are the things that come to mind for me. The real big there, I think, is who is assuming the risk for doing this. I think that you probably want to assume as little of the risk as possible, but I also think that you probably don’t want to go down the road of saying, “We’re going to do X amount of work for you,” but then basically push all of the risk onto them if it doesn’t deliver; because it could reflect very poorly on you if you go through a month, or two months, or something like that and, for whatever reason, you’re just not getting the results that you used to. I think that you’re better off evening those out for the customer and letting them look at the raw numbers and say, “Yeah, we expect to pay $10 a lead, and that’s what we’ll get.”
Well, Brian, I hope that answers your question.
Rob [00:32:45]: And that wraps up our episode for the day. If you have a question for us, call our voicemail number at 888.801.9690, or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. Subscribe to us on iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening, and we’ll see you next time.
Episode 291 | Freemium, Asking for CC Up-front, and a Big Mistake First-time Founders Make (with Guest David Cancel)
Show Notes
In this episode of Startups For The Rest Of Us, Rob interviews David Cancel, of Drift, about whether or not to use freemium, innovating versus inventing, and the topic of asking for credit cards upfront. David also shares some upcoming topics that will be covered on future episodes of his podcast.
Items mentioned in this episode:
Episode 290 | Public Speaking as a Sales Channel with Rachel Andrew
Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Rachel Andrew about public speaking as a sales channel. They discuss the advantages and disadvantages and challenges you will face as a public speaker. Rachel also shares some of her processes and success stories of overcoming public speaking anxiety.
Items mentioned in this episode:
- Double Your Freelancing Conference Europe
- Double Your Freelancing Conference–Discount Code
- Perch
- Rachel’s Website
Transcript
Mike [0:00:00.1]: In this episode of “Startups For the Rest of Us,” I’m going to be talking to Rachel Andrew about public speaking as a sales channel. This is “Startups For the Rest of Us,” episode 290.
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.
Rachel [0:00:26.0]: And I’m Rachel.
Mike [0:00:26.9]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Rachel?
Rachel [0:00:30.9]: I’m good. I’m back in the UK at the moment. I flew in from Boston last night, so I have no idea what time it is.
Mike [0:00:38.7]: Oh, that’s okay. I know that I caught you at a bad time, right between conferences. You just got back from one, and you’re headed out to another one tomorrow, right?
Rachel [0:00:45.3]: Yeah, I’m always in between conferences. That’s a permanent state, as you’ll discover.
Mike [0:00:49.9]: Got you. Well, speaking of conferences, I do have an announcement. Brennan Dunn is running the Double Your Freelancing conference over in Stockholm this year. And that’s next month. If you’re interested in that it’s a four-day event that is for freelancers and consultants. And it is aimed at helping them to grow their business, and essentially land more customers, make it more profitable, etc. We do have a ten percent off discount code that you can enter. Discount code is “Startups.” But we’ll link it up in the show notes with a direct link over to that. Again, this is primarily aimed at freelancers, so if you do have that type of business, or you’re a consultant, that might be a good option for you to help grow your business. But with that out of the way, Rachel, I wanted to give you a little bit of a brief intro and talk a little bit about your background; what you’re doing. You’ve been a main stage speaker at MicroConf Europe for the past couple of years. You are running a product called Perch, which you can find at grabaperch.com. It’s a CMS that is built for Web developers. You launched it back in 2009, and you work on it full-time right now. So with that background at play, I guess, expand on that a little bit, and tell the listeners who you are and what you’ve been up to.
Rachel [0:01:52.0]: So I’ve been a Web developer for a very long time; since sort of ’97. And I’ve been running my own company since 2001. And so we have Perch. My background was working really—we do consultancy and we built things for people. I eventually launched Perch, which was a sort of self-funded product; counter management system. And that’s sort of the main job really. That’s what I do, is I work on Perch; write documentation; do support for Perch. And as well as that, I do an awful lot of speaking. And much of that really came from the things as I do as, kind of, a weird sort of hobby. I’m involved with [Ready Open?] Web standards and CSS, and I’ve always been involved with that really, for as long as I’ve been a developer. So a lot of the stuff I do outside of Perch is regarding [Ready Open?] Web standards and things like that, and talking to people about that, and writing.
Mike [0:02:41.5]: I guess for a little bit more background on that, you said you do a lot of public speaking. How many speaking engagements do you do a year?
Rachel [0:02:49.4]: I think last year I did about 27 presentations, and sort of three or four full-day workshops.
Mike [0:02:56.6]: Okay. Now how big are these different presentations that you do? Are they 10, 20, 30 people? Are they more like 100, 200, 500?
Rachel [0:03:03.7]: Usually in the 100s. I also speak at meetups and things, and often what I’ll do when I’m traveling, if I’m asked sort of a bigger event that’s flown me in, I’ll then go and speak at some smaller things that are around as well. They wouldn’t be able to afford to fly in at international speaker, for instance. So typically the things that I’m speaking at are quite large events. But I’ll also do meetups, especially locally or whatever.
Mike [0:03:26.4]: Now when you’re giving these talks what is the general subject matter? I guess, how are you presenting things to the audience? What topics are they? I know you said that you are involved in Web standards. Is that the kind of stuff? Is it more technical? Is it more marketing?
Rachel [0:03:38.8]: A lot of the time. At the moment I’m speaking a lot about some very new CSS specifications that I’ve been involved with. So I’ll talk about those. So a lot of those kind of talks are really just training, essentially. It will be an instruction to a new spec, and how all that works. I often talk about business, as you know. When I came to MicroConf Europe I was talking about our experience launching Perch. So I do a fair bit of speaking about that. So it’s never directly sales related, in terms of our product, but I tend to be speaking to audiences who’d be interested in the product.
Mike [0:04:11.3]: So it’s mostly, I would say, technical presentations, if I’m understanding you correctly.
Rachel [0:04:14.9]: Yes, generally.
Mike [0:04:16.0]: Now, you said that the audience themselves, because you’re talking about this technical stuff and it kind of relates back to your business because you do have a product that is aimed at Web developers, what sort of impact have you seen from the speaking side of things on the product sales?
Rachel [0:04:31.9]: All right. It’s really, really difficult to know. The speaking kind of works on different levels. We’ve been doing Perch for about seven years, so we’ve got lots of customers. We’ve got customers worldwide. So one of the things that the speaking enables is for me to actually meet those customers. And it’s pretty normal that I’ll speak at an event and then afterwards I’ll get a bunch of people talking to me about what I spoke about. But also a bunch of people who are Perch customers. They’ll come up to me and they’ll be saying, “Oh, we use Perch, and we’ve got this feature request,” or, “Here’s a project that we’ve just used it for.” So that’s a real positive thing, and something I can see an impact from, because it means I can actually speak to our customers face-to-face, and I wouldn’t otherwise. But in terms of sales, I mean, we do get a sort of fairly steady stream of people who’ve, for instance, they’ve signed up for our online demo, and they quote, “Oh, I saw Rachel at XYZ conference.” So, it’s very difficult to actually measure the impact of this stuff.
Mike [0:05:25.7]: People that I’ve spoken with, that whole concept of attribution is somewhat difficult to directly assign, especially when you’re talking about conferences and just general awareness and visibility. But at the same time, if they hadn’t seen you would they have even sought out the product, or would they have even known about it?
Rachel [0:05:42.8]: I think there’s that, and there’s also the fact that in an industry where people need to have confidence that someone who’s creating a product like Perch, that people use Perch to do all of the projects that their business does for clients. So it’s quite a big thing to start using; to use a different CMS. And quite a lot of people have moved off, for instance, WordPress. So you’re jumping from one platform to another, and you want to know that the people behind it know what they’re talking about. So the fact that I’m there on the stage of a large industry event and seem to know what I’m talking about, I hope that then reflects positively on the product.
Mike [0:06:17.9]: Yeah. It lends credibility and trust, not just to you, but by virtue of you being the developer behind the product, it lends trust and credibility to the product. It just kind of transfers to that.
Rachel [0:06:28.0]: Yes, absolutely. And this is what developer relations people, for all sorts of products, do. A lot of the conferences I go to there’ll be quite a few people on the bill who’ve been sent there by their company. They’ll be speaking not really in a sales way, but they might be speaking about something interesting they’ve learned while developing the product. But that’s exactly why they’re there, is that reflects well on the product itself.
Mike [0:06:49.0]: So I guess you said that you did 27 speaking engagements last year. Let’s take a step back and go back in time a little bit. When was it that you first started speaking, and how did you go about finding the first speaking engagement that you ended up with?
Rachel [0:07:01.6]: It’s only in the last few years I’ve done this much speaking. For a long time I’ve — been a writer since way back when; I don’t know 2000, 2001, I think, I first sort of actually had something published in a book. And I started to be asked at that point, “Will you speak?” And there were far fewer conferences then for web developers. And I was actually really terrified of public speaking, and just wouldn’t do it. There was absolutely no way I was going to do any public speaking. And I’m not quite sure where the change happened. I think I did a panel. I was on a panel at a conference about ten years ago, and that was okay, because I’ve never minded being asked questions. So I was doing this panel, and then sort of slowly I started doing smaller things. And there is video somewhere of me absolutely shaking in my boots trying to do like a ten minute talk with absolutely no confidence, sort of, hanging on to the lectern in case I fell over. And so it was not something that I immediately thought, “This is what I wanted to be doing.” And really the change came, because in the industry being able to speak became far more important if you wanted to get something across that you had to say. And when I first started writing was, kind of, everything. I needed to follow that change really.
Mike [0:08:15.1]: When was it when you started to realize that doing some of these public speaking engagements was a viable, or a good, sales channel for you? What was it that drew you to it? It sounds to me like you started out really, really gently into it, and then over time, obviously, it’s ramped up quite a bit. But was there a turning point, or an inflection point, or something that sticks out in your mind that kind of jumped out at you and said, “This is something that I really should be doing a lot more of.”
Rachel [0:08:39.7]: I think with Perch it was we were sort of couple of years into Perch by the time I started doing a lot more speaking. And partly that was because my daughter got older and I wasn’t needed to ferry her backwards and forwards to things. It was easier for me to be away for a while. But then I’d start to see those comments. You know, people signing up for the demo and saying, “I saw Rachel on stage.” and I just started to realize that this is a valuable thing to do. It’s something that I’m quite good at. By that point I was a lot more confident. It’s something that I enjoyed. I’m quite introverted, but I find that when I’ve gone out there and spoken on stage that gives people a reason to come and talk to me. I don’t have to start those conversations. And so it makes it a lot easier for me to chat to people and find out what they’re interested in, and what they’ve been doing with Perch if they’re customers. It’s a combination of things that really made me realize this is important. And also just the fact that being at these events I get to see what’s important in the industry, and what people care about, and that’s vital for the development of Perch.
Mike [0:09:38.3]: It’s interesting that you say that you’re an introvert, because most people when they think of public speakers they say, “I could never do that because I am an introvert, and I just do not want to be up on stage and I don’t want to be the center of attention.” And I kind of, am the same way – to be perfectly honest – but at the same time I feel the same way as you do, and I’ve talked to other people who also have encountered this. They’re introverts and they don’t mind being up on stage, because they are comfortable talking about the things that they know about. But then it gives other people excuses to come up to talk to them, so that they don’t have to go out and seek them while they’re at the conference.
Rachel [0:10:11.3]: Absolutely. If I attend a conference I’ll not speak to anyone. I’ll hide in the corner with my laptop. So, actually as a speaker then, I speak, and then afterwards I know people will come and talk to me, and that’s great. And I enjoy that. It’s, kind of, like I’ve started the conversation on stage, and then for the rest of the conference I’m able to continue that conversation individually with people.
Mike [0:10:32.4]: That makes a lot of sense. So over the years has it gotten easier for you to find speaking engagements? I would imagine that in the early days it might be very difficult, because you’re trying to get your first break, or you’re trying to get noticed by people who either run meetups or conferences or just many events. Have you found it easier to get more speaking engagements over time?
Rachel [0:10:52.7]: Yes. It definitely gets easier, because I think people see a talk that you’ve done somewhere and think, “Oh, I’d like to have that person come and speak at my event.” And so it naturally sort of builds on one on the other. I’ve found that, certainly in the early days, pretty much every speaking engagement I was directly asked to do was because of something I’d written. So I’d write a blog post somewhere that someone would be interested in, and they’d say, “This would make a great talk. Have you thought about making this into a talk?” So that tended to be where people would approach me from. But particularly in the early days I just applied for these call for papers. There were sites you can go and you can find which conferences have got open call for papers. And the good ones will tell you exactly what they offer; if they’ll cover you’re travel or if there’s a fee, all the information about it. And you can just put together a proposal for a talk you’d like to give and post it there, and see if it’s interesting. Initially that’s what I was doing a lot of. I do far less of that now because, to be honest, this year I’ve turned down more requests for me to go and speak than I’ve actually accepted, because there’s so many conferences and they’re all at the same time and there’s only one of me. As you do more of it you’ll get more people actually saying, “We want you to come and talk about this subject.” At the beginning you kind of have to put yourself out there and find things.
Mike [0:12:07.8]: You mentioned calls for papers. There’s a couple of links that you gave to me before we got on the podcast. So we’ll link those up in the show notes. But there’s the Weekly CFP, there’s Tinyletter.com, and then there’s Lanyard. There’s also other places that you’re aware of for resources. Can you talk a little bit about what the process is for those call to papers? How in depth are some of the proposals that you need to give? Is it something that you can put together in 15 to 20 minutes, or do you have to essentially build like your entire talk before you even get to the point where you’re making a proposal?
Rachel [0:12:37.2]: Most call for papers just want a sort of abstract. So, kind of, a couple of paragraphs explaining: what the talk is going to be about, what the attendees will learn from it, the level it is. Because obviously – particularly if it’s technical stuff – it could be for beginners, or it could be something really advanced. So it’s useful to outline that. You certainly don’t need to worry if you’ve got a beginner’s talk, because a lot of conferences want talks for beginners. People think, “I’ve got to be an amazing expert in my topic to be able to speak at the conference.” And that isn’t true at all. There’s lots and lots of conference that wants things that are for newcomers to the subject, because they’re the people who are being sent along to the conference. So usually it’s a couple of paragraphs. And absolutely you can write the abstract before you’ve written the talk, and most people do that. You think, “This would be a great fit for this conference.”, and if it gets accepted then you go and write the full talk.
Mike [0:13:28.5]: So when you go through the process, and you have gotten to the point where you are going to be speaking at a conference, what are the general logistics of speaking at some of these conferences? Are they paid engagements? Are they unpaid? Do you get compensated for travel only? How does some of that work, or does it vary greatly between one type of conference or event and another?
Rachel [0:13:48.5]: It does vary. It varies between industries and so on. I, as a person who’s self-employed, I’m not funded by a big employer, so I won’t go and speak anywhere unless my traveling expenses are covered. Unless it’s literally down the road and I can just walk down there, they need to cover my expenses. Typically, I’m paid these days. I think you have to balance that with how valuable something is for your business; how much you want to be at the conference. Because, obviously, if you’re getting your expenses paid and it’s a conference you really want to be at anyway, and you’re getting a ticket for it too, then you might be happy to speak for free in order to get that. That’s fine. But as you go along you tend to find that if you’re doing quite well as a speaker you’ll get more requests than you could ever do. And it kind of becomes part of your income. Which for me it now is. I mean, actually speaking at conferences and doing workshops is a reasonable chunk of my income. Just that’s how it’s turned out. It was never something I aimed to do. But obviously anytime I’m spending speaking I’m not actually working in the business so I have to balance the two.
Mike [0:14:50.1]: I was just about to ask that, because you do do a lot of speaking. So how is it that you’re able to balance that? Even if you’re getting paid to speak at a conference, you’re generally getting paid for going there and delivering your talk and some of the prep time for your talk beforehand. But at the same time, depending on where that conference is—like for me, if I were to fly out to Las Vegas it’s an entire day for me. I mean, it’s a six hour flight and then on the way back it’s going to be nine, because of the three hour time zone difference, plus an hour or two at the airport each time. It adds up. And for me, something like that’s an entire day. How is it that you’re able to balance this? Are you getting a fair amount of work done while you’re on the road, or in the air?
Rachel [0:15:29.9]: Yes. I work everywhere. I’m very able to do that, and I don’ think everybody is. My husband Drew, he really can’t work on planes, whereas as soon as that seatbelt light goes off I’ve got my laptop out and I will work for an eight hour flight. I will work from the minute that light goes off to the minute they’re telling you to put your laptop away in your bag. And I’ll get a ton of stuff done. I’m very organized. For flights, in most of the flights from the UK to the states, there’s no Wi-Fi. So you’re going to be offline. And so I just make sure that I’ve got absolutely everything I need for whatever bit of work it is that I’m intending to do, sort of, all ready. So I’m not being frustrated and thinking, “I can’t do this because I’m not online.” I get into hotel rooms. I set myself up. I’ve got a little stand for my laptop, and a separate keyboard, and trap pad, and I sort of get myself set up so I can actually sit down and do full day’s work in hotel rooms. And I do that all the time. You, kind of, need to have the work you can do like that. Obviously I can code or write documentation or do support very easily from a hotel room. And you need to be the sort of person who can work on the road, and I don’t think everybody is. That’s just a sort of personality type. But you do get better at it as you go along.
Mike [0:16:35.4]: Yeah. It gives new meaning to the word “road warrior.”
Rachel [0:16:37.6]: Yes.[laughter] You just have to be really organized if you want to be able to get a lot of stuff done. Which I am, just as a person. So that makes it, I think, a lot easier.
Mike [0:16:47.2]: What’s changed from when you first started speaking, to now, in terms of the preparation you have to do in advance of a talk? Are you reusing a lot of your previous talks, or is that very heavily dependent upon the speaking engagements that you accept?
Rachel [0:17:01.4]: Yes, it does depend. At the moment I’m speaking a lot about CSS specification now, being involved with CSS grid layout. So I’ve got hundreds and hundreds of slides and information, examples, and bits of code and things, around this subject now. So if someone says, “Can you come and talk about grid layout and performance, or something,” I can pull together the right set of slides. If they say, “We need a real instruction for absolute beginners, they’ve never heard of this before,” I can pull together a bunch of slides. So there is somethings that I can very quickly put what looks like a new talk together, but it’s essentially just repurposing things. And then there are events where I’m going to have to write something brand new, and that is going to reflect in whether I say yes or no. Because if I think “Yes, I could write this talk, and then I could use it for another event.” then that’s more useful than something completely unique.
Mike [0:17:53.0]: Now, one of the challenges that I’ve run into, in terms of putting together a talk, is the fact that you don’t realize it up front, but making your presentation look good actually matters to some extent. And you don’t realize how much effort and work that takes upfront. Are you reusing the basic template that you have every time? I mean, obviously the slides themselves and all the information on them will change, but do you have a template that you use from one talk to the next? Or one conference to the next?
Rachel [0:18:20.2]: I have a couple of things; I’ve got a keynote template that a designer friend of mine did for me when she redesigned my web site. A lady called Laura Kalbag. She made me a keynote template that matched my site, which I use for some things. And it’s got some really good slides in there for showing code. The other thing I use is an application called Deckset app, which is an application that creates slides from a markdown document. And it has a bunch of very nice themes that you can’t really modify. You just use one of their themes. For the sort of talk where I’m not showing code, and it’s just like a bunch of points and quotes and images and things, Deckset works really, really nicely. So you can just sit there and write your talk in markdown, and then it kind of makes it look cool, and it’s very easy to use. You don’t have a lot of customization, but, to be honest, I’m not a designer, so that’s quite good.
Mike [0:19:11.7]: Yeah. I’ve found there’s definitely resources out there where you can just go out and you can buy a template for PowerPoint or Keynote, or whatever. Then use that template. And sometimes they’re really difficult to modify after the fact, but if you find one that has enough page layouts, then you can usually make your talk fit into those. And even most of them will come with a black page so that that way you don’t have to worry as much about it.
Rachel [0:19:34.5]: I think it’s making them clear so people can sort of understand what you’re getting across without being distracted by awful clipart, or things like that. I speak at design conferences and I’m not a designer, so I always sit there and look at everybody else’s slides and think, “Oh, they’ve got these beautiful slides and mine are all code.” But I think a lot of it is just making them clear, and not objectionable to look at.
Mike [0:19:58.9]: Taking another step back, when we talk about going out and doing public speaking, and using that as something as a sales channel for your product, is this an approach that you think can work for anyone? Or are there significant challenges that people are going to need to overcome?
Rachel [0:20:12.8]: It depends on the industry that you’re in. I mean the web design and development scene has a big, big conference scene. There are masses and masses of conferences every week. And so that’s an opportunity. If you’ve got a product which is for those type of people, and you’re able to speak, you’re able to come up with interesting things that people in that audience are going to want to hear about, then that can be a great channel. But that’s not going to map to every industry that every product is aimed at. If they don’t have a big scene of conferences and so on, it’s going to be much harder to find places to speak about things that are related that then link back to your product. So I’m quite fortunate. But I can imagine that quite a lot of people listening to this podcast have things that are of interest to designers and developers and people who freelance in those kind of industries.
Mike [0:21:02.1]: That brings up a really good point, which is that if you’re looking at this as a potential sales channel for your product then make sure that there is a critical mass, so to speak, of these types of conferences, or events, that you can go to and speak at. Whether it’s either locally or regionally, or even across the country or around the world. Because if you can’t get enough speaking engagements then you’re probably going to spend a lore more time doing the preparation than it’s worth. Because I think in your position you’re doing so many of these speaking engagements, and you’ve amassed such a wealth of previous slides that you can reuse, that you’re probably in a position where to do another speaking engagement isn’t so much about building the presentation and doing the set up and the preparation for it, so much as it is getting there and still being productive while you’re getting there.
Rachel [0:21:51.2]: Mm-hmm. Yeah.
Mike [0:21:52.2]: So if you were to go back and do this over again, what advice would you have given yourself when you were first starting out and doing public speaking?
Rachel [0:21:59.4]: Just to get on and do it. I spent an awful lot of time being this person who was scared of doing this. And so every time I did any public speaking I would, kind of, lose three days before because I was so nervous. And then I would be stressed about it afterwards, like, “Did this go okay?”, or I was shaking, and, kind of, really overthinking the whole thing. And I do think to some extent you have to do it in order to get over that. But I think I’ve never really seen anyone, even the most nervous of people, go down that badly; nothing like as badly as you ever think you are. And so it’s really not to stress so much, because if you’ve got something useful for the audience then they’re really with you. They want you to succeed. They want you to get your information across. And generally, it’s an enjoyable experience presenting, once you can get past getting on stage for the first time. So I think I’d tell past Rachel not to worry so much about it and just get on with it. And the more you relax into it the more your personality starts to shine through, and you’re able to really hone your presentation skills as opposed to just trying not to fall over.
Mike [0:23:05.9]: Sure. even from the audience perspective, nobody wants a given speaker to go down in flames, because really what they’re there for is to learn and be educated about a particular topic. Nobody’s going to go to a session if they’re like, “I hope this person fails miserably, or falls off the stage and breaks something.” But at the same time there’s probably some major drawbacks or challenges that somebody might need to overcome. What types of things would somebody run into when they’re starting down this path of public speaking?
Rachel [0:23:31.0]: I think just the general logistics of it. Coping with the amount of travel, because there is a lot of travel. I’ve spent a lot of time traveling about, and making sure that that doesn’t then negatively affect the rest of your business. That’s quite difficult. And I think, as I mentioned, I’m very organized. And you do need to be to do that. I think a lot of people end up doing an awful lot of this and essentially just burn out. Because if you’re a good speaker you will get masses and masses of requests in certain industries. As I say, I’ve turned down more than I’ve taken on, and I’m doing a huge amount of speaking this year. So it’s very easy to end up essentially just burning out. And I see that quite a lot. You see people start speaking, they’re really great, they get loads of invites, and then suddenly they drop off the scene because they’ve just become exhausted. So I think a lot of it is learning how to manage this stuff, and to not get so excited that, “Oh yeah, people want me to speak.” that you make decisions that aren’t sensible, either financially or just for your own health.
Mike [0:24:27.0]: Or you just overcommit yourself. I can see a situation coming up where somebody doesn’t want to disappoint a particular conference organizer, and they say yes to a speaking engagement when they have something that was just the day before, or ending, and the schedules conflict a little bit, and then they show up late or they miss a flight or something like that. And it can really impact the conference coordinator’s schedules.
Rachel [0:24:49.6]: I’m really sort of obsessive about planning these things. And I’ll sometimes pay for an extra night in a hotel just to make sure that I don’t have connection problems with flights and so on. Because I’m really, really concerned about doing things that are last minute. But that’s very much my nature. I’m not a last minute sort of person. I think you have to take care of yourself like with everything. And it can be a really great way to promote your business. It can be a very nice life if you enjoy traveling, which I do. But you do have to also be sensible around it, and work out how to protect yourself when you’re doing this. Because these events come with a whole load of stuff. You know, speak at dinners, and people who want to go out for drinks every night, and all this stuff, and just all the time shifting with travel. So you have to take care of your own health as well.
Mike [0:25:36.9]: One of the things that I can imagine might be a little difficult is dealing with feedback, especially in the early days when you’re not really used to, or comfortable with, public speaking. Do you get a lot of feedback from people, either positive or negative when you’re speaking? And does that contrast differently between when you first started out?
Rachel [0:25:53.7]: Yes, you do get feedback. You get feedback in all sorts of ways. Often the events have an official route for feedback, so you might get PDFs of scanned handwritten forms that they’ve handed out, or they might just send you the votes and things. I really don’t like the sort of feedback where it’s like, “Did you like this presentation, yes or no?” Because you never quite know why they didn’t like it, if they didn’t like it. And if you’re presenting on a controversial topic you probably expect 50 percent of the audience to disagree with you. And then, well do they vote, “I didn’t like this presentation because I disagreed.” or because they thought you were a terrible presenter. You never know. If they’re going to do official feedback, I like it if it’s a bit more broken down into the different aspects of the talk, because then it becomes useful. You get people who come and want to tell you all sorts of strange things after you’ve spoken. It’s a well-known fact among female speakers particularly that there’s always a man racing up to you afterwards to tell you off about something which was totally not really to do with your presentation, but they feel they’ve got to have something to tell you. That happens after almost every talk. You get used to smiling and nodding at that. Feedback is often really useful. You hear from people who say, “That slide, it wasn’t very clear.” or, “I couldn’t quite see your code examples on this projector.” and you’re like, “Yeah. I need to shift the contrast of those.” So it’s always useful stuff.
Mike [0:27:14.7]: One of the issues that we’ve run into with MicroConf is creating a balance in our surveys to people after the conference. You addressed this a little, or talked about it, but when you’re asking about a speaker, one of the things we have in mind when we’re requesting the people rate the speakers, is their rating based on how applicable the talk was to their business, or was it their impression of the person on stage. And those are two extremely different issues, and having just one score for somebody can really screw that up.
Rachel [0:27:46.1]: Exactly. I think for other conference organizers, I think that’s the thing is breaking this stuff down. Because someone could be a fantastic speaker, but they’re speaking about a controversial issue. And then it looks like they’ve got a very low score because people disagreed with them, but it was important to voice that, for instance. So, as you say, the content might not be relevant to a good chunk of the audience, if it’s a single track conference. But that’s okay, because sometimes you’re going to have to sit through things that aren’t relevant to you. The next talk might be. So it’s useful to have them a bit more broken down, because I’ve got a fairly thick skin at this point, but if you just get what looks like a bad mark and you’ve got no way of ascertaining what that was about, well it’s not helpful. You might as well have not been given that.
Mike [0:28:26.4]: Right. I think that if you look at scores in aggregate across the spectrum – like let’s say you only asked for one number from the audience for a particular speaker – when you’re looking at the numbers – let’s say that there’s a 100 of them, a 100 ratings – you, kind of, have to not just look at what the average of those ratings is, but also the distribution of it. Because if you’re given a controversial talk, you’re going to end up with some that are much higher and then much lower, versus if they’re all clustered in a particular region. So if they’re all between four and six, for example, then it’s very different than if you got a bunch of twos and threes, and then you got a bunch of nines and tens.
Rachel [0:29:02.3]: Exactly. And I think as well, there are some speakers who are so good at just presenting, that they really could come and present the phone book and people would give them a high rating because they’re just talented presenters. I don’t think I’m that person. I’m a good trainer. I’m good at teaching stuff and making things clear to people, but I’m not the inspirational speaker type. And it’s those types people leave going, “Wow, that was a fantastic talk!” I hope that people leave going, “I learned something there.” And that’s really where I am with speaking. I’m trying to pass on information; stuff I’ve learned.
Mike [0:29:36.5]: Right. And that’s actually something else to talk a little bit about, which is making sure that you know what your goals are going into these. Because it’s one thing to accept a speaking engagement. It’s another to figure out what it is that you’re actually going to be getting out of it. Whether it’s just stage time, or getting in front of your customers, or even just being able to put yourself out there so that you can leverage that in the future.
Rachel [0:30:00.4]: Yeah. I think it’s worth thinking about why you’re doing it. Particularly if it’s taking time away from your business and your family. Why are you actually doing this particular event? And certainly as I get busier and I get more requests, I have to think, “Well it’d be really nice to go there.” because I do love travel and I think, “Oh, if I got an invite to somewhere I’ve not been before.” there’s always a little bit of me thinking, “That’d be nice, I can go there.” But I have to think, “Is this sensible for the business?” Because even though I’m good at working on the road, it’s obviously taking me out of the office. And it’s going to have some impact, going and doing that event.
Mike [0:30:30.7]: So, we’ve talked a little bit about some of the downsides, and what the different challenges are that you need to overcome. Why don’t we end this on what are the advantages to becoming a public speaker?
Rachel [0:30:40.5]: I think I’ve learned a lot more confidence, generally, by doing this. As I say, I was really nervous of speaking, and now I’m able to talk really to anyone about our product. I can present things a lot more clearly from doing this. Whereas before I was always very much into writing things, and not so much into actually being able to voice them, which I’m a lot better at now. I mean, there’s just personal things. As I say, I never got a chance to travel when I was younger. I had my daughter very young, so I didn’t have the time in my 20s or whatever where I went traveling and did that sort of stuff. On a personal level I enjoy seeing parts of the world. I enjoy meeting people from different cultures and finding out about how they work and how their lives are. So that’s a personal good thing. And, as I say, it helps me to learn what people in my industry are interested in at the moment. Because that is vital to the future development for Perch. We could build as many features as we like, but if they’re not what people are currently needing, who are building Web sites, then we’re not doing our job. As well as people finding out about what I do, I get to find out what they do. And that really is probably the biggest benefit.
Mike [0:31:50.4]: I can definitely say that if you’re sitting in your basement or in your living room coding all day and you don’t get out of the house, then long-term effects are probably not very beneficial. But it does get you, not just the opportunity, but an excuse to get out there and talk to other people who are either doing similar things, or are in your target customer audience. Or maybe you’re part of their audience as well. So it’s nice to be able to just have those conversations and learn about people and their different perspectives.
Rachel [0:32:17.4]: Absolutely. And it does give you a platform for things you care about. And there’s a whole bunch of stuff outside of Perch. As I mentioned, things like the web standards stuff that I’ve done. These are things that I really, really care about, and have done for a long time. And so the speaking has given me a platform to talk about some of the things to do with the Web that I think are very important, and that need people speaking about them. So that’s a real sort of benefit that I get a chance to push; a bit of an agenda that I have in terms of things on the Web that I care about. So that’s cool.
Mike [0:32:48.4]: Excellent. Well, I just wanted to say thank you very much for coming on the show. If people want to learn more about you, or maybe see where you’re speaking, where can people find you?
Rachel [0:32:56.1]: I’m Twitter @Rachelandrew where I’m normally complaining about airplanes or something else. My web site is Rachelandrew.co.uk. And Perch is at grabaperch.com. And you can also find me on Lanyard, which is where all my speaking stuff is. And on Rachelandrew.co.uk/presentations is a repository of all my past presentations and slide decks and things. So you can see the sort of stuff I’ve spoken on in the past.
Mike [0:33:21.0]: Very cool. We’ll link all those up in the show notes. You also have a book, I believe. Is that correct?
Rachel [0:33:25.2]: Yes, I’ve got a number of books. The one most relevant to this audience is The Profitable Side Project Handbook, which I wrote really about how we got Perch to market with no money and without any real idea about how to launch a product when we started.
Mike [0:33:38.8]: Well you’ll have to send me over the link for that and we’ll link that up in the show notes as well. But I just wanted to say thanks for your time and really appreciate you coming on the show.
Rachel [0:33:44.5]: Thanks. It’s been fun.
Mike [0:33:45.7]: 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 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 on iTunes by searching for startups. And visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 289 | A Short Guide to Online Presales for SaaS & Software
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike give you a short guide to online presales for SaaS and software. Some of the topics they dive into include inbound leads, sales funnels, lead qualification, and general sales process for buyers.
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 how to do online pre-sales for SaaS and software. This is “Startups for the Rest of Us,” Episode 289.
Mike [00:17]: 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 the word this week, Rob?
Rob [00:31]: Well, I want to apologize to our listeners that the episode that came out last Tuesday, published five hours late due to just a minor scheduling mix up. But we received quite a few tweets and several emails asking where the episode was. I think that’s a good sign – right –
Mike [00:49]: Yes.
Rob [00:49]: – a good problem to have that people notice when you’re a few hours late delivering?
Mike [00:52]: I think so. I would like to attribute it to the entire New England area going dark from Internet yesterday but I can’t say that that’s really the case.
Rob [00:59]: Right. It had nothing to do with it, but the timing is really good – right? We have something to blame it on.
Mike [01:03]: Right, yeah.
Rob [01:03]: Yeah, it was really a bummer. You said – was it a couple of states had a major shutdown?
Mike [01:07]: Yeah, apparently Level 3 Communications – somebody cut a fiber cable, and it took down the Internet throughout parts of – let’s see here. It was New York City, other parts of New York; and then there was Connecticut, Massachusetts and Rhode Island. It affected Time Warner Communications, Cox and Verizon. Somebody cut the wrong cable, I guess, so, “We just cut a cable.”
Rob [01:28]: So, were you tethering to your phone all day, then?
Mike [01:30]: Yeah, pretty much, which kind of sucks; because I was a little worried due to the fact that I had a demo to do yesterday morning. I was sitting there, tethered to my phone and running everything through that. I had Skype running. I had my sales demo running; and everything, amazingly, worked well enough that it didn’t really make a difference. But I did burn through, like, 500 MG worth of data in maybe an hour.
Rob [01:52]: Yeah, that’s a bummer, because it’s two-way, real-time video; so it can’t be compressed, probably, as much as other things. It’s audio, and that’s a lot of data. Are you going to up your data plan for the month?
Mike [02:01]: No. I don’t think I have to, actually. I’m on the minimal 5 GB plan for each month, and I actually have that shared between my wife and I; but I work from home, so I don’t really use it very much and just dropped my data plan because I didn’t really need all the extra bandwidth. Then, of course, the kids come home, and they’re like, “We want to watch Netflix.” I’m like, “No.”
Rob [02:20]: “Not a chance,” yeah. That’s funny.
Mike [02:22]: Nope.
Rob [02:22]: Hey, I have a book and a movie recommendation this week. I’ve been listening to a lot of nonfiction books that aren’t business-related, and there’s a book called “The Big Short,” by Michael Lewis, that I listened to a couple years ago when it first came out. I like pretty much everything Michael Lewis does, and I was blown away by this book when I had listened to it years ago. Then I heard they’re making a movie out of it, but I was thinking, “There’s no way they can pull off this movie,” because the book is so complex, and there’s so much to it. Although the book is better, they did an amazing job, and I think the movie’s probably going to be up for awards, if it hasn’t won them already. I don’t even know when the awards shows are. Apologies about that, but amazing writing and acting and all that stuff. So, if you have time, I’d say listen to the audio book or read the book, because it will blow you away. If you only have a couple hours, then watch the movie, but it’s about the financial crisis – essentially, the housing crisis in 2008 – and how the bankers caused it and a bunch of players. There were three-different players who predicted it and bet against it. It’s called “betting short” – right – “going short” on it. Just the characters in it are amazing. It’s probably my favorite film I’ve seen in the past maybe year and one of my favorite books during the past year as well.
Mike [03:27]: Interesting side note here: I actually know Michael Lewis personally.
Rob [03:30]: Is that right? Where do you know him from?
Mike [03:31]: I have to put a little caveat on here. It’s a different Michael Lewis, who is also a writer, and there’s a little confusion there.
Rob [03:36]: Oh, got it. Nice. You know a Michael Lewis.
Mike [03:39]: I know a Michael Lewis. It is not that particular Michael Lewis, but he does often get confused with that. Of course, he’s got the name and driver’s license to back it up, so he could pull it off if he really wanted to, but I don’t know how long it would last. [Laugh]
Rob [03:51]: “The Big Short” – read the book?
Mike [03:52]: I have not. I did see advertisements and stuff for the movie, but I haven’t checked it out yet. It does look good, though.
Rob [03:57]: Yeah. It’ll rock your world. How about you? What’s going on this week?
Mike [04:00]: Well, I hired somebody to do some manual testing on Blue Tick a couple weeks ago, and they’ve gone through and started sending over bug reports. Most of it’s little stuff, like, “This field right here doesn’t prevent you from putting in as much text as you want,” which is kind of nice, because that’s the advantage of having testers who their job is to go in and break things. At the same time, it’s creating a lot of work for you that I would say is lower in the priority list for most of it, and it doesn’t necessarily do anything specific for the app other than make it more stable in the long run. So, when somebody goes in and tries to do something funky like that, the app doesn’t break under what the person is doing.
Rob [04:41]: What’s your thought behind hiring this person rather than either doing it yourself, or having developers continue to do it? The reason I ask I know developers are not the best testers, and you need a certain personality type because a lot of developers will just crank it out and then push the code. At Drip, we are ten people. There’s a couple of part-timers in there, but we still don’t have a dedicated manual tester. We’ve been able to get by pretty well without it. I’m interested in hearing your thoughts on why you’re making that move early.
Mike [05:09]: Sure. I’ll call it more of a safety net than anything else, because there’s a bunch of different ways you can go about testing. The reason I hired somebody to do it was because going through that manual profess was just time-consuming, and there’re certain parts of the application that I haven’t been able to get to the point where we can automatically test them either using unit tests or integration tests or anything like that. It makes it very difficult to go through that, because it’s just so time-consuming. For example – just something little – I’ll give you a prime example. When I was first starting to onboard some people, we went through and I said, “I need you to go over to this page and register.” Well, we changed the back end route for the URL where you go to register; but it wasn’t something that we ever went in and tested again after making that change, because how often do you go in and actually register? We actually have code in there that just automatically sets up the account so that you don’t have to.
When I first went in to onboard somebody, I found out that that was broken, and because we didn’t have the unit test in place, or a manual tester who would go through and just perform some of the basic functionality, I ran into that. Fortunately, I was able to fix it on the fly; but, again, I want to make sure that as we’re pushing things into production, those types of things don’t come up, that are fundamental issues that would prevent it from working. You can do a lot of manual testing, but as I said, it’s time-consuming. So, what our basic process is now is we’re going through. We’re implementing unit tests and making sure that the back end of the application is functional. Then we push it into a staging area, and then in the staging area the person goes through, runs some basic spot checks to make sure that the app itself is still completely functional on the front end – or at least mostly functional – and letting them know, “We changed this,” or, “We fixed this thing over here. Can you double-check it?” Then they check it in the staging area. Assuming he signs off on it, then we take that from the staging area and move it into production.
That’s it more than anything else. I think it’s partially a result of the fact that we’re using Angular on the front end, so it’s a little bit more difficult to do unit tests on front end Angular code mainly because we just haven’t set it up to do that yet.
Rob [07:11]: Yeah, that’s tough. When you have that much code on the front end, you’re right. It’s a lot harder to unit test it. I also think that you’re essentially using contract labor, and so your developers may not be as committed to making sure all the I’s are dotted and the T’s are crossed as when it was Derek and I working – and he’s known us since a co-founder – hacking stuff out and has a very high standard for making sure stuff works before it ships. I think there’s perhaps a different motivation there, so you need maybe an extra check in place to avoid having things breaking on you.
Mike [07:39]: Right. Like I said, it’s partly a time commitment thing. I found that I was spending a heck of a lot of time. I’d send something over to somebody: “Hey, could you implement this,” or, “fix this?” They’d fix it, and it’d come back to me, and then I would have to spend additional time going through everything that I just did in order to make sure that not only did that thing work, but it didn’t break other things as well. And there were times where that happened very early on in the process. It doesn’t happen nearly as much at this point, but with that staging area in place, it makes things a lot easier. It cuts several hours a week of my time out of that process. The cost benefit is certainly there.
Rob [08:13]: What are we talking about today?
Mike [08:14]: Well, we got a listener question in from Guy Lewis, and he says, “Hi, Mike and Rob. I’m wondering if between you, you have a best practice for engaging with B-to-B clients who make sales inquiries via an online business. I have experience in pre-sales face-to-face, but translating this into an email dialogue doesn’t translate well for me. So, specifically, I want to understand typically how much should your pre-sales people who answer online inquiries be pushing early for trials, or just being more relaxed and answering client questions, leaving the clients to reply and come back when they’re ready to engage more. Thanks, Guy.”
Rob [08:42]: To clarify right off the bat, this is from the time someone first engages with you – maybe they sign up for an email list – all the way up until the point where probably they do a demo. So, this is all pre-sales and pre-demo that we’ll be talking about. Mostly, we’re going to focus on SaaS and software sales. It might apply to other industries, but obviously these are the things that you and I are most familiar with and qualified to talk about.
Mike [09:05]: Something else to point out is that I think that in most cases, this pre-sales process is probably not going to be as applicable to something like an info product or any sort of education or training material. I will put a little bit of a caveat on there that says that if you’re selling something that is high-price, that may not necessarily be the case. This could be applicable to those situations, because you are probably going to be much more involved in vetting those applicants or those people who are contacting you in order to identify whether or not your product is a good fit for them; because you clearly don’t want to sell a product to somebody who they simply can’t use it, or it’s not going to benefit them. At the same time, you are probably going to have to go through some sort of pre-qualification process to make sure that, if you’re selling, let’s say, a $5,000 training product, it is going to be a good fit for them and you’re not wasting your time trying to track them down to get them to come to the table and pull out their credit card.
Rob [09:58]: Right, and I’d say this also applies to even lower-priced SaaS apps and software products where at least you’re willing to answer questions and engage via email manually, one-on-one; or, you’re willing to do maybe a pre-qualification phone call or something like that. If you’re selling really no-touch signup and you don’t even want to answer individual questions if someone has some specifics about their setup or how you’re going to work, then this won’t apply; but I think almost every SaaS app that you’d be launching today probably should fall into this. Even if your price is 10 or 20 a month, you or a support person should be willing to do some manual pre-sales email back and forth. Even if you’re not ultimately looking for a demo as the end result maybe you’re just looking to encourage to go to trial. Having some back-and-forth via email and answering questions and encouraging down the steps of the funnel should still fit into the paradigm we’re talking about, all the way up to folks who – let’s say you’re selling for 100 a month. Then, for sure, you’re willing to go back and forth via email; probably jump on a qualifying call 10 to 15 minutes, and then ultimately move towards either a demo or a trial.
Mike [10:58]: The first step in this process is to look at your inbound leads as essentially a sales funnel and try to set it up as a decision-based workflow. Essentially, what that means is that when somebody comes into that sales funnel, you analyze where they’re coming in and decide what to do when they enter that point. If they come in through this web form, do this. If they come in because they replied to an email, then do this other thing over here. Or, if they went over and they viewed your trial page and then they viewed your pricing page and then sent you a support email, do something else. The idea here is that you really want to take a step back and look at your entire sales funnel leading up to the point where they sign in and go to a trial as a decision-based workflow of some kind, and you map out all those different decision points.
Rob [11:46]: Yeah, and to get really specific with this, in essence, once someone signs up for your email list – let’s presume that they’re either opting in to get an email mini course, or a PDF tools list just to keep things simple. When you first start out and you’re just building this funnel out, that’s all you’re going to have, and you’re going to want to educate and give them topics and content that they can use without signing up for your tool; but the whole time, you’re mentioning that your tool makes it a lot easier or faster for them to do it. It will save them time and potentially save them money, or make them money. Then you’re doing a soft sell during this time. Might have a P.S. that says, “Check out our trial.” Or, if you really do want to do demos, if that’s your main focus, then you could have a P.S. that says, “Hey, interested in learning more? Click this ca-[?] link at the bottom of this email and set up a qualifying call,” if you’re doing qualifying calls before your demos. The way to decide to do that, it depends. If you have a lot of people coming in and you really want to qualify them, you should do the qualifying call first. If you don’t yet have a ton of people in your funnel, you can go straight to demo and just qualify them in the first five minutes of the demo and then end the demo if they don’t qualify. There are some very specific questions you can ask people to help that.
Beyond that, as you expand this, you’re probably at some point going to do a webinar. You’re probably at some point going to be creating some free content, or even valuable content. At Drip, we have two eBooks now, one of which we sell; and we actually sell real copies of it through Gumroad, and then we have a video course that we sell. These are all things that can educate and are valuable and that do give your brand some legitimacy, I guess. So, throughout the funnel – as you expand it; you don’t have to do this from day one – we then start pitching, and we say, “We’re going to give you these free eBooks.” “We’re going to give you this free video training,” which is a recorded webinar we’ve done at some point. Each of these touchpoints is an excuse to then say at the end, “If you’re interested, click this button and do” either whatever you’re looking for. You’re looking for a qualifying call, or you’re looking for them to sign directly up for a trial, or you’re looking to encourage them for a demo, or you’re going to qualify them. That’s a couple more specific ideas and thoughts about how to structure this front end piece of the funnel.
Mike [13:45]: And much of the decisions that you make there are going to be based on volume. As Rob said, if you only have a couple of people that are coming into your sales funnel each week, then it’s a lot easier to push somebody towards a demo, regardless of the price point because you want to be able to get information from them, and you really need to be able to gather some of that feedback in order to use that information for future efforts and to redirect your attention towards doing different things for those people. But if you have a ton of people coming in, let’s say you have a hundred a day, then your strategies for dealing with 100 people are going to be very, very different than if you were only getting one per day.
Along with that, what you need to do is you need to take a look at your sales funnel and map out, either using paper or some sort of flowchart software, and get at least an idea or approximation of how many leads you’re getting in from different places and what the decision points are for the customers at those points. One of the things that – I’ve done this myself in the past where I’ve set up some sort of a sales funnel, and if I don’t map out the entire decision tree, it’s very easy to lose some of the decision making along the way for the customer. If a customer gets to a certain point at the end of a particular email sequence, or in the middle of an email sequence, if you don’t have those calls to action mapped out, or at least documented some place, it’s very easy to forget that you either didn’t have one, or that it leads to a certain place. Then the customer just kind of gets lost, because you’ve lost track of them at that point and you didn’t take the time or the opportunity to redirect them in a certain place. Even if you did, what happens if they don’t? What happens if they do not take that step that you wanted? Do you just drop them at that point? That’s something to be very careful, of because you don’t want to have a sales funnel where these people are just dropping out of it because you didn’t give them a call to action, or you didn’t take into account the fact that they may not have gone in the direction that you wanted them to or expected them to.
Rob [15:35]: Yeah, and in terms of mapping out your sales funnel – in the old days, I used to literally map it out on paper and then scan it in. This is five, six years ago. I also used Vizio for a while. I think these days, I’d probably – a lot of people are using Gliffy, but these days people have moved towards building it in the app you’re using. If you’re using the right tool – let’s say you’re using Drip. You can use the workflows or using Infusionsoft. You can use their Campaign Builder. You can really build out a sales funnel visually in the tool that you’re using, so you save yourself having to keep documentation, essentially; because your documentation is this actual funnel, and you can move people in and out and have it all in a nice, visual flow.
Mike [16:09]: Yeah, that’s extremely helpful. What I tend to start with is just graph paper, and I’ll work on things from there until I get to the point where I want to finalize it and then move it into the app. But you’re absolutely right. Having that visual workflow inside of an app is very helpful in terms of being able to redirect people through your sales funnel. Even if you’re not actually using the tool for those people – if you have a workflow that you’re trying to move people through, even if they’re not actually doing it inside of the tool, if you just want to tag them or something like that, that can still be very helpful for helping to determine where people are going. There’re similar things in other tools, such as Pipedrive, for example, where you can just people through a sales funnel. They’re not quite the same, but it is helpful to see it visually.
Rob [16:51]: We also have several workflows that are in draft that we use more as documentation than as actual production use. Someday they will be in production, but we use it as reference.
Mike [16:59]: The third step is to take a look at your price point and the complexity of your products in order to determine how to proceed for the business. If you have a high-price-point product, or it’s a complicated product, or if it integrates into a core part of the customer’s business, then taking people and trying to push them into a personalized sales demo is probably going to work out a lot better than sending them directly to a trial; because the communication medium for a phone call or a demo is much different than it is if you’re just trying to engage with somebody through email. If you send them an email, it’s very easy for those things to get lost, or for people to glance at it and not really take in some of the subtle nuances that you’re looking for them to understand. In any sort of business or product where it integrates highly into the business, it makes much more sense to try and get those people into a call of some kind so that you can have those conversations.
At this point, you really have to ask yourself what’s the best or most cost-effective way in order to move somebody towards making a purchase. Just keep in mind that I didn’t say “into making a purchase”; I said “towards it.” There’s a very key distinction there in that you want to move them along the path but you don’t necessarily want to force them. There’s a couple of different reasons for that. One is people don’t like feeling as if they’re being forced into buying a product, or feel like they’re being pushed; but at the same time, you also need to make sure that you’re giving people the information they need in order to make a good decision. And that good decision might be something that they can make immediately, but it might not be something that they’re comfortable with for a week, or three weeks, or even three months. It really depends on where they are in their buy-in process.
Rob [18:32]: At Drip, we used to encourage everyone to sign up for a trial, and then while they were in their trial we would try to contact them and help them get onboarded. We would do calls at that point, if needed. Then about – really, it was over a year ago now. We switched to where we have two different calls to action, and people can choose to either start a trial – because some people like self-serve. I actually prefer self-serve and to dig in and figure stuff out on my own, but a lot of people like to see demos. If you go to the Drip homepage, you’ll see at the bottom it says “Start a trial” or “Schedule a demo.” Then we have a whole funnel to submit yourself to schedule that demo. What we found is that, initially, like the first month, it was a hit to our trial count; because there were enough people that were hitting that demo button that weren’t clicking the trial button. But over time, the people who clicked the demo and actually showed up are way more qualified when they sign up; and once they get inside the app, they’re more educated, and they’re more likely to actually convert. So, it can be good to give folks a choice if you’re on the edge.
We’re email-marketing software, and some people are experts, and they just want to get in. They don’t want to be forced to go through a demo. There’re other funnels where you really need to go through a demo before you get in the app, because you’re just going to be lost, and your trials – they just aren’t going to convert by themselves. That’s what you were saying, Mike, when you were talking about if it’s an extremely complex product, or fits a high price point. There are certain things to it that you’re just going to need to educate. Even if your product’s not complex, but if it’s complex for the audience – like, if you have realtors who aren’t super good at, let’s say, project management or something; and you have a management tool for them, or a process management tool, you’re probably going to want to do demos with most of them; because a lot of them are not going to be technically oriented enough to just be able to get up and self-start. you’re going to have to make a judgment here as to whether you give people a choice, or you force them down one path or another.
This is part of optimizing your funnel. We talk a lot about getting to product-market fit, and product-market fit is when you get that product that everybody wants to buy, and people really will convert and stick around. The next step after that, or the thing you’re doing at the same time is you’re trying to figure out – it’s almost like sales process or sales funnel market fit where you’re trying to optimize that to reduce friction and to figure out what works the best for the people who are coming to you and for the leads who are coming to you. What is what most of them want? And then try to help guide them down that path, and that’s really what we’re discussing here – is the discovery of that and then the architecture of the funnel as they come through and start to become pre-qualified.
Mike [20:55]: Let’s talk a little bit about the general sales process for people who are making purchases. The key thing that you want to try and do here is to be able to identify where that prospect is in their buying process. This ties a little bit back into what Rob was just talking about where he was giving people the option to either take a look at a demo, or to start a trial immediately. There are a couple of different stages here. The first one is awareness. In the awareness stage, are they even aware that there is a particular problem they’re experiencing, or that there are other solutions that are available? The next step in this process is nurturing. Do they even know enough about the nuances of the problem and the solution that you offer? The third step is qualification. Are they a good prospect for you to start going after, or to even use your product at all? The fourth one is evaluation. Are they looking at the different options that are available and deciding where they are going to spend their time, either doing a demo or a trial – taking a look at those things and really deciding whether or not they’re going to not just move forward with a purchase, but taking a look at the different competitors and figuring out which one is the best for them? Then the last one is actually making a buying decision, which is purchasing.
Try and identify where the prospect is in their buying process. You can use what your inbound funnel looks like to some extent to help figure that out. If they come to you and they’ve started a trial, for example; or, they’ve come to a demo, you know that they’ve come to that demo and they are probably past the awareness stage. They’re probably past the nurturing stage. You don’t need to send them additional educational material. That said, depending on what their questions are, you may need to send them some more stuff. You may need to send them some more educational information, but those different touchpoints that you have with them are going to be key pieces to trying to figure out where they are in that buying process and then adjusting where they end up starting into your pre-sales funnel.
Rob [22:44]: Right. It’s easy to assume that when someone first signs up for your list that they’re in the awareness phase. That’s not always the case. You may have someone who already knows about your product. They already are comparing it to two or three other options. They have a short list. They’re a savvy buyer; and really they’re in the third phase, the qualification phase, already. This is where having not just some email marketing tool, but actually some type of nice marketing automation tool where someone can click a link and jump ahead, or they can opt to get quicker to qualification, or quicker to a demo, or quicker to trial is actually really, really helpful. In the traditional roles, marketing is the first three that you mentioned. Marketing is essentially awareness, it’s nurturing, and it starts qualification. Then sales tends to pick up at qualification and then helps with evaluation and purchase. So, again, depending on your price point and your complexity, when marketing hands off to sales, that first piece that sales needs to do is qualify them. They’ll be partially qualified through how they’ve interacted and how they’ve maybe filled out a form, or what you know about them; but at a certain point, you’re really going to have to dig in and start asking some actual questions in terms of who they are, what their usage is like, who they’re evaluating you against, etcetera.
Mike [23:53]: That said, let’s talk a little bit about the lead qualification process, because that’s really where the core of this particular episode is headed. You really need to be able to qualify those people in order to determine how it is best to treat them inside of your sales funnel.
There’s a couple of different things to lead qualification. I think the differentiation between two different types of qualification is that qualification can either be explicit or it can be implicit. It depends a lot on whether you need to speak with those people directly. How do they come into your sales funnel? Is it through an email list? Is it through a webinar? Did they fill out a simple form that just asks for their name and gave a text box for their phone number? Or, did you have this two- or three-page application process that they needed to go through in order to submit that to you so that you could take a look at it and review it? Depending on which of those mechanisms you’re looking at, you can decide whether or not that’s more of an implicit or an explicit lead qualification. If they filled out a giant, lengthy form, then that’s pretty explicit. You’re going to be able to get a lot more detailed information. If they just signed up for an email list, it’s much more implicit, and you can’t really judge just yet whether or not they’re going to be a qualified lead.
Rob [25:04]: The most important part of lead qualification is you’re trying to figure out is it worth your time and is it worth their time in continuing the conversation. You’re trying to be mindful of both of your resources and schedules in this, because if they’re not going to get value out of the product and it’s going to be a bad experience for them, then you’re wasting both of your time in this. The key thing that we found is to figure out a short list of qualifying questions, and that’s something you’re going to have to develop over time. You’re going to start intuitively, and then over time you’re going to see patterns. Get those into a doc as soon as you can so that you can ask the same questions the same way every time and then slowly split-test those questions with others and figure out what it is that essentially – there’s certain things that you shouldn’t be doing with your tool at all, so you’re going to learn over time.
I’ll give you an example. With Drip, we get multiple people per week jumping on demos, and the first thing they talk about is how they have a purchased list, or how they have a list of people that they’ve scraped from the Internet, and that’s called “email outreach.” While that’s perfectly acceptable in some tools, it’s not in tools like Drip, MailChimp, AWeber and Fusionsoft. We’re for warm leads, and we’re for nurturing once people have opted in to hear from you. That’s an easy pre-qualifier for us – a disqualifier, I would say. To just be able to say, “Tell me about your list.” “Where’d you get it from?” “When was the last time you emailed them?” You talk that through. We have very specific things.
You’re going to learn what that question is for your tool. How are people accidentally – because it’s not malicious. They just don’t know. They see “email tool,” and they feel like they can just put whoever in that they want. So, figure out what those questions are to disqualify folks early on, as well as the ones that will really qualify them well. You might know that you serve SaaS businesses and people who are bootstrappers, people who have raised funding, or info marketers, or bloggers. There’s going to be a group that you serve really well. Figure out if they’re in that or in the periphery and can fit your use case. If they’re not, it’s really nice for you to have knowledge of your space and be able to actually recommend them out to a tool that is going to work for them; because, again, it’s a matter of using your time well and using their time well.
I heard [Sully Efty?] say this. You don’t owe a demo to anyone. You don’t, and you don’t want to use your 30 to 40 minutes of demo time on someone who you know is not going to get value out of this. So, if they’re qualified, then do it. If not, then you’ll figure out some key phrases to basically politely encourage them that you’re not the right fit and, hopefully, recommend another tool that might be a better fit.
Mike [27:27]: A nice side effect of going through this process and really taking a hard look at this information and what those qualifying or disqualifying questions are is that those can also be used on your website and your sales collateral and your marketing collateral to help guide the people who are going to be a good fit into your sales funnel, and further down, versus trying to push those people away. There’s a couple of different ways that you can push those people away. Maybe, as Rob said, you recommend somebody else’s product for them. In that particular case, if they came in and they have a purchased email list, for example, then they’re not a good fit for Drip. Is there another product out there that could be recommended, or another mechanism that could be used for them to use that list? Those are different ways to down-sell to some extent, or to just provide them with value such that if they come into a situation in the future where they could use your product, then it would be a better fit and they can come back. At the same time, if there are lower-tiered opportunities for offering different products, or lower-price products; or, if they’re a do-it-yourself type customer, can they buy a lower-tiered version of it and do everything themselves? Or, if you have a higher-priced consulting product, maybe they’re a good fit for that. Depending on where they are, what you’re doing and how they fit into that, you’re going to be able to start pushing them – probably “push” is too strong a word, but help guide them in one direction or another based on what it is that you offer, what it is that they’re looking for; and be able to answer those questions pretty concretely.
Rob [28:54]: Another question you want to think about is: would this lead perhaps be better served with a lower-tiered or lower-priced product? Are they a DIY type? Are they not a good fit for you at all due to one of these disqualifiers? Would they be better served either by a competitor or even another class of tool, or even just staying with paper and pencil? Sometimes, we’ve had people to purchase who are doing – he was just getting an email started, had zero people and was going to do something with bars or restaurants and get the owners to sign up. Then he was going to send emails manually. It was just a really manual thing, and we realized, “You know? Maybe just have, like, a Google Doc or an Excel spreadsheet, or even just a paper signup form and then send the emails yourself manually until you prove this out. Then if things work, you can look at a tool like Drip, or even a free account with MailChimp for a little while, if you’re really just sending small broadcasts.” Often, especially people who are just getting started, they may have more of a need for a lot of support. You have to use your judgment. The people who are going to pay you a lot of money tend to be the ones that are more tech-savvy, and they’re further along, so they’re going to tend to be less supportive and definitely worth any support time you have to spend with them.
This is an evaluation piece you have to do early on. In your road and your journey of your product, you’re going to want everyone, and you’re going to learn who are good fits and who are not. Then you refine this over time. As it goes further on, dealing in volume and just getting a lot of people using your platform may not be the right play for you, especially if you’re a bootstrapper; because supporting someone at a $29-a-month plan, they’re going to be more likely to churn, more likely to be unhappy; and they’re often going to need a lot more support than someone at the higher end. So, a qualification is not just can they get value out of the tool, but it’s is it a good mutual fit in both directions.
Mike [30:39]: One of the things that you had mentioned in there was how far along are they. I think that there’s two, different aspects to that. One is how far along are they in the life cycle of their business. Then the other side of it is are they already performing the tasks that your tool is offering to them today, and they’re doing it manually versus are they looking at potentially using it to start doing that. So, if they’re already entrenched in doing that; they’re doing it today, but it’s painful, then your tool can certainly help them out, versus a situation where they look at that and say, “Well, I’d really like to try that out, but we haven’t done it before.” Those are two, very different types of customers. I think that the people who are already doing it today, they’re much easier to sell on it. They’re much easier to work with because they know exactly what they want and what they’re looking for, versus the other ones where you are probably going to do a lot more education with them to help them figure out how to solve that particular problem, because they’ve never run into any of the challenges before because they’ve just never done it.
Rob [31:33]: I think the bottom line is that the majority of pre-sales is really to identify where someone is in the buying process and give them the right information that they need that’s relevant to that step. I think in most cases, a quick phone call tends to be the best if you have the bandwidth to do that. Then in other cases, if you don’t have the bandwidth, you can try to do it via email. Probably not as successful, but some people will prefer email. So, giving them either option, I think, is the ideal way to do it. Your results may vary depending on how much time you have to do it and how good you are at talking to people on the phone and how interested you and/or your team are in doing that.
I think that’s going to wrap us up for today. We designed this whole episode around a listener question. If you have a question for us, you can call our voicemail number at 8-8-8-8-0-1-9-6-9-0; or, email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. Subscribe to us in iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening, and we’ll see you next time.
Episode 287 | 5 High Leverage Areas Bootstrappers Should Focus On
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about five different areas bootstrappers should focus their time on. You’re not going to have time to do everything and some things should be a lower priority.
Items mentioned in this episode:
Transcript
Mike [0:00]: In this episode of “Startups for the Rest of Us,” Rob and I are gonna be talking about five high-leverage areas bootstrappers should focus on. This is “Startups for the Rest of Us,” episode 287.
Welcome to “Startups for the Rest of Us.” The podcasts help 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 Mike.
Rob [0:24]: I’m Rob.
Mike [0:25]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week Rob?
Rob [0:29]: Well, week’s going pretty well. I had about two and a half hours yesterday that I totally killed because of the way that Gmail forwarding works, and the way that it’s really smart and it knows if, like, another Gmail account can send as a certain email address, and if you try to send from a Gmail account to itself as a different address that it won’t send the email. And I had like two or three Gmail accounts and I was trying to troubleshoot all of it, and I won’t to the vast complexity of it, but it was this funny string of, “Man! These things are not forwarding. Google Apps doesn’t work the way I thought it did.” There was a certain forwarding setting that I had set and it just wasn’t working. And two and a half hours later I finally realized, “Oh, it’s because Gmail knows that the other Gmail account could send as that thing, and so therefore it wouldn’t forward the email along. And by the time I had someone else in my office send the email and then it all worked it was like two and a half hours later. So, it was kind of a bummer.
Mike [1:26]: That sucks. You could have asked me. I would have told you that.
Rob [1:28]: Yeah. Well, I knew how it worked with one account, but it was that there were these three accounts that were linked in this chain. To be honest, moving from DreamHost to Google Apps to manage our email has been a fairly seamless transition aside from the upfront work, but just not knowing the interworkings of how it’s gonna do some things, and there was an email that got lost, it instantly made me suspicious. I just hate being on new systems where like you don’t quite know how everything operates and interacts. They aren’t necessarily bugs, but they are like, features or odd behaviors that [crosstalk]
Mike [1:59]: Yeah. They’re little quirks.
Rob [2:00]: They are. That’s what it is, you know, just legacy of how they were built type of thing.
Mike [2:04]: Yeah, I’ve seen that myself. I think the way that I got around it was that what I did was I would send the email and, inside a Gmail, I would have it send through an external SMTP server that would then, basically forward that email back.
Rob [2:17]: That didn’t work. I did that.
Mike [2:19]: Really?
Rob [2:20]: Yeah. It’s exactly that. That’s why it took me two and a half hours, because I was like, “There’s no way it knows.” but it did. It’s crazy. There’s a bunch of technical detail that doesn’t make sense. The bottom line is I killed two and a half hours and I should have just assumed that Gmail was smart. Because that’s really what it is. I mean, when I actually look at it, they built it pretty intelligently. I just didn’t expect it to be that knowledgeable of a separate Gmail account and that it would know who was sending as.
Mike [2:45]: Yeah, I just don’t understand why they prevent you from doing that to begin with. That doesn’t make a lot of sense to me. I don’t know why. Maybe there’s some weird technical thing on the back end, and it might have been something that was early on and then at this point, they’re just like, “Well, it’s not broken so let’s not bother changing it.”
Rob [3:00]: And I also wonder if they’re trying to keep infinite loops from happening, where you like forward from one account to another and then if you were to forward back it would infinite loop back and forth or something? This behavior would avoid that, and so that’s part of why I think they might have done it.
Mike [3:13]: I guess, but at the same time those would be rules, not necessarily like an active send. If I literally send an email, or if I send it, it should send it. It shouldn’t matter what other rules and stuff are in place, and they should have stuff in there. Like if they’re smart enough to do that, they should be smart enough to detect whether or not there’s gonna be infinite loop of forwarding back and forth. It’s six to one, half a dozen the other. It’s like you can solve it in one or two different ways.
Rob [3:35]: Perhaps, but I know that the forwarding can get really complicated and have like custom rules and all that stuff. So they would have to evaluate those on both sides. That would actually be a lot more complicated I think, then just having –
Mike [3:46]: Google.
Rob [3:46]: – the flat. But do they want to waste their time on that, or do they want to be like be shooting rockets in other space?
Mike [3:52]: Or making us all live to the end of time.
Rob [3:54]: Exactly. That kind of stuff. How about you, what’s going on this week?
Mike [3:57]: I on-boarded another customer this week and I am unfortunately not gonna make my deadline of having everybody onto Bluetick by the end of the month, but I am at least making steady progress to it. And the app is getting more and more solid each week that goes by. So my self-imposed deadline of having the app completed was back at the beginning of this month –
Rob [4:16]: Right, and you hit that.
Mike [4:16]: Yeah. The thing is it was completed, and it was largely functional, and we’ve spent the past several weeks cleaning up a lot of the rough edges and double-checking to verify certain things; that everything’s working. And then anything that’s not working, we’re going in and fixing it more or less as I onboard people. Initially it was just, get at least one or two people onto the system, find out where they’re stumbling, and basically I’m just kind of watching over people’s shoulders as they’re going through. I watch them sign up for the app. I watch them configure everything, I watch them as they struggle through the interface and take notes about pretty much everything that they’re doing so that that way I can go back and log new cases and say, “We need to fix this.” or, “We need to move this over here.” or “Make this more clear.” or “Change this text so that if there’s any questions about how something works.” Some of it’s just very simple stuff that you wouldn’t necessarily think of, and it’s just adding some explanatory text is what will fix it, or changing a text on a button. All of that stuff is pretty simple to do. It’s just a matter of knowing that you have to do it. So watching over their shoulder really helps with that.
Rob [5:18]: Yeah, that’s really cool. I mean that’s the benefit to being so hands on in these early days. So, you said you’ve on-boarded another customer What’s your total customer count up to?
Mike [5:25]: I’m up to three and I’ve got another one scheduled for this Friday, so I’ll be up to four. I actually don’t know what my preorders is up to at this point. It’s somewhere between 16 and 20.
Rob [5:36]: Nice.
Mike [5:37]: I don’t know exactly. So that’s kinda where things are at, and I’m hoping over the next couple of weeks I’ll get everybody else on-boarded and start working through the issues. I mean, we’ve already redesigned a bunch of the navigation to make it easier to use, and easier to kind of pop through the screens and do what you need to do. And then a lot of the other stuff is just adding in little bits and features that people need. And one of the things that I really wanted to have operational on day one was Zapier integration, and the person I put on-board yesterday they were able to do that. We wired everything up, connected to a form on their website, sent everything directly through, automatically added them to an email sequence and made it so that they could start sending those emails, basically automatically. It was really kind of awesome to watch.
Rob [6:17]: Yeah, that’s fun. It’s fun to get some real people using it. Have the people you on-boarded actually started sending emails? Are they using it for production use?
Mike [6:25]: Not yet. That will probably be next week. So right now they’re just kind of going and putting it through its paces internally and testing it with just test email accounts, and then I think next week I know of at least one person who’s gonna start using it in a production capacity assuming that everything goes well this week.
Rob [6:40]: Cool. And are they on a trial basis where you’re gonna touch base and find out when they’ve got value, and then you’re gonna charge them for they subsequent month or is it a predetermined timeline, in terms of the trial length?
Mike [6:52]: Yeah, it’s not a predetermined timeline. It’s essentially when I brought them onboard I had them give me a preorder. I took their money and then said, “Look, I’ll work with you through the onboarding process, and if the very first day you can say it’s providing value, great. I’ll apply a credit for however much you gave me and then in X number of months, I will charge you again for that “first month of service” which is, in reality, like three or four months out. But if you can’t say that for six weeks, or for eight weeks, or 12 weeks, then we’ll just keep working with each other until you get to the point where you can say it’s providing value and then we’ll do that. So, they’ve kind of paid already, but I’m not actively charging them more if that makes sense?
Rob [7:32]: Yeah, no that makes sense.
Mike [7:33]: But I don’t have a specific timeline. I mean, I would be disappointed if it took like eight weeks for people to look at it and say, “Yes, I’m getting value out of this.” because then it would mean that there were a lot of things that I got wrong, and I don’t think that that’s the case.
Rob [7:45]: Yeah. That makes sense. That’s how we did it with Drip as well, when we on-boarded those first ten or eleven early access users. I was just so high-touch, and just so aware of what everybody was doing at that point, that at a certain point I was like, “Man, they sent a broadcast to 5,000 people, and got this open rate, I have a feeling they’re getting some value out of this.” So it was purely based on me just circling back every week and reviewing everybody’s activity rather than having a predetermined trial length. And then I went and used that data to then inform, “How long should our trial be? Does it need to be 30? Can we do 14?” And obviously we settled on 21-day trial, but at this point learning and just getting people using the app is more important than the money as long as the people are willing to pay you in the long-term, because you want the right people using it who have money, who aren’t going to be perpetual free users. I think you’re on the right track with that.
Mike [8:34]: Yeah, and that was the purpose of taking that money upfront. It’s more just to maintain an affirmation of commitment than anything else.
Rob [8:40]: It’s a token, yeah. So if listeners are interested in seeing what you’re up to they can head to bluetick.io, and I guess they would sign up for the email list there and you’ll be in touch once stuff’s ready.
Mike [8:51]: Yep. That’s right.
Rob [8:52]: So, how about today, what are we chatting about?
Mike [8:54]: So, today what we’re gonna talk about is different high-leverage areas that bootstrappers should focus on. And I kind of came up with this idea because I’ve been personally buried with just tons of different things that need to be done, and what I’ve realized was that I was kind of going down the rabbit hole in certain places. So, I kind of took a step back and thought about what I should be doing versus where I am spending my time, because I track my time using RescueTime so I’m able to go back and see exactly what it is that I’m doing, and how much, and things like that. It seemed like kind of an appropriate topic to talk about and to share with people. I did a little bit of research when I was taking that step back, and so this is loosely based on an article from Fortune magazine which we’ll link up in the show notes. It talked about five different ways that CEOs should spend their time.
Rob [9:40]: And before we hit record, we talked a little bit about how really these five areas are aimed at more full-time bootstrappers who are trying to grow a business. So right now if you’re nights and weekends, or you have something that’s on autopilot, this probably isn’t gonna be as relevant. It’s more for people who are gonna be hiring some contractors, potentially employees, at some point and who are really thinking of building something that they want to grow and are investing in it. And you know, it’s funny, I’m not sure that it needs to be full-time, but it’s like if you’re hitting it hard and you’re investing time and money into it, and are heading for growth, I think this is gonna be in line with what you should be focusing on.
Mike [10:15]: Yeah. I think the other thing that factors into it is making sure that you’re spending time in the right places and you’re not overworking yourself. I think that that’s an easy trap to fall into if you’re doing something where it’s just taking and consuming a ton of your time and you don’t really have a lot of free time to do other things to kind of wind yourself down. And what I found was I was spending just vast amounts of time working on some of this stuff, and quite frankly some of it I just didn’t need to be doing. It was better left to other people. But at the same time there’s this core group of things that just needed to get done that I’m kind of the only person who could or should be doing those things, and it’s just a matter of balancing those things and making sure that not only do they get done, but I don’t burn myself out in the process.
So before we dive into these, one of the things that I wanted to point out is that I think that it’s a mistake to think that as a small company you can do everything right that the big companies get wrong. I remember years ago when I started my own company I looked around and said, “Well how are they still in business? How is it that they can sustain themselves when they do this laundry list of things wrong?” At the time I remember promising myself that I would never act like that and just drop things on the floor. And with time comes a little bit of wisdom, I suppose, and I’ve realized since then that it’s very difficult to not just drop some things. You can’t always move everything forward. You’re not always gonna be able to pay attention to the smallest details, and there’s gonna be things that get dropped. And that kind of goes along with this particular podcast episode, because there’s gonna be places where you should be spending your time, and then there’s gonna be places where they’re gonna be lower priority. You’re gonna have to neglect them a little bit. So with that said we’re gonna kind of dive into these five different areas. The first one is strategic planning. Under the umbrella of strategic planning this includes things like: your business roadmaps, your product roadmaps, the vision of where the company is going and how it’s going to get there. And along with those things you have to have at least an idea of what it is you’re trying to accomplish, and what the timelines associated with those are, because if you don’t plan those things out and figure out how you’re gonna get there then it’s gonna be difficult to achieve those goals.
Rob [12:21]: There’s a concept from the E-Myth where the author says that, “A technician thinks about today. The manager, who’s one step up, thinks about this week. And the entrepreneur thinks about this month, or this quarter.” That’s where this strategic planning comes in. You have to be thinking out three to six months, and thinking about what features are going to need to be built? What marketing approaches you’re going to need to take? Do you have the cash? Do you have the personnel – whether it’s contractors or full-timers. And really where is the whole space headed if you’re in a competitive area? How you’re going to react to things that other people do? I mean, there’s a lot to be thinking about in this kind of umbrella of strategic planning and vision, and no one else is going to do it. This is really a founder level responsibility, because everyone else is focused on getting stuff done day to day. And this is actually hard to do in the very early days when it’s just you, or you and one or two other people, because you are so focused. You are a technician, and manager, and the entrepreneur. And those are the hardest days in my opinion, because you’re just trying to get the support tickets responded to, and get the next feature built, and get the next page of documentation written. But as you’re able to fire yourself from some of those roles, meaning that you hire good people to take them over – so suddenly you’re not responding to the support emails, you’re not writing the KB articles. This is all stuff I was doing two and a half years ago as we launched Drip, and I’m not doing any of that anymore. Once you do that you find that you free up more mental space to start thinking strategically, and this is where you spend time taking in outside content basically. This is why I do listen to a lot of audio books and podcasts, and I keep up on what’s going on in the email marketing space and marketing automation and marketing technology in general. And I have time to do that because I’m able to essentially delegate all the tasks I used to do, kind of the technician and more hands on stuff. So, you have to make a decision here. If you want to stay small as a one or two person, and you want to keep writing code, that is totally cool. But you do need to fit some time in your week to do some strategic planning even at that level. Then if you do plan on getting bigger, and becoming, let’s say, five, ten employees, you will want to start to move back from some of the more hands on roles.
Mike [14:35]: And I think that’s a difficult line to draw in the sand, and you eluded to it early on when you said that in the early days you are acting as both the implementer and as the manager. And it’s very easy to get sucked into all the short-term stuff and ignore the longer term stuff, thinking “Oh, it’ll just sort itself out.” and you won’t need to think about it, especially if you do really well on all the short-term stuff. And that’s not the case. I mean, because there are definitely times where you need to take a step back and look up to look to figure out whether or not those short-term things that you’re working on are even relevant. Do they even need to be done? And sometimes they just don’t. Sometimes the things that you’re doing short-term make absolutely not difference whatsoever, and it is better to leave them alone and walk away and essentially let them fall on the floor and do something else, because it makes more strategic sense to go do something else. The second high leverage area is to focus on communicating. And there’s three different place where communicating is applicable. The first one is talking to your prospects. When you’re talking to people who are looking at purchasing your product, or using your product, they are going to give you an indication of where the market is headed and where things are trending. The second place where you should be communicating is with existing customers, because they’re going to give you an indication of where they’re at with their business and how you can better serve them in the future. Presumably, those customers are growing, and if you are able to grow your app and meet their needs in the future, then that means that your customer base and the relevance of your app to that customer base – whether they are small or as they are growing – is also going to increase. So, it essentially increases the breadth of people that your app is applicable to and gives you essentially a wider market that you can tap into. And then the third place where communicating is really important is communicating with your team. And that is to essentially make sure that they understand the vision of the product, the business, and where the company’s headed, how you intend to get there, and all the timeline things associated with it; the roadmaps, the goals, the milestones, etc. They need to understand what the priorities are for the business, and if you can’t communicate those things to them effectively, in a way that they are going to understand and be able to relate to, then it’s going to be very difficult to get them to all go in the same general direct. What you’re going to end up with is a lot of people who are either going off into the weeds, or are working on things that are simply not relevant, and you’re going to get frustrated. It’s very easy to assume that because you’ve been involved on all these conversations with customers and prospects and all the different people that you have working for you, that other people know those things. And that’s definitely not the case, especially if they’re sitting there, heads down, writing code, and they’re not talking to the customers. They’re essentially relying on you to relay that information, and if you’re not communicating it with them how could they possibly know that information? So, this is where communication with your team is just as important, if not more important, than communicating with your prospects and your customers.
Rob [17:25]: Yeah. That third part is about communicating your vision. It’s the vision of the company and where it’s going. And, like you said, what the timeline looks like. And I find that thinking out 90 days, in a pretty concrete manner, and kind of having a pretty set up roadmap of where we’re going, is a good place to start. Things change so quickly that past 90 days, for me, it’s always murky. And I know as you get larger, if you’re a 20 person company, you probably need a roadmap longer than that. So, at this point, with Drip, we have ten people working for us. A couple of them are part-time. But, still, a 90 timeline has been plenty. And looking out beyond that it gets a little murkier, but I do have bulleted lists of where I want to see the product going. And what’s interesting is Derek and I will talk about it and come up with what’s happening, and then we have a weekly team meeting where we’re able to communicate that to everybody and give them an idea. And I feel like since everyone is doing their day-to-day job, and they’re busy just cranking out content or doing demos or cranking out new features, they aren’t necessarily thinking about the higher level of like, “What are we building?” And that’s where, as a founder, you need to bring that up to the higher level and summarize it to people. Like, “Did you guys notice that all we’re doing right now is a bunch of UX stuff?” or, “All we’re doing is performance?” or, “We’re building this big feature that’s going to take three to four months.” And communicating it back to them in the way that you see it so that it can lend clarity to them and they don’t just feel like they’re doing all these little tasks, but there’s a higher level strategy to it. And I think there’s a lot to be said for that. And it doesn’t need to be some big leadership ra-ra thing at all. It can just be getting feedback from everybody about what they’re seeing, what they’re hearing from customers – because assuming you’re not the only person talking to customers – and then communicating back to them the current vision for the company. So I think as you get bigger – like say you were a 30 or a 40 person company – you’d split these roles, and the person who’s maybe hearing from prospects and customers would be like the CPO. I think the CEO needs to keep communicating to the team because it’s just so important to keep that ball rolling.
Mike [19:23]: The third area bootstrappers should focus on is researching and testing marketing channels, or at the very least finding ones that are working really well and then doubling down on them. And again, this goes back to what we had talked about very early on in the episode about how not every business needs to go through fast growth. Or some of them just simply aren’t capable of it. But if you are in that situation where you are trying to grow the business, what you’re doing today may not get you to where you need to be, or where you want to be. And some of these new sales channels are going to be very critical to growing your company. Another thing that you have to keep in mind is that not all of these channels that you’re currently using are infinitely scalable. And, in fact, some of them are just going to dry up or go away, because they were – not necessarily fads – but they were not sustainable channels. And that could be because the channel itself collapsed, or it could just be that you have grown enough to the point where the things that used to work in that particular channel simply aren’t moving the needle for your business anymore. So as you get larger a given channel may no longer work as well for you as it did in the past.
Rob [20:25]: Yup. Especially, I’d say early on until you have several employees, this is going to be your key driving factor, because finding good marketing people and someone who knows growth is very, very hard, and they’re very, very expensive. And they’re just a handful who are going to be able to drive this like you will be able to. It’s one of the most difficult roles to fill, I would say. And so, definitely researching and testing marketing channels. At least getting them to the point where they’re working, then you could hand them off to someone else. But this is going to be a critical growth lever in the early days.
Mike [20:57]: The fourth area is what I’m going to call “moving the furniture.” And this is based loosely on an article that Joel Spolsky wrote a long time ago about the fact that what he saw was that the job of management was essentially to remove obstacles from the path of developers so that they could get their work done. And I think that this applies to a bootstrapped company as well. As a manager, or as the founder, your job is to really do the same thing for not just the developers working for you, but also the other people who are working in your company. So whether they are on the marketing team, or you have hired somebody to do copywriting, your job is to essentially remove obstacles for them so that they can become more productive. And whether you perform those tasks yourself in order to remove the obstacles, or you empower them to remove the obstacles themselves, either way that has to be done. You don’t want to have people who are going to run into an obstacle and then either be really hampered in their ability to get work done, and not have any mechanism for taking care of it, or not have somebody that they can turn to to get those problems taken care of for them. I think “moving the furniture,” also applies to allowing your customers to use your product more effectively. And this goes back a little bit into communicating with your customers. But you want to identify ways to get them better results, and those better results are going to allow them to do their job more effectively, they’re going to make those people who are users look better to their existing employers, and essentially want to use your product more. And they will talk about it. So those are all things that fall under this umbrella of “moving the furniture.” It’s more about making sure that everybody on your team is operating it at as high a level as they possibly can, and at the same time still not burning themselves out while doing it.
Rob [22:37]: It’s a really interesting duality where you have to both be removing obstacles and making decisions, but also being able and willing to ask for help and delegate to your team. So you’re both taking things from them and giving them out. And that’s a struggle, I think, that might befall you in the early days; you think that removing obstacles involves you doing everything and taking everything onto your list, or you might over-delegate the other way and not be removing enough. And I think that the idea here of removing obstacles tends to be making decisions, setting game plans. It doesn’t tend to be, “Well, give me that. I’ll just write the copy.” or, “I’ll just write the code.” It’s not taking the task over, but it’s taking over the decision process. Or if there’s like a key intro that needs to be made that you have, or there’s some roadblock that really you’re going to be the best at fixing without actually doing all the technical work, that’s really what we’re talking about here. Other interesting thing is my dad was an electrician, and then he became a foreman, and over the years became a general foreman, and then he was a project manager. So he was just rising up. Then at some point he was an executive project manager managing multiple project managers. And what he told me – because I asked him “What’s the difference?” – and, a, he said being a foreman was the most fun because you had this small team and you could think just out a week, and you were really building stuff and it was so cool. He said the higher up that you go all you hear about are fires. You hear about all the things that are going wrong. Because when things are going right, everyone’s doing their job and they’re able to move forward, you’re only going to hear about the roadblocks. You’re only going to hear about the problems and the trouble. And so that take some getting used to, coming from being able to build stuff with your own two hands, to then making that mindset shift of your day is just basically filled with your good people not being able to overcome things. So there are always going to be challenging problems that are brought to you if you have built a good team. You’ve got to start to enter into that mindset as you move forward, because as you said “moving the furniture,” removing roadblocks, it’s not necessarily always an easy job, because you have to make decisions without complete information. And that’s perhaps the best description that I can think of of someone who’s running a team. You almost never have all the information you need to make the decision, and you just have to learn to make it so that people can move forward.
Mike [24:50]: And sometimes “moving the furniture” is as simple as just making sure that people don’t have to stop to come ask you for a decision. Sometimes you can just say, “Hey, if a decision needs to be made here, just go ahead and make it.” And I’ve actually found that with contractors they have a very hard time with this concept, because I don’t think that most of them are used to being trusted in such a way. Most of them want to stop what they’re doing if they get to a point where they don’t know how to proceed, and they will basically stop all work and come to you and say, “Hey, what do I do here?” And it’s like, “Well, just make a decision.” And you have to set that culture, that expectation, with them. And then another instance where I’ve run into this is where if somebody needs something, whether it’s a piece of software, or they want to purchase a service that will help make their lives easier and more productive, then just giving them access to the company credit card is a mechanism to prevent them from having to come ask you for permission to use it. And you just give them a blanket statement: “If it costs less than X dollars, just go ahead and do it, and then I will reimburse you for it.” So, if you don’t want to give them access to the credit card, you can just say, “Hey, I will reimburse you for anything up to $50 if you just decide to go do it.” So that’s another mechanism for handling that.
And the last area where bootstrappers should focus on is finding good talent. And I think finding good talent is probably one of the more difficult pieces out of all of these, because it’s not just you doing it. When it comes to doing a strategic planning or communicating, you’re the one who is essentially doing that work. You’re pushing out emails, you’re sending instant messages to people, or you’re having those meetings. When it comes to finding talent, essentially you are searching for other people and trying to identify whether or not they’re going to be a good fit for, not just you and the way that you manage people, but also for your team. And are they going to be a good fit to integrate with the team based on their own working style? And that can be very difficult to figure out. And there’s a couple of different aspects to it. One is how they have essentially gone through their career? What their career arc has looked like? Are they early on in their career? Are they much more entrenched in the things that they’ve done? Are they able to pick up new things or not? And another thing that I think most people don’t really think a lot about is whether or not the person you’re bringing on is for a short-term need or for a long-term need? And I think, depending on which of those two things you’re hiring for – whether you’re hiring a contractor because you have a very specific set of things that you need accomplished and you know that it’s probably going to be a short-term need that they’ll be there for two, three months and that’s it – or you want to try and identify somebody that you can keep around for the next two, three, or five years. Those are two entirely different situations, and depending on which one you’re trying to do, is going to influence a lot of the different ways that you handle that particular situation and you go through the hiring process. And the other flipside of that is being able to balance the talent that you’re hiring with the cash flow of the business, because you’re not always going to be in a position where you have the money on hand to be able to hire somebody. And there are going to be times, probably, where you have to hire somebody and you don’t quite have the money yet. So you might be operating at a little bit of a loss for the business. Which, I think for most bootstrap businesses is kind of unusual. When we put this list together one of the things that we thought about including was the idea of cash flow as an element of itself. But for a funded company that tends to be more of a focus of the CEO, because they’re operating at such a huge deficit every month or every year. With a bootstrap company you typically don’t do that because you don’t have a lot to work with to begin with. But, still, when you’re going out and you’re hiring somebody, you still have to make sure that you have the cash on hand, because the last thing you want to do is lure somebody away from their current job, hire them, and then have to let them go in three weeks because you made a bunch of mistakes in your own business. And it’s really not fair to make them pay the price for your mistakes. But, inevitably, that’s what’s going to happen if you don’t pay attention to your cash flow.
Rob [28:43]: Yeah. Hiring’s a big topic. Obviously we could dedicate a lot of time to it. But the bottom line is there’s a lot that plays into hiring. It’s hard to find good people. When you find them, keep them around. The best folks that I’ve worked with I plan to work with for many, many years. And I think it’s interesting you brought up the cash flow aspect of it, because as a bootstrapper you do need to be careful. It’s pretty easy to hire ahead of cash flow and to suddenly have some bill that comes up. Like tax day comes and you get a bill for 20 grand or something that you didn’t count on, and suddenly you could find yourself in a pretty tough position. If you’ve hired right up to the point where- think about your revenue – if you’re making 20, 30 grand a month in revenue and you hire right up to that point, it can be tough if you do get any type of unexpected occurrence and you don’t have a backstop. Because you really don’t want to be laying people off, especially in the early days, because it’s stressful. So this is definitely one of the things that you’re going to need to spend a lot of time on, and it’s something that I have never seen delegated well. As the founder, as the bootstrapper, trying to delegate this to someone else I think would be a real mistake.
So to recap, our five high leverage areas bootstrappers should focus on are, number one, strategic planning; number two, communicating; number three, researching and testing marketing channels; number four, “moving the furniture”; number five, finding good talent. If you have a question for us call our voicemail number at 888-801-9690, or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control,” by MoOt, used under Creative Commons. Subscribe to us in iTunes by searching for startups, and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, and we’ll see you next time.
Episode 286 | Five Guidelines for Balancing Learning and Doing
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk through five guidelines for balancing learning and doing. They help define when learning and consuming too much information can actually impede the progression of your business.
Items mentioned in this episode:
- Drip
- BlueTick
- We Don’t Need Roads: The Making of the Back to the Future Trilogy
- The Snowball: Warren Buffett and the Business of Life
- How Star Wars Conquered the Universe: The Past, Present, and Future of a Multibillion Dollar Franchise
Transcript
Rob [00:00:00]: In this episode of ‘Startups For the Rest of Us’ Mike and I talk through five guidelines for balancing learning and doing. This is ‘Startups For the Rest of Us’, episode 286. 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 [00:00:27]: And I’m Mike.
Rob [00:00:28]: 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 [00:00:32]: Not too much going on. I took a mini vacation last weekend with the family and left around noon or so on Friday. And just got back last night. So I have not been doing very much this past week. Although getting out the door on Friday was a little bit rough because there’s all these things that were happening early in the morning. There were a couple of issues with my build server in the background. And I’m just like ‘Okay, you guys got to handle this.” Some things busted that probably shouldn’t have gone in when they did. But I couldn’t deal with it and I just threw it back at them and said, “You guys need to fix this.” Took them a couple days, but they got through it. That’s good to see
Rob [00:01:06]: Did the team make any progress while you were gone?
Mike [00:01:09]: They did. But I think I had mentioned this last week. One of the developers I have was getting married. He got married on this past Sunday. So he was out of commission. And then the other one was sick this past week. So that’s limited the progress. But there are things that are getting done. It’s just about two-thirds slower than it usually is.
Rob [00:01:26]: Right. And onboarding new early access customers is on your plate, right? So you didn’t get anybody new in the past week?
Mike [00:01:33]: Well I got that on Wednesday and Thursday of last week. I’ve turned people loose a little bit and then, of course, promptly left on vacation.
Rob [00:01:41]: Right. But you’re back in the saddle now?
Mike [00:01:43]: Yes. Things are going well.
Rob [00:01:44]: Cool.
Mike [00:01:45]: How about you?
Rob [00:01:46]: Well I finally pulled the trigger and switched email providers. We had been using just an old Web host—DreamHost. I’ve had an account with them for like a decade, and still use them for some less critical stuff. And for those who aren’t familiar with DreamHost, it’s a big shared host. And they’re massive. And over time a lot of their servers get slower and slower, and since they are so big they just have load balancing issues at times. So what we’d noticed is that over—it’s probably been on and off for like six months, we would see emails taking a while to be delivered to our inboxes. And so someone might reply and instead of getting it in the matter of seconds that you should, it might take an hour or two hours to come through. It was so intermittent though, and we figured a way around it with using POP to check our accounts instead of waiting for them to forward because I guess there’s some throttling going on that Gmail does with forwarding. We had worked around it but in the end, over the past several weeks, there’s been some massive delays within that POP hasn’t fixed. And it was really within the DreamHost servers themselves. Something about the spam filtering was just taking literally hours to run through emails. All that to say, it was just time to move. I’ve resisted it so long because it was quite a pain in the butt. The actual switchover was not a big deal, but I could not find a good email provider. I tried to work with Zoho and I got halfway through setting up all the emails and the domain and all this stuff, and it didn’t have several things we needed and the UI was bad. Google apps, I find to be catastrophically hard to use. It was hours and hours. It was very buggy. I would click save and it would say you saved. And then I would literally go away, come back and it wasn’t saved. And I had to do all [?] work arounds to get it to work. I don’t know of an ideal solution for this. But I do know Google apps has tended to be really solid. And since a lot of use Gmail as the natural client, it seems like the natural fit. But what a time suck that just did nothing for us. I probably, all told, spent 16 hours trying to configure it and then doing the switchover, and having bugs. It probably should have taken four to six. But there were so many rough edges that it is what it is. But I guess I feel good about finally being moved over and everything’s good as of this morning. Cross my fingers that that continues.
Mike [00:03:57]: That’s one of the downsides of all the different mail servers that are out there. There’s no universal mechanism for just saying I’m going to export everything here and import all my settings over to here. Then just toggle a switch and everything switches over. It just doesn’t happen that way. There’s all these little knobs and dials you need to fiddle with and make sure that everything works. And it sucks because you can’t test it quickly either. You have to make a change and then you have to usually wait a little while. And that little while might be as little as 10 or 20 minutes, and then there’s also times where it could take just hours. It sucks.
Rob [00:04:31]: You know one other thing on that email, the bummer is that DreamHost’s administration, the Web based administration of their email accounts is really, really good. The UI is good and they allow you to bulk update stuff. And they allow you to have a bunch of forwarding addresses just in a text area. And it makes it really easy and simple to administer. You see everything on one screen. And I couldn’t find another system that does it the same way. While learning a UI typically isn’t a challenge, when the UI is actually substandard and means you have to do four or five clicks to do what you could do with one click in your existing account, that was really the reason that I hadn’t wanted to switch away. It’s a bummer to take a step down and knowing that anytime I go in to administer it, if there’s multiple clicks with all this front end Java script code running and taking several seconds before the next page loads, it really is a drag that there’s not a better way to do this.
Mike [00:05:20]: So what’s on the schedule for today?
Rob [00:05:21]: Well we put out a call for podcast topics within Founder Café, which is our membership community, and we received a bunch of them a few months ago. And this is one of them. And the question was in essence, how do you balance learning and doing? And so I thought through it and I started pouring out all my thoughts, almost in essay format, which is not conducive to a podcast, right, because you don’t just want to read an essay. But I started seeing that there were these clusters emerging. And so I pulled them out into these distinct guidelines. I have five guidelines that we want to talk through today. I think the first thing that I want to clarify is the question was asked, how do you balance learning and doing, and what you and I realized pretty quickly as we discussed this in preparation for the podcast, is that learning and doing are not opposite things. They’re not mutually exclusive. I think what the person who asked the question was really asking how do you balance consumption, reading books, listening to podcast, learning from classwork, and that kind of stuff, with actual execution. And launching and getting features out the door and talking to customers, and that kind of stuff. How do you balance those because while you’re doing you’re still going to be learning, right? So while we do use the phrase learning a lot in here, what we actually mean is more like book learning or really consumption of material that’s going to educate you. And then doing is the actual execution of that and putting that into play and moving your business forward. And so with that in mind, the first guideline I want to talk about is to remember that learning is the fun part. So for probably everyone listening to this podcast, learning is like a siren song. It’s the fun part that you want to do. It’s the easy part. And the actual doing or the execution is where the rubber meets the road and that’s really hard to do. Especially since these days you can learn via audio when you’re driving, mowing the lawn, you’re doing the dishes, etc. So it feels like a good use of your time. You shouldn’t let that fool you. Learning can easily become a major time suck that masks itself as productivity.
Mike [00:07:13]: And I think that’s a really important thing to keep in mind, just because of the fact that when you are learning you’re going through the process of either reading blogs or you go out and buy an eBook or you listen to a podcast on a particular topic, it’s definitely fun and interesting, but at the same time it doesn’t actually do anything for you. At least not in and of itself. It’s very difficult to measure your progress when you’re sitting there learning stuff because you’re not moving the ball forward on your product, or getting new customers, or anything like that. And it feels like you’re doing stuff. It’s very similar to a lot of the launch activities that we talk about in the past, about getting business cards and a Web site set up, and things like that. None of those things really truly do anything for your business, but it feels like you’re being productive. So it’s very much a trap that you can fall into. And it’s especially true because of the fact that many of us are driven to learn new things and do new things. That’s what most people find enjoyable about being an entrepreneur. You get to learn and do new things. And it can be very much a distraction if you’re not careful.
Rob [00:08:15]: And I think we both say this, not as people speaking down from Mount Olympus who never fall into this trap. I think I say it as a person who falls into this trap way too much. And overconsumes and overlearns, and I have to remind myself to step back and focus on what is it that I’m trying to accomplish with this learning. And that actually brings us into the second guideline, which is to embrace ‘just in time learning’. Jeremy Frandsen, from the Internet Business Mastery podcast, has this phrase that he uses. And he calls it ‘just in time learning’. And in essence it means pick the task at hand. So if you’re running a marketing experiment and you want to try Facebook ads, then go out and learn everything you can about Facebook ads and run it. But don’t learn about those back when you’re still trying to generate an idea or to validate and idea, unless you really need Facebook ads to do it. And so live by this. Embrace ‘just in time learning’ because it is the way to keep your mind from filling up with all this information that A, clogs your mind, confuses you, distracts you, but it also fills it up with stuff that may or may not be valid in six or 12 months. By the time you get to the point where you do need to learn SEO or where you do need to find product market fit, or whatever, all of this advice is not evergreen. A lot of this changes fairly frequently. And the stuff that I think about in terms of the cutting edge learning, I think it’s good for between six and 18 months as a rule. And after that, things will often just be different enough that anything you learned before that, you’re either going to have to learn by experience or you’re going to have to relearn it from someone else.
Mike [00:09:48]: It’s not like when you go back to mathematical equations that you’re learning in college or even high school, where those things, you learn them once and they will never change. The reality is that when you’re sitting there and you’re working on stuff, you deal with so many different things that they will change often enough that it will bite you and you have to go back and relearn them. It’s certainly not that you have to learn them from scratch. But they, as Rob said, they’re different enough that it makes you sit down and dedicate additional time to it. So getting to the point where you know 95% of all the different things about a particular topic, it almost doesn’t matter. And the fact of the matter is that most of those things that you do learn, the practice of those things and the execution is a little bit different than what you’re going to read about. In terms of Facebook ads, for example, you can learn a lot about Facebook ads and general practices, and how to structure and arrange things, but the reality is once you sit down and do them, you’re going to find that there are things that are different enough for your particular business that you need to make some adjustments. So you can do all the learning you want from a book or from a blog or a podcast, and the reality of your product itself is going to be different enough that you need to make those adjustment. Those books are just simply not going to take that into account.
Rob [00:11:00]: And an aside here to compliment this ‘just in time learning’ idea, specifically for you, listening to this podcast, if you’re launching products, it actually depends on whether you’re prelaunch or post launch what you need to be learning about. So if you’re prelaunch what do you need to know? Well there’s kind of a nice little sequence of events that needs to happen. You need to generate an idea, you need to validate the idea. You need to build the product or architect the service if you’re going to do more of a product type service. And then you probably need to start learning marketing. Maybe one or two channels at the most to generate that interest list. And you need to be talking to customers in advance. So those things, in that order, that’s the framework that I used for prelaunch. And then post launch, I think about it as finding enough customers in the space to get feedback. And you do that via maybe one or two marketing channels at most. And you do it with a lot of hustle and by talking to a lot of people. And then you’re going to need to find product market fit based on their feedback. And then that means build something people want. If you’re not a fan or the product market fit terminology or don’t know what it is, it just means you build something that people are really willing to pay for and are willing to stick around if you’re a subscription service. And then, after that is marketing and growth. I feel like everybody focuses on the marketing and growth piece, but it’s like the sixth, seventh, eighth step down the line. And I think take this ‘just in time learning’ to think about focusing on this learning step that you’re at. And really focus on the people talking about that, giving advice on that that’s fairly current, the current market conditions, and devour that. And then execute. Change it up and execute. I mean there’s a recent example I have where I’ve had to do some negotiations. A couple different instances. And I am not trained in that. I don’t have a ton of knowledge in it or experience. I mean there’s all the trite advice people give you. Don’t name the first number, and always do this and do that. But I really wanted to dive into it. So I got two separate audiobooks on it that were highly recommended. And there’s podcasts about a similar topic and I went through and I listened. I took a bunch of notes and I thought through, and then I made real action notes that weren’t just the notes from the thing but it actually related to the specifics of the situations that I was in. And then I looked at those and then I dove in. So that was an example. I didn’t learn negotiating five years ago. And if I had I probably would have forgotten it, might have been out of date. But the fact that I’ve done that just recently has helped keep it fresh and it’s something I’ll know for the time being that I can refresh in the future.
Mike [00:13:16]: And what you’re really doing here is you’re optimizing both for your time and for your performance. Because if you sit down and you are just about to do, as Rob said, for example, negotiation, then you sit down, you read about it and you learn as much as you possibly can, and then you put it into use. Versus if you did it five years ago or you studied up on it. Even in just 12 months ago, you will have had a lot of things that have happened between then and now, and you’re going to forget a lot of those things. So you’re still going to have to go back and brush up on it. And if you didn’t use it back then because it wasn’t necessarily a need, then essentially what you’ve done is you’ve spent a lot of time learning something that maybe you get your skills to 80 or 90%, and then over the course of the next 12 months they taper off and you’ll have to relearn a bunch of stuff. You’ll have to refresh your memory. And it’s simply not a good use of your time. And then, in addition to that, the fact of the matter is that when you go through that your skills are going to get rusty because you haven’t put them to use over that time. So those are essentially two different things that are in play at the same time. You are optimizing not just for your time, but also for your performance in performing whatever that activity is that you’re learning about.
Rob [00:14:23]: And the third guideline is that learning will only get you halfway. That basically, at some point, you have to execute in order to A, actually get anything done. And B, get the full amount of learning. And halfway is an estimate. It’s not exactly 50%. Maybe it’s 40, maybe it’s 65 or 70. But it will only get you part of the way there. What you have to realize is that learning is the easy part, it keeps you in your basement or in the nice comfort of just consuming information. Fires those parts of the brain that probably makes you feel like you’re doing something. But once you start executing you’re going to crash and burn, you’re going to make mistakes. And you’re going to learn more in a couple weeks that you can in months and months of sitting there and consuming material.
Mike [00:15:02]: I think it’s really easy to fall into the trap of trying to consume as much information as you possible can to the point that you’re overconsuming and you’re not putting it into practice. And I know that historically, the reason that I’ve done that is because I didn’t want to make mistakes. So I felt like if I learned more than I would not make certain mistakes. Oh if I had only read that particular book, or if I had only seen that blog post and read it before I got this started, then I would have not made this mistake over here or that mistake over there. But the problem with that line of thinking is that there’s no line in the sand or guideline that says, oh, if you consume all of these things you won’t make that mistake. It’s very easy to forget some of those things or to only realize after you’ve made the mistakes that that particular lesson was going to be applicable to you. So just the fact that you’re sitting there learning, it can be very difficult and frustrating to dive into it when you don’t necessarily feel like you’re ready. I think that, myself included in this, a lot of people just don’t like to make mistakes. So you feel like if you’re going to learn more then you won’t make those mistakes. And I would say that that’s probably not always the case. In fact, it’s probably rarely the case that you’re going to learn enough to make no mistakes.
Rob [00:16:14]: Another thing to keep in mind with this one, tying back into bootstrapping a product, is that realize that learning will be different depending on the phase of your product. So learning’s going to get you halfway and it’s actually going to be a lot harder in the early days, unfortunately. And the reason is because when you haven’t yet built something people want, so you’re pre product market fit, there’s a lot of art, there’s a lot of mistakes, there’s a lot of flailing around, and there’s not nearly as much concrete advice for these steps because there really isn’t a path to finding it. As much as [?] startup, try to lay out a framework, it’s so much trial and error, and even people who’ve done it multiple times, meaning found product market fit and actually started to scale an app, really don’t have the exact formula for it because there just can’t be one. There’s so much trial and error. Which means that consuming more about it isn’t actually going to get you any closer to it. You just have to get to the trial and error. And this is interesting to think about. Back to the negotiation stuff that I was learning about, once I had listened to an audiobook and a half on it, I started to see a lot of overlap. And I actually had a third audiobook that I got, which was too much. And as soon as I started listening I realized I am overconsuming and I am hearing the same things. And I’m being overwhelmed with information. Which of these frameworks and paths should I use because now I’ve heard three different ones? And that’s where you need to step back and say, “Wow, I’ve made it halfway. I’ve made it to pretty much the extent of what I’m going to learn. I’m starting to see diminishing returns from that learning. Now I have to basically stop doing this, and I need to sack up and really kind of get out there and make some mistakes.” I got to be honest, I feel like it’s so much easier to learn about specific tactics after you have product market fit. Because this is where you have to line up marketing tactics, you experiment, you double down on what works. And that’s really the fun part. And there’s a ton of information out there about it. And it’s just so much more of a methodical approach. I won’t say it’s easy. I won’t say it’s fun for everyone. But it is a lot more well-defined than trying to learn before product market fit. And I think people spend too much time trying to get all their ducks in a row in that phase when, I’ll say, it’s impossible to do that at that point because there just is so much art involved in getting to product market fit. And the fourth guideline is to consciously cap your consumption. So keeping in mind this ‘just in time learning’ concept, if you’re focused on a problem, like validating an idea, I typically focus all of my efforts on learning as much as I can about that. I spend a few days. Sometimes up to one to two weeks. Then you have to stop and you have to execute.
Mike [00:18:40]: To me, this is really hard to do sometimes just because there’s so much that you can learn. And some of it’s going to be applicable to where you are right now. And some of it’s going to be applicable to you after you get to a certain point. So back to Rob’s point about the last one, about finding the product market fit for your product, some of the marketing and stuff that you learn and implement is going to be before you get to that point, and some of it’s going to be afterwards. And a lot of the learning is, I’ll say, somewhat generalized. Some of it is going to be applicable before you get the product market fit, and some’s applicable afterwards. And it’s not always clear when you’re learning it which is which. So, sometimes you have to tendency to overlearn because you think that it might be applicable, and it’s simply not. Consciously capping your consumption is a really wise idea because it allows you to learn enough, especially at a cursory level, so that you can start to recognize some of the patterns. And if you find that you are at a point where you’re implementing something and you realize hey, I actually haven’t learned enough to be able to implement this, you can always go back and learn more. You don’t have to continue plodding forward knowing that you’re going to be making these huge mistakes that maybe if you just learned a few more things then it would be better executed. You can always go back and learn more. But you can’t get back that time if you are learning things that are simply not applicable. So make sure that you’re putting a cap on your time that you’re spending on consuming this information. And I’ll be honest, I’m terrible at this. I have a hard time sitting down and scoping out I’m only going to spend X number of hours or days or weeks trying to learn how to do this. And it’s just difficult to do. And it’s partly because some of it’s time management and some of it’s also the fact that it feels nice to learn some of these things and to be able to talk to other people about it. But it’s simply not always relevant to you. So make sure that you’re capping that time so that you are optimizing for the things that you’re doing.
Rob [00:20:34]: And my fifth guideline for balancing learning and doing is to balance learning with inspiration. I feel like you need to strike a balance between these two things. You can only learn and focus on so many things at once. And so if you’re really focused on getting idea validation or whatever, when you stop learning, if you still want to consume things, you can turn your heads towards inspirational content. As an example, recently I’ve listened to a book called “Song Machine” that is about the hit factory that’s developed over the past 20, 30 years, of how all of our pop songs don’t tend to be written by the artist. They’re actually written by these factories. It’s this group of people that are manufacturing hits. There’s this great book called ;We Don’t Need Roads,” about the making of “Back to the Future,” that’s just really well told. “How Star Wars Conquered the Universe,” is a book I’ve read a few times. “The Snowball,” which is the biography of Warren Buffett. “Masters of Doom,” I’ve mentioned. They border that line between really inspiration and just kind of fun listening. They’re really isn’t a ton of this hardcore learning. You’re not learning tactics from these. And I really believe in this idea of getting more motivation, or this extradisciplinary learning that I think you need to get from broader sources. It’s not going to help you directly, but A, it takes your mind off of this focused problem, and it allows you to not get oversaturated with different ideas and confuse you. But it also provides inspiration. It can kill time if you really want to listen to audiobooks, podcasts in the car or while you’re doing the dishes or whatever. I tend to switch over to this once I’m oversaturated on a certain topic and I don’t want to get any more content in my mind. And the other bonus is it often gets me thinking about my business in a way that I normally would not consider. Hearing “Snowball,” hearing “Masters of Doom,” even hearing “How Star Wars Conquered the Universe,” it’s extradisciplinary. So it gets your juices flowing. And I find that little ideas and thoughts will sometimes resurface themselves later on that tie into that experience, that will help me in my business in ways that I couldn’t possibly have predicted.
Mike [00:22:28]: I think this is more of a focus on trying to figure out what sorts of things are going to help you without knowing what questions to ask. Let’s say that you have gotten product market fit and you’re trying to figure out what ways you can grow, you can certainly say, “Well, I’m going to do some paid advertising,” and you dig in and you learn about paid advertising. But what Rob’s really talking about here is that you are learning about lots of other things that are generally applicable to business versus solving a particular problem. So when you start doing that you’re able to get a wider view. And it’s much shallower, but it’s a wider view of business in general, and how different people have gone around solving different problems that they have encountered. And all it does is it gives you that hook that you can use later on in order to come back to later. For example, for “Masters of Doom,” or “The Snowball,” there’s a bunch of different data points that are in there, that if you were to go through and read those books, you’re probably going to remember bits and pieces but you’re not going to remember everything. And that’s not the point. The point is to anchor your brain to certain things where if you’re working on a problem later on in your business, if you remember that oh, I remember reading about this. Where did I read about it? And you can go back into maybe Amazon if you buy all of your books through there or through iTunes and their bookstore there. The point is to be able to go back and use those hooks to figure out where did I hear about that and where can I learn more about it? Versus I have this very ultra-specific problem that I need to solve right now. And that’s a very easy issue to deal with, it’s much more difficult when you don’t have that broad base of knowledge. And this is about enhancing your broad base of knowledge.
Rob [00:24:07]: And there’s a caveat to all this. You can’t just wander off into inspiration land when you only have five, 10, 15 hours a week to work on your product and you’re trying to get to launch. That’s where you have to be disciplined about getting work done and not using inspiration as a crutch or a feeling of productivity. Because it’s really not. If you only have those few hours then you have to focus on that problem at hand and just taking the next step towards getting your product out the door or growing it, depending on the phase you’re at. Mike [00:24:36]: So to recap, the five guidelines are, number one, remember that learning is the fun part. Number two, embrace ‘just in time learning’. Number three, remember that learning will only get you halfway. Number four, consciously cap your consumption. And number five, balance your learning with inspiration. If you have a question for us you can call it into our voicemail number at 1-888-801-9690. Or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control,” by MoOt, used under Creative Commons. Subscribe to us in iTunes by searching for startups. And visit startupsfortherestofus.com for a full transcript of each episode. Thanks you listening and we’ll see you next time.
Episode 285 | How to Make Your First Hire
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to make your first hire. They discuss how to decide if you need to hire full-time or part-time, the pros and cons of each, and some tips on the hiring process.
Items mentioned in this episode:
Transcript
Mike [00:00:00]: In this episode of “Startups for the Rest of Us,” Rob and I are going to be talking about how to make your first hire. This is “Startups for the Rest of Us,” episode 285.
[Theme music]
Mike [00:00:16]: 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 Mike –
Rob [00:00:24]: And I’m Rob.
Mike [00:00:25]: – and we’re here to share our experiences to help you avoid the same mistakes we’ve made. How are you doing this week, Rob?
Rob [00:00:28]: You know, I’m pretty good. It’s nice to be a week away from MicroConf and kind of get my feet back under me. It feels like … you know, we’re done with queue one of 2016 already and heading into the midyear, so I’ve been looking out: what’s the next 90 days, what’s the next six months looking like, and revisiting the goals and the direction and the vision that I set out in my retreat, which was at the very beginning of January. There was both some personal stuff and some work and Drip-oriented growth stuff that I’m just revisiting and figuring out: am I on track for those? Do I need to adjust them? Are we ahead of schedule, or behind, or whatever? So, that’s been kind of fun, just to go back and review. I think that’s important to do, whether you do it monthly, or quarterly is to review those goals and figure out where you are with them.
And with that in mind, we’re trying to find new growth channels and starting to make some progress on a few fronts. Finally starting to get a little bit of traction with paid traffic, which has been something we’ve been working on on and off for a while with Drip, and seems like we’ve got our foot in the door with a couple avenues that I’m pretty excited about.
Mike [00:01:28]: Very cool.
Rob [00:01:29]: How about you?
Mike [00:01:29]: Recently, I kind of did the same thing. I looked back over quarterly progress because, as you said, it’s the end of the quarter. I look at that, and say it almost sucks because the last three months have just flown by, and it feels like my head is down almost the entire time. But at the same time, things are moving forward. I looked back at some of my annual goals for this year, and for revenue on Bluetick, already I’m to 17 percent of my goal. It’s, obviously, about 25 percent of the way through the year; but I also haven’t really got the product out the door to anyone beyond the people who are doing preorders. The fact that I don’t have the product out the door, really, and I’m still at that point, it’s not like I’m very far behind is really what it comes down to.
Rob [00:02:08]: Right. It’s not atypical. I think most of our goals are ambitious. Do you feel like your Bluetick goal was ambitious?
Mike [00:02:14]: Oh, yeah. It was one of those big, fat, hairy, audacious goals.
Rob [00:02:17]: Yeah. You don’t want to shrug it off and be like, “Oh, well, I just missed it.” I think now it’s like, “Okay, how can I make up that eight percent over the next month or two?” “How can I get to the point where I am actually back on track?”
Mike [00:02:29]: Yeah, and I think that that’ll come with actually launching the product publicly and getting it out there and making it available for people to sign up for; because right now, it’s just based off of what’s going to my mailing list and the little things that I’m doing there. Longer term, obviously, there’s a lot that goes into it.
Rob [00:02:44]: Yeah, and that’s the hard part. When you’re setting these goals, sometimes they are a shot in the dark, especially if you just have revenue goals. If you have milestones of like getting a launch by this date, then it’s a little more easy to quantify. But it’s like do you really know what your revenue is going to be until you’re at a sustainable, repeatable process where you know how many trials are coming in, you know what your conversion rates are? At that point, then you can project it out, but before then it is a bit more of a guessing game. So, I’ve always taken it if I’m ahead of my projected, then I figured I guessed too low. If I’m behind it, then I’m trying to figure out how to get there without letting it destroy me. You can’t let it beat you up or make you feel like a failure. It needs to be motivation rather than making you feel like you’ve dropped the ball.
Mike [00:03:28]: Yeah. The fact that I’m only eight percent behind a quarter of the way through the year, and the product’s just not out the doorm that, to me, bodes really well; because I didn’t expect to have it out there for public consumption until about halfway through the year. In some ways, I almost feel like I’m ahead. You could almost kind of fast-forward to say, “That revenue goal was really for the last six months of the year.”
That said, right now we’re going through, and we’re plugging away at trying to onboard people who’ve placed preorders. I have to be honest, some of the stuff that we’re running into is just flat-out embarrassing. The earliest thing that we tried to do when onboarding – the signup itself was just completely fundamentally broken. I had to do some things on the fly to get somebody on there. It’s generally working at this point. We’re just trying to work through any of the UI and UX issues with people. It’s coming along, but it’s obviously slower than I’d like. One of my developers is getting married on Monday, so he’s out of commission for at least the next week or two.
Rob [00:04:23]: Yeah, that’s always a bummer when you’re pushing hard and something comes up for anyone. Obviously, very important and worth doing, but it’s tough. I think we’re impatient as founders, and we want to hit the goals.
So, what are we talking about this week?
Mike [00:04:35]: This week, we’re going to be talking about how to make your first hire. This is a question that was asked by somebody inside of Founder Café. We’ve mentioned Founder Café before. It’s our online membership site. The question was really geared towards how do you decide whether you need somebody for part-time or full-time, and how do you approach those two, different scenarios; because, obviously, that’s going to be dictated by what your revenue is and what your strengths and weaknesses are in both your skill set and in the business itself in terms of the revenue that’s coming in.
Rob [00:05:07]: Yeah. In your early days, the advice I would give is stay with part-time and contractors for as long as you possibly can. There’s no reason to jump to W-2 employees until you absolutely need to, because it brings complexity. I think in our circles that’s probably pretty well known, but I think if you’re in doubt, part-time contractors give you the flexibility of being able to only pay hourly and flex up and down as you need. There are some pros and cons to doing it that we’ll get into in this episode, but that’s probably a thought that I would start the episode with in terms of thinking about your first hire.
Mike [00:05:40]: To start off with, I know that we’re going to talk about some of the differences and pros and cons for hiring part-time and full-time; but I think what we want to do first is to talk about some of the things that are applicable to both, because I think that there’s definitely a lot of overlap between hiring for part-time versus hiring for full-time.
The first one is to look for self-starters who can dive in and are going to find ways to improve the business and the products that you’re working on. I think this is really important, because you don’t want to hire somebody who is going to come to you and every time they complete a task, they come back to you and say, “What do you want me to work on next?” Then it turns you into more of a micromanager, and it’s very difficult to get away from that. There’s going to be a little bit of that, I think, up front; because they’re going to want to know what the general direction of the business is and the product and everything else, but you don’t want to be in the position where every, single time they finish something you have to find something else for them to do. You really want them to be essentially generating their own tasks and having some sort of awareness of what your overreaching goals are, and then be able to just go do those things without you telling them, “You need to do X, Y and Z.”
Rob [00:06:50]: Well, I think, in an ideal world, you would do this; but I think in the early days when your budget is tight, it’s hard to find people like this. These are the people that everybody wants. I think that there is, perhaps, an approach you can take, even if you can’t find self-starters, that can still work. This is what I did in the early days, and a lot of people who are cash-strapped in the early days do. It’s to find people are really good at a single skill and then slowly basically fire yourself from the jobs that you are doing. The example that I often give is to hire that first tier-one email support person. They may not be that much of a self-starter. They may not figure out ways to improve stuff, but just getting that email support off your plate in the early days with someone who is good at that single skill – there’s a focus lift. There’s a time benefit, and it’s a recurring task that happens every day, or every week. I think if you’ve never hired before and you’ve never even hired a contractor, that would probably be the simplest, little baby step that I would take.
This actually may speak to a point I was going to bring up, which is that hiring is a learned skill. The more you do it, the better you get. When you start, you’re going to be pretty bad at it, and you’re going to have a bunch of missteps. I don’t know anyone who goes out of the gate and hires really well the first time. In the early days, when I was first trying to figure out who to hire and what to hire for – you want to look at your recurring tasks, the ones that are going to be relatively simple to outsource, and then you work way up to the more complex tasks; and this is all based on your budget. The more budget you have, the better people, in general, you can hire; but in the early days, if you really are bootstrapping, then you have to cobble it together and limp along for a while, even if you’re not as efficient.
[00:08:26] That’s one of the reasons some people raise funding. If you did raise an angel round of a quarter million or a half million bucks, it can make this part easier, because then you do have the budget to hire better people from the start. But if you truly are bootstrapping, you want to self-fund this, that’s okay, too. Just know that you’re going to have some limitations in the early days in terms of the quality and the effectiveness of people you can hire.
Mike [00:08:47]: I think kind of a subtext to what you just said is that for something like support, it’s time-consuming, but doesn’t necessarily add a huge amount of topline revenue value to the business. It needs to be done, but it isn’t necessarily you that needs to do it. Because it’s time-consuming, it’s best to start with something like that for you to outsource.
Rob [00:09:07]: Yeah, that’s exactly right. Time-consuming and attention-grabbing. Email support is a bummer because it’s interruptive, and it’s really hard to just batch that because you can’t just do that once a week. Even doing it once a day is not ideal. In a perfect world, you would check every couple hours and take care of that stuff. So, I think there’s the time, and then there’s that focus or attention element. If you have recurring things that take time and attention, those are the first ones you want to look at hiring for.
Mike [00:09:36]: The next thing that’s applicable to both part-time and full-time hiring is that you should always be interviewing multiple candidates. Any time I’ve gone through and hired somebody and whittled it down to just one or two people and then only interviewed one person, it seems to never work out. I feel like that’s because you don’t necessarily have a good basis for comparison of gauging that person’s skills or abilities against the other people who, obviously, you haven’t interviewed. I think that’s one of those recommendations – that you have to interview multiple candidates. If you’re at a point where you don’t have multiple candidates, then that should be a red flag. You need to go find more, or there’s something broken in your hiring process.
Rob [00:10:17]: Yeah, absolutely. It’s pretty rare. I think in all the hiring I’ve done over the years, there’s probably been one or two hires where we knew the perfect person for the job, and it was someone we already knew or were acquainted with. We knew that they’d be fit and all that stuff, so we didn’t interview multiple candidates. But far and wide, the literally dozens of positions I’ve hired for, including – I used to be a development lead and a tech lead and a manager for some companies down in L.A. when I was still doing salary work. It’s got to be approaching, like, a hundred people that I was involved in the hiring process of. With all those, you just have to get a lot of candidates through the door, or at least on the phone. We used to do a lot of phone screenings in advance. Nowadays, you’d just do it via Skype, and you would never actually meet with people in person anyways. But interviewing multiple candidates is absolutely the way to go, and it’s the only way you’re going to get an idea of the skill level and what’s really available on the market at that time.
Mike [00:11:13]: The next thing that’s applicable to both is that a bad hire is orders of magnitude worse than no hire. If you hire somebody who is not a good fit for either the position or for the company culture – and you can have a company culture even if it’s just you and one other person – in those situations, if you’re not able to hire somebody, you’re better off than if you make a mistake in hiring, because those early mistakes are so incredibly time-consuming to deal with and difficult on the business, both in terms of revenue and time spent and opportunity lost.
Rob [00:11:46]: Yeah. The way that I used to combat this – I think over time, I’ve gotten better, naturally, at hiring just because you do it more. You get picker and know what to look for. In the early days, I would recommend that when you hire those first few people, you do all the training via screencast and/or in writing; because you want to have it repeatable. We had multiple situations where we’d hire a VA to help with support and setup and this other stuff, and then that VA wouldn’t work out. Sometimes it was them. They just flaked. Sometimes found out they didn’t have the skills, and having to repeat the training if you had just done it live on Skype or something would be such a pain in the butt, right? Makes it really time-consuming. So, try to make your training as repeatable as possible, especially in the early days; because you’re probably going to have to take a few swings at bat and get a few people through the door, get them trained up before you find that right fit.
[00:12:37] Another thing to keep in mind is that entry-level people are the least expensive, and you can find some pretty good deals, but you have to spend the time to train them on the tasks. Experienced people who already know how to do something – let’s say you’re hiring for email support, and they’ve already done it; or, you’re hiring to manage Facebook ads; or, you’re hiring to help handle integrations and help with stuff. Experienced people are a lot more expensive. If they actually have experience in what you’re doing, they tend to be two times, four times more expensive for the same task; but they can hit the ground running. So, it’s very important to keep in mind “how much budget do I have?” and realizing that trying to find a competent person at a highly sought-after skill set is going to cost a lot of money. You have to think through at what level can you hire.
This is a reason in the early days when you’re bootstrapping, you may need to invest more time, because you don’t have as much money. You may need to work more hours in the early days to get this thing going. That doesn’t mean you have to work the crazy, 80-hour startup weeks forever, but if you’re hiring people and you’re having to train them from scratch, you’re putting in your sweat equity because you don’t have the cash to put up. I see it as exchanging value there, and you have to weigh that out in your own mind.
Mike [00:13:41]: I think the next thing you have to remember is that going from zero to one employees is the hardest. I think this is applicable whether you are a solo founder, or whether you have co-founders. The fact of the matter is that you’re bringing somebody else into the mix that is not familiar with your company, or where it came from, or the roots, or maybe not even the problem space itself. Especially if you’re hiring a new developer and they don’t know the problems that you have been working on and are intimately familiar with, they’re going to have to learn some of those things. They may know their job very well, and they may be an expert in the things that they do, but they’re not necessarily an expert in not just your systems themselves, but also how your business operates and what your customer base looks like.
Rob [00:14:24]: The other thing to think about is as your budget grows, you can hire better people. I do think that you should stair-step your way up as you’re able to because, in general, when you have more money, you can hire better people, like I’ve already said. The other thing that I’ve realized is that in the early days, as a founder, you’re probably going to be the best at any given task because you don’t have the budget to hire subject matter experts. You’re going to have to hire entry-level people, and so if you’ve learned Facebook ads, you’re then going to have to train them. If you know how to do the email support, you’re going to have to train them. At a certain point, that flips. Then you’ll be able to hire people who are actually better than you at a given task, and that’s when things definitely get more expensive; but it becomes so much easier, because you can go out and pay a Facebook ad consultant, or someone who has experience doing this. Or, you can pay a professional senior developer who’s been building and writing code for years and is on par with you. Long-term, that’s the ultimate goal. That’s not your first hire – right – but think about that over the course of several years as your business grows, that you probably want to go from being able to train people and hire people where you’re the subject matter expert; but as soon as you can, get to the other one, because it’ll allow you to move faster.
Mike [00:15:39]: With those things in mind, let’s move on and talk a little bit about the differences between the part-time hires and full-time hires. I think that, generally speaking, as you said before, when you’re looking to hire and you’re first starting to do that in your business, you should probably start with a part-time person. When you’re doing that, if you’re looking specifically at people who are doing contracting, that’s probably the best place to start. I don’t think that you want to go out and look for people who are currently working full-time and then just picking up something on the side. I think there’s a big difference between those types of people versus people who are doing contracting full-time; because they might only work for you four or ten hours a week or something like that, but they’re used to that mode of working. They’re experienced at working remotely. They’re experienced at dealing with people over the phone, or via Skype, or Slack and email; and that’s just their primary mode of operation versus those people who are in an office environment, and that’s what they’re used to. For lack of a better way to put it, that’s how they’ve been conditioned to work. I think that it’s easier to bring on those people on a part-time basis who are doing contracting full-time, because they’re used to being treated like a contractor.
Rob [00:16:52]: Yeah, I can’t underscore this enough: a) someone who’s used to working remotely, and b) who’s not working around another full-time job, or a full-time job and contracting a few nights and weekends. I’ve never had that work out – ever. Every time, their job takes precedent, and they only have a few hours a week to do it, and they get behind on stuff, and they’re just trying to fit you in around other things. It doesn’t work, so I would never – that’s one of the early things I ask now when I go to hire: “Are you currently doing this full-time,” or, “Do you have a full-time job?” because it’s an absolute nonstarter. I think at this point, if I were to find someone who was really good and I wanted to hire and they had a full-time job, I would consider trying to have them leave the job and come on with us; but in the early days you can’t do that, because they might only have three, four, five hours a week where they can work for you. So, try to find people who are a full-time contracting. Upwork is a decent place to do this, because there are a lot of people that are taking that stance.
Mike [00:17:43]: The other advantage of hiring people part-time is that you can generally afford them a little bit better. You can hire experts, and you can get them for a few hours of their time. As Rob said earlier, you may not be able to get the best person in the world, but you may be able to get somebody who has comparable skills to yours or even better, and at a price that isn’t going to break the bank. If you try to hire those people full-time, chances are really good you just simply can’t afford them, and it’s because of your budget.
The other thing that hiring part-time allows you to do is it allows you to practice being a manager. Just like hiring, being a manager is a learned skill, and you need to be able to practice that in order to get better at it, because if you’re not a good manager, then the results that you’re getting out of people that you hire are probably also not going to be good; and it’s going to be due to miscommunication issues.
Rob [00:18:31]: Yeah, and there are pros and cons to hiring part-time contractors where their hours can flex up and down. Obviously, the pros are that you don’t need to have a fixed budget. So, if work slows down or whatever, you’re not paying out of pocket a fixed amount every month, when you may not have that because you’re bootstrapping. Then there’s also the flexibility that, as more work comes in, you can ramp them up pretty quickly. In the early days, you don’t have to worry, necessarily, about career advancement and annual reviews and all the stuff dealing with taxes and healthcare. There’s a time for that. There’s a time where that’s worth it, but in the early days when you’re just trying to get a business off the ground, it’s just so much to worry about.
Now, the cons of this are that – it depends on the specifics, but if you can actually find someone comparable who is willing to work for you as a full-time employee – in the U.S., it’s called “W-2” – there are some advantages to that. One is that, overall, it’ll probably be less expensive if you actually keep them busy full-time, because contractors tend to have a premium that they put on their pricing. Another advantage is there’s a loyalty thing. People who work for you tend to get more involved, tend to care more about the outcome, and they’re going to tend to stick around longer.
Those are the major things to think about when you’re comparing, “Should I hire contractors, or should I hire W-2 employees?” I think that, as we said, in the early days, by necessity, you’re going to want to stick with contractors as long as you can. Long-term, it is tough to grow a huge business solely with contractors. I know a few people have done it, but most of the time, getting that loyalty and that team camaraderie really only comes with a group of full-time employees.
Mike [00:20:06]: To kick us off on the side of full-time employees, I think that one of the important things is that you need to hire before you have a particular need for something. If you wait until the last second – let’s say that you’re working on something and you need a Facebook ads expert, and you say, “Okay. I want to kick that off in a couple of weeks,” and you wait around, and you don’t go through a hiring process. Then it comes time, and you say, “Now I need to hire somebody, because I need somebody by the end of this week.” It can be really challenging to get those people lined up for interviews in advance and go through the hiring process if you don’t do that in advance. Make sure that you are hiring before you actually need somebody to get started on that work. It sounds obvious, but I also think that it’s very easy to underestimate how long that hiring process can take in some cases.
Rob [00:20:55]: Yeah. I think there’s a balance here. If you have a lot of money in the bank, if you’re funded, then hiring well ahead of the need is what people do. They hire months ahead, because they know they’re going to be scaling up. If you’re tighter on cash, I think hiring before the need, like you said, which is really just weeks in advance – it’s kind of like looking out 30 days and realizing it’s going to take you a month to hire. I think that’s perfectly acceptable; but I think that, as a cash-constrained startup or a business, I don’t know if it’s as much as hiring before the need, or it’s as much as hire when it’s really painful. As a founder, you’re going to be taking up the slack with anything, and so as you feel stuff start to just get piled and piled on top of you, hire before it breaks you. Hire before it completely derails what you’re doing. I think looking out two to four weeks on what is going to breaking you soon is probably the way that I think you have to do it in the early days.
Mike [00:21:48]: Yeah, I think Peldi ran his business, Balsamiq, to the point where – he decided to hire when he felt like he was going to die because of all the work. That was really kind of the main point, but making sure that you have things lined up so that you can put a full-time offer in front of somebody if they’re the right fit? I think that it’s important to always be looking. It doesn’t necessarily mean that you need to make an offer to everybody, but at the same time, you also need to be aware that that process can take a while. If it’s a full-time hire, then chances are really good that they’re probably going to give two weeks’ notice to their existing employer, and you may need to not necessarily coach them, but be cognizant of the fact that they may use that as a negotiating tactic, or their existing company may use that to say, “Let me give you more money to keep you.”
Rob [00:22:34]: Yeah. To give you an idea, I think some of the fastest hires that we’ve done in the past couple years have been about two weeks from posting a job to having someone start working, and that’s when they didn’t already have another job already going on. The longest one was probably three months, maybe four, from the time we posted; and we had to post it multiple times. That was for a senior Rails developer, and we were very picky about that. We wanted some very specific skill sets. We actually looked local first, and when we couldn’t find anyone, then we went remote. It was a drawn-out process. That was actually over the Christmas and, I think, the Thanksgiving holidays as well, so that extended it even further. But that gives you an idea of the range when looking for someone.
Another point that we want to talk about is not to rule out remote workers. Obviously, there’s a movement of working remotely, and “37 Signals” talks about this in their book and all that. There’s definitely value in being able to find the best people anywhere in the world, no matter where they live. So, I think there’s a balancing act here, because what we found – I was totally remote for years when I had all the contractors. No one ever lived in the same city. Then as soon as Derek and I started working together in the same city, here in Fresno, it made me realize just how valuable that face-time can be and the advantages of it. So, I don’t think that either one is the best. Everyone going into an office five days a week is not optimal either because of the interruptions and just all the overhead involved with that. I don’t think being totally remote is the best either. The optimal approach, we’ve found, is to actually have an office where all of us are in it two days a week. So we tend to go in Tuesday, Thursdays; and then other people go in as needed, and they have a space where they can work.
All that said, I think the hybrid approach, personally, is something that I would love to have. I’d love to have everybody local, but only meet a couple days a week so that you can go into your home office and actually get all the work done that you need to; because we stuff the meetings, and there’s a lot of interruption and discussion on the other days, but that’s super valuable. That’s when we get a lot of the hard work done.
Mike [00:24:27]: Something else to look at when you’re hiring for full-time employees is to hire for the most time-consuming tasks that you’re already doing first. This is an effort to offload those things. It kind of goes back to what we had talked about earlier, and you pointed out that one of your recommendations for people is to hire for support first. It’s because it’s so time-consuming. If there are other things that are time-consuming for you, regardless of whether they’re really driving the business forward a lot or just a little bit, the fact of the matter is that if they’re taking up a lot of your time, chances are good that there’s probably other areas of the business that you could be spending that valuable time on. It’s probably best to be hiring for those positions first, assuming that you can afford it.
Rob [00:25:10]: Another thing when you’re hiring for full-time is, if you can, like I said earlier, try to hire people who are experienced, especially if you have the budget. It’s tough to burden yourself with intense training, like hiring interns, in the early days. I know they can work out. I’ve heard of them working out. I’ve never been able to justify spending the time to train someone who truly is intern-level. It’s just so much work, and in the early days of your business, you don’t have a lot of time. Time is such a limited factor. With that in mind, you want to look for people who can actually show accomplishments. They’re not just talking about experience. You don’t just read it on a resumé, but in what way can they show you? If they’re a developer, can they show you a source code? If they’re a designer, can they show you past designs? If they’re going to do email support, can you do a short test where you send them three questions about your app? You have them look through and figure out how they would respond to it. You want to be able to see what people have done in the past, not just who they have worked for and for how long.
Mike [00:26:04]: That’s one of the dangers of hiring – is just, in general, that usually their previous experience and the things that they’ve done on a day-to-day basis – your ability to see into that can be somewhat limited. You essentially have elevated the risk by not being able to see their work, and that’s why I think a lot of companies like the fact that there are developers out there who have public GitHub repositories, and they can go take a look at their source code. Then you have Stack Overflow, where you’ve got people’s reputation on there, and you can see questions they’ve answered and how they talk to people and how they answer deeply technical questions. That’s extremely valuable from a hiring standpoint, because you get that visibility. You get to see stuff versus you get a resumé, and everything looks great. There’s no red flags, but you don’t necessarily see any really good strengths either. That’s one of the downsides of going through a hiring process and not being able to see any specific work that they’ve done.
[00:27:00] That brings me to another point about when you are hiring, look specifically for the strengths of people, not just a lack of weaknesses. That’s, I think, a very easy trap to fall into.
Rob [00:27:11]: Another thing to keep in mind is finding really good hires. They typically aren’t looking for jobs. They’re hard to find, and so typically when we’re going to hire, I think through, “Who do I know who knows someone who would be a perfect fit for this?” Referrals and recommendations using your network are the best channel, in my opinion, because: a) it’s going to shortcut the process, but b) that’s where you’re going to find the best people. You have to be careful. I rarely think of, “Who do I know who I could hire for this?” because I don’t like hiring close friends and family. I’ve seen it happen, and I’ve seen it just train-wreck businesses. I’ve seen it train-wreck relationships, so my personal stance is not to hire friends and family; but to hire friends of friends, or colleagues of friends, or folks that your network knows that you don’t have strong ties to. Having a dual relationship where you’re both a friend and a co-worker, or both family and a co-worker makes things way more complicated than I think they need to be.
Mike [00:28:07]: The last item on our list relates to paying for this. I think when you go to hire somebody and you make a full-time offer, you need to think about how you’re going to pay them and whether you’re going to use a payroll provider of some kind. If you have access to Gusto, which is formerly Zen Payroll, I would highly recommend that, but it does vary state to state or country to country. But any larger payroll provider should be able to provide those services for you. In addition to that, you’re probably going to need to offer some sort of benefits, like health insurance and dental and things like that. Those things add up. They can be really costly in addition to the cost of paying for the person’s payroll. Most people don’t realize this, but in the United States, you also end up paying employment taxes, which adds even more on top of that. You could count on adding anywhere from 25 to 50 percent of the cost of an employee on top of what it is that you make them an offer for. So, if you make somebody an offer for 40,000 a year, it could be up to 60,000 or potentially even more, depending on where you live and what sorts of benefits you’re offering.
So, again, this comes down to, in some senses, risk tolerance. Can you afford that? Can your business afford that? You need the business to be able to support those employees long-term, so the revenue has to be there as well. I think that’s where this hiring process becomes such a challenge, because until you get to that point where the business is making enough money to be able to, I’ll say, quote-unquote, “easily hire” somebody, or at least easily be able to afford to hire someone, you might be riding the business a little bit on a razor’s edge in some cases. If the economy goes through a downturn that you didn’t expect and your business starts to go down, you could be in a position where you hire somebody and then three months, six months later, you look at your finances and say, “You know what? We really can’t afford this anymore.” And firing somebody after they’ve only been working for you for a few weeks or a few months is very difficult to do, because it’s not like it was a performance issue. It’s just you made a wrong decision, and I think that that’s more difficult for most founders to accept because they’re the ones who are at fault. It’s not the employee. It’s not as if the employee made a mistake, or is not pulling their weight or doing the job. It’s you made a mistake in the business, and you’ve screwed up.
Rob [00:30:21]: Yeah. I think in terms of the benefits – you know, you mentioned that – that’d be something else. I know a lot of early-stage startups, when you’re below five employees, they don’t offer healthcare; because it is such an administrative – not only an expense; it’s just a big time suck to get that going. So, that’s something to think about. You obviously want to take care of your employees as soon as you can, but it’s something to think about – that it’s not necessarily a need, and it can negatively impact your business if you try to compete with the big boys and get a 401(k) out and you’re under ten employees, and get healthcare for everyone when you’re under five employees. It’s something to weigh and think about both in terms of the cost and the time. And I think what you just said about risk tolerance and having either the cash in the bank, or the MRR coming in to cover is something not to be taken lightly, because having to lay somebody off after you’ve done all the work of hiring them – it would feel terrible, and it would be a very stressful decision that you’d have to make. The nice part about if you do have a recurring revenue business, rather than one-time sales, is that that revenue tends to be more stable; so, definitely a plus of the SaaS or the membership model.
[00:31:24] I think that wraps us up for the day. If you have a question, you can call our voicemail number at: 888.801.9690. Or, email us at: questions@startupsfortherestofus.com. Our theme music is “We’re Outta Control,” by MoOt, used under Creative Commons. Visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening, and we’ll see you next time.
Episode 284 | Key Takeaways from MicroConf 2016
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike discuss several of their takeaways pulled from talks at MicroConf 2016.
Items mentioned in this episode:
Transcript
Rob [00:00:00]: In this episode of “Startups for the Rest of Us,” Mike and I discuss our key takeaways from MicroConf 2016. This is “Startups for the Rest of Us”, episode 284.
[Theme Music]
Rob [00:00:18]: Welcome to “Startups for the Rest of Us”, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and scaling software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob …
Mike [00:00:29]: And I’m Mike.
Rob [00:00:29]: … and 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 [00:00:34]: Well, last Thursday, I added my first customer to Bluetick.
Rob [00:00:38]: Just shortly before MicroConf, huh?
Mike [00:00:39]: Yes, the day before my self-imposed deadline.
Rob [00:00:43]: Nice. So, what does that mean [?], then? They’re in early access, and they’re clicking around and sending emails – that type of stuff?
Mike [00:00:50]: Here’s the issue. I had them create an account, and we were kind of pressed for time because they were traveling on Friday, so I knew that we had to at least get them into the system so that I could take a look at stuff on the back end and make sure – because there’s a bunch of jobs on the back end that do a lot of data processing. I put them on. All of those things worked, but here’s your public service announcement for the day: don’t go in and change a bunch of things that are working perfectly well the day before you do that [laugh].
Rob [00:01:15]: Yeah, I was going to say – as soon as you started saying “…he created his account”, I almost completed your sentence, said, “And then everything broke?” because early access is always like that. All the stuff that worked two days ago totally breaks on them.
Mike [00:01:26]: I went in, and I had a bunch of changes made because I was going through and testing things. I was like, “Oh, this is a little bit clunky. It would be nice to make these changes here to make the flow a little bit easier”, and, unfortunately, we busted a couple of things. Of course, since it’s all based on different routes and stuff inside, the [rest?] API, you break one thing and the whole thing kind of falls down. There were a lot of things that worked, and then there were just certain things where there were core features that we ended up breaking which unintentionally. We got everything back and working within 24 hours; but, of course, I was leaving for MicroConf on Saturday, and he was traveling for the next couple of days. But we’re revisiting it this week or early next week, and we’ll go from there.
Rob [00:02:07]: Very nice.
Speaking of MicroConf, we just spent the last – what – three, four days in Vegas. This is our sixth conference in Vegas and our ninth overall, including the ones we’ve done in Europe. This was the first time we’ve had it at The Palms, and The Palms was – I’d say, cost-wise and décor-wise, it’s maybe a slight step up from the Tropicana, where we’ve traditionally had it. I really enjoyed the time this year. I feel like it was a good mix of – we had a lot of returning attendees, as we usually do. We had quite a few new attendees, and that was neat, a lot of first-year attendees. We even had a lot of first-year speakers. We didn’t have a lot of returning speakers from years past, a lot due to scheduling and other stuff like that, and also just wanting to have a fresh year to kick it off.
How did you feel about it overall?
Mike [00:02:50]: I agree. It was nice. I really liked some of the features that The Palms has versus where we had it at the Tropicana; for example, the food court and the fact that you can walk around a little bit more. It feels like you’re actually getting somewhere rather than just walking down massive hallways that almost have no end and seemingly no purpose [laugh]. Did feel like a slight upgrade. I liked the conference areas better; but, you know, it’s not necessarily all about the conference area either. It’s about the people that you’re meeting, the people that you’re talking to and things you’re learning.
Rob [00:03:20]: Yeah, that was the thing. As always, the hallway track as valuable or more valuable than the notes I took from the talks. It was great to see everybody who came. We had about 220, 230 people, and then we sold some “better half” tickets where folks bring their spouse and significant other, so I got to meet a lot of those. That’s always fun, because MicroConf – it’s not like other startup conferences where you’re there to talk about grinding away 90 hours a week. Our families are intimately involved in the startups that we’re doing, because many of us have significant others and/or kids, and it’s kind of cool to meet that person in a startup founder’s life and be able to have them have some glimpse into this crazy conference that that person goes to and maybe meet a few of the folks from it.
Mike [00:04:01]: Yeah, I had some interesting conversations with a bunch of people’s husbands, wives, boyfriends, girlfriends – that kind of thing. It was definitely interesting talking to the “better halves” and seeing what they thought of not just the conference, but the things that their “better halves” were working on as well.
Rob [00:04:16]: Sure. So, let’s dive in. We have several takeaways that we pulled out from the talks. I think we’ll go kind of in chronological order. There’s not enough time to cover every talk, so we’re just going to pull out some highlights. The speaker that kicked us off was actually Des Traynor. He’s the cofounder of Intercom, and he talked about building and scaling products, his lessons learned from four years and 8,000 customers. He had a lot in there. He’s done a lot of talks for Jason Calacanis, like their launch incubator. You hear it on the TWiST podcast, and he just always has such brilliant insight. He’s such a product guy, right? He knows what to build, how to build it, when to build, how to communicate that. He’s really focused on product and how that ties into, of course, marketing and growth.
I’d say the key thing, probably my number one thing – I took several notes from his talk, but one priority list that I really liked – he said it’s these priorities from the top down. The first thing that you should think about in your development cycle is improving a feature. The second one is getting more people to use that feature. The third thing is getting people to use that feature more. So, first it was more people to use it. Now it’s getting people to use it more, like more often. The fourth one is building new features. It’s in that priority order, which is contrary to what most of us do and how most of us think about product development, right? Most of the time it’s build new features, build new features, and that’s what customers and trial users are requesting when, in fact, Des is saying you need to think about improving existing features, getting more people to use them and more often.
Mike [00:05:38]: I really liked there was a grid that he put up that essentially showed what you should be working on and what has the most impact. There were a couple of different columns that he had there, and it was all based around how many people are using a particular feature and how often. You could see things like, in the top right, if everybody was using it and it was very often used, those are the places that you should be concentrating on.
He also talked a lot about how you are divvying up your team and assigning them to different parts of the project, where most software development teams will say, “Okay, we’ve got these 35 feature requests. Let’s put five people on each of them,” and that’ll take up everybody’s time. The reality was that he talked about bringing a bunch of test customers in, or existing customers, or prospective customers and saying, “Here’s $100 virtual dollars. Please vote on what it is that you would like us to implement.” Inevitably, what you find is that most people will vote for a couple of features, and a lot of the rest of the ones are completely unimportant, and you’re wasting a lot of time and effort and resources building those things that people just, quite frankly, don’t care about. His main point behind that was that you care a lot about implementing certain new features, and your customers don’t care at all.
Rob [00:06:51]: Another talk that I think had an impact on the first day was Claire Lew’s talk. She’s with Know Your Company, which is a spinoff of 37 Signals. Her talk was titled “An Unconventional Business,” and she talked about having a business without recurring sales. It’s a software company that allows other companies to learn more about their employees and what they’re thinking and that kind of stuff. It’s a one-time sale up front. It’s $100 per employee, and then there’s no recurring. She talked about how that is unconventional in today’s model of monthly SaaS charges, or even annual charges. She also looked at the sales process and how there’s only two of them. It’s not this big team of people doing stuff.
What were your thoughts on Claire’s talk?
Mike [00:07:31]: What I thought was interesting was the sheer number of demos they do and their focus and emphasis on gaining customer trust versus optimizing for revenue. Obviously, there’s the idea that you could charge a subscription model, or you could raise your prices, or charge some sort of annual maintenance fee or something along those lines. But when you look at what they’re doing, they’re really optimizing for the trust of the customers, and in some ways that reflects on their future revenue. I think Lars called it “expansion revenue,” because as those businesses grow, they will continue to pay the $100 for new employees. Or, if an employee leaves and they hire a replacement, then they’re essentially responsible for that extra hundred dollars, but it’s because they are so focused on getting the trust and buy-in of the CEO and the company executives and many of the employees that it makes a heck of a lot of business sense for those businesses to continue using their product and their software. So, it’s not necessarily recurring revenue but, as Lars said, it’s that “expansion revenue.”
I think that that’s an interesting take on it. I don’t think that most businesses, especially the ones at MicroConf, certainly don’t focus on, “How can we gain trust?” rather than, “How can we get more money?” More money is typically the focus, because it’s commonly easier to get more customers than it is to gain absolute, 100 percent trust of the existing customers that you have; but I also think that that’s probably true because of the way that their product is sold. You really need to be well-trusted by the company in order to just hand over contact lists and contact information for every employee you have.
Rob [00:09:08]: Yeah, and there was some discussion. There was a question during the Q&A and then that evening of folks questioning that one-time sale and wondering how they can make it a subscription business. I would guess long term that Claire’s got to be thinking about how to do that, because it is just so hard to grow a business when there’s a one-time sale; but all that said, I did like her principled rationale that the reason it’s a one-time sale is because they get that commitment from the company to implement this, and they don’t want them to cancel it in three or six months. She believes that once they do this, she wants them to have it forever. It’s a tough balance; and I think, perhaps, they’re in a bit of an edge-case scenario where – you know, personally, I don’t like one-time-sale businesses. I wouldn’t own one myself, and I think most businesses are moving towards recurring; but I wonder if hers could be in that realm of an acceptable exception.
[00:10:00] Another session we had on the first day that folks enjoyed was our Q&A session with [Stelle?] and Heaton, which turned out pretty good. An hour of Q&A is a bit long, and I think we made a little bit of a mistake in the schedule with that. I think I’d probably cap it at 30 minutes. That’s not saying anything about [Stelle?] and Heaton. It’s just too long to do a full hour of someone answering questions. But it was cool. It was like a live version of their podcast, and I thought that it was pretty valuable for the audience.
You were actually moderating that. You essentially read the questions and asked them the question from the audience and stuff. How did all that feel?
Mike [00:10:32]: As you mentioned, I was asking the questions initially, but we kind of primed the pump by having people submit some questions in advance and asked, I think, five or six different questions and then went out into the audience and started taking questions from there. I absolutely agree with you that it may have been just a little bit too long, but I think there’s good reasons for that. When you have a Q&A session like that, I think what tends to happen is that you get the people who are asking the questions who are the most vested and interested in the questions and the answers, and there’s probably a sizable chunk of the audience that isn’t necessarily as interested in that particular one. If you have too many of those in a row, then it’s difficult to maintain your focus and interest in the discussion. You and I have seen this especially with questions that come into the podcast, or when we’re doing internal, worldwide Founder Café calls where, if you don’t necessarily do any sort of moderation on the questions that are coming in, or filter them in any way, shape or form, then what you end up with is a lot of random things that come up that are difficult to maintain everyone’s interest for a long period of time.
So, I think that that’s probably what we ran into. For the podcast, when we do Q&A episodes, we typically decide which ones to manually respond to and do just one-off answers back to people versus ones that we think that are generally applicable to a wider audience. Those are the types of ones that we end up reading on the air in Q&A episodes.
[00:11:57] The one thing I do think is that, for the people who are asking those questions, they’re hyper-interested in those, so after the day, Heaton and [Stelle?] did an “office hours” after the first day, and they had so many people attend and so many questions, that they actually had to do a second day of them. It was only probably 20 or 30 people or something like that; but, still, that’s enough people with that hyper focus that it worked out really, really well for them.
Rob [00:12:22]: Another talk that had a lot of good takeaways was Patrick Campbell from Price Intelligently. He runs essentially a 20-person consulting firm focused on SaaS pricing. One thing -there were many, many takeaways from his talk, because he’s very tactical and he dove into a lot of stuff. He’s such an expert on the topic that it’s actually a little daunting when he says what you need to do in order to really get a good handle on your pricing. It’s a lot of steps; and I think he said it took him, like, eight hours to do it. There was a case study he did with his mom in a business she was starting, but I think that would take a long time for someone like myself, who hasn’t done the extensive pricing research that he has.
One thing that I really liked about his talk is – we’ve all heard of buyer personas, where you take a certain persona. If you have SaaS users, you might say SaaSsy Sam is your SaaS user persona. Then Billy Blogger is your blog user persona, and then you talk about their feelings and the decisions they use to buy and the factors they think about and if they’re price-conscious and all this kind of stuff. He took it a step further, and I hadn’t seen this. He actually added cost to acquire customer, so CAC values and LTV, lifetime value, to each of the personas. That was a real mental shift for me. I have all this in my head, and we talk about it internally about how we serve these three or four pretty tight verticals. With Drip, really it’s three verticals. Then there’s these other ones floating out there. Actually pulling out the CAC and LTV and all the other metrics by vertical is a pretty interesting idea, right, and it’s going to show you who your most profitable and least profitable are. In addition, he talked about you have to write all this stuff down; and that’s something that, while we have a bulleted list of the verticals, we don’t have the full-on list of all the buyer personas. That was a big takeaway for me was to sit down, draft this up and then do some data mining and figuring out some numbers to put to each of these.
Mike [00:14:14]: Next on our list, you talked a little bit about some different, unfair advantages, specifically, four different unfair advantages for faster SaaS growth. Why don’t you talk a little bit about those four unfair advantages?
Rob [00:14:25]: Sure, yeah. I did a shorter talk this year. It was a little bit a retrospective where I looked back and was trying to figure out at a higher level why has Drip grown faster than any of my other software products, like exponentially faster. Then I started looking around and saying of all the self-funded SaaS I know that has grown quickly, why have those grown faster than just the run-of-the-mill SaaS apps. I made a big list and did an analysis, and I talked to a few people and figured out that there really are four unfair advantages in order to have this 2X, or 5X, or 10X growth that we’re seeing in apps like Edgar, or Basecamp in the early days, or maybe Bytes Kits in the early days, or Drip, or like a SumoMe. There were these examples that were pretty obviously growing faster than everybody else.
I started with a long list of unfair advantages and, one by one, I realized that a lot of them actually didn’t make a difference. The four that I narrowed it down to – and you can have more than one – are, number one, to be early to a space. Second one is who you know, so it’s your network. Third is who knows you, so it’s your audience. The fourth is growth expertise; it’s how much expertise you have growing a company. It was fun. It was a little short, 20-minute talk; and I felt like, hopefully, it gave people ideas of stuff to be working on even if they don’t have a product yet; if they’ve already launched a product, how to try to get one of these in the space they’re in; or, to prepare for a future product that they’re launching.
One thing I meant to say, or I should’ve said, is that growth is not the end-all, be-all. Everyone doesn’t need to want to grow all the time. Of all people, we are the lifestyle startup crowd, right, where it’s like – I don’t build these startups just so they can grow. We build them so that we can have fun lives and we can have these great lifestyles. Even having faster SaaS growth in the title, I debated whether to do that, but that’s really what the talk happened to be about. If you’re out there and you’re thinking, “Well, I don’t really want super-fast SaaS growth,” that’s okay. This is just something that was there to help folks who maybe don’t want to travel a ‘long, slow SaaS ramp of death,’ or at least want to move along a little faster.
Mike [00:16:31]: Our next speaker was Tracy Osborn, and I think Tracy’s story was pretty interesting, because she has run both a funded and a non-funded startup. She ran WeddingLovely, and I think she called it something else earlier on. She had gotten funding from 500 Startups and was working on it then, and then later on – did she say that she took it private, or was it a spinoff of what she was doing based on that?
Rob [00:16:55]: It was the same company, so it was still funded, technically, the whole time; but she basically tried to run it like a bootstrapper, yeah.
Mike [00:17:02]: Right.
Rob [00:17:02]: So, once the funding was gone, she didn’t shut the company down. She was then just trying to make it profitable, which is not what people who give you funding really want.
Mike [00:17:09]: Right, yeah. I got the impression that the people who had given the funding, initially they were just like, “Okay, yeah. We’ve decided this is a failure, and we’re going to write it off at this point,” but she still took it forward. It was really interesting to see the contrast between how she approached it before when she had money versus when she didn’t later on.
Rob [00:17:29]: Yeah, I agree. The real takeaway from her talk wasn’t that funding is bad. It’s that flip-flopping between funding and bootstrapping with the same company is bad, because the priorities and the way you build the business is just so different. To be honest, I liked her talk in terms of the narrative. We go for about an 80-20 breakdown of actionable/tactical versus inspirational and narrative-driven, and hers was definitely in that 20 percent. Maybe we’re 90-10 in MicroConf most years, but hers was definitely in that 10 or 20 percent of a good story and seeing a lot of mistakes that she made. Just her perseverance. She kept calling herself in the talk. She’s like, “I was the cockroach that would not die, and I just have kept the company going.” It was an interesting story to hear and kind of a cautionary tale in terms of figure out if you’re going to be funded or bootstrapped and then go that direction.
One thing that I would add, though, is, again, there’s this in-between of fund strapping, where you can raise a small amount of funding, but it’s from people who understand you’re not going to go for that $50 million idea; because WeddingLovely is a wedding marketplace. In that case, you really do have to get big. You have to hit scale in order to make it work. She had just started, let’s say, a B-to-B SaaS app; and she took some funding, then decided to go bootstrapped. I actually think it could’ve worked a little better, but it’s neither here nor there. I just think it was an interesting story and pretty well told on the stage.
Mike [00:18:53]: Yeah, I think the two, main takeaways that I got out of it was, one, her references to being “the cockroach that just wouldn’t go away,” and saying, “Look. I’m going to buckle down, and I’m going to make this work, and I’m going to make this happen. Even if I get slapped down, I’m going to come back, and I’m going to do something else and try and figure out something to make it work.” I thought that level of sheer tenacity and perseverance was very admirable, because I don’t think that you see that a lot. I think that most people tend to throw the towel in just a little too early. Obviously, there’re times where you can take that too far, but it was interesting to see the level that she went to just to even be able to meet people. That was the other thing, the lengths that she went to in order to meet certain people that she knew would help make a difference in her business.
Rob [00:19:38]: Another session we did on the second day was kind of the surprise session that we had not announced. Patrick Collison, the cofounder of Stripe, showed up. He was just there for about 24 hours. He had said that he’d been following MicroConf for a couple years and that he really wanted to come check it out, which was obviously a big compliment to us, given that Stripe is a $5 billion company. They raised $260, $280 million. He’s just a powerful dude in Silicon Valley, even as young as he is, so it was neat to hear that we were on his radar at all and that he would take the time to come down. He met with a bunch of attendees. He got feature requests, ideas and all that stuff, but he did a 30-minute Q&A up onstage about the early days of Stripe.
I really liked how he talked. They bootstrapped that thing. That’s what probably none of us remember. He said they bootstrapped it until it hurt, and then when they eventually hit the point where they could not go any further, then they raised their first round.
Mike [00:20:30]: Yeah, I really liked the focus of them on their early days about what their customers were doing and how they were using the product. One of the things that he talked about was that, because Stripe is essentially an API that you make calls into, what they had very, very early on was they had it wired up so that whenever somebody made a call to one of their APIs, it would actually email them. Obviously, that is not going to scale long-term. Obviously, it can’t at this point. There’s no possible way that it could do that; but early on they were watching what people were doing, what data they were receiving and what sorts of errors people were getting and what data was being returned to them. It helped them focus in to figure out where people were having problems, so that they could determine, “Is the code bad? Do we need to fix that?” or, “Do we need to go back and update the help documentation?” “Do we need to update some example APIs, or example code that’s on the website?” and things like that. It was really interesting to see some of the technical engineering things that they were doing to essentially help them do that product development.
Rob [00:21:33]: As day two started coming to a close, we had Peter Coppinger from Teamwork.com, and he basically talked about their eight-year journey. It was even more than that, because they were a consulting firm before that, but it was about an eight-year journey of their SaaS app Teamwork, which is project management. They were doing consulting at the same time as they were launching it. Then they made a lot of mistakes. He said that, as a developer, really he still wants to code even though he’s the CEO of a 63-person company, and that he still does write some code for it. He talked about just the mistakes that he’s made over the year and how he thinks that they could’ve gotten to their present level, which is 12 million in ARR – he thinks he could’ve gotten there years earlier if they had started marketing sooner, if they had started sales sooner. He said, basically, if you have your head down for too long and are just pounding away at features and such and not looking outside, that you’re going to hurt the business.
Mike [00:22:25]: Yeah. I think that it was interesting to see the number of mistakes and the types of mistakes that they were making. The fact that they were still able to make it work is a testament to the type of product that they were building. I hesitate to say that everybody can make those types of mistakes and still be able to get to where they are. Obviously, there are different types of products and different markets, and they will naturally break out into varying levels of success, but it’s interesting to see the path and the growth curve. Then looking back at it, they can say in retrospect, “Oh, had we done X, Y or Z sooner, then that would’ve seriously helped us.” I think the one big thing is just the marketing side of things. They just paid so much attention to the code, because they were developers, and that’s what they were comfortable with. It wasn’t until they really started focusing and buckling down on the marketing side of things that things really started to take off for them.
Rob [00:23:17]: Yeah, I agree with you. I think a lot of folks, if they made the same mistake, would probably tank. Teamwork had that advantage of being in a big space, and they were there really early. I think it was like 2007, maybe, when they launched the SaaS app, somewhere around there.
Mike [00:23:32]: Yep.
Rob [00:23:32]: And being a SaaS project management product at that point, there was really – what – Basecamp? That’s the only other one I knew. I’m sure there were more, but I think that they did have the wind at their back, and I think Peter’s right. I think they’d be further along at this point if they had made the right choices, but even making those mistakes, they still survived; and not every business could do that. You’d probably need one of those big four, unfair advantages, if you’re going to make all those mistakes, in order to get to where they are.
Mike [00:23:58]: One thing that I thought was really interesting was the fact that they acquired the teamwork.com domain for – I think it was like $675,000. You look back at their growth curve, and you could see this definitive inflection point at about the time that they got that. I don’t think that a domain name is going to be the turning point for most businesses, but I think that in their specific situation, because of the type of software they were – and the previous domain, I think, was teamworkpm.net obviously, kind of an awful domain. They knew that. That was not even a question, but when they got the teamwork.com domain, it really gave them a level of validity and, I guess, authority that people looked at it and said, “Oh, you have teamwork.com. This must be a legit website and a legit app, so let me give it a shot,” versus previously, you look at teamworkpm.net, and it’s like, “Meh, I’m not so sure about this.”
Rob [00:24:49]: Yeah, I get the feeling – there were a couple questions during the talk, and then someone asked me about it later that evening. There was kind of some folks who I don’t know that they believed that the teamwork.com acquisition was the actual reason that the curve spiked up like that. What made it even muddier was that, like the slide – I think when the slide was converted, something happened where he had an arrow to where teamwork.com was acquired, and it was in the wrong place. So, it was hard to tell exactly the inflection point, if it was before or after the domain acquisition. If it was, that’s pretty crazy. That’s a huge deal, and if just getting the dotcom for your business did that, it really is kind of a vote for maybe ponying up some dollars for a domain name.
Mike [00:25:33]: But I also think that that’s just a matter of looking at the website and being able to explain, “Oh, this is teamwork.com.” If it’s a one- or two-word domain, it gives it that, I’ll say, air of authority –
Rob [00:25:45]: Yeah.
Mike [00:25:45]: – you know what I mean – for the larger enterprises, and you’re able to attract larger customers based on the name alone versus, as I said, teamworkpm.net. You’re not going to get Johnson & Johnson saying, “Hey, let’s dump a lot of money into this and sign up for a ton of accounts.” It’s just not going to happen.
Rob [00:26:00]: Right.
Rounding out our conference, the last speaker was Lars Lofgren. He ran growth for Kissmetrics for many years, and he’s spoken at MicroConf Europe in the past, actually. This year, he was talking about the three SaaS growth levers. I’ve seen parts of his talk before, and I really like it. I took a ton of notes from him. It was definitely one of my favorite talks of the two days, because it just reminded me of so many things that we should be doing at Drip, things that I’ve had in mind, or are on a list somewhere. It reminds me of how important they are.
The levers are: fixing your churn and then getting cohort expansion to work, which means expansion revenue as people are upgrading; and, finally, getting acquisition going. So, a lot of lessons from Lars. One of them that rocked people’s worlds is he talked about if you’re really going to try to grow this fast, have world-class churn before you scale. That means that you have product market fit and that you want your churn in the 2 to 3 percent range. He used this expression if you’re above 10 percent, your business is “on fire.” I’ve always liked that expression when he’s used it.
Mike [00:27:03]: And not in a good way either [laugh].
Rob [00:27:05]: Exactly. Exactly.
Mike [00:27:07]: Yeah. Some of the parts of his that I really liked was the fact that he looked at churn, and he said, “Here are all the different reasons why somebody might churn out.” Or, not all of them, but a bunch of them. Then he listed a bunch of churn reduction ideas. Then he categorized each of those and said, “These are bad. They’re just not going to help you.” Then, “These are marginal wins, and then these are major wins.” The things that fell under the “major wins” category was fixing your product onboarding; improving the value of the product; and then 30-, 60- and 90-day onboarding programs. It was really interesting that he broke those down. Then he said things like removing self-service cancellation. That just does not move the needle for you. But if you fix the product’s ability to onboard people, that’s a major, major win; and you’re going to be able to scale up very, very quickly because of that.
Rob [00:27:53]: Yeah, that’s what I liked, is that he called out these tactics that a lot of us might think to reduce to churn, but he said that basically covers up your churn problem. It doesn’t actually fix it. So, things like down-sells, or forced annual plans, et cetera, are not things that you want to do if you want to grow to this scale; because it just covers up the issue, and it will hurt your credibility long term. It hurts your brand, and people start thinking about you as just more of a fly-by-night company rather than someone who’s building something valuable for the long term.
Mike [00:28:22]: The other thing I really like that he pulled out was the fact that there’s a big difference between marketing and sales, and they can be at real odds with each other if you get to a point the marketing team is able to bring in a lot of people into the top of the funnel, but if sales can’t close those because the product is bad. He called it the “alligator funnel,” because you’ve got that top of the funnel, which is increasing, and then the sales are just flat and they’re not going anywhere. Then the marketing teams and the sales teams are essentially pointing the blame at each other, and you have this internal problem. The root cause is essentially because the product itself is just not able to do what the customers need it to do. That was a very interesting thing. I’d never heard that before.
Rob [00:29:03]: Overall, it was a nice ninth conference. I feel like we’re just starting to get the hang of this thing now.
Mike [00:29:07]: Yes. Only nine or ten more, and we’ll be good.
Rob [00:29:10]: We’ll be [laugh] – exactly. No, so it was good. A big thanks to everybody who attended. Obviously, thanks to our sponsors, and thanks to Zander for all the help in pulling it off. I don’t think we’d really still be doing MicroConf if we hadn’t found someone to help us put it together each year, because that takes a lot of the burden and the time investment off our shoulders.
Mike [00:29:29]: Yes, definitely a big thanks to Zander and everyone else who helped out. It’s very nice to have people like that on the team.
Rob [00:29:34]: And if this sounds interesting, we’re throwing another MicroConf in just a few months, July 31st and August 1st of 2016. We’ll be in Barcelona, Spain. If you’re interested, go to MicroConfEurope.com. There’s a little Drip widget in the lower right where you can enter your email address, and you’ll be one of the first people to hear about it.
Mike [00:29:53]: I think that about wraps us up this week. If you have a question for us, you can call it in to our voicemail number at 1.888.801.9690; or, you can email it to us at questions@startupsfortherestofus.com. Our theme is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. Subscribe to us on iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening, and we’ll see you next time.
