Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions including topics about company identity, using accountability emails, and SaaS project management.
Items mentioned in this episode:
- Screensaver Ninja
- Cyfe
- DigMyData
- Big Snow Tiny Conf
- How to build an MVP with Rob Walling (7 Day Startup Challenge)
Transcript
Rob [00:00]: Alexa, add Chocolate Chip Cookies to my shopping list. Xbox, turn off. Okay, Google, search for Boston, Massachusetts.
Mike [00:12]: This isn’t working, I don’t think.
Rob [00:13]: In this episode of Startups For The Rest Of Us, Mike and I discuss company identity, using accountability e-mails, SaaS project management and we answer more listener questions. This is Startups For The Rest Of Us, Episode 273. Welcome to Startups For The Rest Of Us, the podcast helps developers, designers and entrepreneurs be awesome at launching software products. Whether you’ve build your first product or you’re just thinking about it. I’m Rob.
Mike [00:42]: And I’m Mike.
Rob [00:43]: 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 [00:48]: Hate mail for this episode’s intro can be sent directly to you for turning on people’s Xboxes and ordering Chocolate Chip Cookies.
Rob [00:54]: That’s Miketaber@gmail – cool. What’s going on with you this week?
Mike [00:59]: I’m gearing up and trying to get a couple of things hammered out before I head out to Big Snow Tiny Conf next week. If you don’t hear from me, I probably ran into a tree because I haven’t skied in a while.
Rob [01:10]: That will be fun.
Mike [01:11]: I’m probably not very good anymore.
Rob [01:12]: That will be cool, and that’s Brian Casel’s conference city puts on up in Vermont and then in then in Colorado.
Mike [01:18]: It’s in Vermont with Brad Touesnard, and there’s also a Big Snow Tiny Conf West that is now headed up by Dave Rodenbaugh. I know that Brian Castle is involved with that. I don’t know to what extent but I know that Brian is going to that one as well. That’s a little bit after – I think a couple of weeks after this one.
Rob [01:34]: That will be fun. They’re really small, right? They’re like 10 people, or 12 people.
Mike [01:36]: Yeah. I think the one in Colorado is maybe 9 or 10 people. The one in Vermont, I think it has 11 or 12. I’m not sure on the exact number, but they are really small.
Rob [01:48]: By the way, it’s Brad Touesnard. It’s a silent ‘S’, yeah. Anyways.
Mike [01:55]: Apologies Brad.
Rob [01:57]: I’m sure that’s pretty common. So I had a fun chat yesterday with Dan Norris. Dan is the author of the Seven Days Startup. He did this seven day startup challenge where he got a bunch of folks to come on and do “Q and A” and talk with him about different aspects of doing a, we know what he calls a seven day startup, which is a really short timeframe startup that you get out the door within seven days. So a lot of productized services, and prototypes, and MVPs and stuff come out of it. There’s only a portion that is software. There’s also people doing physical products, and knowledge products, and other stuff like that. We did it on Blab, and it’s recorded. We’ll link it up in the show notes. It was really fun. We talked minimum viable products.
I had five minutes or so at the front where I was talking about how I understand minimum viable products, and the myths around them, and gave some examples. And then Dan said a little bit, and there were so many questions. We did almost an hour of Q and A, and there were some really good questions in there that we had to [?] back and forth. So if you’re wanting to know more about Dan Norris’, and my. thoughts and opinions on MVPs, and some clarifications that I think are important on this topic, check it out. We’ll link it up. It’ a long URL but it’s on Blab.im, and you can just watch it, like a video right in your browser.
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Mike [03:06]: Very cool. Anything else going on?
Rob [03:08]: Yeah. The one other thing I want to mention is I’ve been watching the show called “The Profit”, P-R-O-F-I-T. Have you seen it?
Mike [03:14]: I have not.
Rob [03:15]: It’s a reality TV show. I’m not a fan of most reality TV because it’s so engineered and they act like it’s reality, but it’s loosely scripted or the producers set up these scenarios. I’m sure this one is similar vain. It’s a reality TV show about this dude who’s a billionaire and he goes in and buys hurting businesses, or part of them, and then he works with the people to improve them. So it’s businesses anywhere from – he’s done a car buying service, he’s done a gym type thing with monthly memberships, a candy store and stuff. It’s really cool. The guy knows his stuff. I like Shark Tank, but Shark Tank feel a lot like theatre. But there’s not many business lessons that I feel like you can take away from Shark Tank. It is this big spectacle. The Profit has some of that in it. The guy, Marcus, who’s running it – this billionaire guy – super sharp dude. When you hear him talk about stuff and explain it, it’s interesting. It airs on some weird network like CNBC or something, but I buy it on Amazon and watch on my Roku. It’s something I’d recommend. It’s the closest thing to business entertainment where there’s actually some lessons to be learnt from it that I’ve encountered. I wanted to mention it. I think, if you’re looking for a show and interested in this kind of stuff that it’s something to check out, called The Profit, P-R-O-F-I-T.
Mike [04:29]: Very cool. What are we talking about this week?
Rob [04:31]: Today, we are answering a bunch of listener questions. They continue to pile up. We have some really good ones this week. Our first one is about company identity, and this one is an anonymous question and he said, “I recently heard of your podcast and I became an instant fan. I’m working through your backlog. My startup at the moment has two products. We didn’t plan it this way, but my business partner quit and the original product was his idea and he was the domain expert. I’m maintaining that product but I found myself not being able to evolve it, grow it, sell it, etcetera. Since then, we launched another product, and we might have more in the future. This seems to be frowned upon in the startup world. It’s seen as lack of focus. I’m glad I found your podcast where this approach is not necessarily considered wrong. I’m not ruling out the possibility of one day finding one of these products perform so much better than the others that I will end up getting rid of them, but for now, that’s not the goal. My problem though is one of identity. When people ask me about my startup, I used to say “W”, where W is our first product. Then I started saying “Y”, where Y is our second product. Now I’m saying “C”, where C is the name of the company, and then I tell them about our products. But I find that most people immediately focus on the fact that we have more than one product and forget what they are. When you are a multiproduct startup, how do you identify yourself? How do you pitch for the sake of networking?”
Mike [05:39]: I think you and I have both run into this exact same problem before, haven’t we?
Rob [05:44]: Yeah, for sure, doing multiple things like MicroConf, and having software products, and the academy, and writing a book and all that, and the podcast. You got to figure out a way to talk about it from an umbrella perspective.
Mike [05:56]: Yeah. I think in some cases it makes more sense to talk directly about a specific product. It’s almost dependent upon the context of the networking situation that you are in. So if you’re at a conference for a particular line of business that you’re product is applicable to, you would talk about that particular product. I’m making an assumption here that these products are not necessarily related to each other, and that’s probably where some of the confusion comes from, because if they don’t have an overlapping market then it’s difficult to relate them to each other and to the person that you’re talking to. So that’s, kind of, the underlying assumption that I’m making here. But if you are in that situation, if you are in that networking mode where you’re talking to people and they’re applicable to a certain product, talk about that product.
I would just say, “We develop a product that does this,” and don’t really talk about yourself as a company, because if they want to find you as a company, they’re going to find you through that product. If you talk about your company itself, nobody cares about it, and it seems like you’ve run into this, where people don’t remember your business, they remember what you do. And that’s really the core of the issue is that people are remembering what you do, not who you are. That’s how you have to address this, because you want them to remember that product because that would backtrack the person back to you if you’re looking to network with them. When you are in a social situation where you’re trying to explain to a friend what you’re doing, you can give them a little bit more of the back story about the company and say “Oh, this is where we came from, this is what we do.”
When you’re in one of those in-between situations, where you don’t know whether or not the person you’re talking to is in the market for one product versus another, you, kind of, have to pick and choose. I’ve gone both ways where I’ve said, “I run a small software company that does this, this and this.” Then if they express interest in any one of those specific things then you can talk more about that. But I usually leave it a little bit more of a high level thing, so that you can let them talk a little bit, and feed off of whatever it is that resonates with them. I find it that works best for me. It depends on the social situation that you’re in.
Rob [07:54]: I think the key here is that he is in a different situation than, let’s say, you and I, because he has multiple software products. Whereas if you say that you wrote single founder handbook, you have a MicroConf and you have a podcast, you can say, “Well, I’m in the startup space,” and you can group that under a personal brand thing. He’s trying to network based on what these products do. He’s in a little bit different scenario. With that in mind, you hit the nail on the head when you said, “Figure out what the other person is going to be interested in.” If I’m at a cocktail party and I’m speaking to someone and I find out that they are a lawyer or that they work at a hospital or whatever, when they ask me what I do, I’m probably going to say, “I run a small software company.”
That tends to be my lead-in, because typically the next question then is something more about the company like, “Oh, what does your company do?” At that point, I would probably say, “Well, we have multiple products but our biggest one is X.” Because that’s what they’re trying to do is, kind of, figure out what you’re up to. However if one of my pieces of software was aimed at lawyers, of course, that’s the one I would lead with. I would say, “One of them is actually in the legal field and it helps lawyers do XYZ.” So, I think, getting a tiny bit of information before you answer this question is going to go a long way. I don’t think there’s a single blamket respons is going to be right for everyone. I would keep in mind that the simpler you keep it up front and then let people edge in with further detailing questions where they’re getting more and more information is probably the way to go in this scenario. I hope that helps anonymous.
Our second e-mail is not a question. It’s more of a suggestion and a look at something that has worked for one of our listeners. It’s from [AnderstoPeterson?]. He’s a multi-time, MicroConf attendee, an attendee talk in Europe. He says, “Hey guys. I send out an accountability e-mail every three weeks with status on my project time block, my biggest questions right now, and what I’m working on for the next few weeks. These e-mails have been the single most important thing that have helped me to speed up my progress building this new business. The amount of self-chosen pressure makes me wake up every morning and think, “I’ve done nothing yesterday. I have to get my stuff together, because I’m going to be e-mailing people about this in the next few weeks.” This, coupled with the advice I get from those who receive it, is invaluable. I’ve gotten a few of my friends to do a similar e-mail, so I thought it might be worth mentioning on your show.”
Ander suggests this in addition to mastermind calls that he does. If it’s a tactic that seems like it might work for you, wanted to throw it out there. If you do put this into place, and you feel like it’s something that works for you, and you find a few people who you can e-mail and it keeps you accountable, let us know at questions@startupfortherestofus.com and we’ll give you a shout out in a future episode and thank Anders for that helpful advice. Our next question comes from Chad Rogers and he says, “Here’s an interesting, more technical question that comes to mind about platform as a service versus VMs, Virtual Machines. Trade offs in considerations including cost scale ability, maintain ability and up time. In other words, merging your own VM servers versus using cloud platforms, like say a Google app engine, an Amazon EC2, a Rack Space cloud, that type of thing.” Ready, Mike? Go. It’s a big question.
Mike [10:54]: It is a big question. Some of this depends at what stage of your business you’re at. If you’re really early in and you don’t necessary care about bleeding edge performance – which is especially true when you are so early on that you don’t really have any performance concerns on the system – you can just spin up a VM and use that. The other option is to go with something that’s more of a platform as a service that you don’t have to worry about all of the underlying considerations. Now, the tradeoff there is the fact that you have to understand exactly what it is that you’re getting into when you’re using those platforms as a service, because if you’re not monitoring them and watching them, it’s very easy to have something that spins a little bit out of control, and then racks up a huge bill you weren’t necessarily anticipating.
First it’s something like a VM, where you generally know that it’s going to be a fixed cost. But with a platform as a service, that variable cost could be substantially lower on an ongoing basis as long as you’re managing it well enough. So in some ways it depends a little bit on where you want to spend your time managing things. Do you want to spend it at the virtual machine level, or do you want to spend it making sure that your infrastructure is not going sideways and monitoring everything to make sure that you’re not going to get a monster bill at the end of the month? Some places have different coupons that allow you to cut down on the cost and things like that.
One of the other advantages of a platform as a service is you have a tendency to scale out, and you basically just add resources to it – which is a very generic way of thinking about it – versus virtual machines which you tend to scale up until a certain point and then from there you also scale out. There was a story that went around years and years ago about the guy who ran the website “Plenty of Fish” when having 64 Gigs of RAM of a server was just this massive investment. It was 8 or 10 years ago. He decided to go to a SQL server that had 128 Gigs of RAM because he did not want to rework his code to make it more efficient. It was easier to just spend $50,000 or $60,000 to upgrade the machine and buy a new one than it was to reengineer a lot of the code. That’s basically the decision you’re making here, is what do you want to spend your time and effort on? Do you want to spend it on the infrastructure, or do you want to optimize the code [?]. It seems to like that’s a very similar trade off that you’re making in these cases.
Rob [13:12]: Yeah. I want to touch on something you said earlier on. I think it really depends on what stage you’re at, and how much control you need, and how much cost you can endure because if you’re really earlier on, you don’t have a lot of customers, then a platform is a service. It is so nice that you don’t have to maintain all the stuff and keep these servers patched. There’s just so much that goes into that. It’s a lot more time than you think it is. Even if you know how to do it, none of that moves your business forward. I would always opt towards going with a platform as a service at the start. What we ran into at DRIP, pretty quickly – it was even in just a few months – was that the cost was so high because all of the incoming requests. We were growing pretty quickl, and so we scaled up. We sent a bazillion e-mails, and we have all these analytics data coming back to us in real time. To try and get a pass to support that was expensive. We did move over to Amazon EC2 VMs and as a result we now have the burden of keeping these things maintained and doing all of the devop’s work. For us, it totally makes sense. We could frankly hire a full time person to do this, just based on the amount of money that we’re saving from a past approach. But the platform as a service is always where you’re going to want to start unless you know that you’re heavy duty analytics right off the bat. I hope that helps, Chad. Our next question is for me, actually. It’s about Trello setup. It’s from Finacis Poli Crinakis.
He says, “Rob, in a recent episode, you mentioned you only use a single Trello board for all you projects. How do you handle working with different teams per project? Is the board exclusively available only to you? Do you copy tasks to other boards where your team is?” And the answer is, “Yes”. My Trello board is a single one. I have a single Trello list for my to-dos, even though I’m working on multiple projects. I used to have multiple boards and multiple lists, and then you spend a bunch of time churning and not knowing what to do next. I want to be able to order everything in a single to-do list so that when I go to look for that next task, it’s right there and I’m not thinking to myself, “Oh, should I work on this or should I work on that?”
That means that I can’t necessarily share stuff with people because it’s all baked into the same board. So yes, if I need to assign a task someone else then I do wind up moving or copying that to where my team is. We do work with some shared Trello boards, but that’s not my main day to day to-do list. That’s the way I have it set up, and it works well for me and the way I work. Maybe it will work for you as well. Thanks for the question.
Our next question is about SaaS project management. It’s from J. Davis. He says, “I’m working on building a SaaS app that has a hardware component, and I’ve never undertaken a project like this before. I’m working with a partner company that already has an established client base, understands the market quite well, and assures me that their clients are in need of a product like this.”
So a little injection here; before I built anything I would figure out what the assurance is – like what data do they have, what have they shown you, aside from just them telling you, “Hey, yes, we have people,” Because if you go through a bunch of costs and do this and they really didn’t do their customer development or their due diligence on this one, it’s going to be a real bummer. That’s a sticking point for me right there just in the first paragraph. But let me continue with the email. Jay says, “I’ve built a proof of concept, and given the partner company a demo which they’re happy with. The next phase is to start organizing the project and I’m looking into scrapping methods form the Agile Management Framework to help me get things organized and to find the project goals. I already run my own IT company and can hopefully fund the project development with my consulting work as well as allocate it roughly 40 to 50% of my work week to it. I have some quick questions I hope you can help with. The first is how do you guys approach a new project as far as practical management goes? Do you have a set process? Have you tried anything like Agile? And the other question is what are some pitfalls, you would suggest, to keep an eye out for as far as project management Is concerned?”
Mike [16:40]: I think I’d echo Rob’s earlier question about how much validation has that company done for their own clients. If they’ve done that much validation for it, why haven’t they done it themselves? I would be a little bit more cautious about that aspect of it, because it sounds like you’re making an assumption that they have fully validated the idea and that you don’t have to do that work, when the reality is that that may not necessarily be true, or may not be true to the degree that you need it to be in order to make the financial aspects of it work out. So you might need to sell 10,000 units, but if their validation only said that they can sell 5,000 realistically, then you’re going to have a hard time being able to make ends meet. Because you’re either going to have an overrun with the supply, or you’re not going to have enough to meet the demand which, obviously, that’s a problem that money can fix. But if those numbers are off it can put you in a bad financial spot. Aside from that, how would you approach the project management from a practical management standpoint? That boils down to what are the different steps that need to be gone through in order to take the project to completion? So because this is a physical product, you’re going to need to have that POC System pretty well scoped out so that you can have it manufactured. I’m not a physical products guy, so there’s certainly a number of assumptions that I would probably have to make in doing that. But you’re going to want to know what all those costs are, whether there is unit cost, shipment cost, anything where you need to reship that stuff. So if it’s shipped directly to you or, if you have a drop-shipped, what are the cost components associated with each of those? You’ll also want to know what sorts of marketing efforts that you’re going to be able to have access to through this other company, and whether or not they are going to be funding it versus whether you are going to be funding it. You don’t want to have this list of questions about the entire process that you just iterate through and try to find the answers to all of those questions. I would do a lot of that work before you go down the path of laying out any money to have the product physically developed, because once you start down that path it’s very difficult to put the brakes on it. You want to have any unknowns, or question marks, answered well in advance of that, because you don’t want to have to put the brakes on it somewhere along the way because there was something that came up that was completely unanticipated that, had you just asked the right questions earlier on, you would have know that that was going to be an issue.
Rob [18:55]: If I were in your shoes, I wouldn’t get too hung up on finding a methodology, and finding too many things to apply to apply to this to offer heavy process. You’re going to be fairly agile just by nature – not capital ‘A’ agile – but just you’re going to move quickly. If you are a single person running this, and you can make decisions, and you’re in-charge of the development, then putting together an Excel Spreadsheet with estimates and costs, and getting whatever folks you’re working with in on that, some Google Doc, and having deadlines that are right in that spreadsheet could be plenty. It depends on the complexity of this. That’s where I would start. You can move on to a more sophisticated thing with milestones and things that get pushed and all that, and try to do a Microsoft Project like a Gantt Chart and all that. I would not start there.
I would also maybe read a book about Agile. I have used some of the stuff that came out of Agile, like daily stand up meetings can be useful with software. I don’t know how useful they are with hardware, because I don’t know how fast this project is going to move. Is it going to move quickly enough that a meeting every morning is going to have something new to say? Or should it be two times a week, or once a week? I think I’d just really use a lot of common sense, and try not to get hang up in the exact documents, the exact diagrams, the exact things in the naming and all that. If everyone else doesn’t know what those words mean – you know, because there’s a whole vocabulary that goes a long with Agile. If everyone else doesn’t know what that they mean, then it’s not actually that helpful.
And I think just talking about it common sense terms is where I would start, and certainly reading a book on Agile could be helpful, but I’d try to walk that line between being too obsessed with the process and trying to do the common thing that gets stuff done really quickly. In terms of the pitfalls, you asked, the biggest pitfall is no one ever delivers on time. I’m overstating it only a tad, but pretty much all deadlines and all costs are going to out the window. Expect it to take twice as long and cost twice as much. I think that’s the number one pitfall I would look out for. Don’t be too optimistic, and don’t let a vendor, or designer, or whoever, convince you that they’re going to be able to deliver something in X amount of days, because I bet it’s going to wind up being closer to 2X. You have any other pitfalls that you could think of?
Mike [20:56]: Not off hand. Like I said, the one thing I would be concerned about, to some extent, is shipping cost. For whatever reason, those can double or triple, and it doesn’t seem like much at the time. But when you start talking about a hardware component that you have to ship one or two of them out to each individual customer – depending on whether you’re drop shipping them, or you’re having them all shipped to you in one shipment, and then turning around and then reshipping them out, that can add a substantial amount of costs to the product you’re selling based on whatever the per unit cost is, especially if it’s a low priced cost. Then factor in the fact that you’re probably going to have to ship replacements and things like that. There’s going to be some margin of those things that you manufacture that, for whatever reason, they don’t work.
Rob [21:39]: All right. Our last question for the day comes from J. Pablo Fernandez, from screensaver.ninja. He says, “Hey Rob and Mike. I started listening to Startups for the Rest of Us recently. After a couple of episodes, I went back into my feed and downloaded them all. I’m still working my way through and learning a lot. Thanks so much for your podcast. It’s a great resource. I have question about a product I launched this year. We all have many websites that display information we want to stay on top of; Google Analytics, Case Metric, Twitter Feeds, Issue Trackers, Custom Dashboards etcetera. But it’s really easy to forget to check their state one day, lose the habit, and end up missing an important event. This is why I created Screensaver Ninja. It’s a screen saver that display web pages so you never miss this information, or any other information that keeps coming back to you over and over. I wanted to build this product by myself, and I also thought it was going to be popular with tech entrepreneurs, a group of people I’m very comfortable talking to. Unfortunately, sales to that audience were not great. My biggest sales segment is one that I have a hard time growing, because it’s unapproachable, big organizations such as banks, Ivy League universities, multinational conglomerates etcetera. What do you suggest I do? How can I increase sales?” Again his URL is at screensaver.ninja. What do you think, Mike?
Mike [22:44]: Rob, you and I talked about this a little bit offline. We have a little bit of a difference of opinion on whether or not the biggest sales segment qualifies, and how it is qualified. There’s not enough detail in this question to answer this question for us. The question that we have is, “How do you quantify that biggest sales segment? Is it the fact that there are people in these large organizations buying it? Or is it the sales quantities from these organizations?” I’ve worked with large organizations who have these enterprise level agreements with Apple, and they will buy hundreds or thousands of copies of a particular piece of software, and they’ll just essentially buy them direct through Apple, because they have those developer agreements in place and they’ll just say, “Okay, this is our master account. Let’s just buy 100 or 1000 copies of this.”
I could easily see a scenario where you’ve got a school of 2000 or 3000 students, and 2000 or 3000 computers at school, where they come in and they say, “Hey, we want the homepage for the school to be displayed on every single machine that’s here as part of the screen saver because we have these bulletin boards that go out there, and we want to be able to post messages to our entire school system using that screensaver. I could definitely see them wanting to do that. Because otherwise your other option is to redeploy a new screensaver to every machine in the environment. It’s kind of a non-trivia task. Rob, I think you had a different take on what he meant by the sales segment, right?
Rob [24:05]: Yeah, he said, “My biggest sales segment is one that I have a hard time growing because it’s unapproachable, big organizations such as banks, Ivy League universities, multinational conglomerates etcetera.” My take on it is that I was reading this as it was not the entire organization buying thousands of copies, like you were saying. I was thinking that it was individuals within these organizations buying copies on their own. So it was a guy in an IT department at a bank. It was a software developer at a Fortune 500 company, or a professor, or a grad student at an Ivy League university, not the actual organization. So I think the answer to this question differs depending on which case it is. If you’re correct and it really is enterprises buying this, then I would try to figure out how are they finding you? How did these enterprises stumble upon you? And what gave them the confidence to buy 500 or 1,000 copies? And how can you replicate that process? It’s not going to be something you can approach, unless you want to go through the whole enterprise sales cycle. Outbound stuff for a product like this could be a challenge. What do you think, Mike?
Mike [25:07]: Depending on the answer to that question, is it a few individuals in the company who are buying it and then using it, versus are they actually buying hundreds or thousands of copies of it? I think in each of those cases, depending on what the answer is, is going to dictate how you address the marketing effort. Because if you find that the use case in a large organization is for them to be able to put that screensaver out so that they can get bullets and word messages out to everybody in the environment, then that is a different marketing message that you’re going put on your website because you’re going to want to target those people. Another option would be to have a different section of your website that essentially addresses that particular type of marketing message.
Because if you go to screensaver.ninja, there’s really only one page for the marketing message. You can also put positioning in there to say, “If you were a school, this is what you can use it for. And this I how it can be helpful in your environment. Maybe you want to remind people of what the calendar is, or what those different sports events that are coming up.” All those types of things. If it’s a corporation they’re going to want to have a little bit different information in there, which in those types of environments, displaying a webpage on somebody’s screensaver – especially if it’s metric state of any kind – is probably not a good idea from a security standpoint, unless it’s all public information like their stock prices and things like that. So depending on what the specifics of the situation are is going to, kind of, dictate what you do, and how you position your product. I think it’s more about market positioning at that point, and getting the answers to those fundamental questions answered, rather than a blanket, “This is what I should do. I should go out and try to cold call, and reach into these organizations.”
Rob [26:52]: In either case, the question is, “How have they found you? How can you double down on that?” The one other thing that comes to mind, since it looks like you sell it through the Mac App Store, is, “What does your app store SEO look like? What are people searching for to find this? And how can you improve your app store SEO?” That will help you to a certain extent, but if you’ve already had some traction in a market that’s buying a bunch of copies, I would think app store SEO would be less important, and it would be more about figuring out how to replicate how those people found you.
Mike [27:18]: The other thing that he mentions is that the problem that it was trying to solve was being able to display information that you might want to stay on top of such as Google Analytics, or Case Metrics, or Twitter Feeds and things like that. It seems to me, in larger environments, that’s going to be much more not just proprietary information, but stuff that you would want generally secured. You wouldn’t want it just flashing up on your screen – maybe somebody is at a coffee shop or something like that, with their laptop – you wouldn’t that displayed there. You also wouldn’t want it generally displayed across the entire environment, especially if it’s like Sales Metrics and things like that. So in smaller environments, there’s a lot of different dashboard tools that I can think of that are addressed at smaller organizations that will essentially take new data feeds in. So Cyfe.com, for example, allows you to basically plug in data feeds from all over the place, and they have a ton of different integrations with a lot of different tools that allow you to look at all of that consolidated information in one place. DigMyData is another service that does very similar things. The UI and UX is different, but at the end of the day they both do those things. Yes, you have to log into them, but at the same time you don’t have to worry about somebody driving by your laptop or desktop and glancing at stuff they probably shouldn’t necessarily have access to.
Rob [28:37]: Also keep in mind that he’s selling it for $10. So the lifetime value on a single purchase is going to be too low to do any type of real marketing. You’re pretty much going to have to do free channels. It’s going to be app store SEO, or SEO, or some type of virality. There’s no advertising channels, or any type of outbound stuff you can do, when you’re selling something for $10 lifetime value. But if enterprises are buying it and they’re buying 1,000 copies, now you’re lifetime value becomes $10,000. So for that, you can afford to spend more time working on it, and more money to capture those people who are paying that higher dollar amount.
Mike [29:14]: Yeah. Those other services that I offer, both cyfe.com and digmydata.com, both of them are SaaS subscriptions. That dramatically changes the amount of lifetime revenue for those. But yeah, everything you said was spot on. So i think that about wraps us up for today’s episode. If you have a question for us, you can call it in to our voicemail number at 1-8-8-8-8-0-1-9-6-9-0, or you can e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Out of Control’ by MoOt, used under creative comments. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 272 | Planning For Your Imminent Demise
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike discuss a listener question about planning for your imminent demise. They talk about how to prepare for the worst and give examples of things they have put in place themselves.
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 planning for your imminent demise. This is Startups For the Rest of Us, episode 272. 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 [00:24]: And I’m Rob.
Mike [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 Rob?
Rob [00:37]: Something big is coming Mike. Something big is coming to Drip. It’s our biggest feature since we launched automation in, you know, what 15, 16 months ago. And –
Mike [00:38]: Is it a password reset?
Rob [0:41]: It is not a password reset. You’ve seen this one. You know what’s coming. It’s going to go live in about a week from when this airs, and we’ve been working on it for months, like five months. And I’m pretty excited about it, man. It’s a bit of an innovation on automation, and it’s going to help people visualize things a little better and just make it a lot easier to build complex flows.
Mike [00:58]: It does look pretty.
Rob [01:00]: Very much. How about you, what’s going on?
Mike [1:00]: Well I took my kids to see the new Star Wars movie a couple weeks ago, and the definition of irony – because my son’s name is Luke – and he has taken to going around telling people Star Wars spoilers like “Han shot first.”
Rob [01:13]: Nice. That’s a great — what is he like seven or eight?
Mike [01:15]: He’s nine.
Rob [1:15]: That’s a great nine year old spoiler. Because my son doesn’t understand the concept of spoilers. You know, when we were young there weren’t spoilers. If you went and told someone within a week after a movie came out, the ending, that was a real bummer. But there wasn’t the spoiler culture. I think without the Internet it wasn’t such a thing, and so I was trying to teach my nine year old also, like, “You can’t tell people what happened. You can’t tell the big parts. Even by accident, don’t mention them.”
Mike [1:38]: We made it clear to our kids, because one of our friends, they’re son, one of his friends had kind of ruined it for him and told him one of the spoilers, and then he almost told our kids but his dad was there. And I think that’s why he didn’t. So we took them one of the first days that it opened just to make sure that that didn’t happen to them. But we also made it very clear to them like, “You’re not to talk about the movie to any of your friends just so you don’t ruin it for them.”
Rob [2:01]: Indeed. So we have a bunch of iTunes reviews. We have 460 worldwide reviews. So we have some new ones I wanted to share with the listeners. We have Jay Carbary from the U.S. He says, “Loving this podcast. Episode topics are interesting. The content is incredibly helpful, and the episode length is perfect. Keep up the great work, Rob and Mike.” We have [Great Llama?] from the U.K. He says, “Keep it up guys. A massive help on a weekly basis. This podcast has helped me focus and fine tune my plays more than any other. I’d be so much further off without it. Your advice has been truly inspirational.” And from “Soccer83” of the U.S. he said, “Heard way too much about this podcast to not check it out. It quickly became one of my absolute favorites. As a bootstrapped entrepreneur myself I listen to a ton of podcasts. This is my favorite. Thanks guys.” Really appreciate the kind words, and even if you don’t have time to go in and write a few sentences, if you could go into iTunes – or whatever podcatcher you use – click that five star rating. It helps us rank higher. It helps keep us motivated and making new episodes.
Mike [2:55]: And if you don’t have access to iTunes, or just don’t want to use their interface because it’s terrible, then you can just write back to us at questions@startupsfortherestofus.com like Matt did. And he said, “Hey Rob and Mike. I love the show. I’ve been listening for a long time, and you guys continue to provide value. I’m bootstrapping a SaaS app as a non-technical founder and have used many actionable tips from the show. While I’ve also made a ton of mistakes I’m starting to see the hard work pay off and I attribute some of that success to your show. Thanks for all that you do, Matt.” And he runs an app over at Converthr.com. So thanks for that Matt. I really appreciate it. I think the only other thing going on is I mentioned that the FounderCafe migration was going on last week and everything went pretty well. There was only two minor issues with a couple of people who couldn’t log in because their usernames were the same as their email addresses. And somebody else had had an issue where some of the emails that were being sent for password resets were getting blocked because the vendor we used for sending out those emails monitors to see whether or not the email bounces. And if it does – for any reason whatsoever – it will no longer send email to that. So it was just a minor issue of finding the person’s username and unblocking it from the vendor.
Rob [3:53]: And if you’re not hanging out with a bunch of self-funded, bootstrapped startup founders you should come to FounderCafe.com, enter your email address. And we’re not taking new folks right now, but we are looking to start bringing in new groups here in the next month or two as we get our legs under us with this new platform. So what spurred the topic this week?
Mike [04:14]: Well we got a question to us from Brian and he asks us via email, he said, “I imagine this isn’t something most people want to think about, but if you happen to be a one man show what are some tips for handling your unexpected demise? I keep thinking about the situation of having a SaaS business, monthly charges automatically firing off, and your on ice while your wife is getting things in order and the service hits a glitch. I don’t have a SaaS business at the moment, but my wife would have no idea what to do. Have you guys prepared for the worst?”
Rob [04:38]: So the short answer for me is, “Yes, in general.” Even before I had business partners on the projects I’m working on I had a friend who I had talked to and said “Look, if I kick the bucket I’ve asked Sherry to contact you, and I need you to help her sell them basically.” I mean now it would be a little bit easier now that we have all the brokers around, but I did, kind of, give him general instructions and laid out some simple stuff. Because you’re right, my wife wouldn’t have known the technical side of how to maintain any of that, and there was an understanding that he would help maintain them just long enough until he was able to sell them. And we did have a bit of a vice versa thing were I was going to do that for him as well. And we also have, of course, a will, or a living trust, or whatever you want to set up. And I think that’s, kind of, the fundamental piece you need to have in place. But this really is an edge case that’s not necessarily covered by that, because it’s such a logistical piece of it. And we’re really going to dive into a bunch of steps and other things to keep in mind that Mike has laid out for us.
Mike [05:31]: So I think, as with some of the other episodes that we’ve done on topics that, kind of, touch on anything that is tax or legal related, we have to offer the standard disclaimer; we’re not CPAs and we’re not attorneys, and if you have specific questions about what laws apply to you specifically you really need to reach out to one of them and get their professional thoughts and opinions on it. But that said, here are some of the things that we, kind of, feel are important. And the first on on the list is to have a document that’s accessible to someone that outlines the highlights of the business. And this document needs to be accessible in essentially a secure place. You want it to either be in a safe deposit box, or a keyed safe someplace with a physical and digital copy of everything that needs to be known in order to take things over. Now whether that is simply a username and password that are written down on a piece of paper that you can hand to somebody that gets you into like a Google Docs account and just tells you where that document is that you need to get to, that in itself should probably be sufficient. But again, you need to make sure that that’s under lock and key someplace that it’s not easily accessible, because what you’re really doing is your providing the keys to the kingdom to somebody. And you also have to make sure that that someone is someone that you trust. And as Rob’s mentioned earlier in the episode, he and somebody else have kind of a reciprocity agreement between them that says they’ll do that for each other. But you want to have someone that you can designate that is going too be able to go get that stuff if the need ever arises.
Rob [06:55]: Right, and the reason that this wouldn’t be a great idea to just having a shared Dropbox folder is this is crazy sensitive information. These are like kingdom passwords, your root password and that kind of stuff. So you really don’t necessarily want it to be online unless maybe it had some really extensive encryption, and you had previously agreed on a password that was already handed over to the person. This is very sensitive stuff. The tough part with this is keeping it up to date, because we just forget about it. And so I think even if it’s six months out of date maybe it’s still viable. I think once it’s a year out of date it’s like this stuff’s going to be helpful but it’s not really going to cover it all. So I think that’d be something that you’d want in a calendar reminder that every year you come back in and update this. And this interesting thing is, you know, if you’re a sole founder than you probably need an external person, a developer, or someone, you know, a friend to handle this. If you have co-founders, or business partners, then typically there’s going to be something in your partnership agreement, or your articles of incorporation that specify what happens if one partner dies, and then someone else handles it. So it’s a little more, I would say it’s almost easier if you have business partners, because there’s someone else there to step up and handle this kind of stuff.
Mike [08:01]: And you just mentioned business partnerships there. You have to be a little careful about those as well, because the last I checked it depends on the business structure as to how the business is going to be handled if somebody in the business dies. So for a partnership, generally speaking, that partnership essentially dissolves when one partner dies. So you have to be very careful about whether or not you have a partnership, or an S corporation, or an LLC, and then specifically what the laws in the place that you live are that apply to that business structure, because something like an S corp can live on after you die but a partnership cannot. So you just have to check the laws and make sure you’re aware that the business structure also has an influence on these things. It’s not just about the logistics of handling things. It’s about what happens to the business afterwards as well. The second thing on our list is to make sure that you have a up to date list of the services that you’re using, and what they’re used for. And a lot of times you can pull something like this from your credit card statement. This is actually a very good way to keep that up to date, is if you’re paying for monthly services – or even annual subscriptions to different things – it’s very easy to go back and look at your last 12 months of credit card statements and identify what it is that you’re paying for and be able to make a correlation between those things and the different services that you’re using to run the business. Some things are going to be easier to get rid of, and some things are not. But at the same time, going back to the very first thing on the list is making sure it is documented how to get into those services. Because if you don’t know how to get into those services — and, I guess the primary one would be able to get into your mailbox to be able to do things like password resets at a very bare minimum. But also if you have the ability to authenticate to those different services, whether it’s a spreadsheet of passwords or credentials to a password manager, you need a way to be able to access those things. So the first part of that is just being able to have that list of services, and then being able to access all of them.
Rob [09:55]: That password manager is key here, so you don’t have to spell all these out on paper, on a thumb drive, in plain text or something. Just being able to give them a single password to your OnePass or your LastPass account is going to be a huge help. And you don’t have to then keep that updated, because you are automatically doing that in your day to day course of business. So it’s not some external thing that’s going to get out of date as you change passwords. I had to do this recently – make a list of all the services we were using – because when we spun Drip out as its own corporation, got a new bank account, new credit cards and all that stuff, that all that had to be transferred over. I did exactly what you said. I basically just went to the [Numa?] Group credit card, and I only looked back for maybe 45, 60 days. I know there’s some annual stuff that I may have missed that will come through later, but I skimmed through it, made a list, and I think there were about 30 services. Somewhere in that range. Like between, let’s say, 25 and 35 services, and I just logged in one by one, updated the credit card info and took care of it. So depending on how many you’re using, and what you have going on, this can take up to, I’d say, a few hours to take care of.
Mike [11:02]: The next thing on the list is making sure that the basic accounting information for the business is available. And that includes not just the statements themselves and how all the different financials are doing – because you might use something like Xero, or LessAccounting, or QuickBooks or all these different things to import all your banking statements – but you also need to be able to make sure that they can get into those bank accounts and look at the up-to-date banking information and credit card information so that they can continue to accept the payments on behalf of the business, and continue making bill payments based on the business. That also includes things like your payment providers. Whether you’re using Authorize.net, or Stripe, or anything like that, you need somebody to be able to get into those. And there’s kind of a, I’ll a little caveat here, or a little wrench in the works, which is that in order for somebody to log in from a new computer they may need to answer some sensitive questions about you, or where you went to school, or who your girlfriend was in fifth grade, or something like that. So you may very well need to document some of those sensitive questions that a bank might have asked you a long time ago. So those are the types of things you need to keep in mind when you’re documenting some of this stuff, because that is going to be important for them to get access to your accounts.
Rob [12:12]: And this one’s tough, because you really want to keep this stuff under wraps. So it’s not like something you want to have written on a plain piece of paper and sitting in a desk drawer somewhere. You really need to think seriously about the security of this info.
Mike [12:25]: Is now an appropriate time to go into the lack of security of that info by the U.S. government, and they lost every single piece of information on me including my fingerprints last year?
Rob [12:32]: Did they really?
Mike [12:34]: Yes.
Rob [12:35]: And by lost they mean sold them to the highest bidder or something?
Mike [12:37]: I really don’t know. I just got a letter in the mail from them saying, “Hey, by the way, we did a background check on you, and we lost every single piece of information on you dating back 15 years, including your fingerprints. So just 3D print yourself some new ones.
Rob [12:52]: Finally I’m clear. Now you can go commit a crime and no one will find you. Is that the idea?
Mike [12:56]: Or, you know, everybody will find me. I don’t know.
Rob [13:00]: Yeah, or they’ll certainly overhear you. It’s a bit of an aside but there’s this movie called “Citizen 4”. Have you seen it?
Mike [13:06]: I’ve heard of it. I have not seen it.
Rob [13:09]: It’s Edward Snowden. It’s a documentary on when he was actually doing the leaks, and it is just frightful. It is unbelievable. If you haven’t watched this, I highly, highly recommend it. It’s on HBO. It’s about that topic, about keeping stuff secure, and how really it’s all just an illusion of security. Anyways, I think there’s a difference here between we’re talking about having passwords and your fifth grade girlfriend written down somewhere. Yes, the government could probably find those and they could subpoena them and they could get that kind of stuff. But not particularly worried about that in this case. This is more about someone stumbling upon them, or copies getting made, or coming into the wrong hands of someone who wants to do something nefarious with them.
Mike [13:44]: Of course. It was just a side anecdote of it almost doesn’t matter how secure you are in the things that you do, it’s more that you’re almost at the mercy of wherever you store or put that information. So it’s only as strong as the weakest link, and unfortunately the government does not appear to have been a very strong link in that case. So moving on, the fourth one is to make sure that you have some basic information about the different technologies you’re using. Whether that’s different servers, and you have them hosted over in Azure, or AWS, or some basic technical layouts of how some of the different pieces fit together. What you’re really looking for is the ability to hand off some basic documentation about how your infrastructure is built or put together. And this is especially useful if you have multiple servers that are running your SaaS application that need to talk to one another. Because if any one of those goes down, you’re application is probably dead in the water. And if that happens your website might be up and running, but it’s not obvious or clear that there are other things in the background that are wrong. So if you have something like that that you’re able to hand off to somebody who is technical in nature, that they can take that and at least be able to figure out at a fundamental level where things are and how they fit together, then they can troubleshoot any major infrastructure problems.
Rob [14:59]: An interesting point here is that having a contract, let’s say a contract developer who works for you is actually a risk mitigation factor in this case. Because let’s say you’re the only developer, and only owner, and only founder of this company, and it’s just a one person shop, if you die and someone needs to take it over it is really someone entering into your world, and you have to have this kind of documentation. And you have to keep it up to date. I mean it’s going to be really hard for someone to get up to speed with it. But if you had just a single developer who also worked on it, and you then just had his or her contact information, if you were to die then someone would be able to contact them and at least keep them going. Kind of like when you transfer a sale of a business. If you can keep the contractors on it’s a lot easier to keep it going. So I’m not saying that if you don’t have contractors that you should hire them, but it is an interesting thing to think about of that it could essentially be more stable and outlive you if you do have other things in place, and other kind of stop-gap measures in place, and other people who are familiar with it. So that “bus factor” — you know, you’ve heard that phrase ‘the bus factor’? If you get hit by a bus who takes this over? And right now we’re kind of saying, “Well you just write it on a paper.” But I actually think having another human being involved to that degree might be worthwhile when you hit a certain point of success.
Mike [16:09]: And that leads us directly into the fifth item on our list which is to have contact information for those contractors readily available so that if operational decisions need to be made, or you need in depth technical information about anything that’s going on, or something that’s been deployed those people are going to probably know a heck of a lot more about it than anybody who’s stepping into your shoes to fill in. So, as long as you make sure that you have documented that, or even just pointed out where it can be found, I don’t think you need to report back line by line, “This contractor worked for me from this time period to this time period.” If you’re hiring them through an online platform such as Upwork, or a variety of other ones, that can really be helpful because then the person just has one place to go to and they can see a lot of that contractor history. So having all that stuff consolidated in one place can be really helpful. Another thing that would be helpful is if you have that wired into your payroll provider, and if you’re paying them through that payroll provider then it makes it a lot easier for the person to have just one or maybe two places to go through. So you can just point them to those – to Upwork.com and I use – it used to be called Zen Payroll – but now it’s Gusto.com. But I can point somebody to those two places and that would take care of everything. So I think those are the main points that we wanted to touch on, but there’s some, kind of, addendums to some of this information. Early on we pointed out that it’d be wise to designate somebody who you trust who can temporarily take over. And one of the reasons for that is that your family is probably going to be too busy and having too many other things going on to want to deal with the business directly. And essentially what this person will do is they’ll serve as something of a firewall between your business and your family. So they interject themselves in there to handle those things, and take care of things, and make sure that your family doesn’t have to think about or deal with any of that stuff.
Rob [17:54]: Another thing to think about is your family is probably going to have zero interest, or ability, to carry on the business. So I think that – one of the first things that I’ve thought about – is how do you come up with ideas for how to either sell your share, or sell the whole thing, and liquidate the business? And I think documenting some basic steps on how to do that or – as we talked about earlier – kind of, appointing someone to assist with that is a big deal. Now I think if you have a child or, I don’t know, someone else who might want to take it over who’s in your family — because I’ve often thought about my kids. My oldest child is nine and at this point he couldn’t take over the business, but he’s writing code now, and if when he hits 18 or 20 he wanted to be part of that and have some type of say in whether it got sold off when I died, or he was able to take it over I’d like to have that conversation. I think that’s worth having. But for most of us, if you don’t have someone in your life like that who’s going to be able, or willing, to take it over then really your best bet for your family is to be able to sell it. And whether you have a broker laid out, or a friend who can help assist that, or if there’s a business partner who essentially has to buy you out per terms in like a corporate arrangement, that’s going to be the best for your family is to get that big lump sum in addition to probably the life insurance that they’re getting.
Mike [19:08]: Another thing to keep in mind is that you could probably document some of these things in your will, but even with a will there’s a couple of different problems associated with that. The first one of which is it takes time to change your will. So it’s not something that you want to do everyday, because you’re probably going to have to have some legal representation review it and make sure everything’s kosher with it. And even if you do it could still be challenged. So you really want to have some basic steps and guidelines in place that can be used in, kind of, an interim fashion until the final decisions are made around that. And that’s really, I think, the main thrust of what we’ve been talking about today; how do you keep things at least minimally operational until you get to a point where your estate can essentially settle the business and decide what to finally do with it?
Rob [19:55]: Right. And I think that if you have a family and you don’t have life insurance at this point that would probably be something that I would seriously consider because I see that as kind of the first line of defense. It’s like the business, selling that and getting it organized and all that stuff, it’s going to take time, and the idea is that life insurance helps right away so that your family’s not in dire straights while things are getting sorted out. And then hopefully the business winds up being a windfall if and when it’s sold.
Mike [20:18]: The other side of that is that life insurance, as you said, is that first line of defense, and I totally see it that way as well, but the fact is that that life insurance could be worth substantially more than what your business is worth depending on where it is. I mean, if your running as a single founder company and you haven’t grown into any number of employees then chances are good that your insurance policy is some very large multiple of whatever your revenue is going to be from selling that business. So you do have to keep those types of things in mind and figure out what the order of resolution for those things are and what the time frames are, because selling a business is not going to be an overnight thing, as you said. So that’s something that you really need to be mindful and aware of, that that’s something that’s going to come down the road. And in terms of making sure the family has short term cash available to them, that life insurance is probably going to be the best bet. But even before that you should probably have a savings account set aside that’s going to take care of the short term between the time that the insurance company gets the official notification and they cut a check to take care of the life insurance policy. Because I don’t know how long that takes. I imagine it’s not like six months to a year, but I can’t imagine it’s anything less than probably several weeks to a month.
Rob [21:25]: So the bottom line is it really boils down to having a basic exit plan and keeping it as up to date as you can and as secure as you can. And so next week we’ll be talking about a topic that’s not such a bummer. Thanks for the downer topic Mike.
Mike [21:38]: Anytime.
Rob [21:37]: So this entire episode was outlined and discussed based on a listener question. If you have your own listener 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 271 | Lessons Learned Analyzing 250 SaaS Pricing Pages
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about lessons learned analyzing 250 SaaS pricing pages. They give their opinions and takeaways on the article and how it may apply to smaller size SaaS businesses/products.
Items mentioned this episode:
Transcript
Rob: [00:00]: In this episode of Startups for the Rest of Us, Mike and I discuss lessons learned from an analysis of 250 SaaS pricing pages. This is Startups for the Rest of Us, Episode 271.
Welcome to Startups for The Rest of Us, the podcast that helps developers, designers and entrepreneurs to be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:28]: And I’m Mike.
Rob [00:28]: 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 [00:33]: Well, after a couple of months of effort on this, we’re finally pulling trigger on migrating Founder Café into Discourse. I ran through a dry run of the migration earlier today. Everything seemed to go pretty well. I think we ran into one minor issue but it was because a table was not able to accept the amount of data that we’re throwing into it. We fixed that and everything else seems to be going well.
Rob [00:53]: Very nice. For those who aren’t familiar, Founder Café is our membership community for self-funded startup founders and folks who get a lot of value out of the podcast and want to engage more with the community. We’ve been running it for several years. We’re moving it from an old platform that wasn’t working as well and moving it into Discourse which, so far, has been pretty cool. It has a lot of neat features. I like what Jeff Atwood and his team over at Discourse are doing with it.
Mike [01:19]: The user experience in general is going to be a lot better for us. The primary reason for moving is just partly for that community aspects but also the price considerations because the current platform we’re on is fairly expensive. There’s a huge number of features that we just simply haven’t used. We thought when we moved over to it that we were going to start using a lot of those features and it turned out that we just didn’t and they didn’t turn out to be as important as things that were much more focused on the forms and community interactions. Because of that, it fell short on a couple of different areas. If you go to a product that does a lot of different things, what you find is inevitably it will fall short on some of the things that you might find to be important. For us, that community aspect of it was really important. The other thing is that it wasn’t really designed to be like a paid membership site. It really wasn’t designed to be a membership site, it was really aimed at internal internets for large companies. Because of that, there were a bunch of workarounds that we had to do. At the end of the day it just didn’t work out for us. How about you? What’s going on with you?
Rob [02:20]: We ran an interesting experiment at Drip over the holidays. In essence, your trial to pay conversation rates often plummets over the week of Christmas and the week after Christmas, before New Year’s. What we did is we pushed everyone’s trial out, in terms of their expiration day. We pushed it out by a couple of weeks, anyone who’s going to expire during that time. We e-mailed them and let them know that we were doing that, kind of said, “Hey, happy holidays. Here’s our gift to you at the end of the year,” like restarting the trial in essence, checking in with people who aren’t set up. It gives everybody a little longer trial but it’s a really good reason to do it and to avoid the dip in conversion rate during that time.
With that said, it is very much an experiment, I’ve never done it before, and we have no idea what the results are going to be. We’re just now starting to see the trial to paid conversions from that earliest set of that and so far, so good. We’re a day into it. It’s not anything that has real results yet, but it has been a trip. Basically, there were no trials converting for two weeks and that is absolutely nervewracking as a SaaS founder and as someone who tracks my metrics as closely as I do. I, everyday and frankly every night after billing runs, I’m in there looking at the revenue and what the trial count is and all that stuff. Those are just haywire right now because we kind of decimated the last two weeks of our metrics. The idea is that it will pay off in spades here in January but it will be interesting to see.
Mike [03:47]: On the bright side, you can run most of your yearend analysis stuff two weeks in advance.
Rob [03:51]: Yeah, I know. We didn’t have final revenue and all that but it certainly didn’t change very much in the last week and a half of December after we moved these folks out.
Mike [04:00]: The only other thing I’m working on is migrating a lot of my e-mail campaigns over from Infusionsoft into Trip.
Rob [04:09]: Coming back, huh?
Mike [04:11]: Well, there were a bunch of things that I was looking at inside of Infusionsoft that were fairly attractive. At the end of the day, I got into it and was using it. They introduced a bug back in June or July or something like that, for something that I was using within the Twitter Lead Cards. They just refused to fix it. I ended up having to build this report inside their UI, which showed me all the things that were going wrong and then I would have to go in and manually fix them. It was like every day or every a couple of days I would have to go in and fix a bunch of data errors because the Twitter Lead Cards simply did not work. I kept asking them and saying, “Hey, are you going to fix this?” And they’ll, “Oh, we’ll get to it,” or “It’s not really important,” or “People aren’t really requesting it.”
I was like, “Look, if you don’t fix this, then I’m just not going to be a customer anymore.” They’re like, “Oh, we’ll have somebody get back to you soon,” and I guess they were going to have somebody in their engineering department get back to me. It’s been, I don’t know, several weeks and I’m still waiting, so I’m done with it at this point.
Rob [05:05]: That’s tough. They are a major competitor of ours and so I don’t want to speak poorly of them but I have heard similar stories from folks running into bugs that haven’t been fixed and stuff along those lines. It’s a bummer.
Mike [05:16]: I heard similar stories from other people and for a while, it worked great, did everything I needed it to and it was kind of chugging along. If you’re not running into those bugs, then you’re fine, but as soon as you do and it’s not high on their priority list, then it become a problem. It’s a problem for you but not necessarily a problem for them. It’s higher on my priority list than it is theirs.
Rob [05:38]: Sure, sure. There’s a reason we get a lot Infusion software FUGS and you’re adding to that total. Today we are talking about lessons learned from an analysis of 250 SaaS pricing pages and we get the information from an article on The Next Web and we’ll certainly link that up in the show notes. The article is titled ‘I analyzed 250 SaaS Pricing Pages – Here’s What I Found.’ It’s written by Benjamin Brandall and he says, “We recently had a major overhaul of our pricing and landing page and wanted to get a good idea of what a high-converting pricing page looked like.” He went to the SaaS 250. It’s a list compiled by Montclare and the list is supposed to indicate the most successful SaaS products in the world.
You and I had a debate before on whether or not – or not even a debate, just a discussion of each of these metrics you should probably hold them loosely because these companies, some of them are public, some of them are not. They’re looking at just private data and whatever they can scrape together. As we know, that tends to be less than accurate. Anyways, he looked at 250 of let’s just say they were all successful SaaS companies. A lot of them are big enterprise companies like Salesforce or LinkedIn. They do have Basecamp on the list and companies like New Relic. They have Google on the list and I’m assuming that’s for one of their paid offerings because it’s certainly not google.com. They named Dropbox and stuff like that; a lot of folks that we’ve heard about.
He analyzed their pages and then he tries to pull takeaways and he pulls several takeaways like X% of these companies highlight a package, it’s the best option and that kind of stuff. What we wanted to do today is first talk a little bit about this kind of article and the methodology of it, and our opinions on that and then dive into the takeaways and talk about when we think those actually apply and when we think they don’t apply to folks who are probably listening to this podcast. Because if you’re listening to this, you’re probably not starting the next Salesforce. You’re not starting at $10 billion or $1 billion or maybe even $100 billion company. You’re probably aiming to start a SaaS company with a price point between 10 and 99 bucks a month. That’s the lens that we want to lend to this is when our opinions and our experience, and the testing and the data that we have, based on our experience, when we would use these approaches and why we think maybe that data lines up or doesn’t line up with this article.
Mike [07:54]: Yeah, and I think that’s probably the most important takeaway because I think that throughout the course of this podcast, we’re probably going to pick at this list of commonalities or suggestions from this article. It may very well come across like we’re either not necessarily argumentative, it’s probably not the right word, but very anti against some of the conclusions that are drawn in this. You have to remember that this is from the SaaS 250 and those 250 companies are a list of some of the most successful SaaS companies according to Montclare. Because of that, those companies are in an entirely different category than the types of people who are probably listening to this podcast. Bear that in mind as you’re listening to this podcast. Where do you want to start?
Rob [08:35]: The interesting thing, the first note that he talks about is he says, “Why did 80% of companies not have pricing pages?” He says of the 250 companies, only 48 of them had pricing pages and the rest had pricing available on request by contacting sales people. He talks about how Jason Lemkin – Jason Lemkin was the CEO and co-founder of EchoSign. He sold that company plus a previous company and he is a SaaS genius. He blogs over at saastr.com. If you listen to no one else about SaaS, listen to Jason Lemkin. He tends to talk about the $100 million and billion dollar SaaS companies. There’s stuff that he says that doesn’t necessarily line up with our audience or our approach to it, but as a rule, the stuff he says is not inaccurate if you do want to build a large company.
He has a bunch of reasons; we won’t go through them all, why these companies don’t have pricing pages and he talks about how deals, as you get into the larger deals, they’re going to get more complex as you grow. Discounting becomes difficult if you have a pricing page. If you’re selling into the enterprise, then actually having a low price can really devalue your products. Being a $99 price point is not something that a company like a Fortune 500 company wants to use. They really want to talk to someone, to have the demo, to do the assessment of needs. They really want to go through the long sales process, as much as that sounds insane to us, who want to do it self-serve. But if you really are selling to the enterprise and you really are trying to grow that $100 million company, you need to sell into the enterprise, then having a pricing page is actually a bad approach. That’s one of those things you have to keep in mind. It’s like just because 80% of these don’t have pricing pages, doesn’t mean that you shouldn’t. It’s only if you’re going to be selling into the enterprise that you should consider only having a call only for pricing.
Mike [10:20]: I think that ties back to what type of business that you want to run and what type of customers you want to have. Because if you want to go the self-serve route, then you clearly want to have a pricing page and it’s going to very clearly list out everything that you’re offering and what the prices for it are. But if you want to push up into those $100,000 or a million dollar deals, then you really shouldn’t. I don’t disagree with the conclusions here but it boils down to what type of business that you want to run and how much effort you want to spend on each individual customer to bring them on board. Obviously, with an enterprise-level customer, you spend a heck of a long time, wooing them as a customer but it’s also financially very lucrative if you can plan them. That said, sometimes the other direction is much more appealing to you, depending on what type of person you are and how you want to run your business. It really just depends on what you want.
Rob [11:13]: Right. The final caveat I’ll say to this is he looked at 250 SaaS pricing pages and then pulled out some data from them. I think it’s interesting, it’s novel. It’s kind of like a Myers Briggs Test where it’s like, “Oh, that’s something. That’s an indication of something.” This is certainly not rigorous, scientific study of all SaaS companies. It definitely steers towards or leans towards these big, large enterprise companies that tend – since they are big, they tend to also be selling to other large enterprise companies. It’s something to keep in mind as you’re reading through this. The first point, there’s 11 points that he covers. I don’t know if we’ll have time to get through all of them. Let’s kick off the first one. The first one is that the average number of packages offered on pricing pages is three and a half. What do you think about that?
Mike [11:55]: I’ve never seen a half a package before, but I guess it’s like the 2.3 kids in the United States.
Rob [12:00]: It’s an average, he says the average number. I could imagine if it had three and then half? That’s not an optimal use case, people. Don’t put three and a half. What do you think about the idea? Obviously he’s saying a lot of them have three, a lot of them have four, some have two, some five. The idea that having about three or four pricing tiers is what they did, is what these folks see as optimal.
Mike [12:21]: That’s seems like your classic case of price anchoring. You’ve got your low tier price and then you’ve got a high tier price. The middle one obviously helps you in many ways to anchor it, especially if you’re using that as your most profitable plan, assuming that is your most profitable plan, because sometimes it’s not. Having those three options and then a ‘call us’ option; it seems to me very, very common. I wouldn’t necessarily say that this is a surprise or a shock in any way, shape, or form. That said, I do think you need to be careful about which of the tiers that you decide to use as your price anchor, whether you want to try and anchor people to the top one and get them to subscribe to a lower tier or maybe go for the middle one and there’s going to be people who go above that. It depends on how in demand your products is and where it fits in the market.
Rob [13:09]: Yeah, I think my rule of thumb is when in doubt, have three pricing tiers, like you said, so that you do have the price anchoring. Having three plus an enterprise with either a ‘call here’ button or some type of calculator as you see on the Drip pricing page. It has a calculator there because people can have 50, 000 subscribers or 100,000. We could do a call for that, call us or click here for demo, but we’ve chosen to do a calculator. That’s what I do by default until you have time to test otherwise. I think that having about three pricing tiers and maybe four is about the right way to go. I think that if you can simplify it down to a single tier where is built on or priced based on the number of users or a single metric where you can just say, “All right, it’s 10 bucks per user, per month.”
That’s how Helpdesk Software, CRM software does it. Or, if you can go like a lot of e-mail marketing softwares, it’s purely based on the number of subscribers. It gets difficult if you’re going to have tiers because then you at least need some type of tiering on your homepage. If can boil it down to where it’s a simple pricing, I actually think that that can work as well. It’s looking around and seeing what your competition is doing and if you try to do it too different than the rest of the market, you will cause some confusion and we ran into that, earlier on, with the way that the Drip pricing was done. I think that if you don’t have a competition, that figuring out what to pivot this on, is always going to be a challenge. If you do have competition, there’s probably a standard in the space and not veering away from that is probably a decent rule of thumb as well.
Mike [14:36]: One thought that comes to mind about the three and a half or whether it’s three or four pricing tiers is that I wonder how much of this decision is actually driven by the design of the pages and how much space you have available. If you look at most pricing pages, if they have three or four, they’re typically using almost all the space across the page. If you try to add another one, it would be difficult that things would start to get smooshed or you’ll have to drop the text size and if you try to drop below that to, let’s say two, it makes the space look a little but barren. The UI just looks a little but lost because there’s too much white space. I wonder how much of this decision is actually based on white space design on the pricing page as opposed to what would really make the most sense for people.
Rob [15:21]: I think responsive designs have also changed this because to go responsive means that as you squeeze it inward and go to a cell phone size screen, the, really tier should either go on top of each other, it will have to move around. It starts looking weird and the old model of having all the features listed on the left and then check boxes throughout your tiers, it breaks down when the tiers flop on top of each other instead of next to each other. I bet responsive design has also had an impact on how many of these tiers or at least how they’re structured and how they’re displayed. The next takeaway is that only 50% of the companies highlighted a package as the best option. What are your thoughts on that?
Mike [15:59]: I like that Benjamin calls out some of the different reasons why you might highlight some of the different pricing tiers on your websites. For example, if you have a specific plan that is the most profitable for you, then calling that out to help draw people’s attention to it can be helpful and that it will essentially generate more revenue for you. What I question is how much A/B Testing has been done on this to identify whether or not that’s pushing people towards a specific plan or away from it. Because I think there’s a natural tendency for us to say, “Oh, let me draw people’s attention to this,” and think that it is going to anchor people’s minds to that plan and they’re going to be more likely to select it. In fact, they might do the opposite, where if you highlight the most expensive plan for example, somebody might look at that and say, “Oh, well, I’m not that big. I don’t need that level of service so I’m going to go for the one below it.” I wonder how much testing has been done around whether or not it drives people to a plan or away from it. I think that that’s something to definitely consider when you’re implementing that. You should go in and measure that because you could very well be shooting yourself in the foot as opposed to helping yourself.
Rob [17:05]: I’ve always been a fan of highlighting a plan and I tested this with HitTail and it worked out. It had a positive ROI by keeping a plan highlighted and my average revenue per user, per month went up when I highlighted the second from the bottom instead of not having highlighted or in highlighting the bottom. It drove more people to use that. It was the recommended plan and people who were in a hurry or who wanted to take the take the recommendation, wound up doing it. That doesn’t mean that it’s always a good thing to do or that you should always use the second from the bottom or anything like that. I just know the one time that I have actually tested it, that it really did work out and raised revenue. I think that trying to highlight the top plan is one of the suggestions here and I think that always seems odd when that’s done. You have to use your head here. Highlighting in the middle is my rule of thumb to allow people to get an idea of where you think they should start.
The third takeaway was that just 69%of companies sell the benefits. I have strong feelings about this one. He says it’s only 69% of companies, like he expected more people to do that. The thing, though, is by the time you get to a pricing page, you should already be sold on the benefits. Your homepage has a ton of benefits, and I think you should get into some features towards the bottom of your homepage. Your features page should have benefits and features.
By the time I’m coming to look at a pricing page, I’m at least entertaining the idea that I might use this software and price is now coming into play. I think that listing a bunch of benefits of like, “Hey, it will save time and make you money and save you money,” is just lame. I actually get irritated when stuff is that high level on a pricing page because I want it to be digging in more at that point to actual differences just between the pricing plans. That’s all I want to know at this point. If I want to go hear about your benefits, I’ll go to your homepage or your benefits or wherever else. On the pricing page, I’m trying to figure out how much do you cost and what are the differences between the plans? The more benefits that are listed, the more confusing it is because they are too high level. I want to know the exact features that are included in each tier.
Mike [19:08]: I think it’s just the way that this is phrased and some of the underlying assumptions that you pointed out, because the whole article is based on the analysis of pricing pages. You’re not going to use those benefits on the pricing page. You might want to put it at the top and a headline or something like but you’re certainly not going to sell each individual plan with all of the different benefits. You need to know the details about what it is exactly that you’re paying for. That’s why all these features are going to be listed so that you can, as a buyer, can do a feature comparison between those different things. I almost disagree with the way that this is phrased just because it seems to me like on that particular page, you would want to sell based on the features, not necessarily on the benefits.
That’s because it’s specifically talking about the pricing page. If you’re talking about the homepage or various other pages, then you probably want to sell based on the benefits. I think that you really need to very clearly spell out all of the different features on that page so the person who’s buying it knows exactly what it is that they’re buying in relation to some of the other things. The other side of this is that when he says just 69% of the companies sell the benefits, how much of the benefits are you including in that 69%? Is one sentence enough to get you over the hurdle of saying that you’re selling on benefits or what? It’s not clear to me what that actually means.
Rob [20:25]: It is an interesting takeaway nonetheless. I like that he took a look at it. Number four is that 81% of companies organized their prices low to high. When I read this, I thought, “Of course.” Whenever I come to a pricing page, I like to see it low to high. It just makes sense. It actually throws me off when I come and the high price is all the way on the left. However, he has a quote from Lincoln Murphy at SixteenVentures and Lincoln Murphy said, “The left to right, high to low approach seems to provide a statistically significant lift every time.” I like the way that Lincoln Murphy phrased that, in terms of “seems to provide a statistically significant lift every time,” like in his experiments, he’s [couching?] it, in a good way, to not say, “This always works so this is what you should do.” He’s just stating his experience. That’s interesting, counter-intuitive to me. It’s not something I’ve ever done because it irritates me so much. It’s like when you go to a site that has a bunch of annoying pop-ups or it has an exit antenna. It’s not stuff that I like to experience. Even if it can get you 1% lift or 2% lift, I haven’t done it myself but I am curious if folks out there are doing it and having success.
Mike [21:27]: I’m in your boat on this one. It throws me off when the highest price is on the left. It is a little irritating and I don’t know why. Maybe it’s the OCD in me. It seems odd when the highest price is on the left rather than on the right.
Rob [21:40]: The next take away is that 38% of companies list their most expensive package as ‘contact us’. What do you think?
Mike [21:47]: I think that if you’re trying to land some of those larger customers, that totally makes sense. You could very well me leaving a heck of a lot of money on the table if you have a higher tier plan there that would work for, let’s say, 90% of your customers. But there is this 10% of the people out there that still need something above and beyond that. You’re almost positioning yourself at that point to say, “Hey, we can’t serve you,” or “We can’t help you.” You’re almost writing off that 10% immediately. A lot of times if those types of companies come and they see that you only support 200 users for example, and they have 700 or 1,000, they’re going to immediately assume that you are not going to be able to handle the load that they’re going to place on your servers and they’re going to go find something else.
You need to be a little bit cautious here, but you also have to be in tune with what the general size of your audience is. You might also want to draw some delineation between your company and some of your competitors to say, “Hey, we serve people under 500 employees really, really well. But if you’re above that, go to these other people. They’ll handle it.” You can position yourself that way because you are really cutting into the lower tier of the market for that competitor. I think that there’s nothing wrong with going in that direction, you just have to be consciously aware that that is exactly what you’re doing when you choose to put a maximum on those plans rather than a ‘contact us’.
Rob [23:08]: Yup, it’s a good rule of thumb to always have that enterprise or that high-end plan, have a ‘contact us’. The next takeaway is that the most common call to action is ‘buy now’.
Mike [23:20]: This is a pricing page. Isn’t that supposed to be the call to action?
Rob [23:23]: He compares like ‘buy now’ is 27% and ‘sign up’ is 23%. ‘Start your free trial’ is 8%, ‘try’ is 6%, ‘contact us’ is 4%. I don’t know what necessarily he’s calling out. I guess the conclusion here is that people are saying that you click this to buy now. It does feel weird with a SaaS app. I don’t think of buying a SaaS app as much as I think of either signing up for a free trial or signing up. Beyond that, if you think about it, you probably want to provide a benefit here instead of buy because buy makes it think, “All right, I’m going to take a bunch of money out of my pocket and give it to you.” [?] want to provide a benefit like grow my list faster or get started building my list, something to where the person is they know they’re signing up for SaaS and they know they’re signing up to get a benefit. If you have a benefit there, it’s probably going to convert better anyways.
Mike [24:09]: Looking through what he’s got listed out here; it seems to me he’s comparing the texts there as opposed to what they’re trying to get you to do because the other category has 32% listed in it. Things like more info or fill out the form and things like that. All these are designed in some way, shape or form to move you to a paying customer. I think his point here is ‘buy now’ is the most common. I don’t know if it really makes a difference. At least to me as a buyer, when I go to those pages, I don’t consciously differentiate between them. I don’t necessarily care. It comes down to what the statistics and the numbers tell you for your page, whether or not it works. I don’t notice myself making decisions based on whether this is ‘buy now’ or ‘free trial.’ I don’t necessarily statistically analyze every decision I’ve ever made on those pricing pages either.
Rob [24:56]: My guess would be a lot of these pages I would guess have never been split test. I know that seems kind of shocking. I guess they just haven’t run the numbers or haven’t thought to split test ‘buy now’ versus an actual benefit someone would get. My guess is that they would get a lift now. Would that lift make a difference to the business? I don’t know. Maybe that’s why they haven’t split tested. My guess is they haven’t had the time because they’re busy working on other stuff. That’s the thing we’re looking at. 250 pricing pages from successful SaaS companies doesn’t imply that these are the most optimized with the best SaaS pricing pages.
Mike [25:24]: The other thing to consider there is that you have to have a significant enough volume to come in through those pages to begin with, in order to do effective split testing on those. If you just look at the numbers alone and let’s say that you’re getting 100 people a day clicking on something and if you can get a 10% lift on that page, then you’re getting an extra 10 people a day clicking on it, extrapolate that a little bit, that’s an extra 300 people a month. Let’s say 10% of them convert, you’re talking an extra 30 paying customers a month. But, if there are easier ways for you to get 30 customers a month, you’re probably going to spend the time and effort doing those things rather than testing over the course of three to six months to try and figure out what the best copy is on some of those buttons. It depends a lot on your volume as well.
Rob [26:13]: That’s true if you’re smaller. Of these 250 companies, I bet every one of them has the volume to run a test in a couple of days. We were talking Autodesk and UpWork. I’m even way down in the line. I’m at 134, I’m at EMC and Dell and other companies I haven’t heard of, CollabNet.
Mike [26:31]: I was couching that for our listeners.
Rob [26:33]: Got it. Not for these guys.
Mike [26:34]: Yes.
Rob [26:36]: Another one is that 63% of these companies offer a free trial. This comes back to these being large enterprise companies. I know that in the self-serve market that a free trial is how people get in and get going. Often times, if you’re selling something that is $30,000 a year as a SaaS because a lot of these do annual SaaS contracts. It’s 30 grand a year, 50 grand a year. It’s a huge decision you’re making, but it’s probably a pretty complex piece of software. As a software company, you don’t want someone clicking a button and just getting dumped into an account because without the proper demo, and the proper guidance, and the proper help, they’re going to be confused and they’re going to say, “Oh, this app is confusing. I don’t know what to do here.”
Actually, a free trial could be a detriment. I don’t always think it’s a good approach. However, if you’re a listener to this podcast, then you’re probably starting a SaaS with a smaller price point. In that case, I do think that free trials tend to be a boon if you’re doing self-serve. There’s some different options here. You could either go freemium, which I would not recommend unless you know what you’re doing. You could do a free trial if you have really good on-boarding and you have really good on-boarding follow-up. You could go with no free trial and make people pay as soon as they start using the app. The latter two are the ways to go. I’ve always liked free trial. There’s probably a whole episode on why I like free trials and why I’ve always done that. That’s my default rule of thumb because especially when you’re getting started, it’s hard to get people to pay upfront, but moving to the point where people are paying upfront, I think, is also a good approach.
Mike [28:03]: The other thing to point out here is when you’re offering that free trial, you’re giving somebody an opportunity to say, “Hey, I know you’re signing up here, maybe you take a credit card maybe you don’t.” That’s not specifically called out here as one of the things that’s done. When you’re giving them that free trial, then you’re giving them an opportunity to say, “Hey, you don’t need to do all the work to get the value out of this immediately.” You can push it down the road either a week, two or three weeks, whatever. You can do the work then. You can at least get them in, get some initial things set up and then do the work later versus if you don’t offer that free trial, then they’ve paid the $50 or $100 per month and they’ve paid it right then.
Because they don’t have that free trial period, they’re going to feel compelled to start using it right away, which would essentially decrease your conversion rates because people are going to look at that and say, “Well, there’s no free trial. I’m not ready to do this just yet so I’m not going to do it. I’m going to come back at some other time.” Unless they’re on an e-mail list or they’re really on track to buy your software down the road, then they may very well just never come back. I think that making sure that there is a free trial of some kind on your site is almost a necessity. Even if you look at a lot of the enterprise vendors, there’s typically a free trial of some kind that you can get at. Whether you have to give them your information in order to get it, that’s a different story, but almost all of them still offer a free trial of some kind. I think it’s very rare to buy a piece of software sight unseen and have to purchase it without being able to use it first.
Rob [29:33]: The next one is that 81% of pricing packages are named. I feel like this is a lesser known one. I was surprised it was as high as it is. The idea here is that if you’re going to name your packages, you want it to be linked to a buying persona. You don’t tend to want to offer Lite, Pro and Pro+ Plans because those aren’t that helpful. The better way to do it is they give you an example from Huddle. They offer three plans; they have Workgroup, Enterprise, and Government and Public sector. Those are their three plans. That’s where you really start talking. If you have a Freelancer, Consultant, and Agency as your three plans, people can segment. They can come in and say, “Oh, I am a freelancer. That’s the one I need.” At least it helps guide them. If you are at all able to put some names to it that actually have meaning and aren’t these generic headers at the top of the pricing tier, that’s pretty helpful. I was surprised to hear that 81% of packages are named. I’m wondering how many of these were named things like Lite, Pro, and Pro+
Mike [30:32]: Interesting data point. I heard the CEO of FreshBooks talk at Business of Software several years ago. He talked about some split testing that they did on their pricing page. If you look at their pricing page, they’ve got these weird names for some of their different pricing plans. Their top tier is Mighty Oak and then they’ve got Evergreen, and then Seedling and Sprout, which if you look at that, it doesn’t mean a whole heck of a lot. But when they took those things away and they replaced them with much more generic versions of it, like … I forget what exactly what it was they used, so I won’t try to remember or make something up, but they were very, very generic names or they did that or they didn’t even put a name on it. They noticed this significant conversion rate drop because they didn’t have something there that would help guide people. That’s an interesting data point to take away from that, not just having something like Workgroup, Enterprise, Government and Public Sector or Startup, Growing Business, et cetera. You can have off names, I’ll call them, like Mighty Oak or Evergreen that relate to your business that people are going to relate to or resonate with a little bit more. Those can help your conversion rates.
Rob [31:34]: The last one we’ll cover today is that only 6% of these pricing pages show a money-back guarantee on the page. He talks about there been two sides to this argument. One is that offering this guarantee derisks the sign-up for your customer. If they’re making an impulse purchase or they are signing up for a trial or even paying right away, then of course money-back guarantee is something that is going to lend them confidence in your product and it could encourage them to sign up. The other side of it is that the SaaS 250, they often have these annual contracts. They lock you in for a year or two-year contracts even. Why would they offer it? They don’t need to or want to offer a money-back guarantee. They don’t need to. They’re such a brand name that they can get folks to sign up without it. If you’re doing self-serve, having that money-back guarantee especially to start, especially when you’re not a brand name, is helpful. Even once you are a brand name; I think it’s a good policy to have in general, so why not have that on the pricing page? I do think that it has an impact on certain people, if you’re an unknown to them, of what confidence they have in signing up for your service.
Mike [32:39]: I wonder if part of this might also be related to how much of the onus that you want to push onto the user for using your software versus guaranteeing that your software works and does what it promises to the user, because I think that those are two different scenarios. If the user signs on and they have signed up for your product, they start using it, they use it here and there but they don’t fully commit to it, 60 days later they come back and they say, “Hey, I’d like a refund.” Maybe they even forget completely that they have the account and six months down the road, they come back and say, “Hey, I’d like a refund for the past three months or six months.”
You and I have seen that before, where somebody forgets that they bought something and signed up for a subscription. Then they come back six months later and say, “Hey, can I get a refund on all of this?” Maybe even longer. I’ve seen people go for a year or two and forget that they have a subscription and try and get all of that. It’s almost unfair to you, as a business, to have to offer that. Out of policy, we do that as a matter of course just because we don’t like the idea of taking somebody’s money for not delivering value to them. At the same time, whose fault is it that they didn’t use it? Whose fault is it that they weren’t getting the value out of it? The fact of the matter is you have to put in the work in order to get something out of it. There is some of those things that factor into this as well. Whether you put it on the pricing page or not, I’d say that as a matter for debate. As to whether or not you would adhere to that as a matter of policy, I think that’s a completely separate issue.
Rob [34:06]: Well said.
Mike [34:07]: On that note, if you have a question for us, you can call it in on our voicemail number at 1-8-8-8-8-0-1-9-6-9-0 or you can e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Out of Control’ by MoOt, used under creative comments. Subscribe to us on iTunes by searching for startups in business and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 270 | Our Predictions for 2016
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike make their predictions for 2016, forecasting bootstrapping related topics as well as the greater technology space.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of Startups For the Rest of Us, Rob and I talk about our predictions for 2016. This is Startups For the Rest of Us, Episode 270. 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 [00:23]: And I’m Rob.
Mike [00:24]: And we’re here to share our experiences to help you avoid the same mistakes we have made. What you doing this week, Rob?
Rob [00:28]: Things are pretty good. It’s the last week of the year and we have a new Drip HQ. We moved offices just a few blocks to a nicer building. We’re up on the second floor now, with a nice view of a busy street, and it feels cool to be downtown and just have a lot of people around. It’s like a 50,000-square foot building here in downtown Fresno, and it’s good to be around even more tech companies. We were around maybe 27-ish small software companies over at the other building, but it was only about 10,000 square feet, and this one just has a larger feel. And it’s new construction retrofitting a 100-year-old building. It’s got a unique vibe to it.
Mike [01:03]: Cool. Did everybody move from the other building over to this one? Or how does that work?
Rob [01:07]: A lot of us did, yeah. It was up to you if you wanted to move. The rent’s a little higher here. And it’s in a different location, so some folks opted to stay at the other one and then were backfilling with other companies. There’s been a nice tech scene that’s formed here over the past few years. And so what’s nice is there’s a waiting list at both buildings, from what I understand, and so we’re able to keep them occupied and keep the energy level. It’s something that I think’s going to be taken up. We’re one of the first companies, but I think there’s maybe a half dozen, that are moved in here, and there’s going to be 40 eventually. So it’s still pretty sparse, but just seeing people on the hallway and being able to look out over a cool downtown street is fun. It’s a different vibe than I’m used to, but it’s neat.
Mike [01:44]: That’s cool.
Rob [01:44]: How about you? What’s going on?
Mike [01:45]: Well, I’ve realized that one of the things that I talked about last week on our yearly goals episode was I was going to try and be writing more. And I realized that I should probably have classified that as more of a success than I think I initially did because I realized that one of the things that I’ve been doing is keeping a journal and writing in it three times a day. And I don’t know why I completely spaced out on that, but I did. So I would probably say that that was much more of a success than I initially had indicated on the podcast even though I write it for myself. But I write in it, like I said, three times a day: once first thing in the morning, and then once in the late afternoon, and then once just before I go to bed.
Rob [02:21]: Yeah, it’s interesting because your goal was actually “Keep up my writing habit.” And that doesn’t necessarily mean publishing, although that’s what I had read it as. I’d assumed that you meant to actually blog and push stuff live. Was that your intent when you said, “Keep up the writing habit,” was just to write and not necessarily to publish?
Mike [02:38]: It was a little of both. I think I had initially intended to publish more, but at the same time, there’s a certain amount of content that you create that you don’t ever necessarily publish either. And what I wanted to do was to make it more of a habit than anything else, so just getting into the habit of writing on a very regular basis as opposed to writing a couple of blog posts or writing a couple of articles or something like that and then not coming back to it for two of three months and just doing zero work on it in any way, shape, or form of writing.
Rob [03:06]: I see some value in writing and not publishing, but I think there’s so much more value in getting it live. And so I would give you a half pass on this.
Mike [03:14]: Sure.
Rob [03:14]: Just on my personal, metric system, my arbitrary, personal metrics.
Mike [03:18]: Yeah, but I think that when I’d looked at that on last week’s episode, I’d looked at it from the perspective of, “Oh, I haven’t really written anything at all.” And that wasn’t necessarily true. I agree with you I’d probably get half credit on that, definitely not full credit of course because I don’t think it got published. There’s a huge amount of work in there that just never got published. But the idea I had in mind was like, “Oh, I was actually writing quite a bit here.” I do think I need to do a better job of publishing more, so that will make its way to the forefront, I think, this year.
Rob [03:45]: Indeed. Other news, wrapping up the year, was able to finally make a solid hire to help with growth. He started last week. So pretty excited about that, able to pull some stuff away from myself and Anna, marketing tasks that we’ve been handling. And he is going to be able to focus on this stuff. And so one example is I was messing around with retargeting and trying to optimize it and get it to the place where it needed to be. And then eventually we stopped it at a certain point, and he is able to spend 30 hours a week basically focusing on this kind of stuff. And so already he came in with a much more advanced- and it’s a time-consuming approach but it’s definitely one that I think has legs. So I’m really looking forward to getting going in January with our ramping back up marketing. Because as of essentially next week, when this episode comes out, that’s when things start to come back alive and all the dips and trials and the dips and growth and all that stuff I think starts to turn around for all of us. And so yeah, I’m always excited to hit the ground running as we enter early in mid-January.
Mike [04:39]: It seems odd to be hiring right at the very end of December.
Rob [04:43]: Yeah, it was a little bit of a coincidence. I think I posted it in November and then really wanted to find the right candidate. Because what’s interesting is there are a lot of developers, as an example, and designers. And they’re not necessarily easy to find really good ones, but they’re out there, and you know how to test for that. But finding someone who has the right mentality, or the right experience, and the right hunger to actually do pretty intense marketing and really go after the growth opportunities, it’s still such a nascent, unique skill set, right? It’s not something I think that’s easy to test for. And so that’s what I did, was went around and around with a bunch of people. And when he finally came on, I realized that it’s actually a pretty good time for him to come on because it’s so quiet.
And so we haven’t launched anything yet, but it’s been all prep work. I got him onboarded, got him in the system in terms of payroll and all that HR stuff, and then got him into our processes. He’s now the blog editor in essence. And he really hasn’t started doing any outreach or doing any of the stuff yet, but he’s all set up to hit it hard next week when everything actually ramps up. So it turned out to be decent timing even though it didn’t first appear it would be.
Mike [05:49]: Very cool. To circle back on one of the things that we talked about last week, was some of the different monthly experiments and things that I wanted to do this year, and you had ask me to come back with a list of these 12 different things. And so what I did was I sat down and I started looking at those, and what I realized was it wasn’t necessarily a series of month-long experiments so much as it was an extension of what I read in a book called Habit Stacking. You can find it on Amazon. We’ll link it up in the show notes. It’s called Habit Stacking: 97 Small Life Changes That Take Five Minutes or Less. And what I want to do is essentially stack a bunch of these things together. And a lot of them are just little things. They’re not necessarily major life alterations or anything like that.
So one of them, for example, is drinking at least eight glasses of water a day, which I did it for a little while, but I didn’t keep up with that habit. So what I want to do is I want to go back to some of these and revisit them and start working on those and try and stack them up over time. And I’ve stumbled across a website called healthmonth.com, which allows you to put forth goals that are essentially measurable, and you can put things like that in there. So whether it’s getting up early, or exercising, or setting aside time to do X, Y or Z, you can track those things in there. And it will go on a month-by-month basis, and you get to essentially measure your progress against that of other people who have set a similar number of goals for the month.
Rob [07:06]: So are you going to report on that weekly, bi-weekly here on the podcast?
Mike [07:10]: Probably not. Because, like I said, there’s a bunch of them in there. But you had asked me to put together what that list was, so I’ll quickly run through them. We’re not going to spend very much on it, I don’t think. But they included things like exercising at least 30 minutes a day for 6 times a week, drinking 8 glasses of water a day, going to bed and waking up early at certain times, no junk foods or snacks after 7.00 PM, setting aside an hour to write for my blog, working at a co-working facility 3 times a week, which is something I’ve tried in the past but it’s never really stuck or worked out for me. So I think I’m ready to go back and try and revisit that and try it for a month or two.
Another one was to track all my food intake every day, meeting 10 new people in a given month. I’m going to specifically target a non-MicroConf month for that. I’m not going to cheat on that one. And then spending 15 minutes a day doing, I think I’d talked about this before, it’s a mental game called SuperNBack which allows you to train your brain to remember things a little bit better. So I’ve got a game called Reactor on the iPad that is really good for that, and then scheduling my work day in advance, and checking e-mail only twice a day, which I do that on occasion, but I’m not real good at limiting myself and checking e-mail twice a day so –
Rob [08:19]: Is each of those a one-month thing then?
Mike [08:21]: Yes, they are. My goal is to say, “Okay, let me take one or two of these and just do that for at least a month and see if I can maintain that habit over the course of the month.” And the goal, of course, is to, by the end of the month, turn it into a habit as opposed to something that I’ve just tried out. And if I need to extend it as something that I’m going to track, I will. But the idea is to be able to take those things and engrain them into my daily routine so that I don’t necessarily have to think about it or track it anymore, I will just do it. And that way, I can drop off my list of things that I want to stick with. And if it turns out that there’s something that I really just don’t enjoy or don’t want to continue with, then I’ll just drop it off. And then the next month I won’t continue tracking that or doing it.
Rob [09:07]: I think if there’s one adjustment I would make, as you said, you want to look at one or two of these things in a given month, and I would definitely not start with that. If you’re going to go January 1, pick one and focus on it. If you try to do too many things, it overwhelms you and it’s hard to change behavior. So at least for the first five or six months, until you get the hang of this, I would probably try to attack one thing at a time, unless you really feel like you can do multiple things.
Mike [09:31]: Yeah, some of them are easy enough. For example, drinking more water per day, that’s not terribly difficult. Really what it boils down to is just remembering to do it. So you can do that with timers. I found that there is a prescription reminder application from I think it’s Walgreens or something along those lines that you can throw something in there and it just reminds you every couple of hours to do something, and I’ve used that in the past.
Rob [09:54]: So you mentioned drinking eight glasses of water per day, but you missed the one of drinking eight glasses of beer a day.
Mike [10:00]: Well, that is in the water. You can call it beer if you want to, but –
Rob [10:04]: Right. Beer, water with hops.
Mike [10:06]: Yes.
Rob [10:06]: All right. Well, let’s dig in today. We’re doing our predictions episode, which is an episode that we like to have fun with, right? We made some predictions about a year ago, and some of them have nothing to do with entrepreneurship. We had predicts about Google Glass, net neutrality. And so we revisit those and we figure out if we had success or totally whiffed on those. And then we look at some predictions moving forward and what we think is going to happen in 2016. I think we each have one or two that might relate to bootstrapping, and then others that we just see in the greater tech space. So why don’t you kick us off with maybe looking back at some of your predictions from 2015?
Mike [10:37]: So the first one I had was that net neutrality is going to take a bigger stage. And the thinking I had behind that was that Netflix had started paying service providers for higher bandwidth to serve up a lot of their content. And internet speeds, in general, have increased by 50% since the beginning of last year. So what I was thinking was that this was going to be essentially a problem for many businesses where they were going to feel that they needed to pay for their content to be served up. And I don’t think that this has really come true. I haven’t seen a lot of battles or a lot of public discussion about people having to pay extra for their content to be served up. And it could just be that Netflix is so large and serves up so much bandwidth worth of content every single night that they’re more of an outlier than anything else.
What I have seen though is an interesting shift in how a lot of the content providers have started to go direct to people. So I think it’s interesting that companies like HBO and Starz and Showtime have started coming out with their own subscription services that essentially bypass the cable networks. So I don’t think that those directly affects net neutrality. I would probably call this one a miss more than anything else, but it’s interesting to see the shift for the content providers to go direct to the consumers rather than directly through cable providers.
Rob [11:55]: Yeah, I’d agree with you on this one. I don’t think you hit the nail on the head, but there’s definitely something cooking there where we’re going to continue to see shifts and conflicts in this space. My first prediction for 2015 was that Twitter would become profitable and it would piss off its users in the process, but it would be a solid opportunity for paid placement or promotion for bootstrappers and startups. And I think that I was wrong on the first two aspects because as far as I know, Twitter was not profitable during any quarter in the previous year. They obviously haven’t recorded Q4 earnings, but in Q3, they were still losing money. I don’t feel like they pissed off their users in the process of not becoming profitable. What I was trying to imply there was that they would become profitable but they would have to just stuff so many ads down our throats that there’d be a backlash. That didn’t happen. Solid opportunity for paid placement and promotion, I do think that one is correct and that Twitter cards and other Twitter paid placement is still a viable alternative, even heading into 2016, to get some cheap clicks.
Mike [12:53]: My second prediction was that the number of startups in the wearables category is going to skyrocket, both in terms of the hardware and software. And I hesitate to say that this was a complete failure or a complete success in either way. It just doesn’t seem to me like there’s been a huge number of startups in this area. Obviously Apple came into this space with the Apple Watch, and Fitbit and a couple of other companies have started pushing their wearables, but it doesn’t seem like the number has skyrocketed. I was thinking it would have much more of an impact than it probably has.
Rob [13:26]: Yeah. I think there hasn’t been enough of a ecosystem around it since the Apple Watch. It didn’t “take off.” I know a lot of people bought it, but it really has not become a day-to-day use thing. I don’t think I’ve seen anybody in a while wearing an Apple Watch, maybe one or two people at a tech conference or something. But it hasn’t become a day-to-day thing like an iPod or an iPhone did that I think the wearables category is either still getting going or it’s dying at this point, and I’m not sure which. I think eventually wearables will find out which form factors work for us, but 2015 was not the year of that, for sure.
Mike [13:59]: Yeah, I have seen a couple of people use them, but I think it’s going to be probably several years before companies really figure out what people even really want from a wearable device.
Rob [14:08]: Yeah, and that’s what we were saying back in 2013. So my second prediction was that video ads, namely YouTube ads, would be a big opportunity for cheap clicks in 2015. And I think this one was a success. I don’t know how bold of a prediction it actually was. I guess the way they could have not been an opportunity for cheap clicks is if a lot of advertisers had jumped in on it and, to be honest, that’s what’s happened with Facebook ads now, right? Facebook is a lot more competitive. They’ve nailed mobile and they’re making buckets of money off of their ad platform. And typically when the provider’s making buckets of money, like a Facebook or a Google, that means it’s not a good opportunity for cheap clicks anymore.
And so that could have feasibly happened with YouTube in 2015. It did not. It is still a big opportunity for both retargeting and just cheap ad clicks in general, if you can figure it out how to make it work and reach your audience. If you haven’t looked into it and you are looking for another paid marketing avenue, YouTube ads continue to be there.
Mike [15:02]: My third prediction was that Google is going to screw all the bootstrap startups and there’s very little we can do about it. And I don’t think that there was any large event that comes to mind in terms of Google making our lives difficult. Obviously they make changes to the UI in some of their different applications and stuff like that, and the cost of doing paid advertising through Google AdWords is really high. But it doesn’t seem to me like there was any one major event that you could point to and say, “Hey, these guys have really screwed over a bunch of people.” I would chalk this up to an inaccurate prediction.
Rob [15:33]: My third prediction was that VR, Virtual Reality, would actually be a hit with the early adopters set in 2015, and that did not come true. I know that a couple of headsets came out. It does not seem, even with the early adopters, to have taken off in any way, shape, or form.
Mike [15:49]: My next prediction was that Google Glass isn’t going to go anywhere fast. And I would say that this one, it’s hard for me to judge on whether or not this prediction is successful because I have not seen very much uptake and people using Google Glass. But just a couple of days ago, Google came out and said, “Hey, we’ve got another version of Google Glass coming out.” I really thought that they were probably going to be shutting it down. But I just don’t see any demand for it. I don’t think that people are going to use it in a widespread fashion. I can definitely see places where people would use it in very specific scenarios, but I just don’t see it becoming widely adopted.
Rob [16:23]: Yeah, it was an experimental form factor and they were pushing the envelope. It didn’t take off. They obviously sold their early $1500 versions. They’ve redoubled, and they’re iterating on a hardware schedule, right? You can’t iterate as fast with hardware as you can with software. I think it will find some niches and it will be really worthwhile for whatever, airplane mechanics or surgeons or something. But I don’t see that this will have mass market adoption. I would agree that if you look back a year ago, we didn’t know if Google Glass was going to take off or if they were going to do an actual consumer version. So I think your prediction came true. The fact that nothing really happened with it is what happened in 2015.
My next prediction is that we would see our first sub-$100-a-year, consumer-level, five-terabyte cloud storage service. And I think the week after I said this, someone said that Microsoft was already offering unlimited cloud storage. And then within the past month, they actually revoked that. I don’t know if you heard about that, but they basically said, “We’re not going to do unlimited anymore.” And they backed it way off to a couple of terabytes, I guess. So I’m not sure if this has happened. I was trying to Google around a little bit before this episode and I didn’t particularly come across a mass-market, five-terabyte, sub-$100-a-year service. Certainly, if it didn’t happen this year, I think it’s going to happen in 2016. But maybe if someone out there knows of a reputable service that’s not some fly-by-night thing in someone’s garage that is actually offering this level of storage for that price, you could hit us up in the comments or via e-mail at questions@startupsfortherestofus.com.
Mike [17:49]: Yeah, it’s interesting because I’ve looked around at that a little bit as well, and you see places where they’re doing unlimited backups for $5 a month for Backblaze and a couple of other service, but that is more of an archiving service. It’s not necessarily real-time like Dropbox, where even Dropbox is what, $15 a month or something like that. You can get a terabyte, but you can’t get five yet. But I think you’re right though. I think that it’s coming.
My last prediction was that cloud platforms and services are going to be viewed as a commodity by the end of the year, with not much differentiation between them other than their brand identity. And I have gone through and poked around the differences between Amazon, like the AWS services, Azure, and Rackspace. And quite frankly, there is very little to differentiate them from one another. They’re all trying to point to Gartner or third-party companies that are doing experiments and research on the platforms to try and find out which one is the fastest and which one is the best. And of course they’re paying these companies to do that research. So it does make it a little bit suspect when they come back and say, “Oh, sure. Microsoft paid us, but we did find that they were faster.” But I don’t see very much difference between any of these different platforms. I just don’t see it. So I would say that this one’s a win.
Rob [18:59]: My last prediction for last year was that we would start seeing 3-D printers in the houses of our early adopter friends and I would call this a miss. I know very few people who have 3-D printers in their homes. I’ve seen them start to get into schools. Several of the schools in our area have them, seeing them more and more in local labs and makerspaces, also saw them for sale at Barnes and Noble the other day. There was a 3-D printer there, which was surprising. But being in the home thing, it just doesn’t seem to be there, and I’m wondering if it’s ever going to have that moment that computers had where suddenly we all owned one, or if 3-D printers are going to continue to be this external service that we see at schools and maybe in offices and facilities that need to print and we’re all just going to do it on-demand instead of owning and maintaining our own 3-D printers.
Are you ready to dive into our predictions for 2016?
Mike [19:46]: Yeah, absolutely. Let’s go.
Rob [19:47]: Why don’t you kick us off?
Mike [19:48]: Well, the first one is an add-on to last year and it’s about the wearables category. And I don’t see this going too far. I think that there’s still going to be a lot of churning in the wearables category and it’s going to be several years before any of these devices become really big. I think that the Apple Watch is not going to be nearly as big as the iPhone or the iPod ever turned out to be. So I think that Apple is, in the coming years, going to be looking to see what other products they can develop. And maybe they’ll launch a new product by the end of the year. I don’t necessarily think that’s the case, but at the same time, the general prediction here is that over the course of the coming year, we’re probably not going to see a lot out of this category. There’s going to be some new announcements here and there, but there’s not going to be anything major that comes out of it.
Rob [20:30]: Ooh, I like this prediction because it feels pretty bold. Because I think we’re ripe for someone to come in and really nail this. And it is most likely going to be Apple with like a V2 of the watch, because that’s when they start getting traction with stuff, but I think somebody’s out there really doing some good work, and there’s a decent chance that we could see someone disrupt this category this year.
Mike [20:48]: Got you. Well, I’ll take the opposed view on that and say, “Not this year.”
Rob [20:51]: Yeah, totally. Well, that’s why I like the prediction, right? That it’s actually bold, and maybe a little bit counter to what I think some other folks might think. My first prediction is that single-round bootstrapping, also known as fundstrapping, will become a common, viable option, both in our circles and elsewhere. I’m just hearing more and more about bootstrappers who are getting to a little bit of traction, let’s say between 5 and 20K MRR, and then raising around to just up the game to grow pretty quick, and then to get to profitability and essentially issue dividends to the investors and then spit off cash, instead of doing these multiple rounds of financing where you’re just trying to get bigger and bigger and bigger, and eventually most of them implode.
And so whether you call it fundstrapping or single-round bootstrapping, this is a term I’m tossing around right now, I am seeing more of it, and my hope is that it does continue to become a pretty viable option in 2016. The reason I like this model is because it counteracts all of the negatives of raising traditional VC funding, right? The thing of someone taking over your board and taking control is gone because there’s no board seats. The idea that you’re pushed to get just get bigger and bigger and bigger and basically destroy a company that could be viable as a million-dollar or five-million-dollar company is gone because that’s not what you’re doing. It also gets around the idea of “I’m going to build slide decks instead of build businesses, and I’m going to spend six months pitching and trying to raise this $2 million thing. And that’s the big victory lap is when I raise the funding.” That goes away because let’s say you’ve already built the business up to a 5 to 20K MRR business, which means you’ve actually done something interesting and you’ve had the rubber meet the road, and then you’re purely raising the fundraising as a growth mechanism, which is always the point where I have thought that funding is a good idea. It’s when you have some traction and you just need to add $1 in order to pull $5 out the other side.
So all that to say I still think bootstrapping is very, very much alive and it’s going to be far more common. But this idea of a [?] raising a single round, single-round bootstrapping as I’m looking at it now I think is something that I’d like to see more of in 2016.
Mike [22:51]: Are there any other specific metrics you’re pointing at for here or you’re looking at for specific websites where there are terms sheets for this type of thing commonly available?
Rob [23:00]: Yeah, I see your point. It’s like, “How do you measure this?” right? Because I basically said it will be a common/viable option. What we’ve already seen in 2015 is Indie.vc has basically an outstanding offer on their website to do this. I have heard David Hauser was on Rocketrip podcast a few weeks ago talking about this kind of stuff, although he’s investing at a higher MRR. I’m doing it. I’ve talked to a couple of other successful folks, who, if I’d mention their name, you would know who they are, and they’re looking to invest in startups like this. Because the interesting thing is these kinds of startups have a huge chance of success, but it’s more of a modest chance of success. So it’s a lower risk than investing in the next Twitter or Facebook, and there’s a lower rate of return as well, right? You’re not going to 10X your money with this. You’re not going to 100X your investment. But you stand a much, much better chance of hey, maybe you earn 10%, 20%, 30% on your money every year as this thing spits off dividends. And so I do see people moving into it. I don’t know that I have an absolute metric of what I think we could measure this by, but it’s just something that I think’s going to become more prominent in 2016.
Mike [24:04]: Yeah, that leads into my next prediction, which is I think that we’re going to see a lot more bootstrappers in our circles concentrating less on making money for the sake of making money and focusing more on doing what they enjoy doing and living their lives on their own terms. And essentially what that amounts to is a less of an emphasis on consumerism and accumulating stuff. Because I think you get to a certain point in your life or your career, and you look at it and you say, “Having the big house or the big mansion on the hill doesn’t really matter so much as the things that you’re doing and the things that you find enjoyable on a regular basis.” And this is another one of those things where I think it’s difficult to measure, but I feel like we’re going to hear a lot more stories about this kind of thing.
Rob [24:43]: My second prediction is that Twitter will become less relevant than it is today. It will return more back to its roots where a lot of journalists are using it, news continues to spread on Twitter and the technorati will use it. But the adoption curve for Twitter I actually think is going to be on the decline. I think it’s going to be ripe for an acquisition. It’s still has been unable to turn a profit. It’s been unable to monetize it’s user base, and it just can’t do that forever. And I think 2016 will spell some changes for it. I still think Twitter is a reasonable communication tool, but it’s definitely a lot different than it was a year or two ago. And unless Jack is able to get in and really turn things around, I think they’re looking to be on the decline in 2016.
Mike [25:25]: My next prediction is that we’re going to see fewer IPOs and more acquisitions in the tech space, especially at the higher end. And the reason I think that is because from the so-called unicorn companies, there’s a lot more of them now than there used to be, the ones that that are valued at a billion dollars or more. And I don’t see a lot of these companies doing anything dramatic or really innovating in their spaces. I think that they’re going to hunker down. And they may run some experiments here and there, but it also feels to me like their main growth strategy is going to be through acquisitions and acqui-hires rather than building their own stuff and extending their reach. And as a result, I think that we’re going to see fewer of these companies actually go through an IPO, and we’re going to see more of them eating each other alive.
Rob [26:09]: That’s interesting. That ties into my third prediction, which is that the public markets will continue to value companies lower than the private markets. This has already started in 2015 where companies being privately held as they raise rounds of funding, they’ll be valued at a certain level, and then they go public and their stock actually drops when they go public. And this was the exact opposite 15 years ago, right? That was the liquidity event and the big payday when everyone doubled their money from the most recent private round. And it’s been the opposite a number of times in 2015. And this ties in with what you’re saying, that unicorns are starting to stagnate.
A lot of them don’t have unit economics that actually make sense. They have literally been paying a dollar to make 50 cents. And they keep saying, “We’re going to make it up in volume.” And certain business models, like in Amazon, you can do that with, but several of these unicorns have forsaken any type of not even just profit, but any type of unit economics that make sense. And so I think we’re going to see some fallout from that, as you predicted, and I think that’s going to continue to result in these public market valuations being lower than private markets, which is going to keep a lot of people private longer, resulting in fewer IPOs.
Mike [27:13]: Yeah, it almost seems to me like the fact that they’re paying more to acquire a customer than they’re making from the customer, it’s not even just that they’re doing that. It’s just that they’re also not maintaining those people as customers moving forward. So you had said that oh well, companies like Amazon can do that and make it up on volume. And I think what you really mean is that because somebody uses Amazon, they’re so happy with it, they will continue to be a long-term customer for it. So depending on how you’re going to measure the cost of acquisition for that customer, maybe it is a dollar and you only make 50 cents from the customer, but over the course of the long term, you’re going to be a Amazon customer for a long time. I looked on my account, and I think I have been an Amazon customer for almost 15 years now. I’ve spent easily tens of thousands of dollars with them. And they’re able to do that. But I think a lot of these companies are just not getting people to come back because it’s interesting for people to check them out. But after that, they have no real reason to come back and buy a lot of other stuff from them.
My last prediction is that drone technology’s going to take some serious step forward. And I base this on the idea that new FAA Regulations that have come out that essentially force people to register any drones that are over eight ounces, and I think it’s about 250 grams or so. And there are a lot of drones that fall into that particular category, but because of that lower weight limit that says, “Hey, anything underneath this limit, you don’t need to register,” I think that there’s going to be a lot of technology advances in the space that make it feasible to have drones that are very small, or I’ll say featherweight or ultra-light or whatever the term is, that they’re going to be using for that these days. But I think that you’re going to see a lot of advancements in the size of the components and the weight reduction and things like that to essentially circumvent the FAA Regulations for registration.
Rob [28:58]: And my fourth and final prediction for 2016 is that virtual reality will actually be a hit this year with the early adopter sets. So this is just carrying last year’s forward. I think this thing’s going to catch. I think VR and AR really have a future. And I hope it doesn’t turn into an AI thing where 10 years down the line, I’m still making the same prediction. But I feel like with the release of the Oculus, which is supposed to happen, what, here in Q1 of 2016, that we’re going to start seeing something catch on because [?], the Internet of Things, wearables, and VR, right? These are the next big things. One of these has to catch.
Mike [29:30]: I think I heard a podcast episode from, was it the Daily Tech News Show, where they talk a little bit about some of these different things. And especially with the VR headsets and things like that, there are certain things that almost need to be in place in order for it to catch on. Like the early days of the internet, you need to be able to buy stuff and you need to be able to not take the headset off in order to interact with the world around you. And if there’s any sort of pay walls inside of a virtual reality system that you have to leave that frame of reference, it’s going to make it difficult for it to catch on.
Rob [030:02]: So those are our predictions for 2016. It’s our last episode of the year, and we will see you in early January. If you have a question for us, call our voicemail at 888-801-9690, or e-mail 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 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 269 | Our Goals for 2016 (Plus We Review our 2015 Goals)
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike review their 2015 goals and talk about whether or not they were able to achieve them and the reasons to why they were successful or not. They also set their new goals for the upcoming year.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of Startups For the Rest of Us, Mike and I look at our goals for 2016, and we review the goals we set in December of last year. This is Startups For the Rest of Us, Episode 269.
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 [00:29]: And I’m Mike.
Rob [00:29]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So where are this week’s, sir?
Mike [00:34]: Well, we have an email here from Simon who is referring to Episode 267 where we talked about scaling SaaS support. And he says, “Hi, guys. I’m a single founder, and practically speaking, the only employee, developer, support staff, etc. In that episode, Rob mentioned how the early days of DRIP involved a lot of hands-on support especially by the technical staff and Rob. I don’t have any employees, and I’m still looking to scale things up so that I can leave my day job. What suggestions do you have for a solopreneur such as me?”
Rob [00:59]: Well, you don’t want to hire a full-timer right out of the gate. You want to hire someone basically hourly, and that’s how I’ve been doing it since 2008 maybe, 8 or 9, which is when I hired my first support VA, they call themselves. But really it was just Tier 1 email support. And I’ve had folks supporting info products. We have someone who helps us with support for the Micropreneur Academy. And of course, SaaS apps, just help for products I’ve run. And frankly, until Drip, none of my support people ever worked full-time. It was always purely on an hourly basis. They would basically check the support queue once or twice a day as needed and respond, and they just build based on the hours that they worked. And it’s nice to do that through something like Upwork. Or if you don’t want to use Upwork, you can use Hubstaff to track their time because then they click the button when they working, and you’re really only paying for the hours they worked. But it’s a no-brainer. I don’t think it’s feasible if you’re still growing your app and you haven’t even quit your job yet to try to hire someone full-time. The economics just don’t work out at this stage.
Mike [01:56]: Simon doesn’t say it outright, and I definitely felt like this at one point as well, but it feels in many ways like support requests can’t really wait and you want them to be taken care of as quickly as possible. But I don’t think that most people have that expectation. When they send an email into support, they typically expect a 24- or 48-hour turnaround. And if you get back to them within 12 hours, awesome. But if not, then they weren’t really expecting it anyway. And a lot of times, those support tickets can wait probably significantly longer than you think that they probably could anyway. So that’s something else to keep in mind if you’re a little leery of going down the hourly support route just to have somebody essentially on-call for answering tickets that may or may not be coming in.
Rob [02:38]: Yeah. It really depends on your volume of tickets and how urgent they are. With most knowledge products as well as software products, there isn’t as much urgency as you probably think. And so if you need to hire someone, one thing I would advise, even if you’re going to hire someone part-time, is hire someone who is basically a full-time VA or a full-time freelancer so that they do have flexibility of schedule and they’re not just working in the weekends and the evenings. I had a couple of people like that, and it was a bit of a drag that boy, if they miss one evening because they had something, then it was like a two-day span until they checked in. That really, in my opinion, is unacceptable.
But there’s a lot of ways to make this work. I don’t like it when people come back and say, “Well, no. All the support is just really too technical,” or, “Well, I really need to get back to these people within an hour or two.” It’s like, “Pretty much no. If you’re a solopreneur, it’s probably neither of those is the case.” I know that it feels like that, but there are ways to do this. There are ways to set up a document with the process that people need to troubleshoot. Hire someone who’s intelligent, somewhat technical. I found a guy who was an old helpdesk guy, and so he doesn’t know how to code, but he was able to do some minor troubleshooting of people’s systems.
And it’s not a matter of, “Oh, this will or it won’t work.” It’s how much you’re willing to invest in terms of time to find someone and budget to pay. If you’re paying someone $10 to $15 an hour, you can get someone pretty good probably within your time zone who speaks your language. And they’re going to be pretty sharp, and they’re going to save you buckets of time. And it’s pretty valuable at this point to A, learn the skill of delegating this, but also to buy back that time.
So the other thing I wanted to mention before we dive into our 2015-2016 goals is that the first game from Patrick McKenzie’s Starfighter has launched. And if you listen to this podcast regularly, I’m sure you know who Patrick McKenzie is, formerly of Bingo Card Creator and the Appointment Reminder. He’s been a speaker at MicroConf several years in a row, and he’s launched his new app. It’s Stockfighter.io, and this involves some pretty in-depth programming challenges, and folks can play the game for free. And then certain programmers, as they rise to the top, I’m assuming they’re eligible for really high-end coding jobs in, kind of, a lot of the best employers or most technically oriented employers, in the Bay Area and then other places are looking to hire out of this pool of people who are scoring high on these games.
So it’s a cool freemium model in a way, right? It’s like a two-sided marketplace where you need to find developers, and you need to find people to hire. And they were able to quickly find people to hire, because everybody’s looking to hire high-end developers. But getting the developers in is always the hard part. And so Starfighters is basically doing it by building games that would interest programmers, and that have really difficult programming challenges. So if you’re interested in this type of thing, Stockighter.io looks pretty cool.
Mike [05:17]: Yeah, and definitely congratulations to Patrick for getting this out there. And it looks like it’s pretty involved. And I’m sure there was a huge amount of work that went on behind the scenes behind it.
Rob [05:26]: Yeah, and this is a long time in the making. They spent the last year plus developing it, and I know there’s been a lot of long nights. So it’s cool to see Patrick and his crew get this out into the wild.
Mike [05:36]: Well, I guess we’re going to dive right into our goals, huh?
Rob [05:39]: Yeah. So in Episode 214, we talked about our 2015 goals. And so those were the goals we were hoping to achieve over the past 12 months. And it looks like we each had five goals. And so we’re going to run through those briefly, talk about whether or not we achieve them or not, and why or why not. And then we’re going to look at our 2016 goals, something that we can look ahead and probably review again in 12 months.
So my first goal for 2015 was to 2.5X Drip, so to basically grow revenue by 250%. And we did achieve that. In fact, we achieved it a few months back. You know how I’m really bad at celebrating victories? I didn’t even notice that it had happened. It’s definitely a win for me. But in the sense of recognizing that it was a win, I think I need to work on that for next year. We actually 3.5Xed. There’s still eight more days left in the year here. But assuming that happens, then we’ll be at 350% growth for the year. So far, so good.
Mike [06:37]: Well, congratulations on that.
My first goal was to run a series of what I was calling life experiments. So that included things like going to the gym every day for a month, and getting up early, and eating differently, and various other things. And I would say this is probably about 30% to 40% successful. What happened was I had this list of things that I wanted to do, and the things I just listed were on that short list, along with one or two other things. And I got through that list and then saw that there was nothing else. And I said, “Oh, I need to think of something else to do for the next month.” And then I just didn’t do it, and I fell off the bandwagon at that point. So I ran out of stuff on the list and then stopped. But while it was going on, I stuck with it. So I would say that’s a partial win, and I’m not sure how to count that.
Rob [07:19]: Yeah. This was a tough one because it’s not easily measurable. We talked about the SMART last time, the, what is it, sustainable and measurable and attainable whatever. I think this one doesn’t necessarily qualify for all that. I think you probably want to make it more specific this year if you’re going to return to it and actually have 12 things, one per month, written out in advance. And then you can easily measure it.
Mike [07:41]: I think I had four or five. I think I started out with four, and then I added a fifth one, and then I just didn’t add any after that. And I think that was my problem is I just didn’t have enough to start with and I didn’t dedicate the time to following up on it and adding more to the list.
Rob [07:56]: So my second goal for 2015 was to return to the point where I could choose what I wanted to work on. Because especially towards the latter half of 2015, I was doing a bunch of work that was not enjoyable for me, and I had gotten away from this whole “I’ve run my own show and I can do what I want and have fun while I work,” and I just was not enjoying it in the latter half of 2014. And so this is one of those that is tough to measure, right? Because I had specifics in my head, but it’s hard to communicate them on the podcast without getting into the weeds. But the bottom line is yes, I achieved that.
And I was able to do it through two ways. One is I hired someone who, I don’t know what you call her, but, kind of, an executive assistant, I guess, you’d call. She’s remote. She goes through my email inbox and catalogs stuff, and handles some minor tasks like appointment setting and that kind of stuff. And that helped get me out of the weeds in terms of that stuff. The other thing I did is hired Anna, who runs customer success at DRIP, and has been helping with growth for the past, what, six, eight months. Both of those things allowed me to step a little bit higher up in terms of setting vision and setting direction, and thinking more strategically about things. And so within probably the first four to six months of 2015 I felt like I had returned to the point where I could choose what I wanted to work on again.
The interesting thing is towards the end of 2015, we spun DRIP off as its own corporation, which required a bunch of legal stuff because we have to deal with lawyers, and then move payroll and health insurance. All the stuff had to transfer. And so as I was back to the very same spot of returning to the point where I was working on stuff I didn’t want to. But it was a very defined season, and I already feel like I’ve been coming out of that in December. So I’m hoping that heading into 2016, I’m able to stick to that.
Mike [09:37]: My second goal was to spend some dedicated time each month figuring out how to systemize more of the things that are going on. And I would chalk this up to a complete and utter failure. I just didn’t do it. And I didn’t really have any reminders in place or mechanisms or [forcing?] functions that would remind me that I needed to do that. But I’m using Teamwork.com, which has the ability to schedule tasks, and I have a scheduled task in there now to do that on a monthly basis. So near the end of the month, I think it’s set for the 28th, to essentially go through and start reviewing everything that’s happened over the past month and where there are things that need to be done better. So I’m hoping that now that I have a system in place to systemize stuff, it’ll help out with that. That’s a little bit meta, but I think that’ll help.
Rob [10:18]: My third goal for 2015 was to host two MicroConfs. And my intent here was to host two MicroConfs that were as good as, or better than, previous years’. That’s what I really wanted to do, was maintain the quality and really impact other entrepreneurs and founders. And while this one’s a little bit of a gimme, and it’s a little bit hard to measure, I would give it a thumbs up. Because we put a lot of thought and care into running these conferences, and so I wanted it to be prominent last year because it’s something that takes enough mental space that I wanted it to be listed as a goal. And I feel like we had two really good MicroConfs in 2015. It may have been the best Europe conference we’ve ever thrown actually, in Barcelona, and the one in Vegas was among the top as well, in terms of the Vegas ones we’ve thrown. So I consider this one a success. Although, as I said, it was a little bit of a gimme, so it’s not as if it was some big stretch that I was concerned about hitting.
Rob [11:11]: My next goal was to build a system for maintaining an inbox zero, and I’d say I did really well with that. I hit inbox zero on a very regular basis. Obviously emails come in all the time, but I have, I don’t know, between 50 and 100 rules set up inside of my Gmail account that mark things as read or move them to different places so that I can review them as needed. And then I also go through my email once in the morning and then periodically throughout the day to make sure that if there’s anything important that’s coming in, I can deal with it right away. But at the same time there will be things that I will let sit there until I get a chance to take those things and either deal with them or put them on a to-do list someplace. So I would chalk this up to a success. And it’s interesting that maintaining that inbox really close to zero also frees up my brain to focus on other things because it’s not remembering, “Oh, I got to go back and I got to deal with this in some point in the future.”
Rob [11:59]: Yeah. inbox zero is surprisingly productive for me as well. I was always, kind of, [pooh-poohing?] it thinking that it wasn’t going to be valuable to do. But when I do it, it definitely releases a mental weight.
My fourth goal for 2015 was to launch another podcast, and that was a success. So that’s ZenFounder over at ZenFounder.com. I launched it with Sherry, and we talk about startup, family, and life, and the balance between the three. And so far, so good. The podcast is growing really well, and we’ve put out I think 48 episodes, or a few more than that. So we’re just about to hit 50 and we’ve had some good series going on over there. So I consider this one a success.
Mike [12:36]: My next one was to do a better job of systemizing my different revenue streams. And I have a tendency to jump around sometimes, and it’s a little bit haphazard at times. And I recognize that I needed to be a little bit more calculating with what I did. And over the course of the past year, I’ve come to realize that it’s not just about me jumping around. It’s about not necessarily taking a plan – and I’m good at putting the plans together, at least starting to put plans together – but what I have a tendency to do is start working on the work before that plan is finished. So what will happen is that I will have this half-finished plan, and I will get through that entire half-finished plan, but I don’t have the rest of it in place, or I haven’t really thought all of it through. So because of that, I get to the end of that and I don’t really have a good idea of what I should be doing next because I haven’t planned it out. And I don’t necessarily put together the time to plan out the rest of it. So I’d say I probably did a 50-50 job on that. There’s definitely places where I made really good progress. And then there’s other places where it just didn’t go so well. But I think that the recognition that those plans need to be taken just that much further is really going to be helpful this coming year.
Rob [13:42]: And before I talk about my fifth goal for 2015 I wanted to circle back and talk about how I do a retreat every year and that’s when I typically set and solidify my goals. And we set these goals before I did the retreat last year. And I think within a month after setting them, I went on the retreat and I actually decided not to do this fifth one right away, and I came back and mentioned it on the podcast. But it was essentially an honorable mention, and it was to write another book. Maybe that would be the second addition of Start Small, Stay Small. I didn’t know at the time what it was going to be. But I basically said it on the podcast, and then a month later, said, “Yeah, not going to do that.” So that’s what this one is, is to write another book. Obviously, didn’t do that. And I knew relatively early in the year that I didn’t want to take the time away from the other things from the second podcast, from the two MicroConfs, from growing DRIP, to sacrifice those things in order to write that second book. And so that’s where that one is. So definitely not a win there, but it is something that I realized early on in the year.
Mike [14:36]: My last goal was to keep up my writing habit. And at the time I set this goal it was because I knew that I was going to start through that process of writing The Single Founder Handbook. And I was able to push that out. I finished it, and I forget, it was March or April of last year. After the book was out, I didn’t do so well in keeping up that habit, but the first several months of the year it was good enough to be able to publish that book.
It’s a fairly lengthy book. It comes in at 327 pages. So it was quite an undertaking, I’ll say. So I don’t know how I would count this one as well. Maybe half or three-quarters. But I’m pleased with how the book went, and I’m pleased that I was able to finish writing it.
Rob [15:13]: I think if we were to go back to that episode a year ago, I would probably have asked you to make this one more specific, because keeping up the writing habit is a little vague. I think a better goal would have been to launch your book, because then it’s very measurable. And maybe even launch your book in the first six months or something, first six months of the year, because you achieved that. But keeping up your writing habit, it feels to me like you didn’t achieve that, even though you had a success along the way, in essence getting your book live.
Mike [15:37]: Yeah. I don’t recall whether I had come out and said, “Hey, I’m going to be launching a book,” at the time. I don’t know if I had said that on the podcast yet, but I distinctly remember having that in mind at the end of the year. It’s like, “Hey, I want to buckle down and get a lot of good writing done on this.” But you’re right. I should have probably been a little bit more specific about that.
Rob [15:53]: So I got to be honest, Mike. You had five goals. I think you achieved like one or two of them. Pretty shaky record for you this year, man.
Mike [16:01]: Yeah. As I said it comes down to the planning aspect of it. And I think the other part of it is that I don’t really go back and look at my goals. Or at least I haven’t historically gone back and looked at them and stayed on top of them very closely month over month or anything like that. I think that with the reminders and stuff that I’ve put in place this time, I think that I’ll do better. But obviously time will tell.
Rob [16:26]: I think something else you could do is put it in your mastermind outline every week. Have that be some part of it so that you can check in, “How am I doing on these goals for 2016?”
Mike [16:36]: Yeah. I think we put something in there to review them on a quarterly basis. It was either a quarterly or monthly basis, I forget which, but that’s something else. We’ve actually discussed this a little bit in our mastermind group to try and figure out a better way of tracking our progress towards our [?] goals, because I don’t think any of us do it very well. And it’s easy to let things slide through the cracks because you’re focused on the low level stuff, and you’re not really paying attention to the macro goals.
Rob [17:02]: All right. So that was 2015. Let’s dive into what we’re looking to do in 2016.
Mike [17:06]: I put together my list, and I spent, I don’t know, it was probably like a day or two thinking about what I wanted to do for the coming year, and came up with a couple of really high level goals, and then some milestones to reach along the way, and some sub-goals that fit into those overarching goals. So I have two major goals that I want to achieve this coming year, and the first one is to launch my new product, ideally by early next year. And by early, I mean by April at the latest. I want to have people onboarded and using the products in March or April, and then be able to do essentially a full blown public launch by mid-year, mid-year being June or July.
Rob [17:43]: Okay. So hold on. You named many different months there.
Mike [17:46]: Sorry.
Rob [17:47]: So launching your new product by early next year is too vague. So I’m going to hold you to it. Let’s talk about a date. That is when you email your launch list. What is your goal in terms of a date for that?
Mike [17:59]: Well, I want to have people using it early on because I don’t know how much system resources it’s going to take, and a lot of things are up in the air. So I want to have the 10 people who’ve prepaid me using it by April 1st.
Rob [18:12]: Okay. So then how long do you think from there it’ll take you to launch? A couple of months?
Mike [18:17]: Yeah, I think so. Maybe two months. Possibly three. Probably three.
Rob [18:20]: Okay. So April, May, June, so July 1 then is a reasonably conservative view, assuming it takes you three months from the time you get your 10 early access people in there.
Mike [18:31]: Yup. I think so.
Rob [18:32]: Cool. So I’m going to note that down, July 1.
Mike [18:34]: Hold me to that one [?]
Rob [18:35]: Or at least holding you to it or not, I think it’s just good to have an actual date in mind. And I’m noting down early access by April 1, and then email the launch list by July 1, because I think it’s good. The July 1 is the one that I actually think has more flexibility either way. Because you remember with DRIP, it took us months to do the slow launch to build the features people needed, and iterate on that. And that’s stuff that is hard to rush. The April 1 deadline is one that at this point, since that one’s only, what, essentially 90 days out, and it’s really just you building software, that’s when you have much more control over is that you know what features you have to build. And you have to get the code out there. I feel like hitting that April 1 deadline should be much more in your control.
Mike [19:17]: Yup. Totally agree with that.
Rob [19:19]: Exciting. And when do you plan on starting to mention it on the podcast, in terms of what it is and what it does?
Mike [19:23]: I’m going to give it a couple of more weeks. I’ve got quite a bit of planning that I need to do for it to figure out how long different pieces of it are going to take, and prioritize some of the things that need to be done. There’s also some stuff that I need to learn about, because there’s pieces of it that I technically don’t know exactly how it will need to be done. So there’s a little bit of a research component there. And I don’t know how long some of those things are going to take. But I want to get through those before I start talking too much about it.
Rob [19:48]: You also need to get a landing page up.
Mike [19:49]: That, too.
Rob [19:51]: You got it.
Mike [19:51]: I’ll start a landing page up, too. [?]
Rob [19:52]: You got to start collecting emails, yeah. All right. So my first goal for 2016 is to 2.5X DRIP. So it’s basically the same goal I had last year. To grow by 250%. I’m going to need to focus heavily on this and get all my team on board and all that, because it feels like an ambitious goal. We’re on pace right now, given our current growth rate, to grow by about 1.7 or 1.8X. And to go to 2.5, it doesn’t sound like that much more, but when you actually look at how many more trials and how many more conversions we need throughout the year, just how many more people we need to use it, it’s a substantial amount. And so I feel like this is certainly measurable. It’s definitely attainable, but it feels like I’m really going to have to focus and pull some new levers this year, some new traction channels we’re going to have to find in order to hit this mark. Because we’re talking substantial numbers at this point, right, to 2.5. We’re not 2.5Xing from $10,000 a month anymore. It’s a lot more than that. It’s, sort of, finding that many more people to grow the app is going to be both a lot of work and also a lot of fun, I think.
Mike [20:53]: So my second major goal is to re-run some of the different experiments that I was running last year. And as I said before or earlier in the episode, I feel like I fell off the wagon a little bit mid-year just because I didn’t have the rest of them scoped out. So what I’m doing over the next week or so is writing down 12 different things that’ll essentially keep me busy for the next 12 months, just doing one per month, and focusing really hard on that, just that one thing, in order to see what happens. Part of it’s just about combating boredom. Part of it’s about trying new things. But I just want to try a bunch of different things, see what works, what doesn’t, what resonates, what’s fun, what’s not, and see how things turn out. But the first step is to put together that list of 12 things in the next week or so.
Rob [21:34]: All right. So I have a challenge for you. On next week’s episode, I would love to see your 12 things and which month each of them is going to be done in.
Mike [21:44]: Okay.
Rob [21:46]: A, I think it’ll make it better for you because then it’s super easy to be accountable to it. And you can review it with your mastermind group, or you can review it here on the podcast every month if you feel comfortable. And then I also think that one of the few reasons you said you weren’t able to achieve it last time was that you only had three or four of them, and then you wandered off after that. So if you think you’ll get it done in the next week, I think that’ll be a really good thing to just revisit quickly on next week’s episode.
Mike [22:05]: Sure.
Rob [22:05]: So my second goal for 2016 is to support Sherry with her ZenFounder book. She’s starting work on a book about startup, family, and life. And I think my role is going to be helping her shape the outline, reading drafts of it, helping contribute to it, and adding anecdotes and stories to help beef them out. Because she has a lot of research background, and she has done consulting with founders. But obviously I have more reach into the community and stories of my own. And so I think, technically, I’ll be listed as a second author on the book. That’d be my role, but I really want to help support her to get it out.
I found that over the years, I love being involved in a lot of projects. And in the past, I’ve done too many of them myself, right? I want to write the second book. I want to start the startup. I want to run the conference. I’m going to do all these things. But I’m finding now that the more I focus on running DRIP and just doing only a few things, but if I have a little bit of input into other things like advising startups or doing some angel investments here and there, being able to talk to entrepreneurs, that I get that same endorphin rush and that same feeling that I am involved in a lot of things. And so this is one of those ways where I feel like I can be involved in a book, but the weight of it and the vast majority of the work will not be on my shoulders. But it will still allow me to learn and be interested and to be involved in something exciting that’s happening. So Sherry’s goal is to get it out before the end of the year. To be honest, I don’t know if she has a particular month in mind yet, but we’re working out the details. And so my goal is to basically support her and help her get that out the door.
Mike [23:37]: Very cool. That’s, kind of, exciting.
So the next things I have in my list are essentially sub-goals, and they fit into the two that I just talked about. And the first one is to be much more deliberate about where I spend my time. And that involves separating things out into work time, family time, and then me time. And my intent is really to work less and enjoy my off time more, and essentially be overall healthier, both physically and mentally. Because I have a tendency to think about work when I’m not working, and I really need to start drawing walls of separation between those things so that when I start working, I’m essentially more fresh on it. I can just sit down, and with a clear mind, start working on things that need to get done, and then draw that line on the sand that just says, “Okay, this is family time,” or “This is alone time,” or “This is time I’m spending with my wife,” and I’m not going to be thinking about work, or thinking about other things that are going on.
Rob [24:25]: Do you know how you’re going to measure this one?
Mike [24:27]: I have some ideas about it. It’s a little difficult because I think that if you start thinking about work, for example, in the middle of the evening while you’re eating dinner, it’s a little difficult to just turn that off. But part of it’s going to involve time-boxing a little bit and saying, “Look, these are the hours that I’m going to be working on this. And these are the hours that I’m going to be spending doing that.” I think that’ll help me to put things in perspective a little bit. And I’ve also found that just putting that added pressure on myself of saying, “Oh, I’ve only got these hours to work on something,” that really, really helps me.
Something else I’ve found is that earlier in the week I’m much more productive than I am at the end of the week. So Mondays and Tuesdays, I can put in 12-hour days very easily and I don’t really get interrupted by the kids who are coming home from school, and I don’t have to watch them when they get home because my wife’s around. And what I find is that later in the week, on Wednesdays, Thursdays, and Fridays, I don’t have that – I’ll call it a luxury – but it affects me more. It gets me out of the zone much, much quicker when they walk in the door. So I think that focusing on the Mondays and Tuesdays as being my highly productive days will help with that, and then blocking off Thursdays and Fridays and saying, “Yeah, I know for a fact I’m just not going to get as much work done. So I’m just going to, rather than try and fight it and try and get things done anyway, I’ll just accept it and say, “Look, I’m just going to push these things off and not worry about it until Monday because I’m not going to be as productive on it anyway.””
Rob [25:45]: This is one that I think you’ll need to review on probably a twice monthly or monthly basis or else you’ll forget it, I think.
Mike [25:51]: Yeah, I agree with that. I wouldn’t call it so much as a goal, as more of a strategy of trying to get to some of the other things.
Rob [25:58]: Yeah. That’s what it seems like. It’s like a behavior change rather than an actual goal that you’re striving for.
Mike [26:03]: Yeah, I guess that’s probably a better way to put it. Maybe calling it a goal was a misnomer, but that’s the way I was thinking of it. It’s like what has to happen, or what do I need to do in order to be able to achieve those other goals that I set forth.
Rob [26:14]: Very cool. So my third and final goal for 2016 is to make another handful of angel investments, and I’m thinking probably three to five in 2016. And what I found is, in total I’ve made about nine small angel investments – about six of them I’m a little more involved in, where I’m actually helping and advising, and they’re a little more substantial. And I found that my sweet spot is, not surprisingly, helping folks with B2B SaaS. Hopefully if they’re at product market fit, post traction, that kind of stuff. So folks who are at $5000, $10,000, $15,000 a month in revenue, and there’s some type of path to start getting this thing going.
And frankly, as weird as this sounds, it’s like investing in bootstrappers. And that doesn’t make a ton of sense, right? Because typically bootstrapping means that you’re doing without funding. But it’s this new model of “fun-strapping”, as Colin from Customer.io talked about, where essentially folks have the intent of raising a single seed round to grow quickly, get to profitability, and then that’s it. They don’t plan to go the venture-funded route. And those are the businesses that I like. And I’ve made a couple of investments recently that I’m very excited about because A, there’s a lot of value that I can bring. But B, they’re not trended to grow hundred million dollar businesses, and they have a very high likelihood of becoming seven-figure businesses and potentially even low eight-figure businesses. And that’s where I’m looking to be.
So that’s where I really enjoy it, and where I have some insight and value to add. And this again comes back to I don’t want to start other things because I really want to focus. But just being involved in a little way with these founders who are getting stuff done is exciting and it keeps me learning. And it keeps me, kind of, interested in knowing what’s going on. And so I guess if you are a bootstrapper and you hit that point where you start getting some traction and you’re thinking about raising this small, single round, certainly drop me a line because I’ve been talking to several folks lately.
Mike [28:09]: The last thing I have on my list, as you pointed out earlier, is more of a strategy than a goal, but is to be more complete with my planning. And essentially that involves creating a full plan rather than a partial one, essentially walking the process of the projects that I’m working on all the way to completion and mapping out everything that needs to be done, as opposed to getting it 70%, 80% of the way and then stopping and saying, “Oh, that’s enough of a plan. Let me dive right in and start getting things done.” So, as I said before, I have a tendency to get to near the end of those plans and then I’ll start thrashing because I don’t really know what I should be working on because I haven’t planned it.
Rob [28:43]: Yeah, that makes sense. Again, like you said, this is a strategy or a behavior change. It seems like launching your new app by April 1 to early access, and then July 1 to your launch list, is probably your main goal, and that’s where you listed it, as number one. And so, if I were in your shoes, that is what I would totally be focusing on and getting weekly milestones nailed down and planned out. Especially if you know you have that tendency to not follow through in the end; to get to the point where, like you said, you start thrashing, I think that you need to be keenly aware that around March or April, your lizard brain is going to start finding reasons why you shouldn’t be working on it, or why you should wander off and try to start something else. Or other stuff is just going to magically come up because it always does. So I think it’s good to be aware of this in yourself, and I think that as you go through the year, it’s something to review on a monthly basis of like, “Am I letting this one get the best of me like it has in the past.”?
Mike [29:45]: Yeah. I noticed that I’m for thrashing a lot because my productivity just plummets. I spend more time looking at my ever-growing list of things to do that there’s things that just get added to it. And I’m like, “Oh, I’m not sure what I should be working on.” So what ends up happening is I don’t work on anything. And I’ve already started putting together the weekly milestones like you just pointed out, and finding ways to hold myself accountable to those different milestones, and making sure that things aren’t getting pushed off, and making sure that I’m also assigning a reasonable number of tasks to each of those milestones so that I don’t get so far behind that things just go completely sideways, and then I’m in a position where I’ll never catch up.
I don’t know about you, but I think this coming year it’ll be pretty exciting.
Rob [30:24]: Yeah, I’m stoked to get started with it.
Mike [30:25]: Well, I think that about wraps us up for the day. 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 268 | How to Set Annual Goals
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about setting your yearly goals and some processes to use in order to make sure you meet those goals.
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 set annual goals. This is Startups For the Rest of Us, Episode 268.
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 [00:23]: And I’m Rob.
Mike [00:23]: 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 [00:27]: Doing pretty good. I’m gearing up/down for the holidays, gearing up to hunker down. I want to do some reading, some thinking, and some high-level plotting of next year. I don’t know if I’ll be able to take my retreat in the next two weeks, but it’s getting to be that time, because I really need to nail down how I want 2016 to shake out, the goals that I want to achieve, and frankly taking an in-depth look at how 2015 went and measure it up to the goals that I set last year. And we’re going to do that in an upcoming episode. I think it’s next week where we actually revisit the goals we set last year, talk about whether or not we achieved them, and then look at our 2016 goals. So I’m hoping to take some time in the next couple of weeks, and then go on my retreat hopefully to nail everything down. How about you?
Mike [01:09]: Well, I’ve been recovering from about two weeks’ worth of major back inflammation. My back’s been acting up on me again, so there were several days where I literally just could not even sit down.
Rob [01:19]: That’s a bummer.
Mike [01:19]: So I basically just laid in bed and read the entire time, because I literally couldn’t do anything else. So five chiropractor visits later and a ton of Aleve, I’m feeling better, but there’s still lingering issues to get over.
Rob [01:32]: Yeah. It’s really hard to get work done when you’re debilitated like that.
Mike [01:36]: Well, when you can’t even sit at your desk. Literally I was just sitting there. It was painful.
Rob [01:40]: Yeah, it’s a real issue. So MicroConf sold out pretty quickly.
Mike [01:43]: Yeah, what was it? Do we have official time on that? Was it seven minutes, or was it six?
Rob [01:48]: Yeah. It was pretty bad. So we did it in waves this year where we sold through Academy members first, then returning attendees, and then the early bird list. And each year it has sold out faster and faster. So we’re having some internal discussions of what we want to do next year in terms of there’s a lot of possibilities, right? You could throw a third conference. You could expand this conference, which is something we haven’t really wanted to do in terms of the size. There’s a lot of alternatives. I think as [Xander?] said, it’s a success problem. It’s a good problem to have, but it’s definitely a problem that we need to think about ways to work around.
Mike [02:18]: Yeah. As you said, there’s a bunch of different potential solutions, but every single one of them also comes with its own set of problems. So trying to figure out what the lesser of two evils is – or the lesser five evils, I guess in some cases – is a little bit difficult.
Rob [02:33]: Right. Because is MicroConf still MicroConf if there are 325 people there?
Mike [02:37]: Yeah. I don’t know. The thing is it’ll change no matter what. I mean, if you’re just adding people it will it make it change? But I also think that much of it is the factor of how much year-over-year growth there is. So if you go from, let’s say, 250 to 400, obviously that’s a much bigger difference than 250 to 325. But even that doesn’t necessarily solve the problems. So tough call, tough call.
Hey, we’ve got all good listener question here come in from [Jeremy Vot?], and he says, “Hi, Rob and Mike. Love the show. I’m curious about something I’ve seen, and recently I’ve seen Rob do it with DRIP, which is to giveaway e-books and video courses for a limited time, and then charge for them. I assume they’re free for things like webinars as gifts. So in all reality, these are free items. So my question is about the strategy of putting a cost to them. Do people actually buy them? Is it simply to give them more value in their minds? Thanks, Jeremy.”
Rob [03:24]: Yeah, that’s a good question. The bottom line is the reason we put a price on them is to communicate the value of what they would be worth if they were not subsidized by the main business, which is obviously the software business – the email marketing software known as DRIP. What we did is we literally sat down in the office and said, “What would this be worth if we were running an info product business, and how much would we sell this for?” And we released a set of three e-books a few weeks ago on email marketing, beginners’ guides, and we released a 20-part video series. It’s an interview series with Patrick McKenzie on DRIP email marketing and tactics and things like that. In both cases, we set it less than I think I would have if we were really trying to turn a profit.
But the idea was, A, to communicate the value, and B, yeah, we have actually sold several copies. It was funny, several hundred dollars’ worth of the e-books, and I was surprised that that happened. But it’s a nice little perk. We were joking that it’s our espresso/snack fund for the office, because it’s not any real revenue compared to what the main product is driving. But it does, A, make these things worth it. So it’s not like we’re giving away a free e-book on XYZ, because instantly that makes you think that this thing’s probably not very good. And they are good. We spent literally thousands and thousands of dollars across writing, editing, and the design and the layout and all that stuff. And we packaged something that is worthwhile, and so we wanted to put a value on it. And there’s also a nice thing. We give it away free for seven days, so there is a little bit of time urgency for people to download the thing. And it’s not something that is going to be free forever, and so you’re able to get it into more people’s hands sooner.
But coming back to it again, I don’t think you can just put a price tag on some white paper that you crank out that’s not actually valuable or not worth it, because that will come back to bite you. It negatively impacts the brand. People start thinking, “Well, they’re putting out crap and putting a price on it just to try to fool people,” and that’s not a good way to go. And so we’ve been very careful that any of these things we do put out are what I consider very high quality. They are production-level, things that I have no qualms about selling. And the people who have purchased them, no one has asked for a refund. So they’re obviously worth that to these folks.
Mike [05:22]: Yeah. The first thing that jumped into my mind when I saw this question was part of it was to set that time urgency so that people would pick it up sooner rather than putting it on the back burner. And that would also, I assume, drive people to your email list so that you can then do marketing to them afterwards.
Rob [05:37]: So what are we talking about today?
Mike [05:38]: Today, what we’re going to talk about is how to set your annual goals. And we’ve talked in the past about goal-setting in general and using a system that’s commonly known as SMART. It’s setting goals that are specific, measurable, actionable, realistic, and time-bound. And in this episode, what we you want to do is we want to focus specifically on how to set your yearly goals. Because this is essentially a timeboxed set of goals that you are going to have for a one-year period, and the idea here is that you want to be able to meet all of those goals. So obviously, in setting your annual goals, we’re going to conform to that SMART system. But this is going to talk through the process of how to go about setting those goals and some other things that should go along with it that are associated with that process, but not necessarily part of the goals themselves.
Rob [06:23]: Right. So we’re not going to rehash SMART here. We have talked about it in the past. A lot of folks have talked about it, and it’s. kind of, the elementary thing that you may have heard a little too much about at this point. Really we’re going to talk about seven ways to set goals that are meaningful and that are worth setting.
Mike [06:39]: And to make sure that you’re achieving them throughout the year, because obviously I think that there’s a lot of people who set their yearly goals and then they just don’t look at them for the rest of the year. They’ll maybe revisit them in September or October or November timeframe and say, “Oh, yeah. I haven’t even started on that yet.” So this process is really about not just setting those annual goals, but making sure that you’re putting systems in place, or forcing functions in place, that will help you to meet those goals throughout the year with various milestones.
So we’re going to walk through the seven different steps in this process, and the first step is to make the time to set your annual goals. And the problem I’ve been guilty of in the past on occasion is to set goals when I have time. Or I’ll think about them and say, “Oh, I should do this” or “I should do that.” And what I’m not doing is I’m not really dedicating time to sit down and really give some serious thought to it and making sure that those things are a priority rather than an afterthought.
Rob [07:33]: Yeah. And I typically do this in an annual retreat. We’ve mentioned it here before. And we did spend a whole episode of ZenFounder — if you go back to the ZenFounder Episode 2, we talk all through founder retreats. And this has been an impactful part of my entrepreneurial journey for the past, I think it’s three years, maybe four. And it’s a bit of a learned skill, but the more you do it, the more addicting it becomes to do it because you realize the value of it. I, kind of, view like It’s like an annual meditation where you go off by yourself and you carve out this time to review the past year and look at the future. And I use it as my goal-setting device. My goal of coming out of that two-day retreat that I do is that all my goals are set, and my vision for the next 12 months is secure.
Mike [08:20]: Exactly. And the first part of this process is making sure that you’re setting aside the time to do that. Because if you don’t set aside the time, you’re not really planning it out. You’re thinking about it, it’s, kind of, on your mind, but it’s not really a main focus. And I think if you’re going to do something as serious as setting these annual goals, you really need to make it a priority and make it your main focus for whether it’s several hours or a couple of days with a weekend retreat, something like that. It needs to be the primary focus of what you’re looking at, not just something you do a couple of hours here or a couple of hours there, or even just when 20 or 30 minutes here or there.
Rob [08:51]: Yeah, I agree. And you may have to do some trading. If you have kids, and your spouse needs to watch the kids for that weekend, then you may have to trade and work something out to where this is possible. If you want to do an overnight somewhere, it’s not always straightforward, and there may be some sacrifice involved. But I think there’s a lot of value in taking the time to set these goals.
Mike [09:08]: So once you’ve set aside that time to do it, Step 2 of the process is to recap the current year. And you have to give some thoughts on what went well, why did it go well, or what are the things that you didn’t accomplish that you wanted to, or are there things that you want to happen in the current year that you just weren’t able to fit into the schedule? I also think that what you want to do is you want to make sure that on your list for the following year, you want to keep in mind what it is that you want to be celebrating the following year. So at this time in December of next year, what is it that you want to be looking back on and saying, “Yeah, I’m really proud of that. I set this goal and I was able to achieve it.”? What is that? It might just be one thing. It might be two things. But you have to give some thought to what that is, in advance.
Rob [09:46]: Yeah, and this is a loose outline and, kind of, a high level. It doesn’t cover all elements of basically the outline of what I used for my retreat. And I took that, of course, from Sherry and adapted it for my purposes. And then she had also taken it from some monk from the 1300s who had a meditation and looked back and said, “What gave me life in the past year? What took life? What do I want to do more of? What do I want to do less of?”
There’s a brainstorming element of it. I always use my Moleskin notebook and I write a bunch of stuff, just page after page of notes. Sherry has a big sheet of butcher paper, sketches ideas out, thoughts, and she keeps the butcher paper from year-to-year. And, of course, I keep the Moleskine notebook. You can do it whatever. You can do it on your computer if you want. I find that the computer tends to tempt me to go check email, or go screw around on the internet, and so I like the feel of pen and paper because it is just so different. It doesn’t make me think of work like the computer does. But to each their own, and you want to figure out which way you do it. But I think recapping the current year and really looking at what you want to do more and less of ,and how you’re going to get there is your first step to setting these goals.
Mike [10:46]: And if you go over to ZenFounder.com or look it up in iTunes or whatever your favorite podcasting app is, there’s a really good episode. I think it’s Episode 2 in ZenFounder where it discusses how to go about a personal retreat. And I think we’ve talked a little bit about it on this podcast before as well.
So moving on, Step 3 in the process is to limit yourself to one or two major goals. And the thought behind this is that these goals are going to take quite a while to reach, and it might take you four to six months to even reach one of them. But you also have to allot some time for essentially a little bit of extra padding in case things go wrong, or you get sick, or some family emergency comes up and it’s going to set you back several weeks or a couple of months. There’s always other things are going to come up, and you have to make sure that you take those into account. But once you’ve got your one or two major goals set then you start doing backwards planning in order to set your quarterly, monthly, and weekly goals. And along with this, you can start setting milestone goals that will give you specific feedback about what your progress is along the way. What you don’t want to do is you don’t want to have this big, fat, hairy audacious goal that you’ve set, and no real way to track how far along you are on that goal. So if it’s writing a book, for example, you don’t want to just say, “Hey, I’m going to write a book.” You want to be able to spell out how far along you’re going to be at different points to be able to make sure you are on track to finish that goal.
Rob [12:04]: I think that especially if you’re not totally in control of your time yet – meaning you have a full-time job, or consulting, or things where you’re not just working on your own products – I think one to two goals is where you want to be. And I think one goal can be, “I want to have quit my job by the end of the year.” Or it might be, “I want to only be doing 10 hours of consulting a week, or zero consulting.” That, for me, was my goal for several years in a row. I didn’t go through this process at that point. I wasn’t doing retreats. This is, let’s say, back in 2006, 2007, and 2008. But I knew that that was my one goal, and then I work backwards from that. And I have just focused all my energy on growing my apps, or acquiring apps, or building apps, or doing whatever in order to hit that revenue mark, and there was a number that I needed to make.
And so if you don’t have your “freedom” yet from your job, or from contracting, that, I think, has to be a goal of yours, assuming that you want to do the entrepreneurial life. If you already have products or you’re already working full-time for yourself in essence on your own products, and you’re making a full-time living from them, I think you can have more than one or two goals. I think you’re in a position where you have more control over it, and I think that having a revenue goal and then maybe a goal of launching something new, whether it’s a new, I don’t know, podcast or blog or even a new product or some new major marketing efforts around your existing product, I think all of those could be included in your goals. And it, kind of, depends on how you label the major goals, but I think early on that you’re going to want to keep it to one to two, and then you can maybe expand it a little later as you get a better feel for how much you can actually get done in a year. Because I think most of us early on overestimate how much you can get done. And then you become more and more pessimistic as you set these goals and you review at the end of each year, and you realize, “Boy I really didn’t get that much done.” And you start pushing stuff off to the next year. You become a bit more realistic about it.
Mike [13:58]: Step 4 in the process is to identify specific ways that you can hold yourself accountable through the various milestones that you’ve set up. And the idea here is that you want to set up an automated system that will essentially ensure that you don’t forget about the milestones along the way, or that you aren’t letting things slide. And you can do this through a variety of different ways. You can use a mastermind group. You can use an accountability partner. Your spouse or significant other is also a good one, or a fellow business owner. If you meet up for drinks, or lunch, or dinner, or something like that on a regular basis with anyone else who is doing the same types of things as you are, you can use them to essentially to bounce ideas off of, and essentially just put together an outline and say, “Hey, every week or every two weeks, this is what we’re going to talk about.”
And you have to schedule this time. One of the things that I’ve found is that if I don’t set aside the time for this, if I don’t actually schedule these periodic check-ins to go back and look at that, it’ll be three or four months before I even go back and look at my goals. So you have to schedule the time and make sure that in some way, shape, or form, that you are paying attention to that moving forward. Because it’s very easy, as Rob said, to just push things off. I find that if you have an automated email that comes in to you every week or every two weeks – this is one of the things that we do in our mastermind group – is we have a link that just gets emailed to us every Monday morning that points to the Google Doc, and that tends to work really well just by drawing attention to it. But at the same time, it’s also fairly easy to almost ignore that, or bypass it, just because it comes in on a Monday and we don’t meet until Tuesday night. So depending on the timing or scheduling of that, it might be a factor. But if you schedule it very close to a particular meeting, it’s going to pop into your email and you’ll see it shortly before the meeting. It’ll be essentially a trigger to remind you, “Hey, we need to discuss this.”
So again, any of those things – mastermind group, accountability partner, all of those things – if there are triggers that you can set in place, especially if they’re automated to remind you that hey, you need to review this on this periodic basis, that will help you to hold yourself accountable to those milestones.
Rob [16:01]: I pretty much always have a revenue goal for the main product I’m working on, which has been DRIP for the past few years and was HitTail before that. And what I have found as extremely helpful for me in the mastermind groups that I’m in is at the end of every month, the next mastermind that I have, I say what the revenue was. And just forcing myself to calculate it to the penny and report it in the mastermind group, even though people aren’t necessarily holding me super accountable to anything in the meetings, it really helps me visualize where I am on the path to that goal. And the nice part is your mastermind folks aren’t going to remember your revenue from month to month, so it forces you to basically say, “Hey, two months ago, I was at this. Last month, we were at this. And now, we’re at this.” And it makes you actively think, “Oh boy, we only grew by a thousand each of the last two months. I’m not going to get there if I grow that slowly.” Or if you can say, “Well, last month we grew by 5000, like the month before,” then suddenly you just become more aware of it because you have to explain it to another person. It’s like the concept of how you really know something once you can teach it. I think that, for me, I’ve always calculated monthly revenue. I’ve always looked at it. But something that helps me absorb it and process it is to then explain it to the folks in my groups. And it really helps solidify that, and it adds this level of a recurring accountability milestone.
Mike [17:21]: The fifth step in the process is to identify your motivational triggers, and these motivational triggers can be either positive or negative. So a positive motivational trigger would encourage you to do more work, or to be more productive, while a negative one would essentially hold you back from that, whether it’s making you procrastinate or just doing some form of work avoidance, or spending too much time on certain things because you feel like maybe they’re ultra important and they need to be just perfect. Those are the types of things that you need to identify so that you can implement additional ways to make sure that those things are not holding you back, or that you are encouraging those motivational triggers that are positive. And these are essentially feedback loops that you want to set up.
Everyone has a different motivational trigger. Some people are positively reinforced by money or fame. Or other people who just say, “Hey, I just want to be healthy.” They don’t necessarily have these giant, grandiose goals, but they just want to concentrate on their family, or they want to concentrate on personal learning. Each of these things, there’s nothing right or wrong with any of them, but you have to recognize what your own motivational triggers are and then set up feedback loops so that you can make sure that you positively reinforce and double-down on those ones that are positive and reduce or eliminate the ones that are negative.
Rob [18:34]: Recently with DRIP, we’ve launched those two knowledge products; that e-book that I mentioned that we gave away for free for a week and then started selling, and then the video series with Patrick McKenzie. And what I’ve noticed is the motivational trigger during that time was that the positive feedback of doing something risky and doing something scary in public, right, because you launch it, you email the list, and you’re wondering, “Boy, are people are going to like this? Is it going to go well? Or is all this time and money we spent just going to go out to crickets?” And I saw excitement in the team as we were reporting the numbers and the number of downloads, and the number of uploads on product time, and the number of comments and all that stuff. And so for me, doing things in public and getting positive or negative feedback has always been a trigger of one kind. And I think the further I’ve gotten away from that, You know, I blog less than I used to due to time constraints. Luckily, I still have the podcast and the conference and stuff. But I think that getting back to the things that really matter to you, and push you in a virtuous cycle, I think, is important. I know that I’ve just recently rediscovered that and remember it. I published just a couple of blogs posts in the past few months. And the feedback, and just knowing that I pushed something out into the world again, and writing – it was something I don’t do often – was really a motivational trigger for me. And so I think that learning that about yourself, and then noting it down and not forgetting – which is frankly what I’ve done as I’ve stepped away from that – I think it’s a positive thing.
Mike [19:57]: And some of those things you just talked about lead us into Step 6 of the process, which is to identify the patterns that indicate that you’re demotivated. And some of these things just boil down to a basic sense of procrastination, but sometimes you can recognize certain patterns. So, for example, maybe you wake up later than you usually do because you lack focus, or clarity, or lack a sense of drive to just get out of bed and start working on your product. And this is especially true if you own your own time and you aren’t sure what you should be doing. And it’s very difficult to motivate yourself to get out of bed and sit down and be motivated to be productive if you’re not really sure what it is that you’re driving for, or what you’re trying to do, or you’re not sure what to do.
Another symptom, or a pattern that you might be able to recognize, is if you’re playing an excessive amount of video games, or watching a lot of TV or movies, or you’re just making a general lack of progress towards your milestones. Any of the activities that you typically do that are essentially time-wasters tend to fall into this category of patterns where you can recognize that you’re demotivated. And I think the recognition piece of it is really important, because if you don’t even recognize that this is a problem there’s nothing that you can do about it because you don’t even know where to start because you don’t know that there is a problem. So recognizing that the patterns that you undertake during those situations is really important. And it warrants writing them down so that you have it in your mind that, “Hey, these symptoms, or these things that I do, or these things that go on in my environment, are demotivational to me, and will hold me back.” So as long as you have that in mind and you’ve written it down, you can use that as essentially a trigger to recognize them. And again, going back to identifying specific ways to hold yourself accountable, these are things that you should review on a periodic basis to make sure that you’re not falling into any of those traps that are going to hold you back.
Rob [21:44]: We’re all going to become demotivated at one point or another throughout a year. The key is, as you said, to identify it, and then to figure out if it’s a short-term or a long-term dip. And if it’s short-term, you can often pull yourself out using tactics, or making small adjustments. And the tactics I tend to use are music, getting a playlist together that matches the mood and that I start to loop and, kind of, puts me in the zone. I will up my caffeine intake for the short term and do it at really key times or about 20 minutes before I’m going to start working. I’ll also change my work environment. If I haven’t worked from coffee shops in a while, I will go work in a coffee shop. Right now, I’m actually working at our house – that’s currently on the market – that we’re not living in, so there’s no one here. And I’m here maybe once a week. It feels like a new environment, and that is extremely motivational to me. And I think to most people, to be in a new environment, it tends to spark creativity and ignite something in your brain, because you feel like you’re in a new place.
I think something else to think about is if you find yourself being demotivated for longer periods of time, it might be that the work is just crappy. Or you’re doing the wrong thing? It’s not a good fit for you. If you feel like you’ve wandered off and you’re, I don’t know, writing an e-book or an info product because everyone’s saying you should, and you’re really, really struggling with it and hating it, then maybe that’s not for you. Maybe you’re more of someone who should launch software. Or vice versa. If you’re sitting there just toiling away at your SaaS apps for months and months and months and you haven’t launched it, and it’s demotivational, maybe that’s not the right path for you. Maybe you should take some expertise and put it into an e-book instead and do something in public, get that virtuous cycle started and go off in another direction.
It’s something to think about and reevaluate, and not just take things at face value that what you’ve decided to do is what you have to do. Because if two, three months down the line you’re still feeling this way, something is probably wrong, either chemically with you – which is certainly a possibility. Wintertime is definitely tough when it’s dark and cold and you don’t go outside. Or it may be that the work is just not a good fit for you and that you’re not going to be happy even once you launch. That’s the thing. If you’re not enjoying the journey along the way, for the most part, then you’re not going to enjoy the destination when you get there.
They’ve done studies and such with doctors, or folks in med school actually. And the people who are really unhappy and just grinding it out, trying to get through, and they’re saying, “Well, as soon as I’m a doctor, everything will be great,” it doesn’t tend to be great for them when they get to be a doctor, right? Because they really didn’t love the work and the journey. And it tends to be the folks who are enjoying themselves along the way. Even though they know it’s hard work, they are enjoying it along the way. And then when they get to their destination, now they can look ahead at the next destination. And it’s not like, “Oh no, I need to grind it out for four more years.” It’s like, “I’m going to enjoy the journey to the next destination as well.”
Mike [24:23]: And a little addendum to that is that if you recognize that you are in those situations, it might be a good time to reevaluate what your yearly goal is. Just because you’ve set those yearly goals, it doesn’t mean that halfway through you might change your mind and decide that it’s not something that you actually want to achieve. You shouldn’t just grind it through just to make sure that you meet that goal if it’s not ultimately going to make you happy. So keep those types of things in mind as well.
Step 7 in the process is to set up a reward system for meeting your milestones and major goals. Know what it is that you’re working for, both in the short and the long term, and use those motivational triggers to help push through some of the hard times. And some of the different rewards that you can give yourself — they don’t even have to be very big. You might just treat yourself out to lunch at Qdoba or something like that. I mean, just go to a taco place in the middle of the day for no other reason than it’s a Thursday afternoon and you decided that one of your milestones was to get to a thousand subscribers, for example, and that you just recently met that goal. So treat yourself.
And there’s a lot of different ways that you can treat yourself in small ways that will help with that positive reinforcement. And it’s great to be able to hit those milestones, but tacking on additional rewards to those things can be really helpful as well. And it could just be a dinner and a movie out with your spouse or your significant other. It could be a new video game. It could be some new music. It could be a new album, a new book, for example, or it could just be a short trip, or even just a day trip out to a museum or a theme park or something like that. Everyone’s is going to be different. Everyone wants different things. And some of those rewards are going to be more appealing to you than others, but make sure that you’ve attached some of those rewards to some of the different milestones that you’ve set up in order to make sure that you’re getting that closed feedback loop that is going to help reinforce you moving forward.
Rob [26:05]: I’m actually really bad at this, and I’m trying to get better. You know who’s really good at this, is Phil Derks. And he has his WordPress Simple Play plugin and a couple of others over at Moonstone Media. He did an attendee talk last year at MicroConf and he lives here in Fresno. And all along the way, he had these great milestones set up when he hit a thousand in revenue and X thousand in revenue. And it was fitting, too. They got bigger along the way. It was like, “Oh, it’s a nice dinner with my wife.” Then it’s a, I think, wine club membership was another one that I thought was a great reward for yourself, because that’s a non-trivial cost each year. But if you’re thinking to yourself, “Boy, when we hit five grand a month in revenue, it’s a big milestone for me,” then do something worthy of that. Go out of town for a night without the kids, or do a really nice dinner, and spend more than you typically would. Or do any of the things you said, or set up a wine club membership, something that you wouldn’t normally do, and that is really icing on the cake to give yourself the payback for all the work that you’ve done.
Because although the journey should be fun, and the goal should be worth doing just for itself, I do think there’s a lot of value in celebrating with some other people around you, and then just having that cool thing that then reminds you of the goals that you’ve achieved, right? Because then when the wine arrives in the fall, then you can think to yourself, “You know, I earned this. I built a business that supported this, and that goal paid it back.” And it’ll remind you of achieving that goal, which I think is something to relish. Because as entrepreneurs, I think oftentimes we are trained to be a little more pessimistic. Maybe it’s just me, but we can tend to look at the dark side of things or look at what’s not going right rather than what’s going right. And so I think we need as many reminders as we can.
And speaking of going and seeing a movie, opening night, Star Wars Episode 7, baby. I’m going to see it with my kid.
Mike [27:55]: We’ve threatened the kids with leaving them home or going to see it while they’re at school.
Rob [27:59]: Nice. That’s great. I love it. That’s a great punishment. Yeah, I wish I had a goal that I had achieved recently and I could attribute it to this, but alas, it’s just I want to see it. And it’s weird that they’re selling tickets Thursday nights. Are you seeing it Thursday? Because it’s supposed to open Friday, but then they have a bunch of Thursday showings.
Mike [28:16]: I didn’t know that they were doing it Thursday before midnight. Usually I like doing it on opening night for a movie. Like if it’s a big movie, they’ll do it at midnight, and so they’ll have midnight showings. I haven’t heard of anybody showing it before midnight on Thursday though. But I haven’t looked either. We haven’t really set aside the time to figure out when we’re going to go.
Rob [28:31]: Yeah, there’s a bazillion showings here starting at 6 or 7 p.m. on Thursday night.
Mike [28:35]: You could just say that your reward is for your lifetime achievement of being the oldest today that you’ve ever been in your life.
Rob [28:41]: Boom. That’s it. So to recap what we said in today’s episode, we had seven steps for how to set annual goals. The first one was make time to set the goals. The second one was to recap the current year and then look ahead. The third was to limit yourself to one to two major goals. Fourth was identify specific ways to hold yourself accountable. The fifth was identify your motivational triggers, both positive and negative. The sixth was to identify patterns that indicate you’re demotivated. And the seventh was to set up a reward system.
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 267 | How to Structure Your SaaS Support Team
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike speak from their first hand experiences about how to structure a SaaS support team as well as the tools they use.
Items mentioned in this episode:
Transcript
Rob: In this episode of Startups for the Rest of Us you are about to hear, Mike and I discuss how to structure your SaaS support team. This is Startups for the Rest of Us, episode two hundred sixty seven.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob–
Mike: And I’m Mike.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
Mike: You know, as you read the intro I totally thought you were going to mess it up.
Rob: Yeah? That was from memory too. I didn’t even read the doc this time, unlike at MicroConf Europe when I was trying to intro the conference and froze in the middle of the intro, and you had to pick it up. That was a moment.
Mike: Yeah, that was rather interesting. I thought about singing a song or something like that but I couldn’t come up with anything good on the spot.
Rob: You bailed me out. So, what’s going on with you?
Mike: I talked a little bit about it last week, about taking pre-orders for the product I’m working on it. I’m up to ten pre-orders at the moment, and I’ve got some more that are going through the decision making process, and the a few more that need to be scheduled. But I’m thinking about breaking some ground on the code right now, and working out exactly what the timeline is going to look like and whether or not everything is going to make it because that’s still a little bit in flux but things are looking good so far.
Rob: Congratulations, man.
Mike: Yeah, I want to do – in parallel – some testing with some paid advertising to pull in some cold leads, and do a little bit of experimention to figure out what that marketing plan is going to look like post-launch, but I think I have a good handle on exactly what people are looking for and how to position it.
Rob: One piece of advice I’d give is get that landing page up now. Even if you’re not going to run ads to it, eventually you’re going to mention the domain name here on the show, people are just going to start talking about it, it might show up on Twitter, and you want to be able to send them somewhere and have them be able to enter their email. So, if you don’t already have that up I would do that before I touched any code.
Mike: Yeah, that’s definitely on my list of things to do. I’ve been–I wouldn’t say pushing off, but it’s just been a lower priority just because of all of the other things that are going on. So yeah, I recognize that I’ve got to get that done. Even the people that I’ve given a demo to have looked it over there and said, “Hey, there’s no landing page or anything here!” There is a place where they can pre-order, but there isn’t really any content there.
Rob: Right. Have you already created mockups, and you feel like the folks who have pre-ordered know what they’ve pre-ordered, like it’s very locked down?
Mike: Yeah, I spent probably twenty to twenty five hours working out the mockups and building the entire UX for the application, and the demo process that I went through with these ten people who have pre-ordered–I spent anywhere from 25-30 minutes is on the really low end, but the vast majority of them were 45-50 to 60 minutes. I think the longest one was about 2 to 2 1/2 hours; walking through exactly what it looked like, how it would work, answering any questions that they had, working through different scenarios and things like that so everyone who has pre-ordered I believe has a pretty good idea of exactly what it is that they’re getting.
Rob: Very cool, so you’re just itching to get into the code, aren’t you?
Mike: Yeah, and that’s something that I’ve been holding back on.
Rob: Yeah, it’s always a good idea to fight that urge as long as possible.
Mike: Right.
Rob: Because once you get into the code you become hyper focused. I’m not saying you, just in general, developers, we get sucked in.
Mike: Yeah, tunnel vision is really what it comes down to.
Rob: Yeah, there you go. So, I have a couple of things, one is, if you’re listening to this and you didn’t know that I have another podcast that I record with my wife, I wanted to tell you about it. Episode 45 of our podcast “Zen Founder” seems to be catching some people’s eye. It’s about getting your spouse on-board with your startup aspirations. I saw you had recommended it to someone via email, and some other people were emailing and tweeting about it. So if you haven’t checked out Zen Founder, it’s in iTunes obviously, ZenFounder.com. You might want to start with episode 45 because it seems to have resonated with a lot of folks in the boot strapper space. The other thing I wanted to mention is, if you’re not connecting with Mike and I at Twitter, come check us out. I’m @RobWalling and Mike is @SingleFounder.
Mike: So, what are we talking about this week?
Rob: Today I wanted to talk about how to structure a support team. I think we’re going to focus mostly on SaaS. This would probably apply to any type of downloadable software, membership sites, info products. They all have similar issues, and I really want us to speak from experience. I’ve been making it up as I go along for sure. There are experts in this space, Sarah Hatter has built her career on being a SaaS support expert, and spoken at MicroConf a few times. So she has a lot to say about the mindset and how to organize a team, and replies, and how you should handle things. Today we’re going to talk a lot about structure, first hand experience, and the tools that we use to get the job done. I think we’re going to break this up into a couple of areas. The first is email, because that’s where a lot of your support is going to come through. The second, third and fourth are going to be shorter; talking about knowledge bases, live chat and potentially phone/Skype if you end up doing that.
So, to dive into email — it’s interesting because years ago when I had small info products and downloadable software, I was doing all support via Gmail. I basically had a number of email addresses piping into G-Mail, and of course you can then “send as” when you replied and that actually worked. If you’re one person doing support, it’s not totally sustainable, it doesn’t scale that well to not have tickets, and not be able to make notes, and all of that stuff, but I think it’s the best way to get started right off the bat if you have just a small, simple product and you just want to, kind of, do it. But you’re going to want to transition out of that when you hit any type of a scale and move into a system like Help Scout or Groove. From Gmail, there was no Help Scout and Groove when I transitioned, and I moved into Fogbugz which I stayed with for many years. We used it both for issue tracking and for support and, frankly, we outgrew it and it became a little long in the tooth. They haven’t updated it with a ton of new stuff, and so now we actually do use Help Scout and we really, really like it. So, this is how we support my email marketing app, Drip. Help Scout has a lot of advantages over other tools that I’ve used in the past. Basically there are a ton of keyboard shortcuts that you can use, almost like the G-mail keyboard shortcuts. You can do an “A” for “Reply All”, “R” for “Reply”, you can add a note with “N”, you can set Status using “S”, you can almost not use your mouse and use the app. So it’s a lot faster than other tools I’ve used. Another cool thing is it has this email interface, so when you get notified–if you pick something up on your phone that you got an issue sent to you, you can reply directly to that issue, that email right on your phone, or from Gmail, and the reply will go directly to the customer. Or, if you put–there are some fancy keywords you can add; so you can put @note, just the @ sign and then note, and you can attach a note to it, then reply again and put @assign and assign it to someone on your team. It allows you to do stuff without ever having to log into a web app, which I found is hugely productive for me if I’m on the go.
Then it’s fast and there’s a really nice plugin you can build. I think it took us an hour or two — we’ll reference this a little later – but in essence on the side of Help Scout issues, we can see the customer, and we see their gravitar, and we can see if they are paid, or trialing, or if they’re not a customer at all. We can see how many months they’ve paid, what plan they’re on, and their past support tickets. I’m sure there are other systems that can do similar things, but we’ve really enjoyed using Help Scout for the past six months. How about you, Mike, what tools have you used for support?
Mike: Well, kind of, like you, I started out just using Gmail, and right now I still run everything through FogBugz. It’s fast, it’s easy to have everything dumped all into one place, and I don’t really have to worry about it. I don’t get enough support tickets for most things anyway. I maybe get a handful a month, so it’s not really worth going down the road of building this full blown support system. It’s a manageable level, so I don’t really worry too much about it.
Rob: Yeah, very cool. Let’s talk now about these three stages that I’ve defined here. In essence, think about email support when you first launch as Stage 1, and then within three to six months you want to get to Stage 2 – that we’ll define in a second – and then after that Stage 3. So, Stage 1 is the founder, or founders, are doing all of the support. This is really where you need to start, because at this point you don’t have enough information to be able to train anyone else to do support, and your contact with your customers early on is invaluable because you’re going to be getting so much new information and so many new questions all of the time that, A. you’re going to want to improve the product quickly, B. you’re an upstart so you want to be able to respond instantly. When we had just launched Drip, I was responding to everything within 20-30 minutes. Every ticket you’re just getting back to people. Literally we would get a ticket and build the feature, or add the check box they needed, and get back to them within two hours. That’s how you have to be in the early days, in my opinion, of running a SaaS app or software product, is super responsive because that’s one of your main advantages over one of these big companies, it’s your speed of doing it and your knowledge. Since you’re not a front line person at some big company, you can offer in depth advice and you really know how your product works at this point. So I think there is a lot of value in the founders doing email support for the first, let’s say, 3-6 months.
Mike: The other advantage of doing all of that support yourself early on is that you get a sense of where people are struggling with your product or service. So especially if you start seeing the same types of things over and over it allows you to not only build some training collateral that you can hand off to somebody for tier 1 support later on, but it gives you an idea of where the hurdles are that people are running into, so you can either tweak the product itself, or the service, or you can educate the person who is going to be taking over the support later on, or you can just educate your users a little bit better, and your on boarding material. So, there are a bunch of different advantages to doing that support yourself upfront. I see people trying to just take that and say, “Oh, I don’t want to do support” and they try to hand it off to someone else, and that’s really hard to do just because the fact is you need some of that information. It’s harder to get it from someone else than when you hear that stuff firsthand, because then you get this broad view that is unfiltered from these customers, versus when you hear it through a support rep, because the blinders are on a little bit so to speak. Not that they’re hiding information, but they don’t necessarily relay all of the correlations between the different conversations to you.
Rob: I totally agree. Having that directly line with your customers is big, especially early on. You start to build relationships with folks, and they learn to trust your app, and trust you, and think of the whole experience as being a good one. You need to do that early on in your apps life cycle because you’re trying to build this brand in the early days.
Mike: Just what you said there about the entire experience though, that also relates to how you’re going to do business with them in the future. I think that’s an important piece of this, is that when you’re able to get back to them very quickly and you take care of them, down the road if they start running into problems, they’re not just going to throw up their hands, walk away and go sign up for something else. They’re going to come back and talk to you, especially if you’re either not meeting their needs or if something goes wrong — they’re going to be more willing to cut you a little bit of slack if things start to go wrong. And they’re having problems with the support rep, or maybe there are things going on that are just wrecking their productivity–they’re going to be more willing to come back to you because you’ve done the right thing in the past than they are to just walk away and go find something else.
Rob: Right, and the other reason you want to do support in these early days is that you have no process yet. You don’t have frequently asked questions. You may have made up a few and put them on your website, but you haven’t received enough questions and had to think hard about the answers and created some canned responses, and to know the struggles people are having to be able to train a support person. So, in essence, if you did bring someone in this early on, you could say, “Alright, go play with the app, and then answer the questions the best you can. Anything you can’t answer refer to me”. In a sense they’d assign it to you, but you’d be getting a lot of stuff assigned to you, and at that point I believe wholeheartedly in the value of just being on the front lines for all of the other reasons we mentioned as well as this one.
Then at a cretain point you’re going to want get to Stage 2, because as a founder you can’t spend all of your time supporting the app, and handling front line support. You’re going to involved to some extent, but as the requests become a little more repetitive and you do start to develop a process in your canned responses, and you’re seeing the same questions over and over, you want to move into Stage 2, which as I said tends to be about 90 days in. It depends on how fast you’re scaling up. If you’re still at 20 customers 90 days in then maybe you don’t need to move away from it. But if you hit 75-100-150 customers, you do need to start thinking about getting out of the support role. Here is what Stage 2 involves; it’s basically hiring someone to handle your Tier 1 support. By Tier 1, that’s your front lines. That’s the person who handles every single email that comes in, and either answers them or assigns it to the appropriate person. At that point the founder will probably handle all other issues. At this point you have all of this knowledge so you can create your docs, your training screen casts for the basic recurring issues, and then anything that your front line person doesn’t know how to handle they can assign to you and typically what I was doing was then trying to train that Tier 1 support person by not responding directly to the customer but by giving the support person the knowledge so that they could respond, and either put it into a Google doc or just putting it in the reply so that that person is now trained on how to handle that issue moving forward.
There are a couple of different types of Tier 1 support people. In the old days when I had some small info products, I really didn’t have much of a budget, I did hire really low cost VA’s, let’s say 3 to 7 dollars an hour, often in the Philippines or India, and they were handling stuff. As I’ve been able to level up and build apps that generate more revenue, as well as require a higher level of support, I’ve been able to hire higher caliber, more knowledgeable — some people even with a little bit of technical skill, like help desk level skills, maybe not programmers, but people who know what FTP is, and can explain things to folks. If you get that second kind of person — you know we have Andy doing Drip support and Micropreneur Academy support and that kind of stuff — he is willing and able to learn new things and teach himself, so when we did launch Drip – I had been telling him about it, and I was intending to create a bunch of docs for him – he said, “Just give me a login. I’m going to log in, I’ll look through the KB that you have, I’m going to play around with it, and anything that I need help with I’ll let you know”. That’s obviously the highest caliber support person you’re going to find, but you can certainly start out at a lower level where you really are just handing people canned responses. Even if they’re just handling 50-60-70% of the support and others are still coming through to you, it’s still a worthwhile investment until you’re able to level up.
Mike: And that level of support person is going to take time to cultivate. I mean you said yourself that he had started more on HitTail, and then you transitioned him over to Drip, and by the time he got to that point he just said, “Hey, give me the stuff”. That level of effort on his part is also partly a factor of how you have treated him as a contractor for you. So, that translates over to that new product so that you don’t have to train someone from scratch. Obviously there is training that needs to be done because it’s a new product, but you don’t have to train him on how to behave toward the customers. You don’t have to reset – or set – his expectations about how he should be answering questions. All of that knowledge carries over. It’s not the product knowledge, it’s the “how do you do business?” knowledge, and that’s also very important.
Rob: I agree, and that’s something else to communicate. We have a very customer-centric approach to support where we try to go out of our way and do everything we can to help them, and our refund policy is very liberal as well. So folks want refunds – and unless it’s some crazy thing where they’re asking for the last six months to be refunded – every once in a while we do get those, but other than that, when in doubt lean toward doing what the customer is asking for. And instilling that in the support person; you can’t give them the rules for everything. At a certain point there are judgment calls that need to be made, and if you don’t want to be making those judgment calls every time then you need to start instilling some cultural things, or strategies, rather than just the tactics of how to respond to each individual ticket.
SoSstage 3 of handling email support comes a little later, and I think this timeline depends on your growth but it’s definitely going to be when you start hitting multiple hundreds of customers. This is when, as as founder, you don’t even want to be handling all of the tier 2 stuff anymore. You’re still going to have your tier 1 support person. They might be remote. They might work with you. The odds are they’re going to be remote, because that’s the way you’re going to find someone at a reasonable cost who is still high quality. That tier 1 person is going to be doing the repetitive work; answering frequently asked questions, triaging things.
Then tier 2 spiders out. Instead of it just being you, you, kind of, have five roles that I’ve defined. A founder may need to handle more than one of these, but the five support requests and questions that we see coming through are : developer oriented ones, where they just get too technical for someone who is not into code to be able to answer. So that’s the first kind. The second kind is consolation/advice. And this could be pre-sales, it might be while they’re trialing, or it might be when they’re a customer.This is when someone really needs help understand concepts rather than how to use the specifics of your app. I’ll dive into that in a little bit. The third type is billing questions, asking for refunds, exception, the stuff where someone doesn’t want to make a monetary call. Your tier 1 person may not feel comfortable doing that. Your fourth is product questions, often feature requests and that kind of stuff, and then there is this “Other” bucket that I’ve shoved a bunch of other stuff into like partnership and such.
Let’s take a look quickly at number 1, which is “developer”. If you are the developer, as the founder, you will probably need to be this tier 2 role as well. With Drip, when Derek and I launched it, we pretty quickly realized that there are a portion of the tickets that come through that are just too technical or complex for a tier 1 support person, or even a non-technical founder, frankly. In the early days this developer will obviously be a founder or a true developer, but we realized after we launched Drip, that Derek was not going to be able to actually get anything done if he had to handle all of the tickets that were coming through to the developer support role. Because it can wind up being a quarter or a third of a person’s time in a given week, depending on how many customers you have. So, we hired someone as a developer/support person, so they do handle the tier 2 support. If you’ve interacted with Ian at all, in our support que, that’s who handles that.
Mike: Now I have a question for you about this. When you have Ian doing that does he do any actual development too, or is just a developer who is doing developer level support?
Rob: No, he is spending most of his time building features for the product. He is a Rails developer, and then as support requests are escalated to him he flips over and handles them. But actually less of his time is spent responding to support requests, but he does have that in depth developer knowledge.
Mike: So I’m a little confused. It sounds like you hired someone to shift the responsibility for the tickets off of Derek, but then this other person is spending most of their time doing development. I’m a little confused about how that works. It sounds like you just shifted a problem from one person to another.
Rob: Right, when I said Derek was not going to get anything done that may be an exaggeration. He was spending a quarter to a third of his time responding to tickets, and so development — he’s the lead developer. He handles everything that goes live – all of the deployments – so constantly having him pulled off in the middle of the day, he was really struggling to get the big features built. So we did hire someone else who is not the lead developer. He was, kind of, a Junior when we hired him and now he’s worked up to a mid-level, because he’s worked with us over the past year plus. But then a quarter to a third of his time spent doing it is just a better use of time, because Derek is focused on the big, meaty things, and we can move faster – when all the poll requests Derek has to handle, and that’s his distraction.
Mike: Got it, so you’re really just shifting where those interrupting requests end up.
Rob: Exactly, and overall it makes us more efficient. We get more done. And as we add other developers – assuming your developers handling support requests can continue to handle those – then other people are freed up and they don’t need to handle support requests. It’s not like it Round Robin’s. I feel like that could spell trouble if you’re interrupting a lot of developers all at once. I also think that some developers are good at switching. and others it’s a lot more of a struggle for them. And we happen to have found someone who is pretty good at it. So I think if you do find an avid developer and he’s struggling to do the switches -I’m not good at it actually. When I used to write code I had a real tough time switching into support mode, so I quickly knew that it wasn’t something that I was going to be able to do, so keep that in mind. It’s not something everyone can do.
All right. So our next type of tier 2 question, is this “consolation or advice?”. This almost comes down to customer success. It’s helping them be successful with your product – not necessarily about the nuts and bolts of it – but as an example, with HitTail, we used to get questions about, “How should I do SEO? Does SEO work? Here is my site, do you have any advice for me?” With Drip we often get, “How should I structure my tags?” or email marketing questions, “Are my open rates reasonable? Am I doing something wrong?” It’s like architecture and marketing, structure and advice. Sometimes we will jump on a call if it’s short and it’s an easy question to answer. Other times we’ll answer via email. We do have consultants that we refer people out to if we feel like it’s really exotic, or something where they need a lot of time to help. But being able to offer this kind of expertise quickly and give a few sentences of guidance, we found to be absolutely invaluable. And again, it sets you apart from these larger companies. You email an AWeber or a Constant Contact and they have tier 1 support, but they’re not necessarily knowledgeable on how to structure things, so you don’t expect them to help you out on this front. And as a small company this can be one of your competitive advantages, being able to give very quick consolations or advice for free via a support que.
Mike: So early on I assume that you were probably doing most of these in order to help offload the interrupting nature of those types of requests to Derek. What are you doing at this point? Is there someone that you have dedicated to that type of thing right now?
Rob: Absolutely. I was doing that for the first 18 months at least, maybe two years, and it was super helpful. And it helped me develop my knowledge of all of the markets and how they work differently, and it expanded my knowledge of email marketing and marketing automation and all of that kind of stuff with these different spaces that people are using Drip for. Then about six months ago we hired Anna, who is head of customer success, and she handles these now. It’s going really well. If people are trialing your product they are basically wondering if it’s going to work for them, and if they need help and you aren’t able to give it to them the odds are pretty high that they’re not going to convert. And if you do help them–it’s like you said, it’s that early experience, they learn to trust you as an expert and if your advice works out for them then they become customers. I don’t know that I’ll say life long customers but they become loyal customers because they know that you can help them out in the future if you run into this type of stuff. I think this is probably overlooked in a lot of support qeues, or support structures, but being able to offer this is really quite valuable.
Mike: So, the third one you have here is billing. How do you currently handle billing requests that end up geting escalated to tier 2? I think there are two different things to address here. One is how you handle it versus how it can generically be handled. Maybe we tackle those two things differently.
Rob: Sure, billing is in essence — tier 2 stuff is pretty much passed up to me, because often your tier 1 person won’t feel comfortable making monetary decisions. I will often give tier 1 support the flexibility to make the decision up to a certain dollar amount. You could say, “If it’s 50 or 100 bucks no problem. Don’t even both me with it.” And they may not make all of the decisions exactly like you would, but it’s just not worth your time to handle twenty requests if they’re going to make the same decision with eighteen or nineteen of them. It’s just not worth it. So when billing stuff comes to me then I have to make a decision, and often times I’ll involve other people on the team and get their opinion on how we should handle it, because sometimes there are tricky ones of someone asking for a refund of a bunch of months. There are just anomalies that come up where you have to make a decision and there is no clear path.
Mike: Yeah, some of those there is no right answer and it depends more on what will make the other person happy without disrupting things too much internally, both in terms of your cash flow — because the last thing you want to do is go back and refund like an entire year, especially if the person has been using it for at least part of that time. But yeah, there are always situations where someone needs a refund for a very specific reason, and those tend to be more cut and dry, versus the time where someone asked for a six month or twelve month refund because things have been ongoing. And hopefully you knew about those to begin with, but there are those occasion times that come up where something was going seriously wrong and you had no idea and now suddenly it’s a big issue and fiasco that you have to suddenly be dropped in the middle of without any knowledge of what was going on before.
Rob: The fourth category of tier 2 requests are really around the product. And these are mostly feature requests, maybe bug fixes. But really if it’s a bug the developers are typically just going to jump on it. I think if it’s a super low priority bug, only impacting a small amount of people and it’s not any type of showstopper — like let’s say a misspelling, something not catastrophic – then it’s going to go in the qeue and they’re going to handle it. But it’s feature requests that, kind of, need to be escalated because those always need prioritization. When feature requests come through you want to figure out a bucket that you can put them in. And you can either assign them to a made up person, if that’s how you want to do it. For us, in Help Scout, they get assigned to me and put into “pending”, so there’s a list of all of these pending tickets that don’t show up as active that I need to respond to them, but every so often I go through and make decisions of which ones to put into the issue tracker – which we use a Code Tree over Get Hub issues – or I get the team’s involvement, and I’ll often run through a bunch and make decisions and then ask the rest of the team based on what they’ve been hearing, because they’re dealing with a lot of customers as well and they might have the sense of urgency of certain ones.
In an ideal world, when you get passed a feature request you’d have some context for it. Because not all feature requests are created equal. If a customer is paying you $50 a month versus $1,500 a month, you may need to rate that feature request from the $1,500 a month customer higher. Or if it’s someone that you know really knows the space, and their advice is actually going to help your product grow – we’ve had a ton of those. You get someone like Brennan Dunn or Ruben Gomez using your product and they make a suggestion, that has a lot of weight to it because they know product, and they know email marketing in terms of Drip and when they make suggestions these are ones I really listen to because my guess is these are things that are actually going to be applicable to other people. That’s probably a whole other episode to record, about how to prioritize feature requests. But I think the point here is when they come through support you want to have a pretty systematized way to deal with them, because you are going to get a lot of them. We get several per day. You can constantly being manually copying those into some Google Doc or into some other system. They do need to sit somewhere, and you need to figure out a way to batch them.
Then our last category of tier 2 support is just miscellaneous, or other. You’re going to get these requests especially as you grow, for partnerships, integrations, someone is putting together a packet for entrepreneurs or marketers and they want a discount code, they might need a sandbox or test account, they want to interview someone, they want a quote for a [blog pop?]. I mean, there is just stuff that just comes through. And what you’ll find is that as you grow you start getting more of certain kinds and you’ll want to start either automating them or teaching tier 1 how to make the decision. The example of needing a sandbox or test account, you’re probably not going to build that from day one because it’s quite a bit of time, and so over time it’s been escalated to tier 2 every time, and then I take a look at what they’re doing a make a decision. But recently we’ve realized that we’re getting enough of these requests now that we are going to put something in place with a special URL we can provide for people that have a 90 day sandbox account. This makes it a lot easier for us to handle and it’s not a manual process every time. I think partnerships, any of these, really, could be done that way. You could send them a link to a specific form that goes into a Google spreadsheet and you could handle that in batches, instead of handling each one individually. It’s probably going to be worth it at some point for these kinds of partnership requests or interview requests or that type of stuff.
Mike: It seems like these other requests are the ones that tend to take the longest because you don’t have a canned answer for them, and you have to evaluate every single one of them not only individually but also in the context of the other requests that you’ve received in the past that were even remotely similar, and try to maintain some sort of consistent approach to them. But then in addition to that you also have to take into account the growth of your app or product and making sure that you are doing things in a way that is consistent with what your future plans are for it. So all of those things said, it makes it difficult in some cases just to even estimate how long it’s going to take to address some of these, because some of them take a lot of back and forth as well.
Rob: Okay, so moving on from email support, there are, kind of, three other categories that we’ll cover pretty quickly here because it looks like we’re running out of time. I broke them down into like having a KB or some type of self service support, perhaps using live chat and then finally phone and Skype. Let’s look at KB’s really quickly. We were talking offline before we started recording and I was mentioning how surprised I am at how many people use our KB, and how many people really do want self serve, and they don’t just want to send an email in. They either want the answer immediately, or I don’t know what it is. You had some other theories.
Mike: Mine was that because your audience is somewhat technical they view their time as being valuable, and if they’re working on a problem they don’t necessarily want to do the context switching of moving away, sending off an email to support, moving away and then coming back two or three hours later or however long it takes to get an answer that tells them exactly how to do it. Then they have to slot their time in to come back to whatever it is that they were working on. Essentially they’re in a time period where they say, “Hey, I’ve got got an hour or two to work on this” and they just want to get it done and over with, as oppose to working on it a little bit and then having to sit it down and walk away and then come back to it and do something else in the meantime. Honestly, it’s distracting to have to do that, so when you’re in that situation it’s a lot easier and it feels better to say, “Okay, I’m going to dig through the docs a little bit to see if I can find the answer to this”, instead of just going straight to support.
Rob: Totally, and KB can be used in tandem with your email support obviously. We tend to try to answer questions directly and not just refer people off to KB articles because I hate that. If you email a big company and they just send you a KB link, often times I’ll find it’s a massive article and I can’t find my answer in there, or it’s the wrong answer. So if someone would have just answered me like a human then it would have worked out better. So we air heavily on the side of actually responding to someone, but it’s only when they ask something like, “How do I set up this integration?” and we have step by step that answers exactly what they want. Then we’ll be like, “Hey, we created a KB and here is all of the screenshots and everything. Look them over.” So KB’s are cool for both your own support team to be familiar with as well as external customers. In terms of setting up a KB there are a bunch of options. I have a few that I recommend to people. Help Juice, that’s a shout out to [Amyl Hassrick?]. He has helpjuice.com and I know some folks who use it and are happy with it. Desk and Zendesk which, I think if you’re using them for support they have KB’s built in. I’m not a huge fan of having a KB built into your support software because it’s just one more reason you can’t switch away if you decide you don’t like it. Then, you can use what we do on Drip which is just a WordPress plus a support theme. There is one called [Know How?], there are a bunch of others. If you search for it you can do that. Then you have to work with WordPress and deal with it’s anomalies, and themes breaking, and that kind of stuff so it’s not nearly as easy to maintain as a SaaS approach like Help Juice. But then you aren’t paying the monthly fee and you can customize it as much as you want since you’re in control.
Let’s talk about live chat really quickly. If you’re going to use live chat for support, then you’re going to want to put it “in app” only. If you put it on your marketing site, you’re going to get a lot of sales questions, and that’s a whole other discussion of whether or not you want to do that. But if you’re going to use it for support you put it in your app, and I would even consider only activating it for trial users if you can. That’s something we’re entertaining the idea of these days. We’ve done some “in app” live chat stuff with Drip and have had mixed results in terms of how well it works. Often times you just need time to research something, or you get a question that you need to talk to a developer, or you just can’t answer everything so it’s not actually the most efficient even though it seems like it should be. But there are a number of solutions for this; Olark, Zopim. I’ve heard that Intercoms live chat that what they’ve added is not actually live chat. It, kind of, pings you, but it doesn’t show if people are online, it doesn’t work the way you think live chat should work. I haven’t used it personally, but I’ve heard negative reviews about it but Olark and Zopim are the players that I’ve heard a lot about for this type of support.
Mike: Yeah, I’ve never used chat support before. Inside Communifier where we host the Micropreneur Academy there is a chat system there, and I’ve used that to some extent, but it almost feels like there are much better solutions out there for chat and a lot of things just come in through email. Some people just prefer email over the chats. A chat is one where unless you’re there all the time it can be difficult to do that. So I can definitely see where Intercom might fall down if it doesn’t work the way people think a traditional chat system would work.
Rob: And lastly, talking about phone or Skype or something like that. I think if you’re a single founder and you’re just launching a product on the side then this is not something you want to do. I tried it early on with DotNet Invoice and it was incredibly time consuming. It also depends on the type of customers you’re dealing with. Certain customers you can jump on the phone and it’s a piece of cake, and then others are just really tough to explain things to. You’re trying to explain what a screen looks like, or how to click here, and you can’t give screen shots. And if they’re really non-technical you can’t get them to join a screen share to show them, so stuff can become pretty cumbersome and really kill a lot of your time. It’s also interruptive if you’re taking in-bound calls.
The successful companies I’m seeing do this on a smaller scale – you know, when you have a team of five or something – is to have you initiate the call. You can either give them your number or you can call them directly, or you can set up a [?] and try to do something later in that day, or the next day. It depends on how urgent this issue is, for sure. Sometimes it really is the best route if you have a customer – there are certain customers that you know., and you trust, and you know if they have an issue that it’s not some crazy thing where they’re going to waste a bunch of your time, that they really need help now and sometimes that’s just the best way to do it. And then other times you’ll get a customer who you’re not sure about, and you’re a little concerned that maybe they’re going to try to get you on the phone for 30-45 minutes. Those are the ones you have to make a judgment call about when you do it. If you want to do screen sharing, join.me is a decent example. Certainly if you have something like GoToMeeting and you’re paying for that already. It’s a no-brainer. We found that Skype has mixed results. Some people just don’t use Skype so they don’t have a user name. You have to add them and then they have to accept. There is just more to it than that, but there are definitely options for doing this and sometimes it just is the best option for handling more complex issues.
Mike: Yeah, in terms of tools there are a bunch of different systems out there for screen sharing. Join Me is one. Another one — again, these are tools, and the specifics of the one that you choose are going to be heavily dependent upon how you need to interact with them. So whether it’s you need to show your own screen or you need to share a screen and maybe control their screen, all of those things factor into which tool you use but as you said, Join Me is one of them, Copilot from Fog Creek is another one. Then there is also WebEx and GoToMeeting, and both WebEx and GoToMeeting. Both WebEx and GoToMeeting, on the surface they look like you have to pay for them, but they both have free accounts that you can sign up for. It’s somewhat limited, I think on WebEx you can get a free account and you’re limited to three participants, but after the trial period is over I don’t think that you can request control of the other person’s screen. I think up until that trial period is over you can hand off control, but once the trial period is over you won’t be able to do that.
One of the things that we came up with just before the podcast episode was the idea of treating some of the people you’re onboarding differently based on whether or not they’re currently in a trial, versus when they have been a customer for a long time. Because obviously those people who are just signing on to your service are going to have a much higher likelihood of churning if they are not familiar with who you are, or what you’re doing, and they’re not ingrained in the product. So we discussed this a little bit, we don’t really have any experience there, but if anyone out there is listening to this and you have tried doing this before we’d love to hear from you. Just send an email to us at questions@startupsfortherestofus.com we’d love to hear you’re story and we’ll share it on the air with people.
I think that about wraps us up. If you have a question for us you can call it in to our voicemail number at 1-888-801-9690 or you an email it to us at questions@startupsfortherestofus.com. Our theme music is an exerpt from “We’re out of Control” MOoT used under Creative Commons. Subscribe to us on iTunes by searching Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 266 | How to Cope with Hard Times
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about some of the hard times they have come across in their entrepreneurial careers. They also give a list of eight coping strategies to help with these hardships.
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 cope with hard times. This is “Startups for the Rest of Us,” episode 266.
[Theme Music]
Mike [00:00:15]: 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 [00:00:23]: And I’m Rob.
Mike [00:00:24]: … 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 [00:00:28]: Well, we just made the announcement. HitTail has sold, and so I’m down to one software product, just Drip. It feels really weird.
Mike [00:00:37]: I can imagine. Well, congratulations on getting yourself down to just one.
Rob [00:00:41]: Thank you. I appreciate it. We were talking before. We hit “record,” and I genuinely don’t know how to feel. Of course, I’m happy, of course. People are saying, “Congratulations,” and it does feel great to have a nice little exit and have some cash in the bank, be able to focus on Drip; but at the same time, there’s just a lot of emotion. It’s a big change to not have this thing. I’ve owned it for four years. I spent between 18 and 24 months, full-time, just building it up. So, I did find it a bit emotional, I’ll say, to see it go and to realize today, like, “Huh. I no longer own that, and someone else can do what they want with it.” They might redesign the marketing side, or add features to it, or add services or whatever; and I just have no involvement anymore. So, it’s kind of a trip.
Mike [00:01:18]: Cool. Well, on my end, I’m still taking preorders for the new app that I’m working on. Right now, I’m looking at maybe writing some paid ads to drive some cold traffic that I’m going to try and convert to preorders. So that’s my next step in the validation process; to validate the channels that I might try to use for this. I have some ideas based on the conversations that I’ve had from people, and the preorder process has been going pretty well. Nobody I’ve talked to has really had a problem with that. So that part has been going well; but right now I’m focused on trying to figure out where my sources of traffic and customers are going to come from. That’s the next step for me.
Rob [00:01:51]: Yeah, I think that’ll be a fun experiment to run. When you run the ads are you going to run them to the landing page and ask right away for a preorder? Are you going to just ask for an email address and nurture them? What’s your plan there?
Mike [00:02:02]: It’s a work in progress, and it could adjust as it goes along. What I’m thinking right now is I’ll set up a landing page, start collecting email addresses and make it look like – initially, it’s, “This is the problem that it solves. Are you interested in this?” and then put them on a mailing list. Once they get on the mailing list start interacting with them individually to talk to them about the specifics of what it is that they’re trying to solve, why. Although it’s a cold lead at that point, my hope is that those people will have not heard of me before and talk to them and try and convince them to preorder. I do realize that there’s always going to be some shortcomings with that, but without a finished app to show them I’m reduced to showing them mockups. But the goal will be to get them on the phone and talk to them and walk them through some screenshots of what it’s going to look like, and convince them to preorder without having them know who I am. Right now, most of the preorders have come from people who I either know directly, or who know of me, so that makes it, I would say, a little bit less qualified. They’re trusting in my name more than – not necessarily more than the product – because they have heard the product. They’ve seen what it looks like. They’ve seen what it’s going to be capable of. But what I really want to know is can I convert somebody who doesn’t have any association with me first?
Rob [00:03:13]: Yeah, I think that’s probably a good way to handle it. Obviously, I was thinking of the traditional, you know, having a landing page and just doing pre-launch. Like, “Notify me when we launch.” You know, having the value prop and everything. But I think since you have been doing basically high-touch one-on-one so far, and it’s working, I think it’s a really good experiment to figure out if that is something that you’ll be able to do with cold traffic, because that one-on-one stuff and doing the demos it really is magical. It’s so different than just trying to convert someone with words on a page. So, if you’re able to do this, and able to send cold traffic and then basically do demos and get preorders, I think you’re really on to something. And if you aren’t, I guess it would be back to the drawing board to try to find better traffic sources.
Mike [00:03:54]: And that’s what I’m trying to figure out right now, is whether or not the traffic sources that I have in mind are going to be good ones, or do I have the marketing campaign or the ideas about what cold leads would actually want down yet; because I know what the people I’ve talked to want, but can I translate that into words on a page and convince somebody to walk through the process. I know that it’s not going to be perfect. I know that my conversion rates are going to be radically lower than the ones that I’ve experienced so far, but I still want to walk through that process and see what that looks like so that I have a sense, moving forward, of what I can expect once I get to the point where I’m actually doing a full-scale launch.
Rob [00:04:29]: Very cool. What are we talking about today?
Mike [00:04:31]: Well, today’s episode is inspired by episode 11 of the “Startup Chat” with Sully and Heaton, and there they talked about hard times that they had come across inside of their entrepreneurial careers. So, what I thought we’d do today is we’d talk about a couple of different hard times that we’ve gone through, and then go through some coping strategies for hard times in general, and walk through what people can do, how they can evaluate where they’re at, and map out how to move on.
Rob [00:04:56]: Yeah, I was really struck by episode 11. That came out several months ago. But in listening to the story, I found myself resonating with their hard times, and you can just feel the pain that they went through. Coming out the other side, they learned so much from it that I feel like this episode can offer a lot of value to folks maybe who’ve listened to this podcast for a long time and aren’t in tune with what our hard times have been, because I don’t know that we’ve ever sat down and talked about multiple hard times we were experiencing.
Mike [00:05:23]: So, to kick us off, the first hard time that I’ll relay came from back in 2008. At the time, I was running a consulting company. I was actually running my software company and my consulting company at the same time, but I was much more focused on the consulting company. And in December of the previous year, I went out, and I got an office space, and I looked around for somebody to hire. I went to Monster.com and hired somebody through there. I brought in probably, like, a dozen people before I made somebody a full-time offer. And over the next – I’d say, the first four or five months of the year, we were doing great – we had a lot of solid work coming in, and the future looked good.
[00:06:01]: I’d say probably around the fourth month or so of the year – it was probably April-May timeframe – when things started to just not come through. There were engagements that we were expecting to come in, and they didn’t come in. Then the next engagement didn’t come in, and everywhere we looked the world was kind of coming to a grinding halt. This was systematic throughout the entire consulting industry at the time, and it was because of the massive economic meltdown in 2008. One of the first things that companies do when they come on hard times is they start cutting services, and the first service to get cut is what they consider to be “extraneous expenditures”, like having consultants come in and spending anywhere from 6 to $10,000 a week on them. So, almost overnight, our entire consulting revenue dried up, and I ended up letting go both of the employees that I had, and I still had an office space that I was paying a couple thousand dollars a month for. I was in a lease that I couldn’t get out of, and I’d say probably the next five to six months were really, really hard, trying to string things together.
[00:07:01]: I floated the company for a couple of months on credit cards just to make ends meet, and at some point I just said, “Look, I can’t do this anymore.” That was when I let go both of the guys that were working for me, which was really hard because one of them had been the best man at my wedding. I’d known him for 15 years. The other one, I knew that he had a wife and two kids. It was just a very difficult time for me – obviously emotionally, but also financially – because I had dug myself a $75,000 hole, and it was not easy to dig myself out of.
Rob [00:07:31]: What toll did that take on you? What impact did it have on your emotional state, on your day-to-day life: sleeping, eating, emotional state – all that stuff?
Mike [00:07:41]: Oh, it was awful. I didn’t sleep well. I didn’t eat well. I gained weight – and, of course, all those things roll into one another as well. I mean, if you’re not eating well, then you’re probably not going to sleep well. And if you don’t sleep well, you’re not going to eat well either. You’re going to overeat. You’re going to be anxious, stressed out; and all of those things just snowball onto one another.
[00:07:57]: It really wasn’t until about a year to two years later before I got my financial legs underneath me again before things started to really turn around. So it took a long time, and it was just a lot of work to get out from under it. And in terms of an emotional toll, it was just awful. I felt terrible having to talk to the guys and tell them, “Look, this is just not going to work out. I’m going to have to let you go.”
[00:08:20]: At one point, I remember I had taken a trip to go see a prospective customer, and I was on my way back and one of the guys called me from the office, and he say, “Hey, I’m just working on this over here.” I was like, “I let you go a week ago. Please stop working.” I was like, “I can’t pay you for this.” I felt bad, but there was really nothing I could do. I was already in debt up to my ears.
Rob [00:08:40]: Yeah, that’s tough. Yeah, before you get to your second hard time, I wanted to throw mine in. It’s probably the hardest time I’ve had as an entrepreneur since I left salaried work, and it was in 2014. I’ve alluded to it in the past; but, in essence, what happened is 2013 was a very good year. HitTail brought in a lot of revenue. I think we did two MicroConfs that year. Just everything was hitting on all cylinders, and coming into 2014, Drip had launched – at late 2013 – and I had assumed it was going to start growing – right – because, “I’ve done this before, and DRIP’s just going to take off like a rocket.”
[00:09:18]: Of course, that didn’t happen. Drip launched to a nice 7, 8, $9,000 a month; and then there was this five-, six-month period where we were trying to find our positioning, trying to find our market, trying to find the headline, trying to find the right feature set and all that stuff. It was trying to find product-market fit, in essence. Before that time, I had a lot of cash in the bank from 2013 revenue, and I hired a couple developers – a couple extra ones in addition to Derek, so there were four of us. Three of them were developers. And right around March of 2014, I was making some angel investments with some of the cash I had, and I also learned that I had this enormous tax bill. It was the biggest tax bill I’d ever had, and it was because 2013 had been such a big year, and my estimated taxes from the year prior didn’t really cover it. So, now I had a burn rate on DRIP, because I’d essentially over hired – planning for growth, so to speak. But I had so much cash in the bank, I knew it would back it; but then a huge chunk of that cash went out to the IRS. Then the estimated for that year went up. So it wasn’t just paying the previous year, but my estimated taxes were huge.
[00:10:21]: Then all my angel investments that I’d committed to suddenly seemed like they all came due at once. So I wrote a bunch of checks to those, and it was super stressful. My bank balance dropped by 90 percent to the point where I was making lists of “How am I going to cover payroll?” and I was pretty stressed-out. This was early – let’s say, between March and June of 2014. Then things rebounded, and it kind of just bounced around to that year. It wasn’t until Drip really started growing in, let’s say, August of that year – that’s when the hockey stick started. It wasn’t until then – so it was a solid five, six months where I was having trouble sleeping. I was thinking constantly about, “Where can I get cash from?” I was looking at my 401(k), which is something I never do. I mean, you hear me talk about on the podcast about how risk-averse I am, but I was thinking, “I need to cover this thing, because I don’t want to essentially lay someone off who I hired 60 days ago.”
[00:11:16]: So, overall, it was a rough year. It was a really good learning experience for me, both to be more aware of taxes and estimated – stuff like that – not to over commit just because I have cash in the bank. I just wasn’t looking hard enough at the upcoming expenses. There was actually another expense. Like the hotel expense for MicroConf came through late, and I should’ve known that it was going to come through, but I didn’t think of it. So, it’s kind of like that. I’ve become more wary and more aware of, “Just because I have cash in the bank, obviously, I need to be looking down the line and figuring out what big expenses are coming here in the next 90 to 120 days.”
Mike [00:11:49]: Yeah, sometimes those budgeting things are really hard when you’ve got the money in your checking account, and it’s not always easy to set that money aside in your checking account. It’s not like you’ve got little folders where you can tuck the money away or tag it for different things and say, “This is, kind of, already spent.” What was the timeline there? You said there was, like, five or six months where –
Rob [00:12:05]: Yeah.
Mike [00:12:05]: – it was bouncing around, and you were kind of unsure whether or not you were going to make payroll?
Rob [00:12:09]: That’s right. I was going to whatever lengths I could. I was going to go whatever lengths to make payroll – selling annual plans of things, and doing special deals to my list, and really just trying to keep the boat afloat. I never got to the point where there wasn’t money for payroll. I never had to do anything crazy, but I don’t like to be that close to the edge.
Mike [00:12:31]: Now did that have any sort of effect on your relationship with Sherry? Because I remember when I was going through stuff with my consulting company, things were not good in my marriage either, and it was just a stressful thing. I mean, it wasn’t like we were fighting or anything like that. It was always financial stuff. It was just like, “Oh, how are we going to pay for this?” “What’s going on over there with that bill?” Credit cards were mounting up, and when credit cards start to mount up and you’re carrying 50, 60, $80,000 on credit cards, it’s stressful. And it’s not just stressful on me; it was stressful on her as well, because I’m relatively open with that stuff. It’s not like I hide any of my money anywhere. Did that have any effect on your relationship at all? Or, is that stuff kind of insulated?
Rob [00:13:09]: Lucky for me, our personal stuff is insulated enough, and I didn’t put any money on personal credit cards or anything like that. I was still taking a salary, and Sherry was still taking her salary. So the personal stuff was actually fine. It was just the business stuff I was worried about. We didn’t have trouble with that. There were no fights over that, but I was just kind of a pain in the ass. I was pissed off all the time and just stressed out. Rather than pissed off, I was stressed out all the time – for months. There was so much stuff. It wasn’t just about money either, you know? It wasn’t like, “I need more cash.” It was like, “Why the hell isn’t this app growing?” “What’s going to bail me out of this? It’s DRIP growing. Why isn’t it growing? I’ve done this before so many times. Why can’t I get this app to grow sooner?” That was really the thing. So, I was just probably not the most pleasant person to be around during that time, and I think that caused more the issues than anything.
Mike [00:13:56]: Sure, and it’s funny because that – not funny, but it’s ironic that that anger carries over into other aspects. So, you get very frustrated very quickly about just little things. You’re trying to watch a movie on Amazon, and it’s not working, and you get really poised off really quickly – and it has nothing to do with Amazon, really. It has to do with the other stresses that are in your life.
Rob [00:14:14]: Absolutely.
Mike [00:14:15]: On my end, one of the issues was that my wife had stopped working the year before. So we didn’t really have that second income to rely on, which was a contributing factor; but that kind of stuff happens.
Rob [00:14:25]: Sure. It makes it hard, man. It’s hard to make decisions based on the current information, and it’s the best decision you make. Because I’m sure at the time your wife stopped working because you guys were fine. There was cash in the bank, and you had business. Then something changes so drastically, so quickly, and it’s like you can’t recover, and that’s where you get pushed to that limit.
Mike [00:14:44]: So the second hard time – we covered this in a podcast earlier this year, but the second hard time for me was essentially killing AuditShark. And, unfortunately, it was something that I had known for months, probably closer to almost a year, that that was on the horizon, and it was a very distinct possibility; but it didn’t necessarily make the decision any easier. I think when we did that episode, things were probably still pretty raw. The decision was still pretty fresh. But looking back on it now, I look at that and say, “Yes, that was definitely the right decision. I wish I’d done it sooner”, but I also think that there’s a lot of decisions that we make that we wish we had done sooner, and we just didn’t because we were afraid of the changes that were going to take effect because of that.
Rob [00:15:24]: Yeah, that makes sense, man. It’s hard to be into something five years and just make the decision to turn it off. So I know that was a tough one for you.
I think, to a lesser degree, my other hard time was just the recent sale of HitTail. There was a hard time during due diligence and everything, because where were some – we’re trying to transfer it over, and due diligence can fail pretty quickly, and then sales can fall through. And by the time you’re that far in, you are emotionally invested in exiting, essentially, and not owning it anymore. You know that the cash is in escrow, and that it can go into your bank account anytime. And so I actually had many sleepless nights just a couple weeks ago, wondering if the sale was going to go through. We had trouble transferring some servers, and some of their guys were in the Ukraine, and so it meant that I was up late at night. So, I wasn’t sleeping well. Like you said, I was eating, kind of, crappy, different times of the day, and it just – it was a tough week, two week span during that time.
[00:16:18]: Now that I’m out of it, I expected there to be a massive relief when it happened, and it’s hard to process. Like I said earlier in the episode, it does feel good, and it’s the right choice, and I feel good about it. But it doesn’t mean that suddenly all of that stress is – poof – gone, right? I think I almost need time to heal from that and then get some distance from it, because I’m still turning on that and having maybe some resilient feelings about it.
Mike [00:16:44]: You know what that reminds me of, is selling a house. Last year, I sold a property that I had up in the Adirondacks that I had bought back in, I think, 2003 or something like that. It was basically this little cottage on a lake that I had kept for all these years, and I sold it last year because it just wasn’t something that we used very often. It was a monthly drain, and, quite frankly, for the amount of time that we used it, it just wasn’t worth keeping it. But at the same time, there’re still issues with selling a property that, one, you don’t live in, and. two, you’re just not anywhere close to. I mean, it was a six- or seven-hour drive to get there, and it was a seasonal property, so selling it was problematic. When it finally got to the point where it was going through the process, and they had brought somebody in to take a look at it and inspect it, and going through all the paperwork with the lawyers – that stuff just takes time, and you do have sleepless nights when that kind of stuff is going on. So, I can definitely relate to that. I mean, I think that that’s probably a similar situation, and I think there’s a lot of listeners out there who probably will go through something similar at some point in their lives, because selling your house is something that a lot of people go through.
Rob [00:17:47]: Yeah, I do think it’s similar. There’s also some emotional attachment to a house, typically and –
Mike [00:17:52]: Yeah –
Rob [00:17:52]: – that’s part of it, you know.
Mike [00:17:52]: – Definitely. Yeah, with mine, it was a vacation property that – I grew up in that area. It was a very small lake. It was only, like, three-quarters of a mile long, or a half a mile long, or something like that; but I spent my childhood there. So I was very emotionally attached to the area – not just the place that I had purchased. So, yeah, all that stuff factors into it. It can be hard to let go. And when I sold it, all the paperwork was done, the money hit my bank account, and I’m just like, “Huh.” I didn’t know how to feel. I should have felt great about it, because it’s like, “Oh, I’ve got this financial burden, and I’ve got money in my account now.” I didn’t really know how to feel about it.
Rob [00:18:26]: I think that’s a good summary of how I feel. I don’t know how to feel about it yet, you know? I think as you move further away from it, I think that’ll become more clear for me. So it looks like you have eight strategies here for coping with hard times.
Mike [00:18:39]: Yeah, the strategies that I put together come from a couple of different sources. Some of them actually come from Alcoholics Anonymous. Other ones come from places like “The Huffington Post” and a couple of other places, and we’ll link those up in the show notes. These eight coping strategies essentially allow you to reflect on what’s going on, and work your way through it both mentally and emotionally. To start off with, the first one is to reflect on the situation. Whatever that situation is, you have to recognize that not everything is your fault, but that doesn’t mean that you shouldn’t take responsibility for some of the things that are. So inevitably, in any situation where you’re undergoing hard times, there are going to be places along the way where you made some mistakes. And you have to admit that you made some of those mistakes, because you can’t change something if you don’t take responsibility for the mistakes that you’ve made.
Rob [00:19:26]: Yeah, definitely in 2014 I was reflecting pretty hard on. “How did I get there?” I think I have several pages in my notebook where it’s like, “What did I do wrong so that I never do this again?” I did tend to adopt things as my fault. I took responsibility for what had happened. There were a couple unforeseen things. There were a couple foreseen things that I didn’t keep in mind. I’m a big, big proponent in taking responsibility for as much as you can handle, because I think that the sooner you do that, then the sooner your attitude will turn from one of kind of a victim, of “Everything bad happens to me,” to, kind of, the victor – right – someone going after victory and striving to overcome a hardship; and to look at it rather as something that’s beating you down, as something to overcome.
Mike [00:20:12]: And something else that you had just mentioned there was the fact that there are things that are going to happen outside of your control. That’s part two, is accepting that you have limitations. There are limits to things that are under your control, and some of those things you simply can’t change. That includes things that have happened in the past. Stressing over the things that you did, or the things that you didn’t do, isn’t going to change any of those things – and you have to accept that. There’s no other way to move on is to accept that there were things that probably happened that were completely outside of your control.
Rob [00:20:41]: I think that’s important, and I think there are things that happened that could be within your control, but they’re done now. You made a bad choice. You got yourself into this mess. Now figure out how to fix it rather than stressing about things that you did incorrectly, or you did poorly, or you didn’t foresee that you should have. That’s actually why I sat down and spent the focus time to write it in the notebook and figure out: “What did I do wrong? What will I not do again? What are the strategies that I’m going to use to get out of this over the next several months?” I used that, frankly, as a way of closure, so that I was, in essence, accepting my limitations; accepting I made some poor choices. Then at the end of that, I said, “Okay. Now I’m not going to think about that anymore,” because I’ve essentially documented it here, if I ever want to reference it in the future. If I suddenly come up with another idea of something I did wrong, I will come back. I will write it on this list, and I’ll be done with it.” I, kind of, brushed that dust off of me. I was done thinking about the stupid things that I did, or the mistakes that I made, or the decisions that I shouldn’t have made; and then I was ready to fight this thing head on. That’s a transition that I think you need to make in this. Kind of, accepting your limitations and not stressing about the past.
Mike [00:21:52]: The third coping strategy is to recognize that everyone makes mistakes. You can’t always be perfect. You’re not always going to out and be successful at every, single thing that you do. But at the same time, you have to make sure that you’re willing to make those mistakes, because if you’re not willing to make mistakes, then you’re not going to learn. You’re not going to grow as a person. But you have to be painfully aware that everything you do isn’t going to turn to gold. And even if there’s people watching you and you don’t want to make mistakes, you’re going to make them. You can’t always be perfect.
Rob [00:22:21]: I don’t accept this. I know that I’m not going to be perfect, but I still get pissed off every time I make a dumb mistake. Every time I look back at a decision that I made and I think, “You know, I should’ve made a different decision. I had the information,” or, “I was sloppy,” or, “I was a little bit lazy” or whatever, it infuriates me. So, of all these eight, this may be the one that I struggle with the most. I hang on to things for too long. And that’s why I’ve started adopting that approach of going into the notebook, writing down what I did, writing down why I did it, why I’m not going to do it again in the future, and essentially trying to close that chapter so that I can move on and fix the problem.
Mike [00:22:57]: The thing that gets me, I think, the most, is in situations like this – where I’m afraid of making mistakes – is that I’ll have a tendency to procrastinate, or hold off on making a decision, because I don’t want to make the wrong decision. I know conceptually, “Oh, I should just make a decision and move on.” But sometimes it’s really hard because you don’t have all the information you need. You know that you want to make a decision, but you don’t want to make the wrong one and waste a lot of time or effort. For me, I find that –
Rob [00:23:22]: I think that’s really –
Mike [00:23:22]: – challenging.
Rob [00:23:23]: – common. I do that from time to time, too. The procrastination on a difficult email, or a difficult decision – it’s like our lizard brain’s way of keeping us from making that hard decision, right? Because we don’t want to endure the pain of it.
Mike [00:23:37: The fourth coping strategy is : remember that you grow as a person through some of these experiences. These experiences are what help to shape you, and they help you learn, even if they’re painful. One of the things that you have to keep in mind is that the mistakes that you’ve made in the past are essentially what make you who you are today. If you’d gone through a hard time in fifth grade, for example, you’re going to remember that, and it’s going to influence who you are today, what decisions you make, and what decisions you make down the road. That’s true of anything that’s happened in your past. Anything that sticks out in your memory, those things shape who you are. But they also make you what you are. You wouldn’t be where you are today, or who you are today, without those experiences. So it’s important to just take a little bit of a step back and recognize that those things are important to who you are.
Rob [00:24:23]: I think they have a way of feeling really crappy while you’re in them, and then, in retrospect, being pivotal points in your life – or, at least have the potential to be, if you look at them the right way and if you learn from them rather than make that same mistake over and over – which some people do, unfortunately. But if you’re self-aware enough to be thinking about this stuff, I think that when you’re in the midst of a hard time, it is much better to think about, “Wow. This time sucks. I feel like crap. I know a lot of other people go through it, too.” And you can come back to this episode. You can go to episode 11 of “Startup Chat” to hear each of us talk through that, and you can probably hear a little bit pain in our voices. You don’t just get over this stuff. It hangs around with you. There’s this resonant internal trauma that I don’t know if that ever goes away, because you remember how hard that was. So, if you’re in that situation, what I’ve started doing is: a) trying to think about other people who have gone through it, or go through something like this, and also realizing that there is opportunity here; that, “Even though this part sucks, once I make it out of it, I’m going to be a better entrepreneur, a better founder,” or a better whatever it is you’re trying to be.
Mike [00:25:30]: The fifth coping strategy is to not give in to some of your fears. Many of the fears that we have are more imagined than they are real. So, for example, not everyone is watching you or is thinking about you all the time. Many of the beliefs that we have, or the fears that we have, are very self-limiting. So going back to what you had said earlier; people procrastinate when they’ve run into a situation where they have a difficult email to write, and they either put it off or they take forever doing it because they don’t want to make that decision. They don’t want to click the “send” button, for example. There’s other situations where you’re simply afraid of – you know what action you have to take, but you’re afraid of what the consequences are. I think the reason for that is we’re more afraid of the unknowns than we are of the things that we know we’re going to run into. So, you click the “send” button. What’s going to happen? You might be able to think of two or three different situations that can come out of that, but you also know that there’s a distinct possibility that there’s other things that could happen that you just aren’t aware of, or you couldn’t even begin to contemplate happening. That’s what’s more scary. It’s not the things that we know could happen, it’s the fact that there could be things out there that are going to happen as a result of hitting that “send” button that you just didn’t even consider.
Rob [00:26:39]: I’ve gotten so much better at this over the years, and the first thing I ask myself now when I see things tanking, or when I feel hard times coming on, or when you get an email from a patent troll saying they’re suing you for some patent they own that they aren’t using. The first thing I ask is, “What’s the worst that can happen here?” “What’s my worst-case?” And if I don’t know the answer, I try to find out. I find an expert. I find a friend. I find the Internet. I research and figure out what is the worst-case outcome of the situation. Maybe that means sitting down with your notebook, or talking to your spouse, or talking to a trusted adviser, or someone. Try to get a reality check on your fears, because your fears can run rampant, and your body stresses out, and anxiety goes through the roof; but often the worst case is nowhere near as bad as you are feeling it could be. And if you sit down and logically think through what you’re actually afraid of, in most cases it’s not nearly as bad as you think.
Mike [00:27:32]: That one leads directly to the next one, which is remembering that you’re not alone in the world. There’s always other people that you can talk to who are going to listen. Whether that’s friends, or colleagues, or family, they can help to level-set your expectations and help to ground some of those fears, or biases, that you have and help you objectively look at them a little bit better so that you don’t sit there and dwell on them forever, thinking, “Oh, I should’ve done this.” or, “This could happen.” They can give you a little bit more objectivity than you might have yourself.
Rob [00:28:01]: Yeah, and like I said earlier, that can range from a spouse. It can range from your mastermind group – which I definitely talk to about all this stuff. It can be someone that you hire you might trust, and you can hire them through Clarity. Or, maybe it’s an adviser that you’ve had for a long time. Or maybe it’s a therapist. If you go to therapy already, someone can give you a sanity check on this type of stuff. I can even see having a consultant or some type of expert that you pay. It depends on your situation, but let’s say you’re in a legal thing, or a tax thing. It’s like getting a CPA or a lawyer to tell you, “Oh, the worst-case is this.” That’s actually worth quite a bit to hear from an expert that it’s probably not a bad as you’re making it out to be in your head.”
Mike [00:28:42]: The seventh coping strategy is to map out the appropriate course corrections. Essentially, what this amounts to is determining what things need to change, and how you can get there. You need to pick one thing that needs to change and fix it and, then once you’ve done that, figure out what’s next. Sometimes you can do multiple changes at the same time, but depending on how big they are, or the situation that you currently find yourself in, that can be more difficult than other times. You really need to sit down and logically think through, “What are the next steps here?” “How do I move on from this, and what needs to be done?” “What do I need to do?” Because just sitting and waiting for a situation to resolve itself is almost never going to actually resolve it – unless it’s some time-based thing where you literally have to wait until a certain date before you get more information. Typically, that’s not going to happen, but if you can sit down and walk through – clearly identify the one or two things that absolutely need to change, and those things need to change first – you can work on those and then iterate through the rest of them and eventually solve the problem.
Rob [00:29:40 ]: Sherry has a phrase that she used once. I don’t know if it’s common or not, but she said, “I went from ‘Oh, no’ to ‘Oh, hell, no.’” It just meant this mindset shift of feeling like, “Oh, no. Everything’s terrible whether I made a mistake. I’m going through a hard time. This is stressful,” to, “Oh, hell, no. I’m not going to allow this to happen.” That’s what we’re talking about here. It’s that mental shift from dealing with the stress, or dealing with the hard time, to suddenly shifting into fixing it, and figuring out the strategies that you’re going to sketch out in your notebook, or you’re going to talk through with the expert, with your spouse, with your mastermind group to correct this course, and to make things better – and not make the mistake again, but also to be able to fix it in the short term and move away from whatever hard time it is that’s plaguing you.
Mike [00:30:28]: The eighth coping strategy is to ask people for help. This could be in the form of accountability, or moral support. It could be guidance. It could just be you need an extra set of hands to work on something. But essentially you need a framework to help make sure that change is going to happen. Sometimes all you need is that accountability. Sometimes you need somebody to say, “Hey, this is something that you still need to work on, and it still needs to get done.” Or, if you just need somebody to say, “Look, you’re doing fine,” and, “Things are not nearly as bad as you think they are, but you still need to keep going.” Sometimes, that’s all you need. Sometimes, it’s just, sort of, a coach. But other times you will need that extra set of hands. If you ask for it, chances are really, really good that you’re going to get that help.
Rob [00:31:07]: Yeah. I think, as founders, we’re a little bit headstrong. I know that I am. I have a really tough time asking for help, but it’s something I’ve gotten better at over the years, and to letting people into my inner world as I’m going through hard times, rather than referencing them once I’m through them. I personally think, in retrospect, looking back at my life, I think it’s a mistake when you try to deal with stuff on your own, because there are almost always some people around who – if you give them the information and you let them know what you’re going through – they can help.
[00:31:36] That wraps us up for the day. If you have a question for us, call our voicemail 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. We’ll see you next time. [00:31:57]
Episode 265 | The Absolute Bare Minimum You Should Know About Segmenting Your Email List
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about the bare minimum you should know about segmenting your email list. They discuss the different stages your customers can be categorized as and how to target them specifically in order to get them to the next stage.
Items mentioned in this episode:
Transcript
Rob [00:00:27]: In this episode of “Startups for the Rest of Us,” Mike and I discuss the absolute bare minimum you should know about segmenting your email list. This is “Startups for the Rest of Us,” episode 265.
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 [00:00:28 ]: And I’m Mike.
Rob [00:00:33]: – and we’re here to share our experiences to help you avoid the same mistakes that we’ve made. What’s the word this week, Mike?
Mike [00:01:06]: Well, we got a really interesting listener question from Chris Koenig, and he says, “Hi, Rob and Mike, I really enjoy the show. My question stems from your FAQ on startupsfortherestofus.com, specifically the part about transcription. You’ve switched transcription services in the past and mentioned how each one seems to decline in quality over time. When you see a pattern like that, what, if anything, does it tell you about the market? Does significant customer turnover mean these companies are having trouble scaling up? Or, might it be a deliberate tactic to focus their attention on the newest customers for that initial trial period? Hope it’s not too inside-baseball for the show, but I’m curious about the space and would be interested to hear your viewpoint.”
Rob [00:01:39]: My take on it is that people come into transcriptions because it’s easy to enter, and there’s no barrier to entry, and that’s a problem. It’s basically a commodity business, and people underprice themselves at the start because there’s no other way to compete in a commodity business, right? It has to just be cheap; but then they get in three months, six months, 12 months and realize, “I’m not making any money. This is a lot of work,” and they either just bail on it; or, maybe they’ve raised prices, but they’ve grandfathered, and so those grandfathered people, they’re giving less service to because they’re not making as much money. That would be my take on it.
Do you have a sense?
Mike [00:02:37]: Yeah, that was going to be my guess, was the grandfathering of existing customers because if you’re offering a commodity like that and and the price point’s really low, it’s difficult to justify raising your prices to the existing customer base. So, when they find that they need to raise prices because they’re not getting the people to do the transcribing that they need to, or things are just not working out as well in terms of quality, then their pricing model basically goes to heck in a hand basket. So, it makes it difficult for them just to make ends meet. And I think that that’s it more than anything else, because most of these – I think the ones that we’ve gone to tend to be newer. It’s not like there are transcription services out there that we’ve used that have been around for a very long time, so obviously there’s going to be that issue of trying to go up-market with it and keep your existing customers happy while also trying to charge them more. I think that most of them just – I don’t think any of them have ever come to us and said, “Hey, we need to raise our prices.” I think they’ve all just capped it at, like, a dollar a minute or something like that.
Rob [00:03:40]: I know, and if I was doing a productized consulting service or, I guess, even as these guys are, really, at just an hourly service, I don’t think you can grandfather the way that you do a SaaS; because the reason you can grandfather with SaaS is because a lot of the effort and the time is spent up front acquiring the customer and then onboarding them and supporting them early on. After that, the marginal cost to support them is very low, and so grandfathering them at an older, cheaper price is pretty easy to do. But in terms of ongoing consulting engagements, where you’re literally paying someone to do an hourly or a by-the-minute task, I do think that you need to raise prices over time. Just the way it needs to go in order to maintain a viable business. I do think that your better customers are going to understand that.
We did have some pretty reliable services transcribing over the years, and if they had come to us and said, “Look, we need to raise 10 percent, 20 percent,” we would’ve done it; because the switching cost is painful. If they needed to double their price, that might’ve been a problem, but the fact that the quality has declined over time pretty much across the board – I think we’ve used six or seven, different transcription services in the last five years because within about six to nine months, they all eventually flail around.
Mike [00:04:27]: I think the other thing that factors into that is when you are running a service like this, you have employees or contractors that are working for you, and they’re working for a set wage. Let’s call it $10 an hour just for a nice, round number. At some point in the future, you’re probably going to want to pay the people who’re doing a really good job more, and it’s difficult to raise their salary if you’re not bringing in any more revenue from the customers. And that is a fixed cost. If it’s $10 an hour, if you’re only making $11 an hour from the customer, it’s hard to raise what you’re paying that person in order to retain them as a good employee or a good contractor and still make ends meet. I think that also factors into it as well just in terms of the timeline, because you’re right. We’ve gone through a bunch of these, and over time, without fail, they eventually go downhill.
Rob [00:05:23]: That was a good question. Thanks for writing in.
On my end, just kind of as an update, my chaos is definitely subsiding. Some things have wrapped themselves up. There was a big sale I was working on that closed last week, and so I do feel like a nice exhale coming about in my life as kind of the overwhelm has dissipated. I feel like I’m able to get back to focusing on things that matter instead of just rushing around like I was for the past few weeks. Things are clear, and it’s end of the year. Not a ton happens in terms of business stuff here end of November and December, but this is the time when I’m going to take to really focus on what 2016 needs to look like; and I’ll probably be doing my personal/business retreat here in the next, I’d say five or six weeks, taking notes, figuring out what my goals are. You and I need to record a goals episode, where we look back at the goals we had for last year and plan our goals for 2016. I’m going to be honest. I’m kind of looking forward to what I’m hoping is the quiet of December.
Mike [00:05:30]: Cool. Well, on my end, I’m actively taking pre-orders for the new product that I’m working on, and I’ve got about half a dozen pre-orders so far.
Rob [00:05:31]: Nice.
Mike [00:05:48]: The product itself is aimed at automating the process of moving people through your sales pipeline. If it’s a high-touch sales pipeline, it helps to automate the process of moving them through it so that you can essentially focus on your own work as opposed to going back and continually following up with people.
Rob [00:05:54]: Very nice. When you say “taking pre-orders,” do you mean that you’re getting verbal commitments, or are you actually charging credit cards?”
Mike [00:05:56]: No, I’ve actually charged half a dozen credit cards so far.
Rob [00:05:57]: Bravo.
Mike [00:06:09]: Yeah, it’s going well so far. I’ve still got a bunch of conversations that are scheduled over the next couple of weeks, and I’m hoping to reach my internal goals for financial commitments. And once that’s been reached, then going to start breaking ground on the code.
Rob [00:07:00]: Sounds good, man. It’s exciting stuff.
We have a slew of new iTunes reviews, 456 worldwide reviews. Thank you so much for going into iTunes and clicking that five-star rating. We also have some really good comments. Crispin Hennace [ph] says, “Do not launch a bootstrap business without Rob and Mike on your team.” He says, “I recently discovered this podcast and have been listening to old episodes on double speed. There’s a lot of great material, and it’s fresh and relevant each week. Listening to the archived episodes is like picking up gold nuggets on the street. Every entrepreneur, bootstrapped or not, should make this valuable resource a part of your week.”
And then a nice review from Jamie Hillfield in the UK. He says, “Great podcast. My absolute favorite startup podcast, by a country mile.”
So, thanks so much for your comments, for your five-star reviews. This helps us continue to grow the user base, gives us motivation to continue to do it. If you haven’t logged into iTunes and clicked that five-star, we’d encourage you to do so this week.
Mike [00:07:01]: What are we talking about this week?
Rob [00:09:24]: This week, we’re talking about the bare minimum that everyone should know about segmenting your email list. The idea here – obviously, I run Drip, which is about segmenting emails and sending targeted communications to people based on the things they’ve done and what you know about them. It’s actually funny. When we’ve demoed Drip at, let’s say, conferences, or went to the Microsoft Build conference last year, people say, “Oh, so you guys send spam or something?” Developers especially would come up and joke about that, and we said, “Actually, no. We ensure you get fewer emails that are more targeted to you rather than just getting these blasts from these big companies.”
So, that’s really what we’re talking about today, is the fact that one-to-many email, you know, just the broadcast email, sending it out to your massive list, is really dead, or it’s dying. The businesses that are really savvy at it these days are moving towards one-to-few and one-to-one email, and what that means is that the more you know about someone, the more customized that email can be to them, and the more customized the flow that they follow through your app and your email sequence will go. It’s not magic. It’s not like it’s some AI thing cranking out these magical emails. You have to write these emails, and you have to build certain flows and move people in and out based on tags, or based on what they click; but the idea is it’s about sending people the exact message they want to hear at the right time, to encourage them to take the next step.
That’s what email segmenting is about. It’s about figuring out, “How many buckets do I need to drop people into?” because it’s not as complicated as it sounds, right? It’s not like you need 100 different buckets for your list. Really, what we’re going to talk about is there’s essentially four stages, or four buckets, that I start with. You can go more complex than this, but the minimum you’ll want to know is you’re going to have a marketing list. And these are people that have not signed up for a trial. They have not downloaded a sample of your product. They’re people who are just hanging around, and they’re going to want top-of-the-funnel educational content: maybe blog posts and updates on your product from a high level, like feature stuff, but not in detail how to use it. It’s not super educational. That’s the first bucket, or first stage, is marketing.
The next one I call them a “trial user.” This applies mostly to SaaS, but it also applies to – let’s say you’re selling an eBook and you have a sample chapter. I consider them a trial user, because they have downloaded something, hopefully consumed it. You’re going to need to encourage them to consume it via email, and that’s your second book. It is, in essence, a trial user; and your goal there is to nurture them through that trial path to becoming a customer. That’s, of course, the third stage, is someone paying you. Then the fourth stage is someone becoming a repeat customer.
Mike [00:09:54]: I think there’s different subsections of these stages that you can have as well. For example, if somebody’s a trial user at that second stage that Rob just talked about, they could be somebody who basically fell out of the bucket at that point. They signed up for a trial, and then they decided not to proceed, for whatever reason. That, in essence, becomes something of a subset of that particular stage, and you may want to market to them differently. But at a high level, these four stages generally capture the bulk of your audience.
Rob [00:11:50]: Yeah, and if you’re listening to this, wondering who does this actually apply to, I think there’s three or four markets that I thought about when I outlined this episode; and they are, of course, SaaS and downloadable software. That’s the first. Second is consultants and freelancers. The third are people selling information, basically eBooks, online courses; if you have a personal brand, or you’re a blogger, that kind of thing. All of this heavily, heavily applies to you and you really need to be doing this, moving forward or, else, you’re going to fall behind.
The other two that I thought of that this applies to, but it’s not necessarily what I was thinking when I outlined this, e-commerce. E-commerce tends to be quite good at this. If you have an online store, you basically have your friend list and then people who are hot leads, and then you have your customers and then your repeat customers.
And lastly, even – in Drip and, frankly, in HitTail we’ve had a lot of folks who are lawyers and real estate agents, and it’s the more tech-savvy of those groups. For them, it applies as much as it does for consultants, as much as it does for SaaS. You may not be doing it, but it really puts you ahead of your competition if you are segmenting your list like this and really sending people exactly what they want to hear.
So, let’s dive in. Like I said, there’s these four stages. It’s basically marketing, the trial user, customer and then your best or your repeat customers. Let’s start with this first bucket of marketing. These are the people that really you want to be educating about your space, your industry. You want to be educating them a little bit about your product, but you’re not doing necessarily a hard pitch very often. You’re going to be capturing these emails using a lead magnet, some type of opt-in reward. I always recommend an email mini-course over something like a PDF, because the course is nice because it’s over five or seven days, and it gets them used to opening your emails and reading them. People are more likely to consume something if it’s in their email inbox, because they can just do it right on their phone; whereas, a PDF, they’ll typically download it, put in Dropbox and then not read it unless you ping them again and encourage them to do so. A PDF tools list is a really good start to capture that email. But I prefer, if you have the time, to instead put together an email mini-course.
Mike [00:12:32]: The other thing, I think, that is overlooked in terms of the tools, especially in terms of PDFs, is just Excel spreadsheets that allow people to calculate different things. I think when we had Jesse Mecham on the show, he talked about how his very first product was actually just a Excel spreadsheet that people could download and he would charge them for it, and people were more than happy to pay for that because it would help them do their household budgeting. That essentially morphed into youneedabudget.com and the product that he sells today, but it was a tool that people could use. And Excel is notoriously useful in a variety of different circumstances, and if there are ways to build a simplistic tool out of Excel, then you could offer that as a download as well.
Rob [00:13:12]: Right, and if I was going to do that, what I would do is offer the Excel as a download. Just as a reminder, you don’t want to attach that to the email, because spam filters and all types of stuff choke at that. You definitely want to have it up on a server somewhere and then link to it within the email. Once they download that, well, then you put them in a sequence to hear from you the next day and be like, “Hey, what did you think of that?” “Did you notice that cell 35 does this?” “Here’s a quick use case for it.” Then you ping them two days later, and you say, “Hey, by the way, with that thing do you know there’s this other feature you can do in that Excel spreadsheet that I gave you?”
In essence, you turn it into a mini-course even though they really opted in for that core thing; but you’re kind of educating and teaching them how to use it and how to get value out of the thing that they downloaded from you.
Mike [00:13:36]: Why don’t you expand a little bit on that, because I think that some people don’t necessarily realize that just the nature of attachments – not just that they get blocked on a regular basis, but also the fact that you don’t know if they’ve opened it or not? You don’t know if they were interested in that attachment. Why don’t you talk a little bit about the process of, for example, tagging people when they click on those links? Obviously, if it’s hosted someplace, how do you know that they downloaded it?
Rob [00:15:00]: Yeah, that’s right. That’s a good point, actually. With an automation tool like a Drip or an Infusionsoft, you can basically just put a little rule in that says, “If someone clicked on this link in the email, then tag them with downloaded Excel spreadsheet,” right, or, “downloaded X, Y, Z report.” Like you said, you can’t tell with an attachment, so you lose out on that reporting.
What you can do later on with the information of whether or not someone actually downloaded it is if they didn’t download it, then you can send them another email the next day, or two or three days later. You can say, “Hey, I noticed that you got the email and you didn’t actually download the thing. I wanted to give you another opportunity to do so.” If they do at that point, then you’ve now pulled them into your funnel, and you can send them more information about how to use it. If they don’t, then that may be time to write them off. You don’t want unqualified prospects in your funnel, because that just kind of wrecks your numbers and over time, if they’re not opening your emails, not clicking your links – the ESPs are pretty smart these days, like Google and with Gmail and Hotmail on Yahoo, they’re starting to get smarter and smarter, and if people are not interacting with your emails, not opening them and not reading them, over time Google knows that; and they start putting your stuff into promotion and eventually will just put your stuff in spam if you even get a small number of spam complaints.
It’s valuable to know who on your list is doing what so that: a) you can target them differently. That’s really what we’re talking about here, right, is segmenting them; and b) so that your deliverability and your placement in these email inboxes remains high.
Mike [00:15:39]: What I like to do in those cases is, if you see that somebody hasn’t downloaded something that you sent to them that you wanted them to, you just send them a reminder email so it doesn’t say, “Hey, I noticed that you didn’t do this,” because it depends on your audience a little bit, but it can come across as, “Oh, my God. You’re tracking me,” or, “You’re looking at everything I’m doing.” Well, yeah, you are, but at the same time, you don’t necessarily want them to feel that way. So, I like to just send them an email that says, “Hey, just wanted to remind you about X.” But if they downloaded it, then they wouldn’t get that reminder. So, that’s a neat way to be able to get around those. And those are all psychological objections. They’re not technical limitations or technical objections. It’s just how you are interacting with the people that are on your list.
Rob [00:15:58]: Yeah, that’s a good point, actually, is knowing your list and knowing how they’re going to react to this stuff because, if you’re emailing marketers, they know. They know that you know if they opened it or not. But if you’re emailing less technical folks, or maybe developers, or people who aren’t necessarily in tune with all the fancy tools that we have in a tool like Drip or Infusionsoft, then you’re right. You may need to couch it a little differently.
Mike [00:17:09]: Part of what you can do in addition to just tagging people is you can use mechanism for what’s called “lead scoring.” The lead scoring allows you to figure out who is engaging with your emails. You can use that lead scoring mechanism to subscribe them to additional sequences, and you might use that in cases where, if somebody has opened every, single one of your emails. Then chances are good that they are really engaged with the content, and you might want to send them a special offer. So, if their score reaches a certain level, you send them into a different sequence in order to either make an offer for an upsell, or a special bonus or something like that. It doesn’t even need to be something that you’re selling to them. It could just be something that you’re giving to them as a reward for interacting with your emails. But those lead scoring mechanisms can help you to determine who you should be approaching with some of your different products or different services that you’re offering. You tend to not want to send an email to somebody saying, “Hey, buy my thousand-dollar products,” if they’ve only ever opened up one of your emails before. So, in a way, this lead scoring allows you to get a lot more intelligent about who you are targeting with the different emails that are in your different campaigns.
Rob [00:20:45]: Yeah. If you’ve never used lead scoring, it is mind-blowing to basically be able to have a score that tells you how engaged someone is with your website and with your emails. The concept behind lead scoring is you can set a point value that, when someone opens your email, let’s say they get +1 point. That’s typically the default, and there’s kind of a generally agreed-upon marketing automation thing. I think Pardot and Marketo published things, and they said open is worth one point. A click is worth three points, and then visits to your pricing page is often worth five points. And so we have that, of course, all built into Drip. We built lead scoring into it pretty early on.
And then you can configure it as well. Our tour page, we give folks three points if they visit it. If they visit your careers page or your job listing page, you typically deduct ten points, because it’s indicating that they’re probably looking for a job. You can then add custom events, like, hey, they signed up for a trial, maybe, or, even if you had maybe used a tool. Like, if you have a tool where you’re doing a website grader, or a speed test, and they entered their URL, that could be an event that, hey, they pushed that through, and you could give them five or ten points for that. Downloaded a report.
And then you basically set a lead threshold where you say, “This person, when they’re below 65, let’s say – and that’s, again, typically the default – when they’re below 65 points, they’re really considered just a prospect. They’re hanging around. When they bump above 65, now we’re going to call them a lead, and you can do stuff with them.
One thing we do with Drip is if you get on our list and you’re really engaging with our stuff, in addition to the educational content that we’re sending you, we also subscribe you to a second campaign at the same time, that we call our – it’s our RTB sequence, “Ready to Buy.” That one has a little more Drip-specific stuff. It’s less education about marketing automation and less segmentation, and it’s more about, “Hey, this is why Drip is for you,” and, “This is what Drip can do for you,” and, “This is a comparison of Drip and MailChimp,” “Drip and Infusionsoft.” “Here’s how to sign up for a trial.” “Here’s how to click to get a demo.” There’s a little more sales talk. It’s not high-pressure, but it definitely leans in a little bit. The reason we can do that and feel comfortable is because these are the folks who are really engaged with our emails, so it’s indicating that they are actually interested in hearing about us.
The last piece in the marketing stage is something that you can do. Again, this is optional, but it’s interesting that, if you’re asking folks to do a live demo, what you often find is you have a lot of unqualified folks signing up for demos. If you can figure out what that pivot point is, where someone is a really heavily qualified lead, or that they’re worth doing a one-on-one demo, it’s pretty easy to segment them just by – you give them the form where they enter their email to sign up for a demo, their first name, last name. Then you ask them one question that’s basically like, “How many subscribers do you have?” or, “How many invoices do you send per month?” It’s whatever that pivot point is for you that, hey, if they send ten invoices a month, this person is worth doing a real, live one-on-one demo. And, again, when they fill out that form, they’ll select it, and that goes right into marketing automation. Obviously, Drip does this. Infusionsoft does this, ONTRAPORT. Then right in there, you can just say, “Hey, if that person filled out this value, then let’s send them a [Calendly?] link where they can sign up to have a one-on-one demo.” “And if it’s less than that value, then let’s actually send them over to do more of an automated demo,” because you’re going to get – 70 percent, 80 percent of your people are going to be less than that value because they’re just a lower-end tier, and you may not have the manpower to be able to do all the one-on-one demos.
That’s something we actually do at Drip. We’ve had a lot of success with it, and it’s something that you can only do if you’re segmenting. You can’t do this with older-school newsletter tools, like an AWeber, a MailChimp, a Constant Contact. They just don’t have the capability to be able to do this lead scoring and then to very simply, without writing any code, be able to put them in different buckets and send them different emails to move them along into the trial phase.
Mike [00:20:56]: Let’s start talking about the trial phase. What’s involved in treating somebody like a trial user? Obviously, they have to sign up for a trial, or download a sample chapter of an eBook; but what are the different things that you can do in there?
Rob [00:22:30]: Yeah, this is where you make the switch, right? You’ve segmented them into someone who has a lot of interest, and they have interest in your product now, not just in your space. They’re not just thinking, “Oh, I might need an email marketing provider.” They’re actually saying, “All right. I’m really going to dive in. I’m going to either compare you to other things I’m already using, or I’m doing hardcore evaluation.” The goal here is that you want to really convince them to consume the material or try the product, right? So, if they’ve downloaded a sample chapter, you want to switch from that marketing lens of “I’m just trying to educate now.” You want to totally cut that stuff off, in general, and you want to switch to now, “Hey, did you see what was in that first chapter?” “Have you done the exercise at the end of the chapter?” “Here’s some more information.” “Here’s chapter two,” maybe, even, if they’re engaged.
Or, if they’re trying your SaaS app, you need to find out that “minimum path to awesome,” that MPA that I’ve talked about before, which is what does this person need to do during their trial to get that endorphin rush of, “Oh, my gosh. My head is about to explode?” If it means that they need to activate an email campaign with a couple emails in it and get a form installed on their website and get at least one subscriber, then you figure out how to guide them through that. You’ve really switched modes here from marketing and education into much more trying to show them how to use the product.
It’s not an easy problem. It’s not an easy thing to do. Really, if you summarize it, it’s onboarding. You can onboard someone with a sample chapter. You can onboard someone with a SaaS app. You can onboard someone as a consultant to try to get them to spec out their project, or whatever; but each of those things is the mind-frame that you have to switch into when you’re treating someone like a trial user instead of just as a cold prospect, like you would with marketing.
Mike [00:24:01]: I think one of the key pieces of treating somebody as a trial user is essentially giving them an experience that they are going to be comfortable with such that they will give you money, and that ultimately boils down to trust. You want them to trust that you’re not only going to deliver, but that you know what you’re talking about, that your product does what it’s supposed to do, that you’re going to be responsive if there’s any problems. You want to make sure that, if there’s any sort of time pressure or time deadline associated with it, especially for, like, a time-limited trial, that you are giving them all the information that they need in order to succeed during that time frame. The last thing you want to do is give them the product and just say, “Okay. Let me know if you have questions,” because that’s generally not going to work. People are going to need a little bit of hand holding and, in fact, they want that hand holding. So, if you know that somebody has just converted into a trial user, then you want to give them the information that they need in order to succeed.
Along with that, I mentioned this earlier, if somebody essentially falls out of that trial user bucket, you treat them as a lost trial. That’s kind of a subset of this. You can also treat somebody as somebody who is a trial user who may be having some problems. Have they not done certain things? If they haven’t done certain things, you can use that with either lead scoring or tags to essentially notify your email automation system that this activity, or lack of activity, is going on and go back and reach out to those people to try and help them figure out what is holding them back from being successful with the product.
Rob [00:25:17]: Exactly. Those are all really good points. One thing I’ll add, and then we’ll move on to customer communication, is another tactic that you can use with trial users is figuring out which track someone is one. There might be multiple ways to get onboarded in your app, depending on the person’s goals. In Drip, for example, when you first log into your account, the very first time we have a guided setup. It says, “Are you trying to send emails to your marketing list, or are you trying to send emails to your trial users and customers?” There’s two buckets we put people in, and if you click that marketing list, then we send you down a different path of emails because it’s a different setup process, right? You don’t need to connect the API to Drip. You just need to get the form on your website; whereas, if you’re doing trial users and customers, then you either need to do an import, or you need to do some type of API interaction. There’s a number of different ways to do this.
But figuring out early on and then sending that one-to-few or one-to-one communication that I talked about earlier will have an impact on your conversion rates of people who actually do get onboarded. The cool part is I’ve watched it over time with all of my SaaS apps that I’ve worked with. And the number of people who actually do get onboarded and get to that “minimum path to awesome” that you define, it highly, highly correlates with the number of people who convert to paying customer.
Mike [00:25:18]: What’s next after trial user?
Rob [00:26:32]: The next two stages are customer and then your best, or your repeat, customers. There’s actually a lot less to do with these folks. You definitely want to keep them engaged, and you want to let them know how you’re improving the product. That’s something big that we do with SaaS is that, since they’re continuing to pay the same amount month to month and you’re improving the product, they’re actually getting better value over time. I think that’s probably one of the first things that you’ll want to keep communicating to customers, because basically you’re trying to retain them and you want to show them that they’re continuing to get value and that they stick around. So, sending out a feature email every four to six weeks, based on what you’ve launched, showing them what you’re doing for them so that they do stick around is one thing that you’ll want to be sending to your customer list.
You want to send similar emails to your trial list, but it’ll be couched a little differently, right? It’ll say, “Hey, look at the cool stuff we just released. Maybe check it out,” but you’re phrasing it differently than you would, say, to customers, which is, “Look what we’ve done for you,” and, “You should really stick around.” You can send that same email to your marketing list, but with your marketing list you want to go much less in-depth. You don’t want to really show them how to get onboarded with it, because they don’t care yet. Right? They haven’t used your app. They haven’t logged into it. You just want to give them a high-level view with some flashy screenshots of, “These are the cool things we’ve rolled out.” But it is a different thing, so having that segmentation is powerful.
Mike [00:27:03]: And that essentially allows you to reuse the existing content that you’re creating, so instead of just educating your existing user base about what new features you’re adding, you are educating your marketing list about what new features that they could potentially have access to if they were to sign up for a trial of your product and start using it. As you said, it’s a difference in how you present it to them, but, in essence, the basic concept behind those emails that you’re sending is going to be very similar.
Rob [00:28:16]: Right. And then something else you’ll want to do is, if they’ve done a one-time purchase, let’s say they purchased an eBook, then you’ll want to lead them down the product path, right? You want to pitch your next product, because if they purchase an eBook, then maybe they want to attend live training, or a conference, or purchase a video course. You basically want to pitch them on your next product, because these people are much more likely to buy that next, maybe more expensive product that you do have. If you’re a SaaS app, that’s obviously not what you doing, right? You’re not going to tend to pitch them on the next product, but maybe you want to pitch them on an annual plan: get 12 months for the price of ten, and you get all that cash up front so that you’re able to go out and buy ads and do other things.
Basically, you’re offering them some value by showing them how the app’s improving, and then you’re basically pitching them on some other ways that they can become deeper engaged into your funnel, become more committed users and generate more cash for you in the short term.
The other thing that I like to do is to ask for referrals. This is the point where, if people are in and they’re engaged and they’re pretty happy – you don’t want to ask someone for a referral when they’re two weeks into their trial, so don’t do it then. You want to ask for referrals really when they become customers and then definitely again once you’ve determined that they are one of your best or repeat customers.
Mike [00:29:11]: A lot of that capability has to do with the timing of the emails that you’re sending, so a lot of this is going to be based on sometimes just customer actions; but sometimes it is going to be situational, based on what your business is doing. Other times, it’s situational based on what the customer themselves are doing. For example, if their credit card is coming up for a renewal, that might be a good time for you to pitch an annual plan so that they won’t have to worry too much about their credit card expiring. It may be one of those things where you get them to not only upgrade to an annual plan, but you get their updated credit card information as well. Because you’re giving them a discount, then it helps to push them in the right direction.
But all of this is just simply about having a little bit more intelligence about what your prospective customers are doing and what level of activity they have and really being aware of where they are in your marketing funnel.
Rob [00:30:13]: And then to wrap this up, there’s this next level of customer, and these are your best customers, your repeat customers, depending on what you’re selling. If it’s one time, these are going to be your repeat customers who’ve bought a lot of your stuff. You get to know these folks by name. In SaaS, your best customers are maybe people who are on your bigger plans, folks who give you a lot of helpful feedback and work with you and spread the word. These are folks that you want to reward with some stuff.
Something that we do is we’ll often give our best customers early access to new features or inside information, so I have a small group with a tag called “Drip Insiders.” These are consultants who are actively getting people onto Drip, and I’ll send them stuff several weeks before other people are going to know about it. They love to have the inside track so they can look to their customers like they’re knowledgeable. We give them alpha access to new features we’re rolling out; and so, again, you’re giving them value. You’re not just always pitching and asking for stuff.
So, think about what you can offer your best customers in a way that makes them feel like they have exclusive access to something and like they’re maybe getting a little more than just the other customers.
Mike [00:30:39]: And on that note, one of the pieces that you want to make sure of is that you’re treating this like a relationship. A relationship will go both ways, so you don’t always want to be taking. You want to be giving as well. If these people are already customers, if you’re already charging them, then you want to be giving them as much value as possible so that they feel like they’re being taken care of, and they feel like not just a good customer, but they are getting value out of it and it’s in their favor.
Rob [00:32:12]: Right. What you’ll find over time is that you develop a genuine relationship with these folks. You don’t view them as subscribers or some aggregate thing. Everyone on that list is a person. I think that beginning marketers, early marketers often make that mistake of just thinking too much in terms of aggregate numbers. Pretty quickly, you’re going to realize that everyone on your list is a person and that this is about building a relationship. So, by giving these best or repeat customers something exclusive and making them feel good, then you can sometimes ask for stuff. Sometimes you can pitch a higher-end product, or a higher-end tier or a done-for-you, productized consulting service that adds on to your SaaS that’s very expensive, but that these folks are much more likely to use. Or, again, you can ask for referrals. That’s another thing that we commonly do in our best customer lists. We say, “Hey, obviously, you guys rave about us. You tell a lot of people. What’s another way that you can get the word out? Can we do a joint-venture email?” “Can we do a co-webinar?” “Can you tell three friends?”
There’s a bunch of different ways to do this, but this is when it’s valuable to know who these people are. Because, again, you don’t want to send any of those emails to people in your marketing list, or people in your trial list. You have one goal for them, and it’s to get them to the next stage. And by the time they’re here, your goals change, and that’s why we wanted to talk about segmenting your email list today because this is so critical, and so many people are not doing it. And with the tools that are coming out now, these email marketing automation tools, it’s becoming easier and easier to do it.
It’s just a no-brainer. The benefit that you get from this is tremendous. If you’re listening to this, and you’re thinking, “Oh, my gosh. This is blowing my mind,” it really is. The more you do it, the better results you will get.
Mike [00:33:08]: I think the last piece of being able to know who your best customers are is that it allows you essentially a focus group of people who you can talk to and reach out to on an individual basis to ask them questions about what other things that they need. In essence, to them it looks as though you’re reaching out to the to help provide more value; but at the same time, moving forward, if you’re able to provide that value to them and if they are your best customers – however you define “best customer,” whether it’s the amount of money that they’re paying you, or the amount of usage on the product. It depends on what stage your business is. I think later on down the road, you’re more interested in the amount of money versus earlier on, you want the most active people so you can gain knowledge; but that knowledge will help you to direct the future development of the products to gain more of those type of people. That’s really what you want, is you want to be able to identify who your best customers are, whatever the criteria for that is; and to be able to zero in on those people and get more of them.
Rob [00:33:54]: And I was very careful, as I’ve outlined this episode and as we went through it, to not make this just a big sales pitch for Drip because that’s not the intent. The intent is to give you tools that you can take and use with any automation provider. So, there is ActiveCampaign and Infusionsoft and Drip and ONTRAPORT, and there’s others out there. In my opinion, if you’re listening to this podcast, Drip is probably the best one for you. We’ve heavily focused on SaaS apps, downloadable software, consultant freelancers, and people selling online information products, like eBooks, online courses or, if you’re a blogger, selling a digital product online.
So, I’d encourage you, if this does pique your interest and you’re either unhappy with your current provider, they don’t give you the automation you need, or that you haven’t tried an automation provider before, I’d encourage you to come check out Drip: getdrip.com, and we will definitely take good care of you.
Mike [00:34:15]: I think that about wraps us up. 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 music is an except 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 264 | How to Identify New Product Ideas
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to identify new product ideas. They discuss some of the different stages you will encounter while researching a new business idea and some techniques to get the most out of it.
Items mentioned in this episode:
Transcript
Mike [00:23]: In this episode of Startups For the Rest of Us, Rob and I are going to be talking about how to identify new product ideas. This is Startups For the Rest of Us, episode 264.
Welcome to Startups For the Rest of Us. The podcast 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 [00:24]: And I’m Rob.
Mike [00:24]: 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 [00:28]: Man, feeling a bit chaotic. If you listened to last weeks episode of ZenFounder you’ll have more details. But basically me and both my professional life and the personal life with the family just have a lot going on right now. Unusually large amount of chaos in terms of we’re selling our house, we’ve moved in with some friends temporarily while that’s going on. And trying to find a new place to live here in Fresno. Moving to a different part of town. And then have a bunch of transitional stuff going on. So, just trying to keep my feet under me at this point in time and just feeling overwhelmed and trying to maintain my sanity. So hopefully there’s some things that are starting to get checked off the list over the next few weeks. Somethings that close. And in fact, I don’t know if I mentioned on the show here, there was basically a patent troll that had sued me like a month or two ago. And that resolved itself pretty quickly. But there’s just been a bunch of bizarre stuff like that that’s come out of the woodwork right in the midst of this. And luckily, things are starting to take care of themselves here.
Mike [01:20]: Yeah, it’s always hard when you have several major things going on. And moving is one of those things that’s, I think, on the higher end of the major stressors in like. I think the other one is getting married and having kids. Those are two of the other ones. I forget what else. Oh, changing jobs is another one. But I imagine getting sued by a patent troll would be up there.
Rob [01:38]: Yeah, indeed. It definitely came as shock and it was for an old product done at invoice that I don’t actually even own anymore. But these things take time and then you have to do research and you have to not freak and then figure out how to handle them. So it’s always a learning experience, I guess.
Mike [01:52]: Cool.
Rob [01:53]: How about you?
Mike [01:54]: Well, I’m finally almost caught up with all the podcast episodes I’ve missed while my phone was gallivanting around Barcelona. So I’m down to under five behind at this point. Hopefully, from now on I’ll be caught up on a weekly basis as opposed to several weeks behind everything.
Rob [02:07]: So what are we talking about today?
Mike [02:09]: Well today we’re going to be talking about how to identify new product ideas. And we had a question that came into us from Twitter from Jason [Sweat?]. And he was essentially asking how to perform research to find a new business idea. So what we’re going to do is we’re going to go through a couple of different various stages of what that looks like. I mean the basic process is you do some idea generation, idea filtering, validation, and then execution. I think we talk a lot about execution on the show so we’ll kind of leave that off the list here. But essentially what we’ll do is we’ll walk through the idea generation, idea filtering, and then the validation phases. And walk through what each of those things look like and how to go about them in order to identify a new product idea.
Rob [02:48]: Sounds cool. Let’s dive in.
Mike [02:50]: So the first step is to look at idea generation. And you just have to keep in mind that when you’re generating ideas, this is an iterative process. You’re really looking for quality over quantity, essentially. Because the way that this is set up, you do the generation and then you start filtering things based on different criteria. So really what you’re just doing here is brainstorming. And you don’t want to prematurely eliminate things that might be viable ideas. And the main reason for that is because if you have an idea and you immediately cross it off the list, then essentially what you’re doing is you’re not only crossing that idea off the list, but you’re crossing every potential variation of that idea off the list as well. So when you’re brainstorming you really want to start looking at some of the past problems you’ve experienced. The current problems that you’re having, any interests that you have, and products or solutions that you use that you don’t like for one reason or another or you wish did things a little bit differently. Anything where there’s a spreadsheet handoff for a signature or approval or workflow needed, those are places that are good places to start for trying to generate some of these ideas because they lend themselves easily to building a software product.
But the other thing to keep in mind is that when you’re generating these ideas, you don’t necessarily have to restrict your ideas just to software. So you could, for example, go down the training route, or education route where you’re building training videos or tutorials and things like that, you’re going to sell to a perspective buyer.
Rob [04:09]: All right. So talk about the process.
Mike [04:11]: So when you start taking a look at this process, one of the things that you want to do is you want to start considering specific market verticals or people to serve. And that’s just one place where you can start. And there’s obviously several different places you can start. I talked about some of them before when you’re brainstorming. But essentially you just want to pull out something like a Word document or a spreadsheet and start hammering out these ideas. And then any variations that you can think of. And you want to push these out as quickly as possible. So if you write faster than you type, then feel free to write them. If you type faster than you write, like I do, feel free to type them out. But the idea is to not only come up with those ideas, but come up with the variations of them as fast as possible. So they might be based on a specific market that you want to serve. If you are already into the real estate market, for example, you might want to start there. Or if you don’t like the real estate market, for example, you might want to look at another one that you’re interested it. Whether that’s something that you’ve had any experience with in the past or just something that you want to learn more about.
You can also start taking a look at products that are out there that you like or admire. Or dislike, or don’t like for whatever reason, and you want to create a new version of it that performs in a different way. So you start taking those ideas and as you’re putting them down, typically you can think of variations of those ideas. So for example, if you start thinking about, let’s say, accounting software for example. Accounting software is a very broad idea, but how can you slice up that idea into smaller pieces of it. You can think about it in terms of sending invoices, sending receipts for things that people are purchasing. You can also think of it in terms of just capturing payment information, for example. There’s a lot of different ways to slice up that invoicing thing.
In addition, you could also go down the route of saying oh, well I just want to make it easy for people to issue purchase orders or to send purchase orders back to the company. As I said, there’s a lot of different variations of this and as you start iterating through that list, you’re going to find that as you come up with an idea you can probably come up with three, four, five, maybe even ten different variations of that idea for a specific business. So some of these are going to be based off of core business functions But other might be based off of just functions that somebody in the business might be performing. So whether that’s an administrative assistant, a software developer or marketer, etc. Each of them has a different job and a different set of tasks that they do. And if you can identify some of the problems that those people are facing, then down the road, you’ll be able to easily come up with a customer avatar for them. But those are places where you can concentrate to just start getting ideas down on paper.
Rob [06:42]: Yeah, and when I talk to people about idea generation, I find that some people say they just have too many ideas and that business ideas are always flooding their mind. And others say it’s just so hard to come up with ideas. I think that the folks who say they have tons of ideas always flooding their mind, my guess and in short conversations with the few of them, my sense of it is that they have a lot of business ideas but most of them are not very good. And so, what I tell people across the board is whether you think of a lot or not a lot, put them in a notebook, put them in a text file, put them somewhere and save them because these things are fleeting and they go away really quickly and you’ll forget some of the good ideas you have. And it’s also pretty easy to come up with a new idea and think that it’s great and hang on to it and not allow yourself to see the other ideas you’re coming up with at that time. But later on you may invalidate it and then you kind of have lost all those other ideas. I think being able to make a list of ideas over time that you kind of maintain and nurture, and then being able to hit it when you’re ready and actually look then with fresh eyes on this list of things that maybe you’ve collected over the course of months or years, I think is a pretty powerful way to- you kind of get some context around it. You’re not blinded by the passion or the madness of this idea that you’ve just come up with.
Mike [07:55]: So once you have this cache of business ideas that you want to start taking a look at, the next step is to start filtering those ideas. And the way that I like to go about filtering these ideas, as Rob just kind of pointed out, if you have a lot of ideas, it doesn’t necessarily mean that many of them are good. I mean you can have plenty of ideas and maybe only two or three of them, if any of them, are good ideas. So the basis for idea filtering is to walk through each of those ideas and develop a list of pros, cons, and disqualifiers for each of those ideas.
Something constitutes a pro for an idea if you have domain expertise or you have personal contacts or the engineering effort for something like that is going to be low or if you have passion for the idea or the problem space. Or if there is existing products out there, the product or the problem that it’s trying to solve are easy to explain. These are all considered pros for an idea. Now most of your pros are going to be able to be applied across all of your ideas. All of the ones that I just gave are examples of that kind of thing. So for domain expertise, let’s say that you’re going to come out with invoicing software that just sends out invoices, kind of like FreshBooks or something along those lines. If you have a lot of expertise with something like that, then you might give that a domain expertise of eight or nine, because maybe you’ve built three or four of them before for previous customers or clients when you were doing consultant work. But that exact same pro could also be applied to something where you’re, for example, developing a product around selling real estate, which maybe you don’t have any experience there, so you might only rate that as a one. And the idea here with filtering is to apply the pros, cons, and disqualifiers to all of your different ideas. And essentially, what that allows you to do is it allows you to rank your ideas against one another.
Now ranking the ideas against one another, the intent is to help make this more objective. It’s not because you want to rank them and say this is the best idea. Rather, you want to give yourself a quantitative approach to being able to rank them and how close they are to one another. So if you score your ideas and something comes out to, let’s say, 30, versus another one that only comes out with a score of five. Well clearly you want to go after the one that’s 30. But if something only comes up with a score between 25 or 26, and the next one is a 23, for example, it becomes very difficult for you to say, well this one is clearly better than that one. So again, you want to create these pros and cons in such a way that they are much more objective.
So in terms of cons, some of the things that I’ve used in the past are looking at the number of competitors for different products. Or if the concept or the difference from existing solutions is very difficult to explain, it’s a huge amount of engineering effort or it’s going to take a long time to bring the product to market. Those are the types of things that you can generically apply as cons across every product idea. But there are also ones where you might look at that and say, well this is a con but it only applies to this particular idea. So, for example, you might decide that in terms of the cons, there might be an advertising component. And that’s the [monetization?] strategy for a particular idea. That’s probably not a good idea to use an advertising strategy for most bootstrapped products. But, again, that’s not something that’s going to be generally applicable across most of your other ideas. You could try to apply in most of them. Or you’re going to say I’ll give it a score of ten because there’s no advertising component. You can do that as well. But sometimes those things just come out and say, yeah this doesn’t necessarily apply to this particular idea.
Rob [11:22]: Yeah, I’ve actually done kind of a matrix like this before. I struggled with it because when I did the zero to tens for all the categories, the pros and cons, I even had multiple categories of like my level of interest versus how big I thought the market was, versus how easy I thought it was to reach. And then when I got to the end I had two or three that were almost exactly tied and I realized that since I wasn’t able to weight different factors, that it like, I don’t know, it didn’t work for me, I guess. I shouldn’t say it didn’t work. What I should say is that it didn’t help me make the decision altogether. What it did help me do was rule out the ones that were overall just had low results or low scores. So it did help me narrow down to a few. And then from there I really looked at did I want to be working on this thing for the next two to five, to ten years. And that started narrowing some others out as well.
Mike [12:18]: Yeah, and that’s exactly the point of scoring these different ideas is not to necessarily point you and say this is the idea that you should look at. But it’s really to start eliminating some of those lower tier ideas that aren’t anywhere remotely close. And then the last step of the idea filtering process essentially apply and any disqualifiers. So if something is a two-sided market or it’s B to C or there’s customers with a lengthy sales cycle or they’re going to be difficult customers to deal with, maybe you’ve dealt with them before and you know that they are just very demanding and not necessarily willing to pay for things. Those are the kind of things that you might look at and say well, this is a property that I’m going to apply of a disqualifier to this particular idea. And it may not even matter how much you work or how hard you work on a particular idea, some of these disqualifiers are essentially blanket statements to say, not that it’s impossible, but it’s much more difficult than it probably should be and there are most likely easier ways to make money.
Rob [13:12]: There is some other disqualifiers. We’ve talked about these in the past. But things that require virality or a network effect in order to work. If you’re going to bootstrap it, I mean, you’re really looking at a long shot if you are requiring virality and a network effect. Unless you know how to do this. If you’re Matt Inman or you’re Sean Ellis or you’re someone who knows how to do this, then that’s another story. But if this is your first time, I’d say don’t start with that type of app. Another one is having indirect revenue streams. We’ve talked about having a two-sided marketplace where you’re taking three percent, five percent off the top. Really hard to make even a funded business at that level. So that’d be something that I’d instantly kick off the list. Or having no revenue stream apparent. Again, if you’re bootstrapping, self-funding, since you don’t have a bucket of funding that you’re going to be able to live on and hire employees on, that’s not going to be a good way to go. And then having a bunch of revenue streams also, I don’t know if it’s a disqualifier as much as it’s a really tough way to go because it’s just too complicated. Because you’re just trying to get your legs under you at this point. You’re trying to figure out what people want, can you build it, trying to draw in new customers. And if you’re trying to then sell through multiple avenues, it gets really complicated really fast. So these are all things that I would push those ideas down on the list unless they don’t have these attributes.
Mike [14:25]: One of the things that I briefly mentioned earlier was the process of scoring these. And as Rob pointed out, this essentially becomes a matrix for you to help make a decision about what to do. So to help you visualize kind of what this would look like, if you were to create a spreadsheet, along the left side of the spreadsheet you’d have a list of what all of your ideas are. And then across the top of it you’d have all of your pros set up and then followed by all of the cons. And within the cells that meet up where the pros and cons cross with the ideas, you’d essentially put a number that says how well you could execute on that particular idea for that pro or how much it helps you versus over on the cons side, how difficult it is. So essentially what you have is there are a set of pros and let’s say, there’s four of them, they all have eight, and then there’s a set of cons and they all have five associated with them. Well obviously the numbers are going to come out in such a way that that’s going to be a positive number, assuming that the pros and cons are equal. But it could very well be the other way as well. And what you want to do is you simply want to add up the scores across the board. And ideally, what’s going to happen is the number of pros that you have is going to equal the number of cons. But there’s a lot of cases where this simply isn’t going to happen. In those cases you can either just let it be or you can say, okay, well add or subtract the difference between the number the pros and cons and then multiply by five, either plus five or minus five depending on whether you’ve got more pros or more cons to essentially establish a baseline for you that helps you level set these things against zero. So if you have ten pros and ten cons, you’re best score would be a 100. You’re worst score would be minus a 100. And then it would be right in the middle for kind of an average idea. And what you want to do is you want to order these once you’re done by their final score. You want to validate from the best score down. And as I said, some of these scores could come up very, very close to one another. At that point, you can kind of just make a judgment call or figure out which one interests you a little bit more. So if the difference between the scores is very small, you can say, hey I’m going to try that one first.
And what you want to do is you want to be consistent about your optimism or your pessimism for each pro or con that you put into this matrix because otherwise, what can happen is you are essentially artificially leaning your scoring mechanism towards an idea or against it.
Rob [16:36]: Yeah, and the idea here, it’s to rank these in a way that starts to bring some clarity to it. This is not an absolute list where the top one on the list is the one you should do and the bottom one you should absolutely not. But I would say that if you have ten and there’s kind of a spread between them, typically there’s going to be two or three that are a lot further ahead than the others, then that’s your cluster and that’s what you should really think about doing. I also think depending on what stage you’re at it depends on how much you really want to do the idea. So let’s say you’re at a step two or a step three where you’re really diving all in and you’re going to be building an app for many, many years, then I think you really need to want to enjoy the domain that it’s in and want to hire employees in that space and you want to hire customers in that space. I think if you’re really early on and you’re just looking for your first thing and you want to make a few hundred bucks a month or thousand, two thousand bucks a month, then I think that your interest in that space does not have to be as high because this is just a stepping stone to something greater.
Now there’s also the thought that long-term, if you do launch four or five products as you step up, it would be nice if they all focused on the same niche or the same market, same customers. I think there’s value to that. That’s something to consider as well. However, don’t let that paralyze you and don’t let it make you think oh, this is a good idea but do I really want to work with construction companies for the rest of my life, because that’s maybe not a decision that you have to make now. Any excuse that you find to be paralyzed or to stop and think too long or to basically procrastinate on this stuff is an excuse that will keep you from launching. And so you have to figure out which of these things you’re putting in place just as mental barriers on your own and get rid of those so you can charge forward.
Mike [18:11]: So once you’ve scored and essentially filtered your ideas, what you want to do is move on to the idea validation stage. And this involves making a list of your assumptions about the idea and making a determination as to whether or not you need to validate each of those assumptions. So some of the assumptions that you might come up with are how much time somebody spends on this particular problem. And it’s very easy to validate some of these things and others it’s going to take you a lot longer to validate. But for something like how much time somebody spends on the problem, you might assume that it’s an hour or two, but at the same time, just a quick 15 minute conversation could reveal to you that oh, they only spend ten or 15 minutes on it and that’s only once a week or once every two weeks. So it essentially helps to level set what your assumptions are about the problem space with what the reality of the situation is so that you can make good decisions moving forward.
Another thing that you can start asking people about it whether or not they use existing solutions, are they paying for those solutions. If they are how much are they paying for them, does it work for them, what do they like about it, what do they dislike. And once you start getting further into those conversations, you start asking questions about who makes the decisions about paying for those types of solutions, what schedule do they make those payments on? Do they pay a one time fee for them, do they pay monthly, do they pay an annual fee for it? And as you start going through this conversation, you can start asking more direct questions about what it is that you’re bringing to the table and whether or not they’re willing to switch away from what it is they’re currently using to a different solution. And that’s, I think, and important thing that some people don’t necessarily consider is what is somebody doing now versus are they willing to switch. And one of the things that I’ve heard in the past in talking to people from Fog Creek Software, for example, one of their biggest competitors is people using spreadsheets. Spreadsheets tend to be free for the most part. So competing against free can be somewhat difficult for an organization, especially for a bootstrap company. If you’re competing against Notepad, for example, it ships on every Windows PC and Macs have a text pad editor. So it’s hard to compete with something like that. But if you have a definitive list of benefits that essentially help justify somebody moving from that to your product, then it might help push things in the right direction. But you have to have those conversations. You can’t just assume that somebody’s going to switch from whatever they’re currently using unless you ask them directly.
Rob [20:30]: Yeah, I think Pen and Paper or Excel spreadsheets are the competitor of the majority of our apps. You have a proposal app, you have invoicing software, you have accounting software. Any of those apps, I mean unless it really is something maybe like email marketing software where you actually need something to manage that, can maybe not be competed with [via?] paper. But I think that this is always something to keep in mind that you’re going to have people who are kind of at the forefront. It’s your Geoffrey Moore Crossing the Chasm idea, right? Where you’re going to have early adopters who really want to move into a nice tool. And then you can have the laggards, all the way at the other end, that are really still doing it on pen and paper. And then you have the massive middle. I forget what it’s called, but it’s the folks who might be using spreadsheets right now. And you got to figure out where your technology is in the adoption life cycle in order to figure out maybe how much viability there is an how big- the market ultimately may be huge, but where is that market in this space, right? It’s like where are people already at the middle of the curve and they’re really adopting it en masse. Or is it something more like wow, there’s really a big market but only the early adopters are in it right now and it’s going to be another year or two until this niche or this market really starts attacking it.
So think about, let’s say, lawyers for example. The market for lawyers and maybe for software for lawyers is very large. But from what I’ve seen and I’ve had a couple people launch that I’ve known, that have launched apps into the legal space, lawyers tend to be laggards. So they’re still not really keen on doing a lot of SaaS apps. There certainly are some that use SaaS apps. There’s some that do SEO. There’s some that do email marketing. But the bulk of them do not. And so when will that happen? It’s going to tip eventually, but you don’t know if that’s going to happen now or later. Whereas if you look at web designers, web developers, online marketers, just to name a few examples of people who tend to, just as a group be early adopters, a lot more of them are paying for SaaS already. So that’s why those markets tend to be a little easier to get to use a SaaS app. Now it’s also a lot more competitive to market to them. But these are the types of things that you have to weigh and look at. The existing solutions they’re using versus their willingness to use a new solution.
Mike [22:32]: Now once you’ve started validating some of the base assumptions about the problem space itself and whether or not people will pay for that, then you have to start asking the questions about whether or not they will pay you for that. And I think that is a very important distinction because you can build something and just because you’ve built it doesn’t mean that they’re going to be willing to switch away from whatever they’re currently using. So even though you may have identified some problems with a competing product, there could still be some pretty big deal breakers in terms of what you plan on offering that are going to prevent them from switching. Because there’s always going to be some sort of switching cost, especially if they’re using a current tool that’s in the market. How much of the functionality of that tool that you’re going to need to duplicate or build before they’re going to be able to switch over. And every single one of those pieces that you need to build before they will switch is essentially a dealbreaker to them and it’s going to extend your timeline to getting them up and running on it. So there’s this minimum feature set that you’re going to need to implement and the only way that you’re going to find out which pieces are important to then, without assuming those things, is to ask those people upfront. You need to ask them what are the dealbreakers, what’s the minimum things that you absolutely need in order to start using this and have it provide value to you.
Another important piece to ask is how the tools currently integrate into their workflow, how are they using it today and how does it affect their work to use it in a different way. Especially if you’re planning on implementing something in a different way. So, for example, if you are hosting a solution versus something that they are installing on their desktop, that to them is going to be a fairly different paradigm. Both in terms of purchasing and in terms of usage because they may be disconnected from the internet for parts of the day. Maybe they’re on their phone for most of the day. Those types of things can prevent them from using a new product that is in a slightly different paradigm than what they’re used to.
Rob [24:25]: And the point to remember is that what we’ve just talked through is a list of assumptions about the idea or a list of questions that you have and you’re trying to find the answers. Perhaps for multiple ideas at once. Now, I’m personally not very good at trying to sell multiple ideas at once. So I would pick one, focus on it, really hit it hard for as long as it takes. And it should be a matter of weeks because this should be something that’s at the forefront of what your doing, right? This is not something that you kind of put on the back burner or you put on the side with other things. If you’re going to be serious about this and you’re really going to try and validate an idea this way, rather than doing it- let’s say you find a tiny niche and you find some organic traffic and you’re going to put up a landing page and start building a small site and validating it, that’s kind of a different way. You’re not really talking to end customers and you’re kind of seeing can I get in front of a channel of traffic. And that’s a different way to validate ideas. What we’re talking about here is more traditional customer development, where you’re talking to people. This is a big time investment and it’s something that you need to be serious about and you probably want to move it along quickly because if you lose momentum on something like this, it just has a tendency to take forever.
Mike [25:31]: I think the last key piece of this is to not assume that the idea that you’re thinking of or the thing that you have in mind is actually what people want. In going through the conversations with the customers, you may find that the idea that you have or the product that you want to develop is not something that they need. But they need something related. Or they just don’t need anything in that area at all. So keep in mind that just because you have the idea doesn’t necessarily mean that that’s the end goal. It’s not the place that you’re going to eventually go. It could be something related. It could be in a completely different direction and you need to, essentially, cut your loses and move on before you’ve gone in and invested a huge chunk of time in developing the product.
Rob [26:08]: Remember that validation is hard and it’s not an exact science. And that there’s a certain element of gut feeling to it, but you don’t want that gut feeling or especially your optimism to overpower warning signs. Or you also, if you’re normally a pessimistic person, you don’t want to throw every idea away at the first sign that something’s not going to work out. It really is this balancing act and you get better at it the more data that you see and the more of these you do. Like anything else, it’s a learned skill. So that wraps us up for today. This whole episode was outlined based on a question sent to us. And 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 Out of Control by MoOt. Used under Creative Commons. Subscribe to us in iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
