Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about their takeaways from Microconf Europe 2015.
Items mentioned in this episode:
- Microconf Europe Recap
- Microconfeurope.com
- Product People
- Bootstrappedweb.com
- LeadFuze
- ZenFounder
- Jitbit
- Drip
- How DNS Works
Transcript
Rob [00:00]: In this episode of Startups for the Rest of Us, Mike and I talk about our key take aways from MicroConf Europe 2015. This is Startups for the Rest of Us Episode 253.
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 [00:27]: And I’m Mike.
Rob [00:28]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So [where this week?], Mike?
Mike [00:33]: Well, with the exception of the loss of my phone in Barcelona, I think it’s been a pretty good week.
Rob [00:38]: Is that right? Yeah, so MicroConf Europe- this is our third European MicroConf, it’s our eighth MicroConf in total, and the last two years we did it in Prague. This year we did it in Barcelona, and you left your phone in a cab.
Mike [00:51]: Yes. It was one of those situations where there was a series of unfortunate events like leading up to it, and as I got out of the- had any of those things not occurred. So for example, if my SIM card had not like needed a password reset because the phone itself died and I needed to put in the PIN code again, but then I lost the card that has the PIN code on it so I couldn’t activate it. So I was walking around with a phone that couldn’t actually connect to anything, and I could have remotely said, “Hey, go do this.” But my phone is floating around in Barcelona some place and as I got out of the cab, I had my phone in my hand and I pushed off, and I must have opened up my hand and I closed the door, and then I realized. I was like, “Wait, where is my phone?” and as the cab is going away I was trying to run after it. I could not catch it.
Rob [01:30]: [?] Well, and the funny thing is is our conference coordinator, Xander, did the same thing two days earlier and left it in a cab, and he wound up getting it back, right? Somebody picked it up and took it to a cafe and he wound up getting it. So it’s a bit of a bummer, man. Hold on to your cell phones in the cities.
Mike [01:43]: Yep. I was so close. Like I said, it was a bunch of things that happened, and they just all happened just right, and that’s how I lost it. I know exactly where it is actually. It’s in that cab.
Rob [01:53]: So we got a lot of comments this year that kind of indicating that folks who had been to at least one of the prior Europe conferences. Some people had been to two prior- saying that they felt like this was the best European conference we had held. And I don’t want to get too far into inside baseball, but what do you think about that? Why do you think that’s the case?
Mike [02:14]: I think there’s a lot of reasons for it. I don’t think there’s one thing you can point to and say, “Oh, that’s the reason.” I think it was a lot of little things that added up. The first thing is obviously this is the third time we’ve held it over there. So we get a little bit more experienced over time at hosting a conference in Europe because we hosted in Vegas but we kind of have feet on the ground here so it’s a bit more difficult to do it over there. But at the same time, we kind of upgraded. I feel like the location of having it in Barcelona, it was a better option than Prague partially because it’s at the end of August and it’s warmer. The climate there is just better, it’s more conducive to having things outdoors. There was a lot of stuff kind of readily available in terms of being able to go out and go to dinner and things like that. And then the returning attendees, as you build up a conference and more people are returning, I think that that lends a certain atmosphere to the conference itself. And I think even if you held it in the same place, it would get better naturally over time because of the attendees. But as more of those people come back, it lends itself to a better atmosphere.
Rob [03:15]: So we want to talk through some key take aways that we brought away from the conference. We also heard from a lot of the attendees some of the key take aways they had, and I think we’ll kind of integrate them here. If you’re listening to this and you’re interested in reading through a full recap and the detailed notes from each of the talks, you can head to microconfeuroperecap.com, and that is our designated note taker for the Europe Conference, Christoph Englehart, and he has published a detailed note section on each speaker. So if you wanted to dig into any one of the talks that we mention, that’ll be the place you’ll want to go.
So to kick us off on day one we had Justin Jackson from Build & Launch podcast, Product People podcast, and he talked about marketing for developers because he’s writing a book on the topic right now. And he had, I think it was ten different recommendations for getting your first hundred customers.
Mike [04:07]: Yeah. There was a lot of actual stuff in there, and I think some of these were just completely non-intuitive, and he had these really neat examples. One of which he was using Google Images, not to manipulate, but basically gain attention for images on his website. The proof of concept that he used was if you go to Google and you search for “nerd mullet” in the images, it’ll pop right up, there’s a picture of him from high school, and it’s just really fascinating these little tidbits that you can use that I don’t think most big companies are going to do those types of things, but small companies have the capability and, I guess, the desire and need to do those things in order to stand out from those bigger companies that have a lot more resources. So it was really cool to see all the different tactics and things like that that Justin had put out there for people to take away that they can implement, and none of them were terribly difficult to do. It was just, “Oh, that’s really insightful; let me write that down.” I heard a lot of people saying, “I’m going to go do this” or “I’m going to go do that” based on some of the things they heard from his talk.
Rob [05:08]: Yeah, there were a couple of things that I liked about his talk. Number one is it was ten discreet tactics and you could kind of pick and choose which one you felt might work for you. The second thing I liked is he used the example of a MicroConf attendee. He actually used their website or their business in each of the points to say, “This is how he could specifically apply it.” And so it wasn’t just throwing out tactics, but it was actually trying to weave it into a story. If anything I would have liked to have seen more examples because there was the one website. But if he had picked maybe two or three, and he would have had time to do it, right, to give examples for each of the tactics for two or three websites it would have been, I think, even more valuable.
Mike [05:45]: Yeah, and I talked to him. He actually has each of those examples going into his book so I think they just didn’t make an appearance more than anything else. I’m almost positive that he has them.
Rob [05:53]: Got it. Yeah, I would agree. So our second speaker on day one was Brian Casel, and he was talking about productized services and the reason we wanted to have Brian out is because he has a productized course, it’s a video course, and ebook and a Facebook group and stuff, and he’s from the Bootstrap web podcast, and now he writes Audience Ops. The reason I wanted people to hear about productizing is I think folks often want to make the leap directly to software, and I think if that’s really what you want to do, that’s okay. But I think that knowing that there’s this alternative step that you could take to basically productizing a consulting service is really valuable. And Brian has experience with that because both his previous startup and his current one he’s working on are both productized services, and then he had a bunch of examples from people he knows including yourself, including Justin McGill, who’s running LeadFuze, and there were several others. And so it was cool that- I liked that he outlined the concept and then he just started throwing out examples of exactly how you guys have done it. In your case, it was like building the software first and then turning around and adding the consulting services later to make it more valuable. And in Justin McGill’s case with LeadFuze, it was doing the productized service, it’s outbound e-mail, doing that first, and then going back and launching the SaaS later, which he did just a few weeks ago. And there were other examples like that, so I really liked the structure of his talk, and I liked the concept was well communicated to the group.
Mike [07:13]: Yeah, I heard a lot of good feedback from different people who were thinking about launching something or building something, and his talk kind of shifted their focus to, “Huh. Maybe I don’t need to write any of this” “Maybe I can essentially just offer to do it as a service for people and then build tools to do the automation afterwards as I learn how to do those things myself and I understand exactly what it is that the customer wants and needs.” So it’s definitely a fascinating concept about how to build something complicated that customers have a need for and are willing to pay for and instead of building first and doing all the customer development, you just work with them directly and essentially do it as consulting and move on into building something after you’ve kind of worked out exactly what it is that they need.
Rob [07:56]: Yeah, and I don’t think productizing a consulting service is for everyone, but I don’t think everyone has heard about it. I want to continue spreading the word so that people can make their own decision based on whether they really are dead set on getting the software first or if they really just want to quit their job or quit the hamster wheel of consulting, I think productized services are a faster way to do that for sure.
Mike [08:19]: Yeah and that’s specifically because you can charge so much more for the services because people understand, “Oh, there is a person behind it who is doing that” and they expect to pay more for that kind of thing. So it gets you to a revenue faster.
Rob [08:31]: Right, instead of a SaaS that’s $20, $30, $40 dollars a month, productized services tend to be $500, $1,000 or $1500 a month. They are kind of the price ranges I often see. So you don’t need to have any customers to be able to quit your job at that level.
Our next talk was Sherry Walling, who talked about limits and liabilities and how to get to know yourself and how the limits and liabilities that you carry with you, like in your personality and psychology, can apply to both great things you can do and the things that are going to trip you up with your startup. And she talked about how your past and your origin story can really shape where you’re headed and can really help you understand how you react to stress and when you’re going to function well and when you’re going to probably fail under pressure. And she used specific examples from these founder origin stories we did over on the Zen Founder podcast over the summer. She pulled out specific examples of their stories and how you can tell your own story and apply that to where you are and how to get where you’re going.
Mike [09:32]: Yeah, I liked that she pulled all those different examples out and most of the examples she never said any of the names of them upfront. She just basically said “Oh, this person from here or that other person from there, and these are the experiences that they had early on in life and how they affected them.” And she went through some studies that basically said, “Oh, if you had these different things that happened earlier in life, this is how they affect you later in life.” And it was just fascinating that it had such a profound effect on you. And it was nice that she went through those stories and then afterwards, she revealed who those people were. They’re all names that you would probably recognize if you’ve listened to this podcast before. But it was just fascinating that she was able to take those, and because she presented them in sort of an anonymous way, you could just relate to them. You’re like, “Oh my God, that person went through this” after you heard who it was. So it was nice to see those things because it made it, I feel like more relatable. I think when you hear stories about a high profile person, you almost mentally project what you know about them now into that story. But if you hear that story first, and if you don’t know it that well, if you heard that first and then are told who it is, I think it makes a difference in how you perceive this story and the journey.
Rob [10:43]: Our next speaker on day one was Alex Yumashev from JitBit software, and he talked about bootstrapping to a $1 million a year software company. And Alex runs JitBit. I think JitBit helpdesk is really kind of their prime product at this point, their flagship. And I thought he had a good talk. I heard a lot of positive feedback about it. He offered a lot of his tactics and a lot of his own thoughts on things. Some of the things he said was controversial in terms of talking about some SEO and grey hat and other stuff. But he certainly has experience growing this business and has been doing it many years and has had many products so I think that his expertise was appreciated at the conference.
Mike [11:23]: The part that I found really interesting was the “Did this work or not?” and he put things up there like retargeting and SEO and stuff like that, and it was fascinating that the audience got some of them right and some of them wrong. Because, I think that some of them you would just naturally assume, “Oh, that works.” But, it doesn’t always work and I think that was his point. It wasn’t that this particular technique never works, it’s that it didn’t work for me. And I think that we just tend to naturally assume, “Oh, this worked for somebody else so it’ll work for me” and that’s just not always true.
Rob [11:52]: And rounding out day one, I spoke about the inside story of self-funded SaaS growth. It was basically the story about the last 18 months of Drip and growing that and it was very similar to my Vegas talk. I did make some adjustments to it, some things that I learned while doing it in Vegas. But overall, I felt like it applied to folks over there, it got a good reception. I had a lot of good questions about it, and overall, just felt good about how I’d given it.
Mike [12:18]: Yeah, I think there were a lot of people who were kind of surprised that there was this period of really low months kind of early on in Drip where things were kind of level and you weren’t really sure what to do, and then it was very obvious that at some point along the way, you got the product market fit and you were able to essentially overcome that problem. And I just don’t think that people realize how important that product market fit is. And I think the specific things you talked about were that your number of trials were going down but your revenue was going up because your conversion rates were going up. And as you focus on getting that right, the only reason the trials are going down is because you’re spending less time on the marketing side of things, so you’re getting less leads in but those leads are converting more, you’re getting more money. And at that point, you know that that’s when you’ve hit product market fit.
Rob [13:05]: And kicking us off on day two was Peldi Guilizzoni from Balsamiq, and he talked about a reluctant CEO growing up, and it was basically the growing pains of building a company that he really wanted to be a solo founder, and he reluctantly hired a couple employees, and then he said, “Well, no more than five ever,” and then when he hit ten he said, “No more than ten ever” and he’s actually at twenty employees now. And he had just fascinating tales of a potential acquisition that didn’t go through and just the stress and having to rethink he management structure because he didn’t want to have one, and then he found out he needed one [?] process, and he found out he needed some. And he was super vulnerable and really engaged the audience at a certain point in his talk. It was actually, both his and during Sherry’s talk. I looked around about halfway through and everyone was just wide-eyed, pencils down, no laptops clicking, and just super invested in the tale that was being told.
Mike [14:03]: Yeah, that was an amazing talk. It was just all the stuff that he talked about was stuff that you never see publicly, I don’t think, because most people are either acquired or not and afterwards, they’re just generally not able to talk about it. But he did go and get permission from them to talk about his experience and what went right and what went wrong and how it affected him. And I thought the thing that was really interesting was how badly his health suffered during that process because he was so stressed out and it was so difficult for him. It’s one of those things that most people don’t talk about, it’s like how your mental state can affect your physical well-being, and it definitely affected his physical wellbeing.
Rob [14:40]: The next speaker was Dave Collins, and he talked about the most sincere form of flattery, which of course is imitation. And he spoke about how you don’t have to try to reinvent the wheel on your website. If you want to improve conversions, if you want to improve your website, look to others who are already doing it well, and he had a bunch of examples of how to do that well and how not to do it well. And in talking to attendees afterwards, I actually got mixed reviews on it. I think some people didn’t fully understand what he was saying or didn’t agree with it or something, but then there were also people who took a bunch of notes and are going to apply it to their website. So in a sense, he kind of had a polarizing talk where I think some people really latched on to it and then others maybe had mixed feelings about what he was saying or didn’t follow it, one of the two.
Mike [15:21]: Yeah. I think that when you’re in different states of your business- because there’s kind of a life cycle to your business. There’s when you’re really early on and then you become a middle stage and late stage, and depending on where you’re at different things are going to be relevant. And I just feel like some things were more relevant to certain parts of the audience than others but I liked it. It was definitely interesting some of the things he put out there.
Rob [15:41]: And then we did a bit of an experiment with John Ndege, who has come to I think all three of MicroConf Europes, and he is a self-funded non-technical single founder of a SaaS company, and he has grown it to six figures, and he’s working with a non-technical audience, so it’s all medium and high [touch?] sales. And in essence, he did about a 20-minute talk, but it was him preparing slides and then he led through the slides and then I actually asked him questions during the talk to clarify some points. So it was kind of an on-stage interview mixed with a presentation. And so far, I’ve seen mixed reviews about it. I think some folks really liked the interview approach because it answered a bunch of questions upfront that you might have. I think some folks said since they were technical founders, it didn’t really apply to them which comes back to your point you made earlier. But to be honest, the non-technical founders who I talked to, there were maybe four or five who I talked to after his talk, loved it and said, “His was their favorite” because it related so much to their situation. And I think that’s an interesting thing to remember about these talks is as an individual you can rate the talks, but it’s always based on where you are and your personal biases and your personal thoughts and feelings. Going with John’s talk, it was a bit of a risk to go with a new format and to dive into what a non-technical founder has to do, but I think it was totally worth the experiment, and I think it’s likely something we’ll do in the future.
Mike [17:05]: Yeah, I’ve been going through it to see specifically from the feedback what people thought of it, but I thought it was an interesting format to have onstage, and I liked the fact that it was kind of like a 20-minute talk or so, so it wasn’t a full 40 minute and it wasn’t an attendee talk, which was only 12, it was kind of that sweet spot in the middle. But there was a lot of actual stuff in there. But again, as you said, specifically for a non-technical founder and as you said, there were a lot of those people in the crowd. So it was nice to hear from those people “Hey, I got a lot out of it and it tells me how I can approach things.” But we do get a lot of people asking us on this podcast, “How can I do this as a non-technical founder?” And one of the things that he said that I hadn’t necessarily realized before was that when he’s on-boarding his customers, he talks to every single one of them. And I don’t know what his price points are, but I think they’re like $100-$200 a piece, but because he talks to every single one of them, he gets all of that customer development and feedback he needs to help guide the development of the product itself. And I think that’s the important piece for those non-technical founders. Like, they need to know exactly what their customers want.
Rob [18:09]: And then we had Rachel Andrew from Perch who is a returning MicroConf speaker, and she talked about no exit plan. She talked about how she and her husband have launched their business and they stopped consulting, and everything’s going well except for they don’t feel like they can take a vacation, and they feel like they’re tied to this business, and they feel like they haven’t had enough money to hire someone who can help them with it. So the talk was really her thinking through how to do this, and she wanted to kind of talk to folks out there who are just thinking about getting to the point of quitting their job to maybe think past that and to not just focus on the short-term goal but to be thinking, “Once I get there, what am I going to do after the next step in order to not be tied to this thing” and basically not build yourself a job because that’s not what you want, right? You want to build a business that you can certainly make money from but that you can also be free of when you want to be.
Mike [19:02]: Yeah, that was something else that’s probably not talked a lot about. She was talking at one point about how she was answering support emails on Christmas, and it’s kind of a typical day that a lot of people take off and she’s sitting there answering support e-mails. And there, she talks about how she was working essentially 365 days a year, but on the other hand, she loves what she does. And I think that’s why most of us do what we do is because we really enjoy not just this mode of business but the things that we’re working on. That’s why we do what we do. It’s because we want a job that we love, not just because we want a job. If you want a job that you don’t love, that’s why most of us have those regular 9 to 5s. But if you want something that you really want to work on and you’re passionate about it, it’s okay to make less money if you love what you do.
Rob [19:49]: And rounding out our 10 mainstage speakers at the end of day two, it was Patrick McKenzie. He was talking about leveling up in essence stair-stepping his way up from bingo card creator to appointment reminder through consulting and then to what he’s doing today which is Starfighter, his current startup. And he actually tweaked the presentation. It was very similar to his one that he did in Vegas four months ago, but he tweaked it based on some feedback there, and he pulled out the part about selling an app, and he added some more things that I think were more relevant to the European audience where there’s slight more bend to being at the beginner end of the scale and kind of having just launched or being close to launch rather than being further along.
Mike [20:30]: Yeah. Some of the people I talked to had some interesting things to say about Patrick’s talk in terms of where he was with appointment reminder and how interesting it was to see that I’m actually further along than appointment reminder is or where I thought it was. Or it’s interesting to see how he had a very rough spot in the middle there because you see super successful people and just assume pretty much everything they do they knock out of the park, and that’s not always the case. Different businesses are harder than others. Some things are a lot easier, some things are a lot harder, and it’s difficult to know without seeing all the data and obviously a lot of that information is not necessarily public information to see. But yeah, I really liked how he tweaked a lot of it to make it applicable to those people who are earlier on.
Rob [21:14]: Yeah, and I think in Vegas and in this talk really was the first time he talked about appointment reminder revenue in public because I had not heard him say or maybe he had published a blog post at some point.
Mike [21:23]: Yeah, I think he talked about it in Vegas.
Rob [21:26]: Okay. That was his first time. Yeah. And it was, it was eye-opening for everyone just to see where it was at certain points as he’s cranking along and just how long that slow SaaS ramp up path is.
So we also did something for the first time in Europe this year. We did attendee talks. And we’ve done these in Vegas for a few years, but I think the last three, were basically folks who already have tickets can submit talk ideas and then they get voted up by the other attendees. They get a certain amount of votes, and whatever rises to the top, we do that many talks. And so we did six attendee talks. It was our first one in Europe. And while we don’t have time to go through all of them, I did want to call out, I thought Anders Pedersen’s talk was pretty cool. He basically talked about how he had tripled his revenue, and that was the clickbait headline, he said, that he used but in essence, he had tripled his revenue by raising his prices. And it was based on some other feedback that Dave Collins had given him in a teardown a couple years before in Prague. So it was nice for him to loop it back and basically talk about some of the health struggles he had had and some of the emotional struggles and how MicroConf Europe, the first year in Prague, was the first time he had ever kind of found his people and realized there were other people out there doing what he was doing. And it gave him this great sense of belonging and so he really paid homage to that and was thankful and said, “The reason my revenue tripled in essence was from being around all you people and I’m still learning but I want to now give back to you guys.” So I was inspired by his attendee talk.
Mike [22:49]: Yeah. The other interesting part about his attendee talk was how quickly that turned around. Wasn’t it that he implemented all the changes or most of them within 48 hours and one week later after he’d implemented those things, that’s when he realized oh my god, I just tripled my revenue by doing these small tweaks that I learned at MicroConf? So yeah, it was just fascinating to see that change of revenue based on solely marketing. Because he didn’t change the product really, it was all about the marketing stuff that he did.
Rob [23:16]: Yeah, because it was something like getting rid of a free plan or a free version of it so it was only charging for it and then actually going after the sale and it was tripling his price. I think it was those three things. When I say “Go after the sale” I think it was sending a single follow-up automated e-mail or two after someone downloads it. So it was just some basic stuff, but he said that instantly kind of flipped a bit and has been making that triple revenue ever since. So that’s good.
Mike [23:42]: Yeah. And we had a bunch of sponsors from MicroConf Europe as well. Anders was one of the sponsors who happened to be given that attendee talk through his Time Block application which is something new he’s working on. But there was also Teamwork.com, they had four people come over there, and they’re getting to be a really big company, 30 to 35 employees- that’s I guess really big in our circles.
Rob [24:01]: Yeah. I don’t know how you qualify this, but I’ve heard that they’re the largest bootstrapped startup in Ireland. That’s pretty cool and whether they are [?]
Mike [24:10]: Yep. I think in all of Europe.
Rob [24:12]: All of Europe? Wow. Yeah, it’s really impressive.
Mike [24:15]: [Peldi?] was also a sponsor with Balsamiq, and we had Craig Hewitt from Podcast Motor. The other sponsor is DNSimple, and they called out a URL from the stage for a comic strip that they put together basically on how DNS works and the URL was howdns.works. So if you go there, you can download their comic strip. It was really interesting having every single sponsor was essentially a bootstrap company, and it’s something we haven’t had in the past. But it was really amazing to see, not just people from the community, but just bootstrappers in general saying, “Hey, this is something we really believe in and that we want to be part of.”
Rob [24:49]: Yep. That’s what I liked, and big thanks to all the speakers who came out. They have busy schedules and they still came out and spoke, and of course, to the sponsors because we really couldn’t pull this off without them.
Overall, I feel really good about this year, man. I agree with folks, I think this was probably the best one we’ve done in Europe, and I guess we’ll see in the feedback once that comes back whether it holds true. And now we’re already working on MicroConf Vegas, it should be next April-ish in Las Vegas.
Mike [25:20]: Yeah. I think that Xander said that our contract is signed, so.
Rob [25:23]: Oh really? Oh that’s good.
Mike [25:24]: I believe it is. A couple days before MicroConf Europe started I think he said that he got the signed contract back so I think we’re good there.
Rob [25:32]: Very good. And so if you’re interested in rubbing elbows with 150 to 200 other bootstrapped software founders, who are either just getting started to having launched or have employees anywhere in that range, that’s what MicroConf is about, and we hold it, obviously, in Vegas in April and then we hold it in Europe some time in the fall. Head to microconf.com and enter your email address and we’ll notify you when tickets are available. Tickets really don’t make it to the open market anymore. They sell out before the e-mail list is exhausted. So if you think you might want to come, get on the list. Otherwise, we’ll see you back here next week.
Mike [25:32]: And If you have a question for us, you can call it in to our voice mail number at 1-888-801-9690, or e-mail it 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 startup and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 252 | The Unconventional MVP with Jesse Mecham
Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Jesse Mecham about the unconventional MVP. Jesse talks about his background and company as well as his first product he put out in the market.
Items mentioned in this episode:
Transcript
Mike [00:01] In this episode of Startups For the Rest of Us I’m going to be talking to Jesse Mecham about the Unconventional MVP. This is Startups For the Rest of Us, episode 252.
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.
Jesse [00:25]: I’m Jesse.
Mike [00:26]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Jesse?
Jesse [00:30]: I’m doing very well.
Mike [00:32]: Excellent. Well, I wanted to have you on the show today because I wanted to talk to you a little bit about your story and share the background of your company with the listeners and talk a little bit about the MVP that you essentially put out in the market and the product that you started with. But before we get to that point I wanted to let people know exactly who you are and a little more about your business. The company that you started is called You Need A Budget, and when did you start this company?
Jesse [00:57]: Back in September of 2004.
Mike [01:00]: Okay. And today you essentially sell personal budgeting software for, I believe it’s $60 per license, correct?
Jesse [01:08]: It is, yeah. It still does top software for the time being. 60 bucks, one time and then we’ve sold upgrades over the years to keep the revenue going.
Mike [01:16]: Right. So you call the company You Need A Budget. It’s kind of colloquially known as YNAB. Where does YNAB stand today? Like how big is the business, what’s your approximate revenue look like? How often do you do software releases and how many employees do you have, that kind of stuff.
Jesse [01:31]: Yeah. Software releases, we haven’t done one for a long time because we’re right in the middle of a big, completely from scratch re-write, moving to the web and changing our business model into a SaaS model. That part has changed quite a bit. We’ve been just heads down on that for a couple years. Size-wise, employees, I think we just hired our 30th or 31st. She starts next Tuesday. Her name’s Carrie and she’ll be managing our customer support team. So pretty good size team. A mix of part-time and full-time people. About two-thirds of them are full-time. We’re engineer heavy and we’ve got a couple designers. We need another designer here pretty soon. I always say we won’t hire anymore and then we hire again.
And then revenue-wise, last year we did about four and a half million and this year we’re looking to do maybe a smidge more. But just around there again.
Mike [02:24]: Right. So essentially 30 employees, four and a half million dollars in revenue. And this is a downloadable, one time purchase software.
Jesse [02:32]: Yeah, that’s kind of funny. But yeah. Just recently, Intuit, who’s our main competitor, they sell Quicken and QuickBooks and Mint. They own all those properties. They just mentioned that they were going to sell off Quicken, which is a good signal for us that we’re doing the right thing, getting out of the desktop software business as well. Little step.
Mike [02:56]: Okay. So, as I said, I wanted to focus in on the big picture first to give people an idea why you’re on the show because I think that the backstory behind YNAB is extremely important because essentially of where the business came from and where it started. So let’s start walking backward a little bit. What were some of the major milestones that you hit along the way? Were there specific software releases that you had that were extremely beneficial to you or certain things that happened in the market that really took you to the next level? Kind of give us an idea of what major milestones there were.
Jesse [03:25]: Yeah. There were some interesting ones along the way, maybe a handful. Our software- like our releases, which we’ll probably dig into a lot with the MVP, but moving from my original product into our first bonafide software product, that was monumental relatively for us, early on. Each new release we then moved into the Mac platform a couple years later. And as that platform grew in popularity over the years, we rode that. The app store, the whole mobile thing, we rode that with phones that sync up with your data and everything. And that’s also standard now, but back at the time, it was a big deal. So that wave we rode. We had a funny one where we would sell the software on the Steam gaming platform from Valve. And that was –
Mike [04:09]: Really?
Jesse [04:10]: – yeah. So we didn’t even think it would work but we were one of a few titles that they let in as kind of a little test to sell non-games. And we did really well in like their Flash sales and other things like that. That was a significant boost to our revenue back two years ago. The gamers, they buy compulsively. It’s a hilarious side story. It’s funny that you’re selling budgeting software and people are impulsively buying it and not considering the purchase. So there was some irony. But that was a big one. It got us out in the market quite a bit more. There were a lot of new users. So that was another big- there are tiny ones all along the way, but those are kind of big highlights.
Mike [04:52]: Right. When was this business founded? It was back in what, mid-2000’s? Something like that?
Jesse [04:57]: Yeah, I officially did the paperwork for it in 2007. So like three years later.
Mike [05:02]: Okay.
Jesse [05:04]: Where I started making money, very, very small amounts of money, was end of ’04.
Mike [05:12]: Okay. So you basically operated it probably as a- did you even file for a DBA yet or just run it through –
Jesse [05:17]: No way. I didn’t even think about that. I wanted to make rent with the money. It was like totally- nothing official about it, you know.
Mike [05:25]: Got it. I didn’t realize that. I thought you at least had a DBA in the early days.
Jesse [05:30]: Yeah, I don’t even know if I knew what that was at the time.
Mike [05:33]: Yeah, that’s okay. I guess you filed for the business back in 2007. When was it that you had hired your first employee? Was it after that or before that?
Jesse [05:40]: It was after that. I had been working with Taylor, that originally built our first piece of software. He and I worked together in ’06 for the first time. And then middle of ’08, I was able to convince him to jump ship from the video game industry and come over and build budget software.
Mike [05:57]: Got it. Okay. I guess take a step back a little bit. Where was the business financially when you decided to start hiring people?
Jesse [06:05]: That one’s tough. Every hire is scary. And early on especially. It’s not as scary now. Taylor, he and I originally worked out a revenue share because I couldn’t guarantee a salary. And I remember he took a significant pay cut from what he was making. No benefits. And I could probably back into it actually. Let’s see. The year that he came on we probably did maybe half a million in revenue. That’s a pretty good guess.
Mike [06:34]: Okay. So it wasn’t as though the business was struggling but at the same time, probably when he first came on, you didn’t necessarily know how well things were going to go with him on staff?
Jesse [06:43]: Yeah.
Mike [06:44]: You were kind of making an educated guess in looking back for your sales and kind of looking forward and doing some projections. But you still weren’t quite sure. It was still a risk in your mind.
Jesse [06:55]: Yeah. He took the bigger risk, in my opinion, because he left this career with the cash flow, a dip in cash flow and all that. I’m happy that it paid off for him later on. But it was an educated guess. It still was super scary, which I’m really conservatively wired. So where I feel scared, most people don’t feel anything. And I think anyone else would have probably hired quicker than me and it would have been batter. I just would drag my feet.
Mike [07:19]: Right. Okay. Let’s talk about your shift into the business. Where was the business when you finally decided to go full-time on it?
Jesse [07:26]: I was working as an accountant. I got a Master’s degree in accounting and I was working down in Dallas for a big accounting firm, working 80 hours a week for months and months. It was getting old. I had two little boys and a wife in this new city. It was rough. I had big, personal incentive to not do accounting. And also it’s really boring work. But to highlight how crazy conservative I was, I was making about twice in profit from YNAB what I was making at my day job. And I was working on it maybe an hour a day, if I could squeeze it in. So it took me so long to jump. When I was at about 15 grand in profit per month, that was where I felt comfortable, where I said, “Okay, I can start working on this more as a full-time endeavor.”
Mike [08:18]: Got it. So the business was hitting that 15,000 a month, which is ballpark 180k a year. And that’s when you felt comfortable leaving your full-time position and coming over and doing this full-time.
Jesse [08:29]: Yeah. And I still actually did other stuff on the side because I didn’t want to raid the coffers of YNAB. So that 15 grand in profit, you can look at it and you can eat it and feed your kids with it or you can reinvest it back in the business. And I was definitely more inclined to reinvest than to consume it. So I really tried to built up other things on the side as well and try and reinvest that profit as aggressively as possible.
Mike [08:54]: Right. Now you said at this time your day job was essentially as an accountant. And you have a Master’s degree in, I think you said, finance for accounting.
Jesse [09:01]: Yeah.
Mike [09:02]: You’re not a software developer.
Jesse [09:02]: No.
Mike [09:04]: What was your first product?
Jesse [09:06]: The very first one that we sold and made money was a spreadsheet. I originally built it for me and Julie, my wife, when we first got married. And it worked well for us. We were super poor but the budget seemed to be working well. And then I wanted to Julie to be able to stay home and be a stay-at-home mom when our first baby was born. That was a big deal to her so I was pretty motivated to try and make extra money. And about 350 bucks a month was my target. If I can make that on the side, selling this spreadsheet, we’d be good. We could get out of school. We would have to borrow money for it, that type of thing.
Mike [09:40]: So how much were you selling the spreadsheet for?
Jesse [09:42]: I tried at $9.95. Nine dollars and ninety-five cents. So like Bic Mac pricing. But I tried it at $9.95 and I couldn’t get any traction. For about two weeks I was paying for visits through Pay per click way back when it was cheap and easy and no one bought it. I had enough visitors hit the site where you should have seen some purchases just from the law of numbers, right. But no one was buying it. So then I had chatted with a friend one day on the bus and he said, “You ought to double your price. People aren’t buying it because it’s cheap.” And so I doubled it to $19.95 and saw my first sale that first day.
Mike [10:19]: Interesting.
Jesse [10:20]: I had to refund that sale but it was still a good thing. So still good.
Mike [10:25]: It’s ironic that you doubled your price and then you immediately had to refund that first sale.
Jesse [10:30]: I was at a negotiations class the other day. It was fascinating. This guy’s major negotiation work with countries and things. He was giving us this clinic and there was one little bit that jumped out that would apply to every single person listening. He said, “You never want to bargain with yourself.” And when we go to price our own services we always bargain with ourselves well before we’re bargaining or negotiating with someone that’s actually going to pay us. So you’ll bargain with yourself and just talk yourself down. And when you bargain it’s always about price. It’s never about value. So he was trying to get us to say, “Don’t bargain. Always negotiate.” And then do not bargain with yourself, especially. I think it’s applicable for anyone just getting started. We’re so quick to talk ourselves down to this barebones price and it’s not helpful at all.
Mike [11:20]: Yeah, that’s fantastic advice. And I think it especially applies to software developers who tend to undervalue what other people are willing to pay for their work. Especially given their average salaries, just to be honest.
Jesse [11:32]: Developers are wizards. They’re like magic people. How do you place a price on that? You got to think of yourself as a wizard and then maybe you could price more appropriately. From my view, I just see magic happen. And where people that are in the know, you have the cursive knowledge where it’s like I could build that. I could do that. That’s the worst place to be.
Mike [11:53]: So your first product, it was just this spreadsheet. You were selling it for $20 per download, I guess. And you said that at some point you got it to the point where it was making what, $15,000 which was when you decided to make the leap –
Jesse [12:06]: No, by that time the spreadsheet really capped out at making about five, six grand a month. Where I started making about 15 in profit was when we had launched our software, about two years later. That was the big jump.
Mike [12:22]: Got it. So there was this time period during which you were only selling the spreadsheet.
Jesse [12:25]: Oh yeah. About two years just selling the spreadsheet.
Mike [12:29]: And how long did it take you to build the spreadsheet?
Jesse [12:32]: When you’re building it for yourself you don’t really count that time, but if you were to start from scratch and build it and knew what you wanted and had a clear spec on it, it took me a couple weeks. Of course I tried to make it fancy first and then I pulled back as it got complex, which is a classic trap we all fall into. But over time I actually simplified it, stripped things out of it. But it wasn’t a huge endeavor. I mean two weeks, that’s not long.
Mike [12:54]: And that’s something you said you were making what, five, six thousand dollars a month from?
Jesse [12:58]: Yeah, toward the end when I learned how to market, that was the ticket. But I pulled up some stats while we were chatting. My first full year – so I launched in September of ’04. It didn’t really do anything. And then in ’05, by December of that year, I’d made in profits, 2500 bucks. And that was when I was in school as a college kid. I was working a 30 hour job, going to school full-time and doing this little business on the side. I wasn’t investing tons of time. And I was learning a ton as I went along. So I’m trying to paint this picture that even for someone to get to a grand or two with the information that we have available now, it’s totally doable. And the product, it was a spreadsheet. It’s a spreadsheet.
Mike [13:42]: Right. So you said that you launched the software product in 2006, right?
Jesse [13:46]: Yeah, end of 2006, right at the tail end there.
Mike [13:49]: How long did it take to build the software product itself?
Jesse [13:52]: It took Taylor, he was the sole developer, it took him nine months. We just worked over the phone. We didn’t beta test it, which is funny. I kind of used it a little bit but we did not do anything formal. Yeah, nine months with just a solo developer. And we were basically porting the functionality of the spreadsheet over into a Windows application.
Mike [14:13]: Right. And I think that’s the part that is really interesting because you start out with this MVP, which is nothing more than a spreadsheet which takes you about two weeks, and then you make this leap from – you’ve got a market, you’ve got people paying for this spreadsheet, and they’re clearly willing to pay for it. There’s a demand there that you have proven with this spreadsheet –
Jesse [14:30]: Absolutely.
Mike [14:31]: – and then you say, “Let me take that information and I’ll predict the future a little bit. If they’re willing to pay for this spreadsheet, I bet they would pay for this software product that I could build based on this demand.”
Jesse [14:42]: Yeah. I felt confidant enough about it that even risk adverse as I am, I had been saving money up to that point to put a down payment on a house, because in the U.S., if you think back to like ’06, ’05, real estate’s going crazy, right. So Julie and I are going to graduate in ’06 and we’ve got this baby, another one on the way, and I’m thinking we’ve got to get a house because everyone’s buying houses. So I’m saving for this down payment. In the meantime Taylor comes along and says, “I could improve your spreadsheet,” and I said, “No, I’d rather have you build separate software.” So he just agrees to like a project rate and it was a lump sum, milestone payment. Pretty standard stuff. And we do that over nine months. But I was confident enough in the move, I knew people would pay more for this software. And I knew that the software would also be, obviously, more attractive to more people. So I could charge more and appeal to a broader market. And I used our down payment money, for the house, that we had earmarked for that. I came to Julie and was like, “Hey, what about this thing instead? I have this stranger down in Texas that wants to build this.” She was game. But I felt confident enough because I had market knowledge. It was priceless. I didn’t feel like it was risky at all.
Mike [15:57]: That brings up a separate point. Because you’re not a developer, you didn’t start by building a piece of software because, quite frankly, you just didn’t have the skill set. How do you think that affected the evolution of the product? I think most software developers would immediately jump into building a product, but you went in a different way, I think, because you were forced to. How did that impact, not just the financials of the business, but how did it impact your approach to the future of the business?
Jesse [16:22]: It’s been a huge advantage for us that we started with that spreadsheet. When you think about building a piece of software, and it was fairly complex, that we had built in nine months, but because we were riffing on an MVP built on a spreadsheet, it naturally constrained the normal desire we have to add, add, add, and make more complex. Because it was just like listen, take this, make it so it can run without Excel. And it was like, okay that’s good. So how should the UI act? Well, let’s just have it kind of look a lot like the spreadsheet. Okay, that works well. Taylor and I both aren’t designers and weren’t designers back then even more so. So it forced us to just recognize we’re going to do still kind of the minimum, but take this obvious next step. I feel like a lot of times when you build first, with this grain-like open field in front of you, you have a hard time making decisions because you have so many options. Where we just didn’t have the advantage. It would be interesting to think how we could, as a budding entrepreneur, as this developer, how you could create artificial restraints for yourself to try and control that.
Mike [17:33]: Right. And I think that’s the problem that most of us as developers face is that we’ve got this open-ended problem that we’re trying to solve and we say to ourselves, “I could do this or I could do that,” and “It’d be really cool if I added this other thing over here,” and you end off into the weeds trying to add some stuff in that ultimately you don’t even know whether or not anyone is going to use it or going to care, unless you’re doing a lot of heavy upfront customer development. But because you had that MVP already in place and you knew what people were paying for, it was really just a process of replication so that you could produce incremental improvements on it and increase the price and do lots of other things.
Jesse [18:10]: Absolutely. Like just to give people an example, we launched the software end of ’06, that is supposed to compete with Quicken or Microsoft Money at the time. And it’s a check register with a budget laid on top of it, essentially. We didn’t even allow you to have multiple accounts in the software that we originally sold for $40. So we would just tell people every transaction goes in one big register. And we sold it and people bought it and it worked. It really worked. It wasn’t like we were selling them something broken. But you didn’t import from your bank, we didn’t handle reconciling to any accounts. We had very rudimentary reporting. It was so barebones and it still just gave us that much more knowledge to keep heading down the path. And that’s what you want. You don’t want to know the end goal. You just want to know that you should stay on the path you’re on and be content there. So we try to build, a lot of times for the destination and then who knows where that ends up.
Mike [19:13]: You mentioned Microsoft Money just a few seconds ago. Didn’t they go out of business or didn’t they shut that product down?
Jesse [19:19]: They did. They shut it down. Several years ago, actually.
Mike [19:22]: And now Quicken is being spun off. How does it feel to basically have run them out of business?
Jesse [19:27]: It’s hilarious. I feel really good. I feel like we conquered them. No. Intuit’s revenue for consumer non-tax revenue is like $340 million a year. They’re a four and a half billion dollar a year company. There’s such a far distance between them and the next guys it’s crazy. I don’t even know if they’ve heard of us. But maybe they have. That would be fun. It is cool to see that we’re headed in the same direction as the big guys because I think they obviously have major market knowledge with all the exposure they have.
Mike [19;58]: There’s a lot of benefit to having hindsight when you’ve gone through this process –
Jesse [20:00]: That’s true.
Mike [20:02]: – are there other products that you can think of that in hindsight you could have potentially come out with that were also not software related or were not directly pieces of software that either could have done well or had the potential, maybe not quite as much potential as what you ultimately ended up with or maybe something that could have exceeded it. Are there anythings that you can come up with that fit that mold that were non-software?
Jesse [20:26]: They’re all kind of related to YNAB and its core business but we’ve tested all sorts of different monetization strategies over the years. We’ve tested partnering with companies that we like. Like Betterment is one that we like. We don’t take commission from them anymore but we still refer them. We were kind of going like a blogger route early, early on where it was like affiliate relationships. I found that to be fairly distracting from the core. We did some servicing around, literally over the phone type work, coaching with business owners to try and teach them how to manage their cash flow better. And I actually ended up selling that off to my friend Mark who was running that for us anyway. And he now runs that Budget Nerd. But for us it was working, it was just I felt like we were losing focus.
Mike [21:17]: It was a distraction.
Jesse [21:18]: Yeah, it was a distraction. I’m very, very susceptible to the new shiny and so I really have to check myself and make sure I’m focused on just a few very core things, and then obviously drive that to the whole team.
Mike [21:32]: Now I think that focus is probably something that all software developers who are starting out and trying to find that product that they want to invest a lot of their time in, maybe it’s the next six months or maybe the next ten years. But what sorts of other advice do you have for people who are specifically looking at building software first? Because as we discussed, you had the spreadsheet first and that’s probably more of a non-traditional MVP. What other shortcuts could people come up with that would help them get to the point where they have a product that people will pay for?
Jesse [22:04]: I like the idea of utilities. So if you’re thinking software specifically, I’m trying to go that route. I like the idea of looking at a very, very concrete problem where the MVP, where the problem is so small and so specific that you can’t add too many features on top of it. I know the open source is a great solution for a lot of these, but I think you could not do the open source route potentially, and just say what is this utility that does this one thing that people on Stack Overflow are constantly asking about or that I’m constantly having to do again and again? Whatever it may be, and just release something very small, very concrete, one off, no subscription, only so that you can cut your teeth on the transaction, the marketing. And so the smaller the problem is the smaller the solution, super niche, the easier it is to market it, which means then you can- it’s tough to find the pain when you’re trying to sell financial software. It takes awhile. It’s complex as far as marketing goes. But when you’re solving this very, very concrete problem that like a little utility solves, suddenly it’s very clear. What I want to do it get people to a very clear value proposition and a very clear solution and get them to be able to build it quickly, release it quickly, have a defined market, just to practice that aspect. Once you start making money, the desire to build, it’s minimized a little bit because you realize this thing that I was procrastinating to selling, isn’t as hard as I thought it was. But all these developers, you guys don’t find it easy to sell but you find it easy to code so you procrastinate the selling and just keep coding and coding and coding. That was a long answer.
Mike [23:59]: No, that’s okay.
Jesse [24:02]: That’s like if I were to coach someone on, I’d be like find a smaller problem. Find a smaller problem, really, really small, and then see what you can do. Like a little ruby gem or whatever it may be, but just something super small and then go for it.
Mike [24:14]: Well I think the natural inclination for developers is to look at stuff like that and because they minimize the value of the particular problem that they’re trying to solve, and they say I could whip up something to fix that in a week or a month or something like that, they minimize how valuable that is to a base of people. And I think the other mistake that they make is that because they try to make something that’s a little bit more generic or bigger, it makes the marketing, as you said, a little bit more difficult because it’s not so well defined. Selling financial software, it’s not abstract, it’s just there’s no concrete pain point that you’re solving. It’s just, it’s financial software. But what specific thing are you doing that somebody might have a particular problem with? And it doesn’t allow you to focus in on the marketing.
Jesse [25:02]: And so that’s the- you can do it. Like in our field we know a lot about the market and how you talk about money. It’s basically around stress. But the idea if I were a developer releasing some little thing that I said could supposedly whip out myself for two weeks, that’s the value proposition right there. You talk to that developer and you say, “Listen, do you really want to spend two weeks doing this? I’ve done it for you and it will cost you half and hours wage.” And then suddenly you get some traction, the value proposition’s really clear, and then you can start to test the waters. I like the WordPress plugin market. I like it for that reason. Those can also totally metastasize on you. But I like it for that reason that you can do small little solutions and get used to the marketing. It’s not a slam dunk but it’s some – I’ve just had some thinking along those lines lately.
Mike [25:51]: Yeah, I think the other thing that that also helps people with is it helps somebody starting small because they don’t have to think about creating 30 or 50 pages on their website. They only need to create one that says, “Hey, this is this exact problem I’m solving,” and they tend to get very specific, highly targeted traffic, which somebody else or a competitor would treat as long tail traffic so they don’t care about it. So you’ll rank higher for it. And then over time you gradually increase the size of the product and it’s capabilities and what it does. And eventually ten years down the road you end up with youneedabudget.com, 30 employees and four and a half million in revenue.
Jesse [26:26]: Yeah, that’s not how I started, right? So you start super small and you don’t worry about how did Jesse do this or that because the answers are obvious when you’re in the moment. I know where we’re going now. I’m hopeful our decisions are solid. But it feels just as obvious to me now as it did six, seven, eight years ago because you just deal with the information you have on hand and you don’t try and predict the future, you just try to keep things small and concise and tight. And then when you’re deciding should I start a new product or should I keep going whole hog on this one, I would tell you to not start the new product.
Mike [27:04]: Something else that you brought up early was that you were doing marketing for this spreadsheet. And I know that there’s a lot of techniques that were probably highly applicable back when you first started this process, like for example, you mentioned Google AdWords were much more cost effective at the time. What other types of things were you doing to market this spreadsheet?
Jesse [27:25]: I was trying to get in with- blogging was just starting up and financial blogs were one of the first because people were pretty intrigued by the idea that you’re sharing finances online. That took off. And I would try and get in the blogging space and it worked to a degree. I tried to recruit affiliates for a while and have people be paid commissions to push YNAB. And I had some that were great but 98 percent of them were horrible and would sell one copy a month and then they would want the world from you as far as “Can you do this, can you do that?” So it was just kind of a time sink and we shut down the affiliate thing. The best thing I did marketing wise was an email course. It was no comparison. The absolute best thing I did early on was I wrote a ten-day budgeting, I think I called it a bootcamp back in the day. And it just taught them my four rules, my method for how you should think about money. And it was super soft sell. And it, I think, quadrupled, actually I have it right here. It doubled our revenue month over month and then doubled it again the next month. It was insane. It still works, too. We still use that as a marketing technique.
Mike [28:36]: Right. And I think that that actually illustrates a gap that a lot of people who are getting into entrepreneurship face also is where the initial expectation is I’ll create this product and I’ll create a website and then I’ll put a buy now link on my site and people will search for it. They come to the site, they click the buy now link or they download a trial and then boom, they’re a customer. But it doesn’t really work that way. The email course that you put out there, that’s basically building trust. It’s not just website, click the button, payment. There’s this time period in the middle where you have to build some level of trust before they’re going to give you money.
Jesse [29:12]: And you’ve got to recognize they’re not all ready to buy right away. They’re in different stages. And the email course does a good job of keeping its arms around them while they’re moving through those different stages.
Mike [29:23]: Right. And that’s something that in some cases re-marketing helps with that where you’re cooking people and then you’re advertising to them later on to help bring them back to your website. But the basic idea there is they’re not ready to buy today, they might be tomorrow, they might be six weeks from now but you still want to be able to maintain some sort of open line of communication with them to help bring them back when they are ready.
Jesse [29:45]: Yeah. Absolutely. Yeah, the re-marketing didn’t exist back then but it would have been gold. Works for us now. It’s the nature of the beast. And in our field with financial software people just aren’t ready. They’re in research mode and things like that. So it’s critical that you recognize that they’re in different phases. And some markets aren’t. Some are like I need to book a hotel, and if you can capture that, you behave differently. But most there’s a long process. I’m thinking about buying a new car, right. Guess how long it’s going to take me. And those marketers know that. You just got to make sure you understand what your cycle is for your buyer and respect that and keep in contact.
Mike [30:24]: Yeah, all great advice. Are there any parting words of wisdom that you want to leave for the listeners?
Jesse [30:30]: Enjoy it while you’re doing it, like enjoy the whole process and make yourself uncomfortable. Do things that you are procrastinating. There was a good book called the War of Art. I didn’t really like the second half of the book but the first half it’s about overcoming your resistance to really doing your best work. It’s been a book that I’ve thoroughly enjoyed. The creative types and developers are extremely creative, designers, obviously extremely creative. That is a book for you. You want to make sure that you’re overcoming what the author calls “Resistance,” and I think that’s just part of the battle. But enjoy the whole process. Just be in the moment with it.
Mike [31:12]: Thanks. So Jesse, it’s great having you on. If people want to learn more of the different you have to say, if anyone’s interested there is a video from Jesse’s talk from last year over on the MicroConf site. You go to microconf.com and then check out the videos there. His talk from 2014 is there. We’ll probably have the 2015 video up there because you were a speaker this past year as well. Where can people find you online and where can they specifically learn more about You Need A Budget?
Jesse [31:37]: So youneedabudget.com if you’re interested in the software specifically or if you just want to look at how we market and things like that it’s good to visit and see what we do there.
Mike [31:47]: I’ll second that. It’s actually very fantastic the way that you have a lot of information there and you do a lot of educational stuff around personal finance and helping to draw them in and kind of tell a story to them about this is what your life could look like if you follow this process.
Jesse [32:02]: Yeah, I have a good team there. And then the software’s excellent so there’s that as well. If you want to follow me online, I don’t tweet a ton but it’s @Jessemecham. I occasionally will tweet something trite. I go to MicroConf so if you ever want to meet face to face. That’s kind of the only conference I regularly attend. Just hit me up at email if you want. It’s Jesse@YNAB.com and I’m happy to chat or give unsolicited advice.
Mike [32:34]: Excellent. Well, thanks for coming on.
Jesse [32:35]: Yeah, you bet. Thanks, Mike. It was a lot of fun.
Mike [32:37]: 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 Out of Control by Moot, used under Creative Commons. You can 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 251 | Email Marketing Demystified with Matthew Paulson
Show Notes
In the episode of Startups For The Rest Of Us, Mike interviews Matthew Paulson, founder of marketbeat.com, about email marketing. They also discuss his upcoming book “Email Marketing Demystified”.
Items mentioned in this episode:
- MarketBeat.com
- GoGo Photo Contest
- Email Marketing Demystified Book
- Mattpaulson.com
- Drip
- AuditShark
- AWeber
- MailChimp
Trancript
Mike [00:00]: In this episode of Startups For The Rest Of Us, I’m going to be talking to Matthew Paulson about Email Marketing Demystified. This is Startups For The Rest Of Us 251.
Mike [00:16]: Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products. Whether you’ve built your first product, or you’re just thinking about it. I’m Mike.
Matthew Paulson [00:24]: And I’m Matt.
Mike [00:25]: And we’re here to share our experience to help you avoid the same mistakes we’ve made. How you’re doing this week, Matt?
Matthew Paulson [00:29]: I’m doing well. How are you Mike?
Mike [00:30]: Pretty good, pretty good. So, I want to introduce Matt to the audience. Matt is the founder of MarketBeat.com. He’s also the co-founder of Go Go Photo Contest and he’s a partner at US Golf TV. He’s also the author of 40 Rules for Internet Business Success. And we’re going to be talking to him today about a book he’s writing called Email Marketing Demystified and that comes out in a couple of months but that’s kind of the main focus for our topic today. Is there anything else you want to add to that? Did I miss anything?
Matthew Paulson [00:58]: The book called Email Marketing Demystified, it’s coming out October. We’ll get the details at the end but it’s myemailmarketingbook.com to get a free copy when it comes out.
Mike [1:05]: Matt, could you tell listeners a little bit about MarketBeat.com because I think this is one of the interesting reasons why I wanted to have you on the show because of the size of the email list that you have and that you manage on a monthly basis and the sheer volume of emails that you sent. It’s not just about oh, you’re writing this book on email market. It’s like you’ve got a lot of serious experience to back this up as well.
Matthew Paulson [01:25]: Yeah, so we published and invest newsletter to about 242,000 stock investor as of the data we’re recording this. Today, the newsletter we sent out, it’s freemium so most of the people sign up for the free list and we have 3,000 or 4,000 people that pay us 15 bucks a month to get the freemium version of the newsletter but it’s basically away for stock investor to keep track of the companies they own and kind of what’s going on with them. We send out probably about 10 million emails a month but I think we’re on track to do about 2 and a half million in revenue in 2015. We’ve been doing it for about five years now. It’s grown over time and figured out it’s a marketing channels that have really worked well for us and we’ve really been able to just kind of blow up the size of the list in the last 18 months.
Mike [02:05]: Yeah, I mean that’s an incredible size list, I mean not just in the sheer number of email addresses that you have and that you send emails too but like 10 million emails a month is a massive amount and I don’t think that most people can even kind of wrap their heads for.
Matthew Paulson [02:17]: Yeah, I think that’s a big, big number and then I go to the trafficking version concerts in February and Ryan Dice goes on stage and says, “Yeah, we sent out about a billion emails a month.” And it’s like, “Oh, crap. I got a whole another level to be at.”
Mike [2:30]: So, I wanted to talk to you about this because I think the email marketing itself is one of those marketing channels that people look at and they say, “Oh, yeah. I should do that but they don’t necessarily do it.” And, I think part of the problem is that email marketing, they don’t necessarily realize the ROI on it or they don’t realize the benefits and they start looking at all these other things and it kind of gloss over the fact that that is probably going to be the single biggest differentiator in their business long-term. So, can you talk a little bit about why is email such a compelling marketing channel over a lot of the other options that are out there.
Matthew Paulson [03:04]: Yeah. You see people today talking a lot about Facebook and LinkedIn and Twitter, if you add up the user base of all of those combined, it might be 1.4 billion people. Twice as many people use email marketing as all of the biggest social networks combined. So we got 1.4 billion people on Facebook, Twitter, LinkedIn. You’ve got 2.8 billion people on email. So it’s just a massive channel and people just don’t realize how big it is.
Mike [03:27]: So just because of the size of it is different though doesn’t necessarily mean that like if you spend $10 on email marketing, what about the same $10 spent on social media advertising either Facebook or Twitter or various other avenues, I mean is there a different between the email marketing versus the social advertising?
Matthew Paulson [03:43]: I think there is. I’ve seen a few studies. Some of them say that have query marketers and the responses that they got say that about 75% of people are happy with the results they get from email marketing and only about 60% are happy with what they get from social media marketing. There is a lot of data out there, there’s a McKenzie study that said email is 40 times more effective at getting customers and Facebook and Twitter just in terms of total volume. So the direct marketing association said that business were earned in an average of $43 for every dollar invested in email marketing, I don’t know what the logic behind that study was but if that number is anywhere close to crack, it’s a pretty great ROI compared to just about anything else that you can do.
Mike [04:21]: Yeah. And I think the tendency for a lot of entrepreneurs is to look at studies like that and be extremely skeptical of them because they depend on so many different factors, I mean I’ve done my own stuff where I’ve done advertise on Twitter and Facebook and tried to get those people to either buy directly or to get onto an mailing list and then have them buy after joining the mailing list, and what I found is that you can acquire Twitter followers for example relatively straightforward fashion. There’s documented processes that you can go through and follow to get those people onto your Twitter following. But to get those people to buy from you is a completely different ball game than sending email because you can send those emails week after week, month after month but it’s a little bit more difficult to get directly in front of them on Twitter because they may be following 5,000 people or 10,000 people and them seeing your message, it’s kind of hitting mess. I mean just by raw numbers for the first 24 hours in the day, how long is that message going to be in their feed? It depends a little bit on how many people they’re following but for my initial estimates is like five to ten minutes, it’s not very long.
Matthew Paulson [05:29]: Yeah, I think if you look at the [?] that Twitter has, maybe 2%, 3%, 4% of the people will actually see any given twit if that and on email you’re going to get an open rate if you have an engaged list of somewhere between your 20% and 40% so you could send 3 emails and make sure that everyone sees that or you could send 3 Twitter messages or Twitter post and maybe 5% or 10% your followers will actually see it.
Mike [05:52]: Yeah, so that makes it a little difficult so like compare those things because it’s no longer an apple to apple comparison. Email becomes a much better channel. One of the things that write in your book was it was such a profound quote that I have to call it out. You said every now and then I’ll hear someone that runs a website say something like I hate pops out and I hate marketing email. I would never use them in my business. What they’re really saying is I hate making money because email marketing is an incredibly effective marketing strategy and it’s so funny because you look at that quote and it stands and start contrast to like the raw numbers that we pointed out earlier to kind of justify what the ROI is. Why is that you think that entrepreneurs are so resistant to using email marketing?
Matthew Paulson [6:31]: Sure. I think tech people and entrepreneurs and kind of people in the communities that we hang out with, we kind of think we’re immune to marketing and we also think that kind of marketing is annoying, I mean how many of us are on a million email list from a million of different things and we get email, we don’t remember what it was and we just want off the list and we want to receiving email from people. So we think that our customers are just like us. We think that our customers hate email marketing just as much as we do. We think that they also think they are immune to marketing and it turns that we are not our customers. Our customers might actually want to get email from us because they are interested in our product and want to hear from us. You can’t assume that your customers are just like you are and your customers may behave in a very different way than you do with email. Like we might be inbox zero people and want to clear the inbox everyday but if you look at the email of my wife or a lot of other people there’s just a ton of different messages from ton of different brands and it’s more of a stream and they’re okay with having just content from a variety of people in there.
Mike [07:26]: You know, I know exactly what you mean. I mean I tried to maintain inbox zero as close as I possibly can so anything that goes in there is a little bit of extra stuff that I have to deal with but I’ve also seen people where I kind of glance at their phones and the little icon over there email says that they got 14,000 emails in there. I’m just like how do you even deal with that? And of course you think to yourself, well they just must not read any of it but it doesn’t necessarily mean that they don’t want to receive those emails either.
Matthew Paulson [07:51]: Yeah, yeah, I mean if you have a business and you provide helpful information to people and you send out over email, you’re going to have to assume that people want it because they’re not going to sign up for your email list if they don’t want it. If they sign up for your email list, that means hey, I want to receive email from you so you should probably send them some email if they want it.
Mike [08:08]: So seems like that’s one of those helpful hands I guess for getting over the fear of clicking on that send button when you got whether it’s a 100 or a 100,000 people on your mailing list because that’s one of those things that I think that a lot of people get hung up on is they get everything ready. They write the email and then there’s just like, “Ah, I don’t know if I should send this. Maybe I should wait. Maybe I should think about this a little bit more. Maybe it could be worded better.” And so they either delay on hitting that send button or they just don’t put it on their system yet. I feel that’s a very helpful hint for that, I mean there are other things that you can think of that would help people through that.
Matthew Paulson [08:42]: Yeah. I think that the two keys are one is to understand that no email is going to be perfect because not everyone all respond to in marketing email or a piece educational content in the same way. Every email will interest some of your subscribers but not necessarily all of them. So, you just have to know that depending on who the subscriber is and email is going to be hit or miss and you’re not going to hit everyone with every email and that’s totally okay. The second thing you can do to mitigate some of these fears is just to have systems in place. So before we ever send out a broadcast email that says I write my assistant has an SOP to follow so she checks the spelling and the grammar, she make sure how the links work, she checks all the prices and the numbers to make sure everything is correct in that email before we sent it out so that way we don’t have to go back later and say ops we made a mistake or anything like that, we know that an email is correct in the first time because there’s more than one set of eyes on it.
Mike [09:32]: Now that brings up another objection that I hear from people where they’re tracking the analytics behind some of their emails and once you go through and you click on every single one of those links, what it does is it starts adding numbers to every single one of those. It seems to like if you have a mailing list of 100,000 people then those 1 or 2 clicks may almost no difference in the analytics but when you only have a mailing list of say 100, those 1 or 2 clicks make a big difference I mean it’s a couple of percent. What are some strategies you can think of to kind of get around that particular fear?
Matthew Paulson [10:02]: Okay. So, I think a lot of entrepreneurs and marketers think that the emails that they send have to be perfect and I don’t really think that’s the case because a good email now is going to be better than a great email never and you just kind have to get over that and decide hey, every day or every week that I’m not sending out any email is the day that I’m losing sales. So even if your first message or your first several messages aren’t perfect, mostly your first messages are going to probably be pretty terrible that’s okay. Sending out an okay email is much better than sending out no email at all.
Mike [10:33]: Right. It’s about improvement over time versus getting things perfect.
Matthew Paulson [10:37]: Absolutely. I mean if you’ll look at some of my first emails or probably my first seven emails Mike sent out about Audit Shark forever ago, they’re probably not going to be anywhere nearly as good as anything he would write or I would write today.
Mike [10:47]: Right. Okay. So, let’s talk a little bit about like the basic email marketing strategy and I think the first step to that is talking about email service providers themselves and there’s kind of three different categories that they breakdown into is the transactional emails, the bulk emails, and then kind of true marketing automation and there’s different service providers who kind of addressed each of those different needs. Can you talk a little bit about what situations you would use each of those in and why?
Matthew Paulson [11:13]: Yeah, so transactional is just for brought email delivery. You connected them via an API and sent say, “Here’s my message. Please deliver it for me.” So that’s like [?] Amazon SPS, those are great if you’re writing custom software and have to do like a notification email, a welcome email, or anything like that. If you have a SAS app, you’ll probably need a transactional email service provider in there somewhere. It might not be the main thing you have but it’s way for people who are writing custom software and have account notification emails and stuff like that. Bulk emails are the mail chimps of the world, stuff like that. They’re really for managing an email list and sending out messages to that list. They’re weaker in some of the more advanced stuff like marketing automation and auto responders and some of those things. They’re okay for some types of list that are small and/or even big but just don’t have a lot of custom functionality that’s needed. They don’t need marketing automation, any fancy emails or anything like that if you’re just going to send a single email to your list or to check if things are okay. So the marketing automation platform, I think it’s really worth that right now. These are the companies like [?] and Fusion Software and a few others but these really have some advanced functionality that allow you to send specific types of messages to specific people at the right times. So if somebody buys a product, you could create a custom auto responder, send them email to on-board them or if they send for a lead magnet, you could to a special auto responder series just to them and there’s just so much that you can do with the marketing automation platform. If you’re really going to down to the road of – if you need to do email marketing, I think you are better off to starting off with point infusion software or something like that from day one because you hate to sign up for something simple and then have to switch ESPs later, that can be a big pain in the butt to do. So, I recommend start up with something of high level of functionality even if you’re not going to use it right away, it’s good to have down the line.
Mike [12:57]: And I think that’s one of those things where people look at that and say, “Well, I don’t want to pay for that now. Let me do what I have to do with this other provider and then grow into it.” But the reality is they’re just basically creating work for themselves down the road when they are successful with their products.
Matthew Paulson [13:11]: Yeah, and if you look like what a starting Drip account costs, 50 bucks a month or something like that, in any business that makes any amount of money, that’s just a very tiny business expense and I think it’s worth forking the money for that.
Mike [13:23]: Yeah, and I think to differentiate here a little bit more between a bulk email provider and something that does true marketing automation, I think one of the things that people don’t realize is that they look like for example Mail Chimp and what you just talked about there was the idea of oh they signed up for this and then they get a series of email, well, Mail Chimp does that and I think the differentiating factor is that with marketing automation software, things are event driven, so when somebody takes an action of some kind, then it is essentially an event in the system and that event triggers a series of other emails that it is essentially a sequence of emails but it is based on that event and you can kind of do it in Mail Chimp but I think those marketing automation platforms make it significantly easier to do and their designs to operate off of those of that.
Matthew Paulson [14:10]: Yeah, and if you look at Infusion Software or anything like that, you can have just kind of a nice visuals [?] how it actually works kind of tell them do this better than others but just nice to be able to see like what the different processes or if somebody does this lead magnet and then they get this email series and then they buy this and then they get this email series. It’s nice to have a more visual way of representing that.
Mike [14:30]: Right. And I’m in a complete agreement with you in terms of email marketing, if you’re going to do anything around email marketing, you really should invest in marketing automation platform of some kind. I’m hesitant to even recommend Mail Chimp at this point I mean not because they don’t do well with what they do but because email marketing can be such a critical component of the business that it almost seems like you have to have that in placed as opposed to trying to do with something like a free or $15 Mail Chimp account now only to have to switch over later.
Matthew Paulson [15:00]: Yeah, I absolutely agree with that.
Mike [15:02]: Well, the other thing that you can kind of add to it is that once you get involved in a marketing automation platform, your eyes are open to all the different possibilities where if you’re in Mail Chimp, you don’t necessarily see all the different options that are available to you because they don’t exist, but once you get into an email marketing automation platform like all of a sudden you see all this different possibilities that were just never there before.
Matthew Paulson [15:23]: Yeah, and if email marketing is going to be a big part of your business, these things aren’t really optional. You would really need to have good marketing automation in place and have different series and campaigns driven by events and you might be able to get away with that 10 or 15 years ago but email marketing has just gotten so much more advanced. You need to have the technology stacked in place that will let you do those kinds of things.
Mike [15:43]: So, now let’s talk about the different email service providers. Let’s talk about collecting email addresses and we’ve talked about this a few different times on this podcast but what are the different ways that people can go about collecting email addresses on their website?
Matthew Paulson [15:56]: Yeah, so obviously you need some opt-in form, you need some kind of offer and then a sign up box. So it’s typically a title, a subtitle, a textbox and a button and to sign up. There are different types of opt-in forms you can do. You can do an entry popup, an exit popup, a welcome gate, something in your sidebars, something below the post. I’ve tried a lot of different opt-in forms on my websites and I found that nothing comes close to doing the popup form welcome gate, just having something that people can’t miss right away. It tends to work very well to get email opt-ins. If you only show the people once a week, they’re really not that annoying so I think if you have scoop those box, it’s not easy to pop up on your website, I think it’s time to just maybe get over that and put it on your website anyway and see how it works. And then another good place I found is pretty one directly below the post of an article, so if you’re reading article, typically you’re looking for the next step to do. And if your email opt-in form is right there, it’s a really good way to get opt-ins. I like to use a combination of both the popup, like an entry popup and an entry form below the post and that does pretty well with opt-in rates.
Mike [16:56]: And I think that’s interesting what you said about getting over in the idea of putting in that welcome popup because personally, I’m not a big fan of those type of things and I don’t tend to put my email address in them but there’s also times where I’ll go to a website where even if I close it three or four times, if I find myself going back to them, I have a tendency to put my email address [crosstalk]
Matthew Paulson [17:14]: Yup, and again, that’s just a matter of we aren’t your customers so if even though we might not prefer our email address into a popup form, that doesn’t mean our customers won’t. So, it’s really a matter of trying it out and saying, “Hey, how many opt-ins am I getting from this versus whatever I’ll say and do from getting a lot more than maybe it’s just worth to leave it there even if you think it’s a little bit annoying.”
Mike [17:34]: Yeah, and that’s something you can even just try for a week. What’s the worst thing that’s going to happen? The people who came to your site are not going to come back? That’s not the end of the world, I mean your business is still going to keep going.
Matthew Paulson [17:43]: Yeah, there is a local coding boutique that does e-convert that is helping out a while back and they had email list and they have a list of maybe 500 people and their email stuff was so hard to find and I just – hey try popup for a weekend and see what happens. The guy was pretty resistant to it but when they did it, they went from having 500 emails on their list total to adding 500 emails every month and the popup is still there a couple of months later so clearly, it’s working for them well enough that they want to keep it even though the guy thought it was a little annoying to begin with.
Mike [18:13]: So let’s talk a little bit about how to entice people to actually sign up. In episode 248, we talked about 14 different ideas for high impact lead magnets. Are there lead magnets that either appeared on that list or that you can think of that worked really well or do you think a lead magnet is not necessary?
Matthew Paulson [18:30]: I think the lead magnet is absolutely necessary. You can’t just say, “Hey, give me your email address so I can send you email.” Nobody cares. You need to give them something to care about in order to get them to give you their email address. I think the format of the lead magnet matters less than the content in the format. So like, I don’t care if it’s a video, a guy, the PDF, whatever, but it should just be very relevant to the content on the page so that might mean that if you have five or six different topics that you talked about in your website, you might have five or six different opt-ins or a lead magnet that show up on each page based on the category that it’s in. So to me relevance is a lot more important than just the medium of whether it’s video, audio, or text whatever. It just is the content in your offer relevant to the content on the page.
Mike [19:13]: And I think that’s probably an important distinction to make for people because there are different types of lead magnets that take different amounts of time and effort to create. So, something that is very simple even though it’s relevant and it’s very quick to create, it can have just the same impact to something that takes 10 or 15 hours to build in terms of getting people onto your [crosstalk]
Matthew Paulson [19:33]: I absolutely agree with that. I don’t think that your lead magnet is something you should spend a lot of time on when you’re first getting started. Don’t let that be something maybe comes a 10-hour ordeal, just take some content you already have and make it into a nice format that’s makes for a nice PDF or something like that and makes it a nice download but I would spend a whole bunch of time doing the original content for your lead magnet.
Mike [19:52]: Yeah, that kind of brings up the idea of premature optimization if you’re spending too much time trying to figure out what is the best thing to do here, you are wasting time and you’re not actually building something to click through.
Matthew Paulson [20:02]: Yeah, I mean if you’re not getting many opt-ins every month, like if you have 100 opt-ins on a monthly basis, you’re not going to have enough people coming and to create a statistically valid split test anyway. So, it doesn’t really matter if you to think that the lead magnet that you have now wasn’t perfect because you couldn’t even test something else out to know whether or not it’s better or not. You just need to do something that’s good enough for an hour than once you start getting a ton of opt-ins every month then you can test out something better.
Mike [20:26]: Right. And it’s about optimizing down the road instead of now. So now that we have somebody on your email list, how do you go about marketing to them? What types of emails should you be sending to them and at what times should you be thinking about sending those emails?
Matthew Paulson [20:38]: Yup. So the first email that you send is probably the most important, that’s called your welcome email. And inside your welcome email you want to accomplish a few different things. First you want to set expectations about what kind of emails you’re going to receives, you might say, “Hey, I send an email every Monday about SAS news and applications or whatever. You can chat us.” And say, “This is what we do. This is what to expect.” The second thing you should do is try to get people to whitelist you or add to your their contact list. So if somebody replies you a message and adds you to the contact list, whitelist you in whatever way that you can, your messages are almost always going to automatically go to the inbox. So you want to ask them to do that right away and then at the bottom of your welcome email, like the PS of your message, you can do some kind of promotion for a product if you want to. So you can say, “PS, hey, do you want to learn more about whatever I do? Check out our cool product here so you could do that in your welcome email as well.” There are two other types of emails you send, one is that auto responder series. So that is 30 to 60 to 90 days the first however many days somebody is on your mailing list, you send them a series of emails, one every other day, one every third day, whatever you want to do. Those emails are designed just to get somebody familiar with your content and familiar with your products and services. So you might have say 15 emails in your auto responder series 1 every 3 days for 45 days, 7 of those might be sales emails for your product and either those just might be contact emails that teach people how to do things or provide people information that isn’t trying to sell something to them but just trying to help them out and establish a relationship and finally there’s broadcast emails so after someone is done with your auto responder series, don’t need to email them so you make a broad cast count every month and you send a mix of content whether that’s just new blog post, new podcast episodes or more product ads or this content whatever you want to do, you still need to send out. You need to keep email in people that are done with your auto responder series because if you stop emailing somebody, then they’re just going to forget about you and forget that they opted and did it in the first place.
Mike [22:29]: Now, one of the things that you just brought up there is that during the auto responders, not every email is essentially a sales emails. You’re not always pitching them a product. Can you talk a little bit about the contrast between establishing a balance of engagement versus generated revenue because obviously there are certain types of emails that are designed to engaged the user and essentially provide value to them and then there’s others that you send them that you’re essentially giving them a sales pitch, you want them to buy something from.
Matthew Paulson [22:57]: Yeah, it’s a lot like somebody that’s a fan of a podcast, person listening to the podcast thinks they have a relationship with the host of the podcast even though they don’t just because you hear them all the time, the same is true for email list. If I’m sending you email all the time and you’re reading it, like I might think that I have a relationship with Kathleen because I get her email all the time even though we’ve never meet. So, you have to think about it like you’re starting a relationship with somebody. You can’t just sell them all the time where you’re going to make them mad at you and they’ll go away and unsubscribe or report your messages and spam, you can’t do that all the time. So you really need to have a mix of content that is relevant to your audience or a stuff that’s entertaining, educational, helpful and stuff that generates revenue as well because that’s the point of being the business. So, a good balance I think is ever other or some people are more conservative than that they might do two content email for every sales email or and it kind of depends on the makeup of your mailing list.
Mike [23:48]: Now, in terms of the sales offers themselves, what are the different ways that you can use an email list to generate revenue for the business? What types of products can you offer? Obviously, there’s your own products if you have them, but what are the other ways that people can generate revenue from their list?
Matthew Paulson [24:03]: Sure. Obviously, you sell your own products and then you can sell other people’s products, through affiliate marketing kind of like what Kathleen does with his mailing this. He promotes a lot of other people’s products and gets a large commission check from [?] and lots of other places every month, people can do that. There are some other ways. There are advertising companies and networks and agencies that work with people that have email lists. I work for [?] investing media solutions that’s specific to finance but they will sell our newsletter ads in my newsletter so people will pay or advertisers will pay on a cost-perfect basis to getting them a newsletter. I’ll get revenue from that. They also sell [?] but they rent it so somebody can pay $50 APM or something like that to email my list, and that’s pretty good money if you can get it. That’s kind of the advertising method for the advertising strategy. That’s also on your thank you page, you can place ads called co-registration ads. So if somebody signs up for your mailing list, they might see offers for somebody else’s product and then if they check those, you might get a couple of bucks for whenever somebody checks those and signs up for a product. Co-registration advertising can be a good revenue source that people don’t realize exist that we do about 40 grand a month in [?] and your thank you page is just a very valuable, a place to monetize because somebody is just taking action and then they’re very likely to take another action if you give them an opportunity to take an action. So, if your thank you page says thank you, you should change it and put it in a co-reg ad, an adsense ad or just even try to sell one of your products in your thank you page because people are very willing to take action right after they signed up for your mailing list.
Mike [25:33]: And I think that this an area where people are also very averse to kind of sharing the fruits of their labor in terms of the emails that they’ve acquired but at the same time these are people who – they’re the ones making the decision about whether or not they’re going to sign up for one of these co-registration ads and I think that the other thing that you mentioned which I thought was very interesting was putting advertisements in your own emails to your own list, can you talk a little bit more about it because I think you very briefly mentioned it about sharing your email list itself, but I don’t think that it was probably clear the specifics of what that really means?
Matthew Paulson [26:06]: Yeah, so you don’t ever give out your email address or your email list to anybody else, that’s a big no, no, but what you can do is talk to an advertiser and say, “Hey, what’s an email from our list for what your product for the set amount of money. They might want to email 100,000 people they’ll pay $50 APM, that’s 5 grand they would pay me to send the email out. I usually work with an advertising agency that sells out stuff for us so I don’t have to really worry about it too much but it can be a good money when the advertisers are available and in season and that kind of stuff. Newsletter ads, that’s also I think the same agency but those are typically done on a cost perfect basis, so there are other financial publishers that people start talking on financial products that have ads they want to get eyeballs for they all put that in my newsletter and they’ll pay me a dollar or two for a products just to get somebody to go to their landing page. So much of that though is you worry about handling over your email to somebody else and a lot of that depends on the industry that you’re in, in the financial industry, people sign up for a lot of different crap. So I don’t care if somebody signs up for my stuff and then I get them to sign of two other stuff. If you’re a co-reg ad or through an email ad or anything like that but if you’re Ruben and you have got BidSketch, you’re only going to use BidSketch or you’re going to use somebody else. So in that case, you probably don’t want to do that, so it just kind of depends on what industry you’re in and if it’s a zero some game or not.
Mike [27:20]: Interesting, so let’s talk a little more about after the person has made a purchase from you. So you generated revenue of some kind from a specifically through these direct product sales or through the affiliate marketing or co-reg ads or the newsletter ads or anything like that, but after somebody has actually purchased a product from you, what sorts of things you do? How do you interact with them after you’ve made the sale? Because I’ve purchased products from people before where I’m getting all this email marketing and then I make a purchase and then I never hear from them again. What are the best practices with that?
Matthew Paulson [27:52]: Yeah, some of it depends on your business model. If you have a SAS app, you need to get them to keep buying every single month or every year. So you have a strong incentive for them to keep using your service array of program or whatever it is. After somebody buys, you should have some kind of consider an event in your marketing automation system and then you have a sequence that goes after that that really helps people use your products or you should remind them that they bought the product, remind them what’s your name, give them the link to go access it, just have two or three weeks’ worth of content that shows them how to use a product, how to get the best value out of it, all of that kind of stuff so that people will actually use your product because if they used their product, then they are more likely to buy a stuff from you in the future. If it’s a SAS app, they’re more likely to go up. The goal is to get people to engage with your product and actually use them because people that buys something and never use it which happens a lot more than you think, they’re going to bounce and they’re going to be somewhere else and never think about you again.
Mike [28:42]: So let’s circle back a little bit. We’ve talked to about how to choose an email service provider and collecting the emails and using lead magnets and then generated revenue from these people and kind of what to do after you’ve made the sale to them but what about the sales funnel itself, so there’s always different pieces that you kind of string together. How do you look at this from the kind of global standpoint. You’ve got this top level view and you want to say, “Okay. Over here we’re going to do this. Over there, we’re going to do that.” Are there any general strategies you have for kind of mapping out what this looks like? In the past I’ve used graph papering, you draw little boxes and point little arrows to different things. But are there other strategies you’ve used or seen people use that could help with this?
Matthew Paulson [29:22]: Yeah, I mean you really have to start what’s the end goal that I want people to buy my product? Do I want them to do who knows what and then you work backwards from there. So what needs to happen for people to want to buy my product, they have to become familiar with it, they have to learn about it, they have to understand why it’s better than anyone else and here I’ve done all these steps and then you have to convert them into an email sequence of some kind. You can do pen and paper like you do with graph paper or you can use [?] to make some fancy parts. Some ESPs has some of that stuff. I just work it out on the Word document of what kind of emails I need to send. I figure out okay, what’s in a welcome email that leads to this? What needs to happen in the auto responder series? Let’s say they get to the end of the auto responder series and then they don’t buy then, what do I need to do in my broadcast emails every month to try to get them to buy after that fact? So, it’s more about knowing the steps and less about knowing the specific emails right away. You have the steps and then you try to figure out how do those steps translates into the specific emails that will help people get down to fact?
Mike [30:20]: I find it interesting that you use a Word document because for me I’m much more of a visual person so having kind of like I said a graph paper map kind of helps me with that, is that depending upon the type of person that you are or is it just are there certain techniques that you think work better?
Matthew Paulson [30:34]: Yeah, I’m a pretty left-brain person. So I think it’s just how I think about things and how things connect together in my mind. For me, that’s how I do an auto responder series and then a broadcast team around, I print out a monthly calendar on paper and then just kind of fill in what emails I think I should send and what they so that it’s based on appropriately and there’s a good mix of everything but there’s not a whole lot that goes in. It’s not as complicated of a process as it might seem.
Mike [31:01]: It’s not that it’s complicated, there’s a lot of steps though, at least there can be and I think that that’s where people get hung up is, “Oh, I have all this work to do.” And then they just don’t it.
Matthew Paulson [31:09]: Yes, that does happen, because I think people will expect results from email marketing right away or results from email marketing right away and then they look at all of the stuff they have to do and then they get overwhelmed by it and just don’t do it.
Mike [31:20]: With the email marketing, it’s not just one or two emails that you need to send, I mean there are cases where you need to send 15 or 20 or 30 emails before you convert somebody to a custody, right?
Matthew Paulson [31:28]: Well, absolutely, I’ve got people that subscribed my free newsletter for two years before they finally upgrade whenever we sent out like a sale email. It can take a long time for somebody to finally get a sign that they want to buy you product.
Mike [31:39]: And maybe that’s part of the hesitation for some people to kind of invest in this is a channel because they look at that and they say, “Well, I sent out three or four emails and I only get a handful of sales.” So, email marketing isn’t working and they kind of [crosstalk]
Matthew Paulson [31:52]: Yeah, it’s a ramp, I mean it takes a long time to build up a list and to start figuring out how to actually make emails at sales because we print opt-in form in your website, you get 1,000 emails for a month even which would be good for a lot of people. At first month you only have a 1,000 people to email and that’s not a very big list to generate sales from because if you think, if I get open rates of 20% that means 200 people open an email and out of that, if 5%, buy it, 5% buy the thing. That’s maybe 10 sales I will get in the first month and that’s probably optimistic even, but once you get down to 2, 3, 4, 5, when you get 2,000 emails next month, 3,000 on your list for third month and so on down the line, then it only starts to get bigger and you start to get more results as it grows over time.
Mike [32:37]: So it’s more about the iteration process and the incremental improvements or the month over month improvements that you’re getting from it?
Matthew Paulson [32:44]: Yeah, I mean my first month that I did the freemium newsletter, I sold maybe 10 premium subscriptions. So I made $1500 that first month then I made nothing for like the next two months because I didn’t send out any emails to promote the product, so it was not just a matter of time to learn and try stuff and see how it works and not to list grow. The results aren’t going to happen overnight but 2 or 3 years down the line, the results are going to be probably a lot bigger than you could imagine right now.
Mike [33:08]: Well, this has been great so far. Where can people find out more about the book that you’re writing called Email Marketing Demystified?
Matthew Paulson [33:14]: Yup, so the book is going to come out October 1st, 2015. It will be available in Kendo, Paperback, and AudioBook formats. It will be in Kendo version for the first week, so if you want to be notified about that, I’ll go to my myemailmarketingbook.com, again that’s myemailmarketingbook.com. Type in your email and I’ll send you an email when the comes out and you can get a free copy. And if you want to follow me on Twitter, my user ID is MathewDP and you can follow my personal blog at mattpaulson.com and Paulson is P-A-U-L-S-O-N.
Mike [33:43]: Or if you got a chance to go to MicroConf, you’ve been attending to get MicroConf.
Matthew Paulson [33:46]: Yeah, so I went to MicroConf for this year in Vegas. I had a great time. I’m going to go back next year. I’m going to try to do an attendee talk so if you guys see that in the voting, actually vote for it if you’re going to come to MicroConf this year, I did one last year but nobody voted for it so we’ll hope I get in next year.
Mike [34:00]: Okay. Well, great. I just wanted to say thanks for coming on the show.
Matthew Paulson [34:04]: Thanks, Mike.
Mike [34:05]: If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or email us to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Out of Control by Moot used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 250 | 10 Ways to Use Engineering as Marketing
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about 10 ways to use engineering as marketing. They define engineering as marketing and discuss how it can help generate awareness of your company and product.
Items mentioned in this episode:
- The 8020 Manager Book
- MailChimp
- SumoMe
- Bounce Exchange
- speed.wpengine.com
- Hubspot’s Marketing Grader
- Pingdom
- DontTrack.US
- DuckDuckGo
- Baremetrics
- DotNetInvoice
- Dropbox
- Kissmetrics
- Drip
- Bingo Card Creator
- Tractionbook.com
- Themakerscrew.com
Trancript
Mike [00:00]: In this episode of Startups For The Rest Of Us, Rob and I are going to be talking about 10 ways you can use engineering as marketing. This is Startups For The Rest Of Us episode 250.
Mike [00:16]: Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products. Whether you’ve built your first product, or you’re just thinking about it. I’m Mike.
Rob [00:24]: And I’m Rob.
Mike [00:25]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
Rob [00:29]: Well, this is my last episode for a few weeks because when this comes out I’ll be in the middle of France or Spain. I’m taking a month with the family and going to Europe before MicroConf Europe in Barcelona in a couple of weeks.
Mike [00:42]: Very cool. Yeah, we’ll have a couple of Gaston for a few weeks until you return but the show must go on and on that note, we are on episode 250. So, I just wanted to say thanks to everybody who’s been listening to the podcast, been going on for around five years now. I think we had the five year anniversary a couple of months ago but 250 episodes is a pretty big milestone so I just wanted to say thanks to everybody.
Rob [01:02]: Yeah, it is indeed. Our five year anniversary was a few months ago but in early days we didn’t put out a weekly show. Yeah, it’s been good to be on there all this time. The other thing I wanted to mention is we have kind of a secret drip project going on. We’re in the midst of the biggest single feature edition that we’ve added since automation last year and automation if you recall was the big game changer that allowed us to pivot from email marketing and the marketing automation. And so, I don’t know that I’m going to be as lame as to say. That was Drip 2.0 and this is Drip 3.0 but it’s cool to embark upon this and sometime in the next month, I think we’ll have a pretty big announcement so stay tune on the podcast for me to talk about it or you can obviously go to [getrip.com?] send it for the mailing list if you’re interested in hearing about what we’re up to. The only other thing I wanted to mention is I just finished up a book called the 8020 Manager and I don’t tend to listen to a lot of management books just because that’s not necessarily something that I want to dive too far into. But, I like books that talk about 8020 even if it’s a little overly used but they talk about how to find kind of a maybe a core competitive advantage or a thing that you can focus on in yourself that will allow you to do things better, and that’s what I like about this is that it wasn’t all about being a manager. There were things about being a leader and there were things just about performing better in your job, in your company. So even if you’re not really managing people, there were some good and interesting suggestions in this book for how to key in on are you a really good networker, do you have a lot of people that know that can trust you then use that as your advantage. Are you really good at like researching, digging things out, then use that as your advantage. And if I recall there’s maybe 10 of them, 10 different suggestions and the author says, don’t try to do all 10, pick one that for you is going to be your 8020 because it’s not going to be for everyone. And then he said master that one, raise your game, and then pick another one. So, I found myself taking a lot of notes as I listen to this book which is typically a sign that I’m getting a lot out of it and so I wanted to mention it here in case folks haven’t heard about it, 8020 manager.
So what are we talking about today?
Mike [03:07]: Well, today we’re going to be talking about 10 different ways you can use engineering as marketing. So let’s talk a little bit about what engineering as marketing is and the purpose of engineering as marketing is to help generate awareness of your company and products and it’s also a way to provide incoming leads. So the basic idea is that you create or build something that you’re going to put out there and you’re going to do some marketing efforts on it to drive people to the tool or website that you’re building and you’re going to get them to use it because it’s going to be applicable and valuable to them. Now, it’s probably not something that you’re going to charge them for, it could be something that’s a bit of a strip down version of something you already offer or just a click little utility that somebody may find some value in but the basic idea is that you build something that it has some peripheral focus around your product. So, we’re going to talk about 10 different ideas that you can leverage to using your marketing efforts to help drive people to your products. So to startup with, the first question that you can ask yourself is, is there a competitive advantage that I have over my competition that I can highlight? What you want to do is you want to find something that your product offers that your competitors either don’t or simply don’t measure up to and then find a way to be able to highlight that to your perspective customers. And the examples I have for that is WP Engine Speed Test. When WP Engine came out with their WordPress hosting, one of the key advantages that they really focused in on was speed and being able to make WordPress faster. So, what they did was they built the speed test application where you could go, you could plug in your website and you go over the speed.wpnengine.com and you can see this example. But you plug that in and it will tell you how fast your website is. And what that does is it essentially helps to highlight how fast your current hosting is versus what they offer. And the basic idea is very simple, it’s very straightforward. They want to show that they are faster than their competition and by focusing in on at speed, they’re also able to highlight other pieces of information that might be relevant to you such as if your website is slow by X seconds, then you’re going to lose Y percentage of people to your website because they’re just going to say oh, this is too slow and they’re going to leave.
Now, in the case of WP Engine, by making your website faster, they’re actually helping you to attract customers and to keep those customers on your site rather than they click through Google, your website kind of hangs because it’s WordPress and it just happens to be slow on whatever current host you have and they say, “Oh, heck with this. I’m going to go back. I’m going to go someplace else.” And what WP Engine is able to do is capitalize on that fact and help you to gather more customers.
Rob [05:42]: And I think there are a lot of opportunities here to figure out if your unique selling proposition really is that you are faster or that you do things better than other people, then getting this free tool out there. Basically, you don’t just build a tool, you allow someone to enter their URL and then you ask for an email address so they can get the results. And I’ve seen this done like you said with WP Engine, Ruben did this with BidSketch where you enter your email and you get like a personalized proposal. And so he’s basically trying to show that their proposals, how nice they actually look and how simple it is and that’s the kind of thing you could customize. If you were on SEO company, I mean you could crawl someone’s website looking for broken links so you could crawl it and just look for SEO improvement opportunities, some things that are kind of low-hanging fruit. There’s a lot of ways to think about building a tool that really kind of captures your competitive advantage and I think if you sit down and give a little thought and you have some engineering bend with, you can put some together.
Mike [06:40]: The second way is to look at your product and see if there’s a free version of a report from your product that you could offer in exchange for an email address and that email addresses will essentially help get somebody into your sales [?]. But an example of this is something like HubSpot’s marketing creater and you can go to marketingcreater.com where you’ll be able to put in your website and they will give you a grade for your website based on all of the internal algorithms that they have and they’ll analyze it and essentially email you a report that shows you what your current marketing efforts look like and maybe some places where you can improve. Now, that doesn’t mean that they need to give you the entire report, they could give you let’s say the top three or top five different things in each of those categories. And oh, by the way, if you want to get all of these different things that you could be doing better, sign up for our service we’ll be able to give you all this stuff on a regular basis. We’ll give you daily reports, et cetera. But essentially, it’s used as an upsell opportunity to get somebody into your sales funnel and then be able to market to them on an ongoing basis and convince them to use your full-fledged product.
Rob [07:40]: Yeah, I actually have several points in my idea notebooks where I’ve gone through this exact exercise for several of my products including DotNetInvoice and the HitTail and Drip and I always find it fun to kind of think of what is something that someone would A like to see about their website but also potentially be like to share about their website, right, or about their business because just getting them to view it as one thing, and that’s cool, but if you have a Twit button or a like button there, and there is even a little bit of a viral thing of like, “Hey, these are metrics. What are your type of thing?” There’s another element there of marketing where you’re not just getting that one person but potentially getting them to share it to. And if you know your product pretty well and you know the most popular reports, it’s not too hard to realize which of these is probably going to be the most popular if there are any that are applicable.
Mike [8:32]: The third option is to see if you can show a demo of your product capabilities. So, if you go over to Pingdom’s website speed test for example, you can go to tools.pingdom.com and there’s a textbox there where you can just enter in the URL for a website and it will go through and it will do a complete speed test on that. Now you can use that for a variety of ways as an end-user but what Pingdom is trying to do is show you that hey, by the way, we can do these things for you and we can help you and drill in and analyze all the different ways that your website is slow, we can alert you when it starts to get slow and help you to make sure that your website is as fast as possible. Now, this is a little bit more generic than WP Engine Speed Test where that was specifically for WordPress hosting versus Pingdom’s options which is primarily intended for any type of webhost.
Rob [09:16]: Another interesting example of this exact thing I’m showing a demo of your product, I’ve seen some SAS apps that have an actual visual piece, maybe let’s say Drips that will opt-in widget where you can enter on a form, you can enter your website and the site reloads with your site in an eye frame and they’ll actually show you what your website is going to look like with that opt-in form down in a lower right or with the light box covering it or whatever. And so it’s a nice way to get someone just one more step involved, and this actually doesn’t require an email opt-in for that one. It’s just a tool to get someone to maybe enter their URL so that you could certainly reach out to someone later if you wanted, but I’ve always liked that idea of kind of showing them how it might feel to be using your product just to get them one step closer. I mean I think realtors, when they’re showing houses, they know that folks are thinking about making an offer when they start to imagine themselves in the house and maybe even start talking between spouses about, “Hey, would the couch go here? Would the table go there?” You start to get the mindset of, “Hey, we could actually be here.” And I think that’s a similar thing. It’s like showing a demo of you using your product and giving you actionable information about your own website, your own business because more value than just talking in generalities like we typically do on marketing websites.
Mike [10:32]: It’s kind of like showing the benefits without forcing the commitment.
Rob [10:35]: That’s right. And it’s reshowing not telling, because you can tell the benefits that my product will bring your more traffic and it will blah, blah, blah. But when you actually show them on their own website, there’s just more value there.
Mike [10:46]: The fourth idea for engineering as marketing is to advertise your product through your own customers, and I think that there’s a really creative way that Rob has actually done this through Drip and they get Drip which is that he put “Powered by Drip” at the bottom of the different email captures and there’s a pricing tier where you can remove that particular branding but I think that it’s very effective and I’ve heard from other people that doing similar things on various website widgets is extremely effective for gathering new customers because anyone who goes and takes a look at that is going to see that powered by logo. So, if they see that and they are interested in any way, shape, or form in doing that kind of thing and capturing that information, they’re probably going to click through that and also take a look at the product that’s behind it.
Rob [11:28]: Right. And there’s a bunch of companies that do this; Olark does it, SumoMe does it, Bounce Exchange. I mean this is a pretty common thing for folks who have any type of UI widget I think Hellobar does it as well. And to be honest, I was at MicroConf a couple of years ago, it was two or three years ago right as Derek and I were building Drip, and Heaton Shaw mentioned this specifically that if you have a visual component, you should mention and have it powered by and I ran back to Derek and said, “Oh man, you’ve been noting this down?” Because I was making notes, and he’s like, “I’m quoting this up already.” Like we were adding it as a conversation because we knew this was a no-brainer to do. And the other thing that I recently did is actually, originally we were the powered by link straight through to the homepage of Drip, but I realized that people clicking on it didn’t want a homepage. They really should get a specific landing page. So if you haven’t clicked on that powered by link in a while, I recommend you click it and kind of see what we did there with the copyrighting and how we couch the landing page and how we approached trying to link up with eth mindset of the person reading it.
Mike [12:26]: The fifth idea is it’s sort of a variation on this but it’s essentially embedding your company name or URL on different reports that come out of the product, and obviously you want to offer a pricing tier of some kind that allows removing this, but this is especially helpful in situations where people are using your products on behalf of their customers. So any product that serves agencies and spits out reports on behalf or their customers, it would be really good to be putting that type of information directly into the product. I’ve seen a bunch of downloadable applications that do this as well. So, when they dump things out to PDF, they embed their own company logo onto those reports and oh if you want the professional version of this product which will cost you an extra $200 or $500 more, then we’ll remove all of that branding from those reports.
Rob [13:10]: And you can see MailChimp does this not with reports but with the actual emails they send. If you’re on their free tier, there’s a little badge at the bottom, that’s a MailChimp badge. I think if you’re sending out any types of emails on your customer’s behalf and you have a free tier or a very, very low-priced like a cheap-mium tier, as [Dormesh?] calls it, where you’re basically charging your cost for the tier, I think that you should have some type of badge or link back or something in emails that are sent out on customer behalf in any type of visual UI component. And as you said, to offer pricing to your folks that want to remove it.
Mike [13:45]: The sixth way to use a microsite and I like microsites because they’re used for telling a story and it allows you to create essentially a marketing angle that for a current new story that might even be publicized or just a general feeling about that people are kind of going through and the example is that if you go over to DontTrack.US, you’ll see that DuckDuckGo has created a microsite that talks about tracking for website searches and they go through essentially what has become a giant privacy issue based on the US governments tracking of all internet communications and intercepting phone calls and things like that. So, they’ve essentially capitalized on this idea that hey, the privacy and security for just something as simple as website searches is important, so let’s create a website, we’ll talk about that particular story and then at the bottom they talk about not just DuckDuckGo but a couple of other sites that they have that kind of revolve around the same type of story but obviously, in this particular case, DuckDuckGo is kind of founded on the principle of hey, we don’t track you and we don’t store information about the people who are searching through our search engine. So it’s extremely relevant to create a microsite around that particular story and publicize that.
The seventh idea is for using a public demo and I think that most SAS applications are going to have probably some sort of a public demo available but the problem with public demos is you don’t necessarily have data to go into them and I like if you go over to demo.baremetrics.com, you’ll see that Baremetrics put together a demo that shows a completely working system and it included their own live data in that. So, this kind of combines two different things. One is the marketing angle of leveraging public transparency but it also shows real live data that’s going into the system and you can see that stuff track overtime and how it changes from day-to-day. And I think some of the issues that some people run into with a public demo of some kind is that demo, the data inside of it tends to be relatively static and maybe it gets refreshed once in a while but it doesn’t change overtime and if you go in today, and then you go in three months from now, that data is largely going to be the same. So it can look pretty barren unless somebody went through a lot of time and effort to make it look like a real functional application that somebody was in the middle of using.
Rob [15:57]: Yeah. I think we’ve largely moved away from the idea of kind of public demos or places where you can click on a demo version and see it all populated and we move more towards these free trial models, that I mean that’s kind of how SAS is done these days. But I think there is still room for public demos in certain spaces. I think that if it takes a lot of time to set anything up, like if the onboarding really is intense and it’s complicated, that I think seeing your app full-fledged working in the flesh can be helpful. Now, there’s also a drawback to it. If your app is so complicated that it’s hard to set up, it might be so complicated that you’re just overwhelmed when you log in and that’s not a good thing. But I also think that if you have any type of downloadable product certainly like a one-time sale piece of software like Perch or DotNetInvoice, then I think having some type of demo to at least be able to click around and feel how it feels, screenshots are good but I think that demo can help especially if you do ask for an email address before people can really click through and try it, you’re going to get the folks who are really interested in entering real emails and you’re going to get the ones who just kind of want to want to poke around. They tend to enter fake email address just do to it, so there’s certainly the roof of it and I think that with Baremetrics, they’re really good example because there are reporting tools. And so having reports that you can see really easily, and kind of explore the product is kind of a no-brainer because even if they just want to hook up to your data, it’s still interesting and relevant to see someone’s data in there and to see all the reports put together. It’s a little harder if you have an app that’s a backend cred app that’s supposed to taking a bunch of data and do stuff with it, and if it’s not catered to your specific data, I’d say it’s less interesting.
Mike [17:32]: The eight idea for engineering as marketing is to implement a referral program of some kind, and you can do this on a variety of ways but the basic idea is that customers who refer other customers get a bonus of some kind inside of the application and I think a primary example that most of us are probably familiar with is DropBox, and if you sign up for DropBox, you’ll get a certain amount of extra free space for inviting or referring other people to use the product. And in addition, that person also gets that free space as well. There should be a cap on it of some kind because you don’t want people running around in inviting everyone under the sun and they get basically the world handed to them for free, but at the same time, you want to be able to use some sort of a viral component to that to get people to share it amongst their friends especially if they’re getting value out of it. And in the case of DropBox, the value of DropBox is pretty evident when you sign up for it and people are encouraged to go out and ask their friends, hey, do you want to sign up for this? This is really awesome. We can both get a benefit if you sign up. I think affiliates kind of fall under this umbrella as well but not as much.
Rob [18:34]: Yeah, and this is less about engineering as marketing and more of a virality I think which is fine but I think anything that contribute to your virality kind of like the “powered by” logo is pretty powerful. Building up a network of affiliates and a referral network, and a referral program actually takes quite a bit of work to do and to manage it properly. I think you really have to have someone that people are stoked to share. But obviously, with something like DropBox which was a kind of a new product and like you said they gave both people the bonus, I think that can work. But I think their numbers also were, they’re B2C product when they started and so, B2C is going to have a better luck with this kind of stuff. I’m not saying it doesn’t B2B but it takes a little bit of I think a longer term to do it and I just think that the viral coefficient is going to be a lot less than when it’s B2C.
Mike [19:24]: The ninth way to use engineering as marketing is to leverage some sort of daily report email and show progress towards the goal and the daily e-report emails can show that progress but the core piece of this is showing progress towards whatever the goal is and for different applications, they’re going to have different goals. So for example, with Kissmetrics, you can get a daily email that shows you some of your KPIS with codeschool.com, you can get a report card that shows you how far along you are in inside of the school and showing you what sort of progress you’ve made. Anything where you’re showing progress towards that goal is something that you’re going to want to be able to highlight to people and use that engineering effort to say, “Hey, you’re making progress towards this goal. Don’t quit now.” And you can go in and implement additional things that look at that and analyze to figure out are they slowing their progress down, or they’re not making as much, are there ways that you can essentially draw them back into the application to help them move forward.
Rob [20:17]: Yeah, I think daily or weekly reports are powerful when like you said with the Kissmetrics I’ve seen perfect audience to a really good job of this. Some of these emails that I get are really irritating and I don’t actually care. To be honest, one that it’s not irritating but I never look at it it’s the one from [?] I just don’t care about the activity. I use it as a tool and I have no interest in it and I should probably just unsubscribe from it but I haven’t yet. Whereas something like Kissmetrics or email marketing software or Perfect Audience which is ads, that type of platform to me it’s a no-brainer and this is in our feature list we trip to actually build one of this but I think having a daily or a weekly report is a really key part of keeping your customers engaged.
Mike [20:58]: And the 10th idea for using engineering as marketing is to essentially leverage the content from your application for SEO, and primary example of this is bingo card creator has a ton of automatically generated webpages that are based on different bingo cards that were created for the application and some of these bingo cards are for either holidays or animals, bingo card creators designed to create bingo cards and from those there were all these different webpages that can be generated to essentially help fill out the website and the larger the footprint for your website, the higher the likelihood is that you’re going to start ranking for some of these very obscure search terms especially if you engineer it in such a way that you’re doing all the right things in terms of the H1 tags and the titles and all the different meta tags that go with it or the URLs, I mean there’s a lot of different things that factor into that. But most of that can be automatically generated especially if you have a large base of content that you can generate it from.
Rob [21:55]: And Bret Palombo also did this with distress pro, and I’ve heard of a few other folks doing it as well. Oh, Zapier, that’s the other one I was trying to think of. They did a good job with kind of linking up all of the things they integrate with. And so if you search for [linktrelo?] with Gmail for the longest time, Zapier will rank number one for that, I don’t know if they still do because they link them and they figure out how to create enough content to link all 150 of their incoming with all 150 of their outgoing. When you do that multiplication, that’s a lot of pages that they spit out and they kind of cover the nice surface area in Google. So, this is definitely something to think about and this is something that you had done I think about a year ago with AuditShark as well. How did that turn out?
Mike [22:36]: It went pretty well. The initial uptake on the traffic was pretty good and then it leveled off pretty quickly and it bounces a lot. It depends a little bit on how much Google is kind of searching around and finding pages that are not relevant for some of those long tail search terms but they are extremely long and most of the pages maybe only get like a couple of visits a month, but at the same time, I mean it does amount to thousands of visits every month because I’ve got I think well over 1,000 pages that are created for that.
Rob [23:06]: And it probably fairly targeted since they’re searching for such a specific thing.
Mike [23:10]: It is, but the problem is that they are searching for that specific thing and they’re not necessarily looking for a product to solve that particular problem. They’re looking more for information about what that thing does. So it’s not quite as targeted as I would like or at least I kind of found that out after the fact it does draw in traffic but not nearly as targeted as I would like, I mean those pages are definitely lower converting the most for the rest of the site but I think that your mileage in that particular situation is going to vary based on what type of information it is that you have.
Rob [23:39]: Right. So for some closing thoughts on this, obviously, it’s reasonable to ask for an email address and email people the results of most of these things. If you let them use the tool and you don’t get an email address in front of that, you’re losing a lot of value especially if you can get it into a system where you can actually tag them as the fact that they did the specific thing and not just dump them into a random list or dump them into a list of people who have used this tool but actually have them in a big bucket and just being able to tag, then you can see who are the people who have never visited, who’ve done this, and who were the people who are already trials and customers who are using and then kind of exclude them from that. It can really see your metrics really well, and then you can engage obviously just the people who have never use their tool that a lot differently than you would if the folks are already familiar with your tool.
Mike [24:24]: And we’re going to link it up in the show notes but there’s a couple of links that you might want to take a look at for additional examples of how people are using engineering as marketing. One of them is over at discuss.tractionbook.com and the other one is over at themarkerscrew.com and they both talk a little bit about engineering as marketing and have some examples there that are a little bit beyond what we talked about here. Some of them are I’ll say are a little bit less relevant in our particular space so they talk about Facebook and Twitter and some companies like that how they were leveraging some engineering as marketing but you still might find it useful and you might be able to pick some ideas out of there.
Rob [24:55]: If you have a question for us, call our voicemail number at 888-801-9690 or email us to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Out of Control by Moot used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 249 | Finding Your Competitors’ Customers, Pre-validating a WordPress Plugin, How to Hire a CTO, and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about finding your competitors’ customers, pre-validating a WordPress plugin, how to hire a CTO, and they answer more listener questions.
Items mentioned in this episode:
- Restaurant Engine
- MicroConf Europe
- Appear.in
- Endo Creative
- SendOwl
- Easy Digital Downloads
- BuiltWith
- Datanyze
- GroupAgree
Transcript
Rob [00:00]: In this episode of Startups For The Rest Of Us, Mike and I talk about finding your competitors’ customers, pre-validating a WordPress plugin, how to hire a CTO, and we answer more listener questions. This is Startups For The Rest Of Us episode 249.
Rob [00:23]: 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 [00:31]: And I’m Mike.
Rob [00:32]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week sir?
Mike [00:36]: Well, we’re ready to announce the final two MicrConf Europe speakers. We’re going to have Brian Castle, the former owner of Restaurant Engine and he’s off working on Audience Opposite at this point, and we’re also going to have Justin Jackson who is in the midst of writing of a book on Marketing for developers. He’s the podcaster behind Products People and Behind Build and Launch. So it would be great to see those guys. I think both of them were on the stage over in MicroConf Vegas so it’ll be great to see what other things they come up with.
Rob [01:04]: That’s right, yup. Some more folks who have made the lead from coming and doing an attendee talk at MicroConf and stepping onto the main stage. So, we’re looking forward to hearing from those guys. Yeah, we’ve been getting a lot of really interesting listener comments on the podcast blogs so it’s at startupsfortherestofus.com and folks are commenting on individual episodes. We have a comment from Mathew on Episode 243 where we discussed the tools that we used to run our startups and we mentioned Skype and Mathew commented, he said, “We switched from Skype to Appear.in which seamlessly integrates into Slack. You can start new video chat by typing /appear and then a roomname. It also makes sharing screens easier and we can have multiple people on the same call. We’ve also started using Appear.in. It is nice that it integrates with Slack. It’s also HTML5 so it just goes right in your browser. You don’t need to download a [?] or anything. The drawbacks that I found to it are A, none of us can get it to work in Chrome. There’s no audio to it and I’ve emailed back and forth and done run diagnostics and all types of stuff with the Appear.in guys and it just won’t pick up any of our audio even though our audio works with whatever approaching that we use. In addition, Appear seem to, I don’t know if it’s an HTML5 where it renders in the browser or whatever, but it just hammers through processors, processing cycles. So, you run away like my pancakes on as soon as we started chat and it makes all of my internet browsing really slow. So if you’re going to try to browse and talk, it’s kind of tough. I have like almost like a brand new MacBook Air with a nice processor and everything. So, I like it for quick chats but it we’re going to do anything more involved, we turn to switch over to Hangouts or Skype.
Then we had a comment in episode 244 which is where we interviewed Josh Pigford and we talked about a number of things in that episode but one of them was transparency and Simon from [Small Farm Central?], he says, “I like the idea of “point in time transparency” rather than this level of sharing that only seems to help competitors. If the story of your business is important and you are targeting people who would care about revenue, then this point in time really makes sense because it allows you to craft a story and release only the metrics that are important for the story, rather than baring everything to the world.” So, I enjoyed that comment from Simon and it was kind of a summary there were a lot of folks who Twitted and emailed about kind of the discussion about transparence in that episode so I appreciated it. And the last one was on episode 247 where we talked about whether you should focus on people versus process and Jeremy Green posted and he said, “I just gave a presentation at WordCamp Boston on this very subject. It’s at http://www.endocreative.com.” And we’ll link it up on the show notes. He says, “In creative work, the most important thing is to have a process in place for the tasks that are the same for every project. That leaves you more energy and brain power to focus on the creative side of the project.”
So thanks everyone for your comments. There are more there than we can obviously read but I wanted to call at a few of those because they seem to really kind of hit the nail on the head and add something to the conversation.
So today, we’re answering a number of listener question. We have a pretty nice backlog right now. So, I had to call through those and pull out the best that I could find. The first one is about which niche should I focus on first and it’s Hylton from GroupAgree. And in that, I’m going to summarize because the email is further long and so Hylton is working a GroupAgree which he summarizes as a drama-free group decision making. And he says is that during his alpha, he’s found that his users identified a number of different context for making surveys. And so I’ll start to read his emails from here. He says, “Casual, such as what movie should be see, what restaurant should we go to, what game should we play at our land party. And then the second one is academic, what should our book club read, when should I reschedule my class so most students can make it and what should the topic be for our final project. And the third is business. How should we prioritize our customer’s feature request, when should we meet with the client, what should we do for our offices at summer activity.” In Hylton’s words, he says, “My question is this, with a product so broadly applicable that my users have successfully taken it lots of different directions, how do we identify which of these three niches to focus on first? This may sound like a good problem to have but it’s definitely stressful because it will define the direction by initial marketing campaign and I’m worried that choosing incorrectly now will send me back for to six months.” What do you think about this Mike?
Mike [05:07]: Well, I think even those three different niches that he identified. To me, it seems pretty obvious as to which one to go after and the three options were casual, academic, or business. And to me, I would go for the business because they are much more likely to pay you than any of the other ones. Like I could see myself using an app like this with my friends to find out like what restaurant we should go to or what movie we should see but I can’t possibly see myself actually paying for it. And then in terms of academic use, I can definitely see some uses for it but again, I think that it would be difficult to identify places where there’s like a business justification for actually showing out money for it. So to me, it seems obvious that you really need to go to the direction of the businesses because they’re going to be more likely to pay you than any of the other groups.
Rob [05:50]: Yup, I agree. And how to make a statement that having a broad appeal seems like a good problem to have and I disagree, I think it’s the exact opposite. I think having a great appeal is a bad thing early on when you don’t have a ton of money, a ton of staff, and you have to focus. You really want that narrow, narrow focus so that you can get a small group of people in there who just love, love, love using the product and then we’re in town from there and go broad later.
Mike [06:14]: One other thing that comes to mind though about this given the broad appeal in those other spaces, it might be possible to come out with and I wouldn’t do this right away. But down the road, when you kind of have things locked in, come up with something of a free plan or a free model where it’s like free for personal use or casual use only or something like that, it’s definitely not for businesses but to help essentially expand the footprint of the product and get it in people’s mind so that when they go to work and they start seeing places where they could use it, then it almost becomes an upsell opportunity or a lead generation engine for you. Again, I wouldn’t do that upfront because I think that freemium right off the bat is probably going to hurt you a lot more than it’s going to help but it might be something to consider down the road.
Rob [06:57]: So thanks for the question, Hylton. The next one is about licensing and delivering a downloadable product and it’s from Brian Wall. He says, “Hi, Rob and Mike. Thank you for your podcast. I’m a 14-year faithful employee for a software company in Fresno.” Which is funny that I’m never run into Brian. He says, “After all these years, you’ve opened my eyes and inspired me to take the plunge. I’m taking the stair step approach that Rob talks about and my first product will be a downloadable plugin for a product that runs on Windows and Unix servers. I expect it to be fairly low-touch in terms of sales. My question is, how to license and sell a downloadable product like this? Is this a good candidate for something like Gum Road or would you build your own dedicated storefront? I’m not so worried about activation keys but I do need a way to manage licenses, updates, renewals, cancellations, et cetera. What do you recommend?”
Mike [07:40]: This is hard because I don’t think that there’s a good option, but I don’t know as I would go about building my own dedicated storefront. There’s a lot of different options out there that allow you to do payment processing and I think that it feels to me like the underline assumption here is that you’re worried about too many orders coming in and having to process them all, and I don’t know as I would worry about that problem just yet. I would worry about it once you find that you’re getting a lot of updates and renewals and cancellations and things like that. I mean as long as you can issue a license to somebody, it doesn’t really matter. The other things, you’re not going to have such a high volume of them for the first probably 6 months or 12 months and it’s going to be a big deal.
Rob [08:19]: Yup. I would probably do it pretty manual at first, just with a stripe account is what I would start with. And I totally agree with Mike. I would absolutely not build my own storefront. There are a couple of ways to deliver digital products that you might want to migrate to after you’re getting more than, what purchase a week that you’re manually fulfilling. One that I’ve heard a lot of good things about is SendOwl, it’s send, O-W-L, and it’s Gum Road A in the little more at technical folks and I think it has more API stuff. So you might want to take a look at that. It’s a SAS app. The other one is a WordPress plugin. So you’d need a WordPress as your frontend but it’s called Easy Digital Download and I’ve heard a lot of good things about that. It’s written by a WordPress developer named Pippin who sells his own WordPress plugins through it. So if you have a onetime download and you want to manage license keys and annual renewals and all that stuff, it’s kind of baked into that. So if you’re willing to put WordPress as kind of the storefront, I think Easy Digital Downloads is probably what I would go with. But this is a good question, thanks for sending over Brian.
Our next question is about how to find people who are currently using your competitor’s products and it’s from Ryan@builderbuilt.com. He says, “Hey, guys. Great podcast. You continually provide well-thought out actionable content in today’s episode about why people might not switch to your SAS and provide some good tips on how to convince them to make that switch by removing barriers. My question is, how do I actually go about targeting companies who use my competitors’ solution so I can market to them?”
Mike [09:41]: I think there’s a few different ways that you can go about this. The first one is to find where those people are hanging out and talking about the competitors’ products online. And now, if this is on your competitors’ forum, you probably don’t want to overtly go in there and start pitching your own products. It’s not going to work. It’s not going to go over well. And the people who are currently happy with that products are probably not going to take kindly to you going in there and kind of pitching your own products. I would answer questions but I don’t necessarily think that I would say, “Why don’t you try this to solve your particular problem instead of trying to work within that competitors’ solution?” Another option would be to go over to core and see if there are people asking about what types of alternatives there are for specific products. So, if let’s say somebody is using unbalancing, go over to core and start looking around for people who are talking about unbalance and looking, actively looking for people who have offerings that are in an adjacent market or a competitors’ to unbalance because they’re looking to switch. They’ve already kind of made up their mind and they want to move away. Another thing that you can do is you can use SEOs. So, if you have a specific webpage you set up on your website where you talked about those other competitors and present them directly as competitors to your own products, you can essentially create your own story about those things. So, those are a couple of different things that I would think about in terms of ways to get in front of those people and then depending on what your personality is and how much time you have to go about that and the type of products you have, it may makes more sense to do one versus the other.
The last thing I can think of that you might want to do is offer what’s called a competitive upgrade. So if somebody already has the competitors’ products, you can offer them discounts for essentially turning in that products and switching over to yours and you could offer like onboarding [?] services and move to your data over and all kinds of different things. But again, that can be more of an enticement than something that actively convinces them to switch products.
Rob [11:30]: There are two services I know that actually crawl websites and they can actually figure out what stuff is Built With. The first one is called builtwith.com and these are both SAS subscriptions and they’re not cheap but builtwith.com is the service that I know that several of the kind of outbound legion guys use and they’ll say, “Well, my competitor is X, Y, and Z and it’ll give you a list.” Now, Built With crawls certain amount of websites every so often. The second competitor is more expensive but they crawl daily. So they cannot only tell you who’s using what, they can tell you someone started a trial of this yesterday, like they just installed the code. So it’s much more powerful but they are more expensive. That service is called Data Nyze, it’s data, N-Y-Z-E.com, both of those if you’re willing to put down the money are going to be good services to find out who’s using your competitors and for full disclosure, I am a small angel investor in Data Nyze but I have seen and used the interfaces for both of those tools. So thanks for the question Ryan.
Our next question is on validating a WordPress plugin before using and it’s from Dave Bush. He says, “Hey, guys” one of the things he mentioned on our recent episode was to avoid building before you validate a product idea. One of the things I still can’t get my head around is how to validate a WordPress plugin without actually building the free version first. There’s so many WordPress plugins out there, how can you get away with testing your idea for WordPress plugin without actually building an initial free offering?
Mike [12:54]: I think the misconception here is that in order to validate something, you have to go out and specifically talk to people or have a free version available. I think that there’s multiple ways to do can go about validation, and I think the bottom line is that validation is about gathering information and being relatively confident and what’s your analysis of the situation is. So, in this particular case, you sure getting a working prototype built and put it in out there and driving traffic to it and having people go through is going to give you that validation, but at the same time you can also get that validation by looking at what people are already doing today. So, instead of driving people to your own plugin and looking at those download numbers, take a look at the existing download numbers of other plugins that are doing similar things and measure those overtime and it should be fairly simple. You can go into wordpress.org, just take a look at the download numbers and it will tell you flat out like whether somebody’s downloads are increasing overtime or are they decreasing, when the last updates were, all that kind of information. And you can get a sense from that information alone as to whether or not it would be possible to put another plugin that offers similar functionality that it also going to get a some level of attraction from people who are looking for that type of plugin.
Now, it’s not an absolute guarantee but at the same time nothing is. I mean unless you have people giving you credit cards saying, “Hey, take my money,” that’s probably the next best thing that you can get without building something.
Rob [14:19]: I take it a step further. I think that is the initial validation. I would agree that I would poke around and look at what people are talking about, what the download numbers are; with a WordPress plugin, in my opinion, you can’t validate it until you’ve built that free version. WordPress is so much different from SAS and that with SAS you need some customers paying you a decent chunk of money and spending a lot of time validating that upfront is worth it because to build your SAS app might take you a year, I mean tremendous amount of time. It might take you more than that if you’re doing it part-time. Whereas with a WordPress plugin, you can build it yourself at nights and weekends in a month or two months, I mean you can build it full-time to get a kind of a prototype free version out there, probably in a lot less than that, you can hire developer. WordPress plugin developers don’t tend to be that expensive. WordPress plugins are not that complex to maintain. You don’t have to get servers up and running and do dev up stuff and there’s just all the stuff that makes is so much simpler to validate that after I did some initial look at numbers and other downloads, if I knew it was for a specific niche mark and then I knew that it fixed a problem for them, yes, I would reach out to some people I know in that market. But to do cold calling and do the interviewing and the other stuff that you would consider doing if you’re going to do customer development for a SAS app, I don’t think it’s worth it because the WordPress plugins that I see are making in volume, right. They’re doing $20 for a one-time thing or $40 or $50 for a one-time thing.
So going and trying to find 10 people who are willing to pay you for that, I question if you shouldn’t just go and build the thing, get it out there fast. And now, if you’re trying to build some super exotic that WordPress plugin is going to sell for $1,000 license, then yes. Now we’re talking about enough of a lifetime value where it’s worth really doing a bunch of upfront research. But if you’re sitting there, trying to think about how to validate something that you’re going to sell for 30 bucks one-time, I would say just go do it like go build the thing, go hire somebody to build the thing. Get it in the store, you’re going to learn so much by doing that and it’s really not that big of a risk compared to actually building a full-fledged app.
Mike [16:17]: And I think that’s the key point here which is the risk versus reward versus the investment that you’re taking and if it doesn’t take you very long to do it, you may as well just do it. I mean if you were going to build a plugin that literally only took you two or three days to build, would you go out and do the customer development? And the answer is no, why not? And the answer because, well, it’s going to take you more than two or three days to do the customer development. You may as well just build it and see if you can sell it at that point because your investment is so incredibly small.
Rob [16:42]: Right. I feel like this ties in to Dan Norris’s idea of the 7-day startup of if it’s going to take you less than 7 days to build the thing, then just go build it. I would say seven days collectively like if you would work let’s say 10-12 hours a day for 7 days, so what is that? Maybe 80 hours, if you can build it in less than that, even if you don’t have the 7 days and you have to do it 80 hours nights and weekends for the next month or two, I’d be more of the might get the code out there and will validate. So I appreciate the question, and I hope that helps.
Our next email is actually not a question, it’s some advice on hiring a CTO, it’s an audio recording and it’s from Ben Cole. And he says, “Hi guys. You briefly touched on hiring a CTO to help find and manage a development team in episode 242. I’ve had some experience in this base and a particular quick audio response with some tips for your listeners.
Ben Cull [17:28]: Hi, guys. First of all, I just want to say thanks for such a great show. I can’t wait for each new episode and you really got me hooked. Thanks for all the great info. I just wanted to talk about a topic that came up recently about CTOs for hire. Now, I’ve been in this position myself a couple of times recently and I think I’ve got some great advice for your listeners. My name is Ben Cull. I’m a senior .NET consultant for a company called SSW in Australia. And first of all, what you going to want to do is to find yourself a senior developer. Try and get them in as early as possible and get them into the meetings with your potential development teams because they’re going to ask the right questions and know what kind of team is going to work for you. Second of all, find a CTO that understands process because about two-thirds of what you’re going to be doing is ensuring the process is going smoothly. Now personally, in SSW, we use the scrum methodology but you don’t have to be that formal. My advice is just to ship small, ship often, and ship all the way to production. It really forces you to get your process together by even shipping your very first feature even if it’s a registration page. Ship it to production and you’ll understand that you need all the environments, and all the automation to get things running smoothly.
My next tip is to use video to describe your requirements. Now, as a product owner, you can get across way more information in the video than you can with just pictures and text. And on the flipside, get your developers to put together a video to demonstrate the functionality that they have just developed. This lets you give feedback a little easier and you can pick up on more of the problems quicker.
Finally, have retrospective meetings. This is probably the most important tip. And for people that don’t know a retrospective meeting is where you ask three questions; what went well, what didn’t go so well, and what can we improve. Now, you include the development team, the CTO, and the product owner in this and you’ll come up with things like, what went well. We had meetings at 10:00 AM instead of 8:00 AM because everyone has had their coffee and they’re raring to go. What didn’t go so well was support tickets took a while to answer. What can be improved, well, I think that the moment database development is a bit tricky. Maybe we should have one person in charge of that. Let’s try that out this week.
These are just a few tips to managing your remote development team and hiring a CTO to help with that. If anyone has any questions, you can catch me on Twitter. My name is BenWhoLikesBeer. Cheers guys.
Rob [19:44]: So thanks a lot, Ben. Thank you for that, and hopefully that’s helpful for folks out there who are considering doing kind of that CTO approach where instead of managing a develop for yourself, if you’re looking for an intermediary because you might not have the technical experience to hire someone yourself.
Our next question is about conversion rates from a launch list to paying customers. It’s from [Percaush?]. And he says, “Hi Mike and Rob. My question is about conversion rates. Is there a general conversion rate to keep in mind to translate from a beta signup list to a trial signup to paid subscriber. Put differently, how many in a range of beta signups lead to one paying customer?” Here are two additional pieces of information in case they matter. Number one, these beta signups are coming from a landing page and not necessarily from friends and a network so they are not well qualified. And number two, it’s a SAS product costing between $100 and $300 per year. Thanks in advance, you guys rock. So, this is a really hard question because having cold signups and trying to convert them to trials is hard enough but if you don’t have a product that someone wants to pay you for, meaning if you don’t have product market fit yet, then your trial signup to paid subscriber ratio is very likely to be somewhere within the approximation of zero, literally zero. I’ve seen people with launch list of 1,000 get one or two paying customers right out of the gate and then lose them within a month or two because they turn out. So, there is literally no number that I could throw on this that could give you an idea. Now, I can tell you that if you have a beta signup list of let’s say 1,000 people, if you mark it really well and you build anticipation and you’re sending them screenshots and the product looks good, and it solves the problem that they want, and you send a sequence of launch of emails instead of a single email, I think that you can get upwards of 30%-40% of your list to sign up for a trial. I think that’s your range. I think the low end is literally zero if you fumble a ball in all respects and if you did everything really well executed, I may even rich and say if you get 50% into a trial, but I think a reasonable performance is somewhere between about let’s say 20%-35% to trial. Then the number of trial folks who convert to paid and then who stick around, it’s all a bunch of other numbers, right? If you don’t have product market fit, then that number say from trial to paid, if you ask for credit card upfront is going to be between 10% and 20%, and if you do have product market fit, when you ask for credit card upfront, maybe it’s between 40% and 60%. If you haven’t asked for credit card upfront, then it’s going to be between 0% and 10% or 15% depending on if you have product market fit. Then insurance is going to kick in and you’re going to lose somewhere between 5% and 25% of your people per month depending on how well they like it, how much of a problem this solves for them.
So, that gives you an idea of how wide ranging these numbers can be, and if you multiply those numbers, those ranges that I gave you, it can give you literally anywhere from out of 1,000 people, it’s like anywhere from zero to several hundred paying customers. So, I think that’s the answer is not to try to think of what is the number that’s going to become paid. It’s the real question is how can you optimize every stage of this funnel and just wild up hands off of people so that they really want to stick around to the next page especially if you have a new product be listening to what their requesting so that you can actually build something people want because that’s the goal with this launch, right? Is to get to the point where you have something people want so that you can then continue on from here and scale it up. Thanks for the question Percaush, that was helpful.
Our next question is from David Sandbrand. And he says, “Hey guys. In the context of your listeners, when is a startup no longer a startup?” So of course if someone stops pushing forward and essentially folds, that would count. But I’m wondering more on the side of success post launch. So is it the number of clients, is it time since the launch, is it revenue based? I’d love to hear and extend the discussion on when is the startup no longer a startup? Is it Eric Ries’s or Steve Blank’s definition? Is it a startup is in search of a repeatable and scalable business model? And so once you’ve achieved that, then you become a – you’re not a startup anymore. So like HubSpot would not be startup right because they kind of raised funding when we need a product market fit, and then you figure out how to scale your marketing and sales, now you’re scaling and you’ve less startup, that’s a fair definition of it.
Mike [24:06]: Right. Yeah. I guess from my standpoint, it depends on how you classify yourself. I mean there’s different points of view that you can look at. It’s like, is your business no longer a startup by your definition or by somebody else’s? And at the end of the day, I almost wonder like does it actually even matter? And I think in most cases they answered that as really no. I’ve almost feel like when company’s self-identify as startups, they’re hungrier. They do a lot more things and they’re much more aggressive about taking a different path as they go down. But once a business kind of stops referring to itself as a startup, then it’s much more of a mature company, double quotes around the mature part, but really they stop going after things hard because they don’t necessarily have to anymore, they get comfortable. And I wonder if to some extent, somebody might look at that and say, “Well, that’s no longer a startup.” And it could be very early on.
Rob [24:54]: Yeah. I think it’s an interesting question. I wonder if it really matters. I guess I’ve never been at the point where I have not thought of myself as a startup, so I guess the companies I’ve worked at that sees being startups like you said become a little more maybe process-driven, they become bigger, they become – they’re trying to scale up. They’re not hungry. What’s a good word for it?
Mike [25:12]: Yeah, I mean I just remember when I was a pedestal and we were required, we had like 60 or 70 employees or something like that and we got acquired but to us, we were still a startup. We just raised like $8 million or something like that and then even before we got a chance to really start spending it, we got acquired. So, I don’t know.
Rob [25:29]: Yeah. I think the lean startup, or I don’t remember from Steve Blank’s definition or link startup where they say it’s a scalable, repeatable business model where it’s a company in search of a scalable, repeatable, business model. I like that definition in terms of summarizing what a startup is but I think in terms of what David is asking about, I think I would go beyond that because as soon as you find that scalable, repeatable business model, then you have to execute. You have to find hungry people. You have to motivate yourself and them, and in my opinion, you’re still a startup there. You are scaling revenue up but you can find that business model and only have 10 grand a month in revenue and I think you’re still a startup at that point because you’re still kind of clawing your way forward. So I think there’s a certain point where I don’t know, I don’t think it is just headcount. I don’t think it is just clients. I definitely don’t think it’s time since launch because that’s going to depend why learn if you built something people want. I definitely think that it’s way pass product market fit. It’s like product market fit, then scaling things up and I think for me personally, I would call something not a startup when there’s so much process in place and such a headcount that it’s now feels like kind of a big company. And even for me like working, I worked at a company that when it hit 100 employees, it felt like a big company because I’m not a fan of organizations that big. And so that was when I was kind of like I started thinking about taking my exit because it really didn’t feel like a startup any longer, but I think that certain companies could still feel like hungry startups even with more employees than that.
Mike [26:53]: Yeah. I mean I’ve been looking at over at the leanstartups.com right now and the quote that I think that you might have been referring to was that Eric Ries said that, “A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.” And I think that last part right there is really the key, it’s like “extreme uncertainty”. So, if you haven’t fit product market fit yet, then you’re probably still a startup and you should still be classifying yourself as a startup because you’re still hungry, you’re still trying to figure things out. And because you don’t have it figured out yet or you got that uncertainty, you need to keep going. You need to keep moving forward because you don’t know specifically what is going to work for you moving forward and what’s not. But once you figure that out, yes, you can be radically hit the product market and continue to grow, but once that I think starts the level out or once you’ve got it figured out, maybe you’re no longer a startup at that point.
Rob [27:42]: The quote I was actually referring to is Steve Blank’s quote from January 2010 on his blog, and he says, “In this post, we’re going to offer a new definition of why startups exist. A startup is an organization formed to search for repeatable and scalable business model.”
Mike [27:57]: Yeah. Tough question though.
Rob [27:57]: I agree. It’s a good one to think about. Thanks for tossing that to us, David. All right. We’re going to wrap up with one final question and it’s about client work versus the uncertainty of working on your own product, and this is from Joe Robinson of greenflagdigital.com. He says, “Hey guys. Have you seen any research or discussion topics about how when working for clients, your brain just clicks and does the work, but when you’re trying to work on your own products, there’s often too much resistance to fight through. Does this mean that fear of a client dropping you is way more than an incentivizer than the vague idea of success on your own product?
Mike [28:32]: I haven’t seen any specific research on that part of it, but I think I can talk generally around the kind of the concept of working on your own product versus working on something that somebody else is paying you to do. So, if you were working on a project that you’re getting paid to do, there is a very concrete and definable ROY on that time versus working on something of your own where you don’t get that. You don’t necessarily know if things are going to work out. So, it can be demoralizing to look at two different sets of task, one of them which you may or may not get paid at the end of the day versus one of them where you know you’re going to get $125 an hour. Most of us are going to gravitate towards that one that pays us $125 an hour unless we absolutely hate it and we will do anything to get out of staying on that treadmill and we will work on the other stuff on the side in the hopes that it will turn into something that gets us off of that treadmill. The other thing that I think comes into play really heavily is the fact that when you’re working on your own stuff, you don’t necessarily know what you have to do. There are a million and one things that you could be doing and you’re not quite sure if any of them has the right one to do. So, with client work, you know what you have to do and you know what you have to get done because the clients already told you or they’ve given you a problem and you have to solve that problem. You’re working towards kind of a known goal. But with your own products, yes, you have to build the products but at the same time, there’s all these other things going on with SEO and marketing, and code, and process, and SSL [?] and all these other stuff that’s kind of thrown in your way, that’s really hard to kind of sort out sometimes. So, you don’t know which you should be doing first. You don’t know what problems you should be prioritizing over others. And it makes it that much more difficult because you don’t necessarily have the experience to deal with any of them either because theoretically, you’re probably in a position where you haven’t really launched very many products of your own. You’ve launched them for other people but those people have kind of set the timelines and deadlines and things like that versus your own where it’s kind of on your own time, you’ve got a million different options and you’re essentially in a position where you have so many options, you don’t know what to do.
Rob [30:37]: Yeah. And for me, I think the latter one has a lot more impact. I think both of them are valid reasons but I think the indecision and the analysis paralysis of your own product, and not knowing what to work on next is what keeps a lot of people from working on their product, and also feeling like maybe their throwing their time away. But the fact that a client basically typically tells you what feature to build next or at least you can ask them and they have to make the decision, that makes it a lot easier because then you can go in, you can design, you can write some code. Whereas if you have to decide what you’re doing next, and that’s always a hard point. That’s always a sticking point in your schedule is any time you have to make a tough decision.
Mike [31:15]: I think some of that also comes down to the ability to self-regulate as well and I think that some people are more inclined to do that from a younger age than other people. There are specific studies that I’ve seen are about little kids who were given us option of getting a candy bar now or getting two candy bars if they wait, and it’s about that delayed gratification and whether or not they can handle it and I think that there are certain people who are predisposed to taking that instant gratification versus looking much longer term and being able to go down that road instead. It’s not saying that you can’t fight it and go against it, but I think there is a certain amount of predisposition of one towards the other.
Rob [31:51]: We appreciate the question, Joe.
Mike [31:52]: Well, I think that wraps that up for today. If you have a question for us, you can call it into our voicemail number at 888-801-9690 or you can email that to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Out of Control by Moot used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 248 | 14 Ideas for High Impact Lead Magnets
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about 14 ideas for high impact lead magnets. They discuss the types of things you can offer in exchange for email addresses.
Items mentioned in this episode:
- Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future
- The Micropreneur Academy
- Bidsketch
- GrowthHackers
- Digital Marketer
- Petovera.com
- Google AdWords Cheat Sheet from Software Promotions
Transcript
Mike [00:00]: In this episode of Startups For The Rest Of Us, Rob and I are going to be talking about 14 ideas for a high-impact lead magnets. This is Startups For The Rest Of Us episode 248.
Mike [00:17]: Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products. Whether you’ve built your first product, or you’re just thinking about it. I’m Mike.
Rob [00:25]: And I’m Rob.
Mike [00:26]: And we’re here to share experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob [00:30]: New iTunes reviews, sir. We’re at 432 worldwide reviews in iTunes. We’re going to read a couple of verses from Nick Goede in the US, he says, “Inspiring and enjoyable. A great podcast to listen to. It’s full of actionable advice and every episode has inspired me.” We have [Cole Klav?] from Germany who says, “Very practical and I like the varied topics. A good Tuesday starts with Startups For The Rest Of Us. I don’t conceive riding my bike on a Tuesday without listening to a new episode. In fact, I will actually ride my bike in order to listen to a new episode of this podcast.” So thank you so much for the five-star reviews. If you haven’t given us a review, I appreciate it if you could log in to Stitcher or iTunes or whatever pod catcher you use. Give us a five-star review. Even if you don’t leave a review a full-on text, multi-sentence review, it really helps us, keeps us motivated. Mike reads this when he’s sad and alone.
Mike [01:22]: When I’m crying into my pillow.
Rob [01:24]: Exactly. And it helps us rank and it helps our [?] which is going to keep us producing the podcast. We’ve been doing it for five years and hopefully we can do it for another. How are things with you?
Mike [01:33]: Well, I recently took a short-term consultant gig and the impetus for that was to say, it doesn’t pay very much to be perfectly honest, so I definitely did not take it for the money but it has implications for potentially an audit shark sale down the road. And the people who are having me on this project, they basically have a enterprise-wide compliance projects that they need to have sold. So I was kind of brought in and tapped to go in and take a look at everything and help them put all the data together in a way that they needed to be done and I don’t know, we’ll see how it goes but it’s pretty exciting so far.
Rob [02:06]: Yeah. You haven’t consulted for more than a year I think, how was it to be back in the saddle?
Mike [2:10]: It’s interesting. It’s funny because I remember having to go through all these different projects that were just to complete nightmare and hassle and this one has been a dream so far. They just basically dropped the problem in my lap and said, “We know you know how to do this and so just do it and give us the results.”
Rob [02:25]: That’s the best kind, right?
Mike [02:27]: So they’ve just completely left me alone and just completely hands off. I barely talk to them at all. It’s just kind of I do my work and hand it over to them and that’s the end of it.
Rob [02:35]: Yeah, that’s nice. Cool. Good to hear that things are going well with that and hopefully it leads to the enterprise sale you’re looking for. So, I read a book.
Mike [02:42]: Congratulations.
Rob [2:43]: Yeah, it’s my first ever.
Mike [02:45]: Was that paper?
Rob [02:46]: It’s called Elon Musk: Tesla, SpaceX, And the Quest for a Fantastic Future. I have to say, I was really impressed with Elon Musk with the risks that he has taken. He made a bunch of money early on with an app. I don’t remember what it was called, it was before PayPal and he just reinvested it. He like put it all on the line. I mean that’s tough, man. It’s stuff to make several million. I think he made 10 million or 20 million from the first one and it was all back in to what eventually merged with PayPal. I think it was called x.com. And then he made 150-200 million from PayPal, put it all back in to SpaceX and Tesla and SolarCity and he was basically, if these things had not pinned out and they were months and/or years when it looked like and all of them were going to fail, he would’ve basically been, I’ll say broke. I mean he wouldn’t have been destitute on the street but he would not have had very much money because it was all tied up in these companies. And then they have all succeeded widely and he is making a bazillion dollars now and certainly he’s not doing it for the money but I was really impressed by this guy’s ability to deal with stress, his ability to work extremely, extremely hard for long periods of time and just a sheer raw intelligence, like his IQ must be off the charts. So it was a really enjoyable lesson for me, if you haven’t listened to it, I definitely recommend it just a tail of someone who perseveres and then puts it all on the line over and over and is really changing the world frame, I mean a lot of startups talk about starting something to change the world and it’s like yeah, you’re building a delivery service for cat food or whatever, I don’t know how much that changes the world but the stuff Elon Musk is doing now, is literally driving our species forward.
Mike [04:21]: There’s demons in the closet too.
Rob [04:23]: What do you mean?
Mike [04:24]: How do I put it? Like I’ve heard stories and stuff like his divorce and how his ex-wife has come out and said that it was just very difficult living with him because he was so driven to succeed and so driven towards certain different things –
Rob [04:37]: I think that’s really important to call out actually. If you look at the “great people” like the Henry Fords, the Ben Franklins, the George Washingtons, the, I don’t know the great industrialist or the Steve Jobs, or the Bill Gates or the people who do big things, like this, they almost always, almost invariable have complete train wrecks for personal lives because they value their goal of doing the business or of changing the world or whatever how do you, more than they value people. And so, I don’t model myself after these people, right? I mean I’ve chosen the exact opposite. But, they have multiple divorces, they had all these terrible marriages, a lot of them have kids that disown them. I think Ben Franklin and all of kids disowned him. Steve Jobs –
Mike [05:18]: Steve Jobs disowned his own kids, I mean –
Rob [05:20]: They’re train wrecks, and it’s actually interesting to remember Sarah Hatter had a quote a couple of years ago at MicrConf. She said, “Don’t take business advice from people who have terrible personal lives, or don’t have work-life balance or something like that.” I really take that to her, like I’m not going to start a business like Elon Musk, or Steve Jobs, or any of those guys. But unfortunately, those seem to be the folks that actually do kind of change things on a world scale.
Mike [05:41]: I wonder how much of that is about the control that they exert over the business and I mean because if you look at Steve Job as an example, I mean he’s notorious for having exerted, absolute control over various parts of the business, and in your persona life, it’s very difficult to do that because there are people in life. They’re not your employees. Your kids are not your employees. Your wife is not your employee or your spouse or whoever. And so you can’t exert that level of control or that degree that you could if it was the business and you are basically given the person a paycheck. So, I think that it becomes difficult for them to deal with their personal lives because they can’t exert that control and maybe that’s why there are train wrecks.
Rob [06:22]: For sure. I would say that’s a big part of it. The other thing I think is it’s like being obsessed with your goal. It’s being kind of a workaholic I’ll say. It’s like if you work 80 or 90-hour a week which all of the people that I mentioned did, if not more, I think Elon is working 100 hour a week or some crazy thing and he’s done it for years, you can’t really maintain relationships with a life that looks like that.
Mike [06:43]: No, I mean and he kind of goes even one-step further I think, doesn’t he? He owns two public companies, doesn’t he? The SpaceX and Tesla, is SpaceX public?
Rob [06:51]: SpaceX is not public.
Rob [06:52]: It’s not public.
Rob [06:53]: I think SolarCity might be.
Mike [06:55]: And either way, I mean that’s still a heck of a lot of responsibility and probably not enough time to deal with all of it and once you’re trying to throw personal life in there, it’s hard to carve that out. So you need to have somebody within your personal life who’s going to be understanding that they are certainly not the number one priority and they may not even make the top 10.
Rob [07:12]: Yeah. So what are we talking about today?
Mike [07:15]: Well, today, what we’re going to do, is we’re going to go through 14 ideas for a high-impact lead magnets. And I was thinking about this because I’ve talked to a bunch of people recently about the types of things that they can offer as part of their website in order to get people to basically handover their email address. So, I think that most common one that I’ve seen that’s been recommended is an email course of some kind and obviously you’re very familiar with those through Drip. But I think that there’s other ones that people either overlook in favor of an email course that are potentially less work or have a different RY in certain cases or a better fit for certain types of customer. So what I wanted to do is go through some of these different ideas for different lead magnets because I think that people just kind of clause over them and think that an email course is the only one and it’s probably one of the better ones but I don’t think that’s the only one that people should be looking at. So I think before we start, we want to talk about exactly what a lead magnet is. And, as it kind of implies, lead magnet is designed to essentially help you generate leads and that could be leads for your product or for a course that you’re selling or just want to add to your email list. But, the basic idea is that you’re creating something and you’re offering it to them in exchange to get it for their email address. And so, that’s the primary goal for you is to get some of these email address. But you have to be able to provide them something of value that is significant enough that they’re going to give you that email address. So, the whole premise behind a lead magnet is that you’re using it to essentially bribe somebody to give you their email address.
Rob [08:46]: Yeah. And I’ve heard people call it an opt-in bribe and I don’t like that term. To me, it has like a negative connotation to it. I’ve always called it an opt-in reward but I think a lead magnet is probably a better term and a more common term for this. So to kick us off, the first idea we have for lead magnets is of course an email course and that’s what you mentioned. I tend to lean towards email courses, five-day, and seven-day email courses work really well. The real reason that I like them the most is it gets a subscriber used to hearing from you on a regular basis and it gets them used to opening your emails and they do tend to consume them because they’re smaller pieces of content. If you send someone, let’s say an E-book or a PDF, I don’t know how many of those I have on my desktop or in some folders somewhere that I’ve never read whereas when I sign up for email courses, I do tend to read them when I have spare time. I’ll read them on my mobile if they’re in my certain category in Gmail. I just think they’re consumed more. I think it gets subscribers used to hearing from you and opening emails which also tells spam filters that people are opening and reading your email. Gmail, I know uses behavior to determine whether it should deliver the emails under the promotions of the other tabs and I think that getting a five or seven to eight mail course kicked off will get the rest of your emails into their inbox, I mean if people are reading the early ones. So, that’s why I like put them together. I also think they’re fairly easy to assemble and we give away a free kind of blueprint which is the shell of putting the other five-day course. And even if you don’t sign up for Drip, we give it away in our knowledge base and we can link that up and shown us, but we have a bunch of blueprints that people use within Drip if you’re a customer and you can just link and kind of enter some specific content to you but the intro and the outro are already in there so that it doesn’t take a ton of time to set one of these up.
Mike [10:29]: Yeah, I’m a big fan of email courses as well and they work well as you said that I do train people to open your emails and they do help you bypass some of the spam filters because if Google recognizes or other email providers recognize that you are not flagging those as spam and you are taking action inside of that email course, then it is more likely to let other things through when you are for example presenting a specific offer to somebody or you’re running a flash sale or just a regular promotion of any kind. They’re going to let that through because they already let five or seven other emails through that you accepted and you looked and you probably clicked through. So, that’s very helpful from the standpoint of the person offering it. And if the person is getting value out of it, then clearly, they’re going to clicking on those.
Rob [11:15]: If I could think of maybe two drawbacks to give the other side of the story. I think email courses do take longer to create than some of the options we’re going to list. And I think in some markets, they might be oversaturated with email courses and they might be valued less than say an E-book or a cheat sheet.
Mike [11:32]: I think one of the other good points about an email course is that it helps to promote trust and it helps to establish you as some sort of an expert and whatever the industry is that you are promoting the email course on. So if you’ve created an email course on how to create landing pages for example. Whoever is receiving those is going to look at you as essentially the fact to expert of landing pages, and that may not necessarily be true but that’s going to be their perception. And when it comes to selling to that audience, the perception piece of it is extremely important.
Rob [12:04]: You said that it builds trust. I also like that it builds trust over time. Even if it’s only five or seven days, if someone hears from you every day, there’s just a little bit more of a longer term relationship than if they get one email from you with a PDF toolkit or something and you redirect and you’re like, “Oh, that was cool.” It’s not something where you’ve touched with them every day. So I think there’s probably a difference in the trust level there.
Mike [12:24]: The next lead magnet that you can use is the report of some kind. And for example this, you can head over to micropreneur.com, put in your email address, and you’ll get a short PDF that essentially outlines the high level concepts of what a micropreneur is and kind of walks you through the thought process behind starting a business and micropreneur.com is a website that Rob and I host, part of the Micropreneur Academy. But you can generate a report and create a PDF or a word document that can be associated with a landing page where people can just go in and they enter in their email address and they will get a report, and that report can be a sample report from the application that you have. It could be a sample set of data. It can even just be what you stand for. What source of ideas that you’re trying to promote your manifesto so to speak. So, there’s a lot of different ways that you’re going to leverage your report like that but my advice I think in most cases would probably be to use a specific landing page for that report because you really want that to be on its own page where you’re driving traffic to it that is relevant to that, and I think that if you have multiple different types of reports that you’re going to offer, then you need to be able to drive traffic that is relevant to that type of report and sometimes you’re going to be able to change the landing page copy and sometimes it’s going to be a little bit more difficult just because of the type of people who are coming. So, let’s say that you are doing something around email marketing, there’s going to be people who are much further along and you’re going to want to offer them a different type of report than somebody who is much more entry level. So, you have to balance those types of things and I probably wouldn’t necessarily recommend putting both of those on the same page for example.
Rob [13:59]: Right. And the other advantage to a report is if your audience happens to be more audio inclined, let’s say it’s something to do with podcast or you know that they might listen to podcast, you can turn a report into an audio report pretty quickly with a USB headset, read for 15-20 minutes, do a little bit of editing, and then you have now a report in PDF and an audio version of it, it’s pretty powerful. I mean it’s worth a lot to a lot of people to be able to listen to that. The other advantage by the way of having it on its own page is if you’re going to build links to it, you can get some SEO juice and rank for a specific term. And now, in some cases, it’s not relevant, but in others, having it hosted on your own website can just be better. My third idea for high-impact lead magnet is a cheat sheet or a handout. I’ve also heard Clay at LeadPages called this like a tools list, top 10 tools to get really good at taking pictures or top 10 things that the best gardeners use to trim their hedges or whatever. The nice part about this thing, the biggest advantage is these are pretty easy to put together especially if you’re already in a space and you’re knowledgeable, you could probably type this up as text in 5 or 10 minutes off the top of your head, and it intrigues people. People like tools lists, people like cheat sheets. I think there’s some value in just getting something out there quickly.
Mike [15:15]: I like that idea of just typing up something in Word or Notepad or something like that and that at least gets the ideas out of your head and then you can turn around and hand it off to a designer who could then make it look pretty and could make it something that could actually be printed out. I’ve seen things from Dave Collins over at software promotions where they have a Google AdWords cheat sheet which is essentially a kind of a four-page flier that walks through all these different concepts about how you should be using Google AdWords and what sort of things you should be paying attention to, which sorts of [gulches?] there are or areas where you need to take a little bit of extra care and it talks about each and every single one of those on this Google AdWords cheat sheet and it’s really well put together. There’s tons and tons of information on it. I’ve had that cheat sheet laying around for probably close to a year and a half now, I mean it’s really good.
Rob [16:01]: Other nice thing about a cheat sheet is if you just type this up in a text editor real quick and then you go into something like Microsoft Word or Publisher and just get one of the reasonable templates, you don’t need something fancy but just something that looks reasonably professional, you can kind of paste it in there, use their existing styles, and maybe not even need to hire anybody to make it look cool. And so if you can get by without having to invest a lot of time or money on this one.
Mike [16:26]: The next lead magnet is a template. So, you can make a downloadable template for a variety of different things. And these I think appeal very much to the do-it-yourself crowd especially if your application, whatever your app is automates the stuff inside of the template and tracks everything for you. I think a really good example of this is if you go over to Bidsketch, you can download some sample templates of what their proposals look like, and you can even just modify them yourself if you really want it to and just say, “Okay. I’m going to use this as my template and you wouldn’t have to necessarily buy the application. The application makes it a heck of a lot easier to replicate that over time and keep them all in one place and do all sorts of other things, but as a basic template to essentially get someone started, they’re still valuable because they can use them by hand until they get to a point where in their business, it makes sense for them to invest in a tool that will automate some of the rest of the stuff.
Rob [17:17]: And LeadPages did this a lot in the early days. I think they still do it when they talk about a landing page template, in a blog post, and then at the bottom for an email opt-in to give away that template in HTML and obviously that template is available inside LeadPages if you sign up and I heard that it is very successful for them. Tim Pages talked about that on a couple of webinars. Our fifth idea for high-impact lead magnet is to give away a free video. So a training video, a walkthrough of something and I think the key here is that video overtime, it used to be super, super valuable because no one was producing it but over time I feel like it’s becoming maybe a little less valuable. And so just giving away a single video, it depends on the market, right, but some people might not be that wowed with it. It’s also, you can’t listen to it on the go and you need to carve out time with audio. You probably not going to want to watch it at work in your cubicle or whatever. So there’s some drawbacks to it in terms of it’s a little bit more difficult to consume than these other things. However, if you have a pretty well-produced video and you keep things pace pretty quickly and you have a really good title for it like three secrets you must know in order to do email marketing or the walkthrough that no one else will show you or whatever. I mean something that intrigues and kind of builds that interests, I think those a lot of value. The other thing is if you’re reasonably good, whether if it’s on camera or doing a screen cast, video can be super easy to produce and take you 5 or 10 minutes if you can get it done for a couple of takes. I might produce a bunch of screen cast and they get easier and easier overtime. And so, this is one that could potentially a hyper super value if you title it correctly and then keep the pacing moving but really not take a ton of time to produce.
Mike [18:57]: The thing that I really like about doing a video is that if you have a link back to your site for them to do the video and you’re not embedding the video directly into the email, you can get a sense of how much people are actually watching them by using the analytics on your webpage to figure out whether people are watching 30 seconds into the video and just cancelling it or watching the entire video. And I know that there are certain ways to see how much people are leveraging the things that you are sending. So for example, if you send somebody an email course, you can look at open rates. If you’re sending people a PDF, you can check the download numbers and things like that. But just because somebody downloaded the PDF doesn’t mean that they actually ever opened it and looked at it. And again, there are some tools that will allow you to do that but it’s a lot more advanced and it’s a little bit less obvious that you’re going to be to get that information whereas with the video, you can track to see how far into the video is people are watching and if you need to re-record some parts of the video or see which parts are resonating when people because they watched that part of the video three or four times, you can get that information and that’s why I really like the idea of using these videos to send people to a webpage and monitor the usage on that page.
Rob [20:03]: If you’re going to record a video, I would say record it as quickly as you can in terms of keeping the pacing going really fast and then have someone edit it so that when you’re typing, it just appears on the screen. No one wants to sit there and watch you type. And you can take like an eight-minute demo and crunch it down to between four and six minutes pretty easily if you just cut out time to load screens and time for you to fill in forms and all that stuff, and it will definitely increase the number of people who make it through the entire video if the thing moves faster and it’s the shorter overall.
Mike [20:35]: The next lead magnet is a toolkit. And I think tool kits tends to consist the things like checklists, and spreadsheets, and guides about how to do different things. But essentially, it’s a resource that people can leverage to perform a particular task and these are really good for allowing people to manually do something that your application does automatically for them. So if you have this series of steps that somebody would have to go through, you can provide those as a checklist or they could purchase your application and it will automatically be taken care of for them. But, if they don’t even know what those steps are, chances are good that you can take a lot of those things and add them into a checklist or a spreadsheet and package it up and allow them to download it as a toolkit and you can market that toolkit in exchange for the email address so that you can then upsell them later to your full application. So the seventh idea is a free trial, and when I say free trial, most people will say, “Oh, it’s a free trial of the application.” And I think that that’s probably the wrong way to pitch it when you’re offering this as a lead magnet because you don’t want to offer it as a free trial. You want to offer, so let’s say you’re giving them 14 free days of your application, you want to offer them 14 days of whatever the beneficial output is. So for example, Ruben Gamez who owns Bidsketch, he offers a 14-day trial for proposals that can help you make money for your business. And that’s the way it’s offered. It’s not offered as a 14-day free trial for Bidsketch, it’s offered as that 14 days of proposals for you. So it’s a very slight difference in the way that it’s marketed.
Rob [22:04]: Yeah. Kind of pitching the benefit rather than the pitching the fact that you’re going to have to spend a bunch of time getting on-board it into an application or pitching the benefit rather than the work the person has to do to get the benefit.
Mike [22:15]: Exactly.
Rob [22:16]: Our eight idea for a high-impact lead magnet is an E-book or a physical book. Obviously, this tends to be a lot more work than something like a report. I would typically think a report is maybe 5 to 20 pages whereas an E-book, I would think 40 to 100 pages, 40 to 200 pages. And a physical book is probably in the realm, I mean you could have a paperback book that’s 50, 60, 70 pages. I know Jason Cone had used this at a smart bear where he wrote a book about code reviews and would give away paperback copies. I don’t remember if you had to pay shipping. I think they might just give it away.
Mike [22:50]: Nope, they gave it away. Yup.
Rob [22:51]: Yeah. They gave it away totally and they covered the cost and he said that when they would go in to do sales calls and they saw that book up on the shelf, it was a shoe and because they had literally written the book on the topic. So it’s a total no-brainer. I think if you’re marketing your price point more [?] than you have the time or can produce something like this, I think this is pretty valuable.
Mike [23:10]: The ninth idea is access to a community. And I’ve seen this a lot in different info products but you can offer access a set of forearms or choose a [slot shot?] instance or anything along those lines where people are essentially buying into this community aspect for a particularly type of product. And I think that it works really well when you’re trying to educate people about how to do something whether that’s design skills or programming skills or how to build a business or how to do an email campaign. There’s lots of different ways that people want to communicate and by providing them access to a particular community, that can be one benefit that people will buy into. One that I see do this really, really well is growthhackers.com where you go over there and one of the benefits of growthhackers.com is just having access to that community. And by joining the community, they get your email address. So, it’s really an interesting way of harvesting email addresses to send out promotional emails or educational emails and use those as leads for your products or your business.
Rob [24:13]: The 10th idea for lead magnet is a swipe file, so a collection of tools, information, guides, or text snippets, et cetera that you have picked up from your experience in the niche. So if you are selling at the copywriters, then that’s probably a really common swipe file that I’ve heard of is a bunch of headline ideas. Here’s my swipe file of 100 of the best headlines that I’ve ever seen and they serve as good inspiration and frankly a good swipe file is worth quite a bit. And if you already have it lying around, it’s kind of a no-brainer to issue it and it certainly doesn’t need to be formatted very well, that’s the other advantage. You could literally just do it as a Word doc or a text file.
Mike [24:50]: Our 11th idea is running a webinar and I like webinars because they have the sense of reality to it where it’s not just a video for webinar, the idea that you’re kind of pitching to people is they have to show up and I’ve seen people put into their webinar email campaigns, and when you’re inviting you they say, “Oh, we only have space for so many people.” And sometimes, just because they want to say that and it’s part of their marketing copy. Other times, there are technical limitations on the software that they’re using. So, depending on their level of go-to webinar for example, there might only be 25 space or 100 spaces available for them to run the webinar. And that can be a very good incentive for people to sign up and attend the webinar, but because it is a live session, you can ask questions on the spot and if you’re really interested in it, you’re going to show up and you’re going to be there for the live webinar versus the recording that may or may not be emailed afterwards.
Rob [25:43]: I’ve been skeptical of webinars because I’m just not a fan of them personally but very huge. Everyone who I hear who starts doing them has a lot of success with them. So, I think there’s a real value that people put on a live presentation like this and I think it’s absolutely something that you’ll want to move to though it’s a bit time intensive to set up obviously and it’s something you have to do on an ongoing basis. It’s not like a toolkit or an E-book that you can write ones and give away, but already, the webinars that we’ve done for Drip in partnering with other companies, they have been quite successful in terms of the number of trials we get out of them. So I think there’s a lot of value there.
Mike [26:21]: Well, you mentioned the part about it’s time intensive to do and you’ll have to create multiple webinars. I think you want to be able to pitch it to different segments of the population in different ways, especially if it’s for the exact same products. But if you have a sequence of let’s say six or eight different webinars that you’ve put together that are related are similar or overlapping in some way, shape, or form and you’ve Twit the copy and headlines and things like that, you can then repeat them because if people didn’t make it to one of them, if they’re on your email list, then you could potentially get them to one of your other webinars.
Rob [26:52]: Our 12th idea for lead magnet is a case study. So it’s like a deep dive into a specific type of problem of before and after, so what’s great is if you have existing customers, it’s so easy to do case studies because you can just interview them on Skype and either use that, do a video case study of it. You can have it transcribed or you could just take notes off of it and write out blog post case studies that can have a lot of impact because people get to see the true before and after of using your service, and there’s value there even though you don’t have to produce a ton of the content.
Mike [27:23]: Our 13th lead magnet is free consultations. And I think with the free consultation, you really need to be very targeted on the type of problems that you’re solving, but I think that that’s also a very good legion for a high-priced product. I don’t think that you want to do free consultations for a product that’s $39 or anything like that. But if you have a relatively high-price product, then those free consultations can turn into thousands, and thousands of dollars or revenue or annual contracts. I mean it just kind of depends on what it is that you’re offering. But at the of the day, you want to be able to have that consultations you can get on people’s radar and talk to people directly. This is I think extremely important early on when you’re still trying to figure out what your ideal customer is, but again, it goes back to what your price point is. And if you have a higher price product, it works a lot better than if you have a lower price product because it’s just not going to be worth it if the price point is below a certain point.
Rob [28:13]: And our 14th and final idea for high-impact lead magnets are to do a short interview and get a transcript as well. And what I like about this one is you can give away two formats, so you have both audio and something in text and this doesn’t require you to create much content and you can just pick an expert in the space. So, for example with email marketing. I interviewed Patrick McKenzie about a bunch of different pacific, marketing questions and then have it transcribed, and we have video of it. You can make an audio of it. And so, you don’t have to create the content but you get an expert who is essentially lending their credibility to it ending at some really good opt-in rates if people know who that expert is because you have name recognition. And so, even if you’re in a niche where you are not an expert. Let’s say you were doing horseback riding or something, you just need to find that big name and interview them. They probably haven’t been interviewed by many people if you’re in a small niche, and then you don’t have to learn all the stuff. You have a little bit of content there that you’re able to kick out. So, I’ve always like this idea as a way to get a lead magnet up pretty quickly but one that has quite a bit of value to it.
Mike [29:20]: So those are the 14 different ideas for high-impact lead magnets, and I think that there’s a couple of things that you want to consider when trying to decide on what lead magnet you’re going to create and I think the very first one is what is the goal of that lead magnet? What is it that you’re trying to accomplish? Is it that you are trying to get people to trust you? Is it that you’re trying to get people to have familiarity with you or brand awareness or are you trying to establish yourself as an expert? That is probably going to dictate the majority of what the content is. And then you also have to think about what types of formats your audience is going to be interested in consuming. Is it going to be video? Is it going to be swipe files? Is it going to be an email course? What is appropriate for not only the goals that you’re trying to achieve but the way that your audience is going to consume that information. And the last thing to think about is, what type of prospect do you think that you’re going to attract? And I think that’s probably an extremely important piece of it because if you’re attracting the wrong people, then it’s probably not a good idea to create that type of lead magnet. So to recap our 14 ideas for high-impact lead magnets. Number 1 an email course, number 2 a report, 3 three cheat sheets or handouts, number 4 templates, number 5 free videos, number 6 tool kits, number 7 free trials, number 8 E-books or physical books, number 9 access to a community, number 10 swipe files, number 11 webinars, number 12 case studies, 13 free consultations, and 14 interviews with transcripts. And the last thing to mention is we’ll link up a couple of different resources from this podcast and the show notes for this episode. You will find them over at digitalmarketer.com and petovera.com.
Rob [30:53]: If you have a question for us, call our voicemail number at 888-801-9690 or email us to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Out of Control by Moot used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, we’ll see you next time.
Episode 247 | Focusing on People vs. Process
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike discuss focusing on people versus process. They dive into the question whether you have to hire exception people or run your business based on process.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of Startups For The Rest of Us, Mike and I discuss valuing people versus process. This is Startups For The Rest of Us Episode 247.
Rob [00:17]: Welcome to Startups For The Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products whether you’ve build your first product or you’re just thinking about it. I’m Rob.
Mike [00:26]: And I’m Mike.
Rob [00:27]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike [00:31]: Well, I’m in the middle of running a webinar but I had to set up everything up first so I basically copied one of my old webinar campaigns. Going through that and updating all of the little tiny things that need to be updated is incredibly tedious.
Rob [00:44]: Did you change the title and some of the content?
Mike [00:46]: Well, yeah. You change the titles then you have to go through, and you have to go through every single email to make sure you’ve changed the title there. All the dates, any times that you’ve changed, and then of course you have to reconfigure everything if you have it set off of a specific date. It’s just tedious to go through.
Rob [01:02]: Yeah, it’s almost like somebody needs to build a little placeholder thing on that you can enter it in one place and then reuse in a bunch of emails.
Mike [01:07]: Well, kind of. I mean it might be nice to have not tags but like variables that say, “Okay, put this here for the name of it,” or something like that. But even then, you still have to go through every single email and read all the copy and everything. I’ve got, I don’t know, like half a dozen of them or so that I had to go through so it was just a long process of like four or six hours to get everything done.
Rob [01:26]: Right, right. When you started this you said you were running a webinar right now which meant was you’re launching a webinar, right?
Mike [01:31]: Yes, yes.
Rob [01:32]: Yeah. You’re not actually running one while we’re talking?
Mike [01:33]: No.
Rob [01:35]: Cool. For me, we’re working on a bunch stuff. I’m running a webinar tomorrow morning. It’s kind of the first Drip-only webinar. It’s put on by us and it’s only going to be folks from Drip who are on it. Pretty excited by it. It’s nice to have first one, you can get a lot of attendee right? Because you can use your existing list and then the ones after this will have to pull from new folks and start running ads. But that prep has been pretty time intensive, to set up the slides and set up the demos and make sure the demos work, and work back and forth because I’m co-hosting it with Ana who does customer success with Drip. We know when you co-host something like that, it is so much to think about – who’s going to say this, who’s going to run the cameras, to figure out which person’s on at which point and then we’re also trading back and forth on some slides. So there’s a lot more complexity, a lot more logistics than when you’re just running one yourself.
The other thing we’re up to is we’re launching something called Drip University. It’s at getdrip.com/university, and the tagline that I finally landed on is “Courses so good other sites would charge for them.” So our first one is going to be a 20-part video course where I interviewed Patrick McKenzie, and each part is like a two to five minute video of a specific question and a specific answer about email marketing. So how often could you send, what are typical open rates, stuff like that. You get these questions all the time and so I wanted to get his take on it, obviously he does a lot of email marketing. If you go to getdrip.com/university, we’ll have that live in the next – it’s going to be a week or two until it’s live but obviously you could leave your email now and hear about it then. It’s kind of exciting. I’m excited. We have a couple of other courses that are already – we have webinars and stuff that we’re linking to that and other courses in mind that we’ll be launching in the future. So it’s kind of a way to help folks just have more answers about email marketing and obviously it’s a bit of content marketing for us.
Mike [03:27]: Cool. I’d imagine it’s a lot of those videos that you can probably reuse in some of your email marketing where you just send those out to people in sort of a Drip campaign.
Rob [03:36]: Exactly. Yep.
Mike [03:37]: Cool. So what are we talking about today?
Rob [03:39]: Well today, we’re talking about valuing people versus valuing process. And when I say it, it almost comes out weird like, “Shouldn’t you value people?” But it’s really this phrase that you hear in business about whether you have to hire exceptional people who are crafts people and super gifted, or whether you are able to basically run a business based on process and to hire folks who certainly are skilled and you hire the best you can but they don’t need to be these phenomenal talents. You often hear it out, we have to have a process and then we’re going to insert any person or we have to value people over process. The reason I want to talk about it is that for the past several years, I’ve heard a lot of people talking about the value of process. We have standard operating procedures, standard operating documents, you have Dan and Ian at Tropical MBA talk a lot about this, Brian Castle has talked a lot about it, and anybody who’s productizing a service is going to be talking about it. To be honest, I’ve never been a fan of process. I know that you need some. I have Google Docs and I have VAs who look at that stuff, but in general I don’t enjoy that, like I get bored with it pretty fast. So I started realizing that maybe I don’t fit in, like my personal way of running a business doesn’t fit in with the whole process emphasis. So I don’t particularly love creating them and I don’t particularly love following them. Within the span of a couple of months, I heard a couple of quotes from people who, I respect and they both talked about valuing people over process. It occurred to me that perhaps these are just two sides of a coin – that it’s not one over the other, that it really depends on your goals and perhaps your working style. So that’s why I wanted to talk about it today.
So the two people who had mentioned this valuing people over process, the first was the CEO of Pixar’s. His name’s Ed Catmull, and he has the book Creativity, Inc. where he talks all about their creative process. He kept pointing out in that book that in order to create the Pixar movies that they’ve done that they have to trust people, not process. They do have a process for creation but he says it wouldn’t get done without the people. The other person who talked about this is I heard Warren Buffett quoted as saying something very similar where like he said, “I just have to have really good people and then let them run it.” He also runs a bunch of companies so he has to hire like really good CEOs, and for him creating process wouldn’t work. But it just got me thinking along these lines, and I guess I’m definitely more of a believer in this people side of things rather than investing so heavily in process.
Mike [06:07]: Well, I think it depends pretty heavily on the type of problem that you’re having people solved too. So there are certain types of problems where there is either a single way to do it or there’s a single best way to do it and it’s clearly identifiable, or there’s a good enough way to do it and just go through these steps and although it’s not perfect, it doesn’t really make a difference. And then there’s this whole other classification of problems where you really need to have good people who are creative and are able to think outside the box and it’s not necessarily a standard type of problem. So for example, one of the things that you can look at is the software development which actually fits both of those types of things at the same time. So there are certain types of software development where you have to do design and you have to build good stuff, and that tends to happen I think more on the UI side of things. You need to have that creative side in place where you actually have to have good people. And then there’s other things, on the backend for example where the customer doesn’t see the code and it’s very straightforward, so like a simple [?] application where all the backend processes are pretty straightforward. That type of stuff, you can hire somebody who does more of a process-driven thing.
Now, of course the entire software development process, there’s a process in place for handling that and rolling out changes and everything else, but depending on the type of problem that you’re solving, it can go one way or the other. For any sort of services, business, some of the different names that you talked about earlier, any sort of productized service or business, those are heavily driven by process. You want to be able to produce a reliable output for those things so you’re going to need a lot of standard operating documents, you’re going to need a lot of processes in place. Anything that’s creative, you mentioned Ed Catmull from Pixar, they need to have a lot of creative people in there because there’s a lot of stuff there that you just can’t have a process for. They’re basically creating emotions. I’m not going to say that there’s no process that you could follow in terms of psychology to create certain types of emotions throughout a movie, but that’s very difficult to pre-engineer in a way that’s not predictable for an audience. You don’t want to have a ton of cookie cutter movies, which is certainly not what Pixar has ever come out with. They don’t do cookie cutter movies but they do do good movies.
Rob [08:20]: Yeah, it really is. The more I’m thinking about it, it really is a choice. If you want to grow fast, let’s say you’re venture funded, I feel like you have to rely on process because if you rely on people, you’re going to really not going to have a lot of process. You have to hire exceptional, exceptional people and so you must grow slower because by definition, you just can’t find that many people who are that good. So I think the question really boils down to is, should you hire the best you can find and rely on strictly documented processes or should you hire only exceptional people and rely on them to make good decisions realizing that it’s going to kind of stunt your growth a little bit?
Mike [08:55]: Well, I think there’s two pieces of that. They’re just entirely glossed over by that question, and the first one is, do you have the money? Second one is, then if you do have the money, then what do you want? What is your ultimate goal?
Rob [09:06]: Yeah, that’s right. There’s a couple of really good articles by Joel Spolsky on this topic. One is called “Ben & Jerry’s vs. Amazon” where he compares Amazon who is just raising a bunch of funding, and this was ten years ago. He wrote this maybe even more, maybe 15, and he compares them to just growing and growing and growing and obviously they needed enormous amount of process, enormous amount of employees and they just need to kind of plug them in where they come. Whereas Ben & Jerry’s was a very slow growth organic business. I don’t think it raised any funding. He talks about knowing your goals up front and I think that relates here.
The other article’s called “Big Macs vs. The Naked Chef” and we’ll link up both these in the show notes. But the Big Macs one is really interesting and probably even more applicable here because it talks about how the Naked Chef is this expert. He’s an exceptional chef and he can make everything up the top of his head, he doesn’t need any process, and he can start a restaurant but he can’t start a hundred restaurants without having a bunch of process and then bringing in people who are not as good as him. Whereas if you’re going to start a restaurant that serves Big Macs, he says Big Macs aren’t very good but they’re all not good in the same way. They’re very, very consistent and it’s because they have this killer process. So if you do want to get large like that, you kind of can’t. You just can’t rely on people as much as process.
I think some other roles that really lend themselves well like you said earlier to process are like virtual assistant roles, support, friend and support. That is one place where we do have a bunch of process. We have always had process for Drip and HitTail and [?] and all that stuff because it just makes sense and the things are a little more cookie cutter. I think if you have a manufacturing business, for sure, any type of productized consulting we’ve already mentioned. Yeah, I can’t imagine trying to scale that without having really good process and being able to hire – you hire good people. You hire as good as you can but they don’t have to be these truly exceptional people who are off the charts, either consulting in VC back there, perhaps the other places where you’re definitely going to need process just because you can’t find good people quick enough.
Mike [11:00]: I do wonder if a little bit of these just boils down to being able to think outside the box for certain types of problems. We did talk about it a little bit before. Any sort of creative activities, so Pixar obviously is a great example of scriptwriting and scripts in terms of movies and things like that, but anything where there’s not a clear best approach. Obviously movies fall into that, some software development falls into it, but I think that there’s also places in consulting where you do need to hire good people as well, so if it’s a consulting engagement where there’s the high potential that something could go wrong. I’ve done a lot of enterprise consulting before, and you need to have very good people. Process helps you to some extent, but you still need people who are extremely knowledgeable and know the software inside and out, and you can’t just throw some random person in there who’s got certifications because that doesn’t always work. They need to be able to not only manage the software but the project itself, and those are two different skill sets. There’s some people who are technical and some people who are good with people, and finding the overlap between those such that they’re able to solve not just the technical problems but also the people problems associated with that, that can be really hard to do and you can’t just have a cookie cutter process for something like that. Especially because there are situations that come up where you have to deal with them on the spot and you can’t just go consult a manual or you can’t go talk to other people, and you need to come up with an answer right then and there on the spot. Especially when it comes to a meeting where somebody looks at you and says, “What do you think we should do?” You can’t say, “Hey, let’s take a 30-minute break while I go talk to my colleagues and figure out what the best answer is.” Sometimes you just can’t do that. So there’s these places where you need to be able to think on the spot about that stuff, and that’s where the people over process comes in.
Rob [12:45]: Yeah, I would agree with that. I think any task that involves a high element of creativity or that’s extremely complex is really hard to turn into a process. When I say complex, that might not be the word for it, I’m thinking of software development like writing code. I’ve seen shops with 50 or 100 developers and how they tried it. Any process around something, any process for the basic steps of checking in code or checking out code from source control or deploying, those things, I’m not arguing against having process for that because it totally makes sense. But it’s like trying to turn software development itself, the art of taking a feature and architecting it, building it, and putting that out the door trying to turn it into a process, I’ve seen people attempt to do that. Again I’ll counter, it’s not a methodology either because Agile I would not say is a process, it is a methodology that guides you but you still need solid people. If you put crummy developers into Agile methodology, you’re going to get crap code out the other end. That’s what I’m kind of wrestling with. It’s like I think that certain roles really lend themselves well to heavy process and it’s the ones that are not necessarily as creative and they’re more road tasks and they’re not as complex as something like software development.
The complexity like I said might not be the word, it’s almost like craft. When it’s a craft, when you’re having to hand-shape something and build it yourself and pull a lot of brainpower and be that, they call it a knowledge worker. I think Bill Gates came up with that term. Those are the roles where you can put a process to it and I’ve seen it done “successfully” in the sense that software does come out the other side, but in my opinion, that software tends to not be very good. It either suffers from bugs or the features are not built really well or the UX is really awful. The stuff that I’ve seen that I want to emulate, the projects, the products, they are built by crafts people that are really, really good at their craft and it wasn’t a process that told them how to design the front end of it and how to build the UX and how to write the code. The stuff that really executes and is elegant tends to be done by these exceptional people. Frankly, I just enjoy being around people like that. They’re smart, they’re interesting. That’s who I want to work with day to day. So I think what’s occurred to me is even if it hampers my company’s growth because I can’t hire 50 people or whatever, I want to air on this side of valuing people versus trying to put everything into a process.
Mike [15:04]: I think one thing that comes to mind around this particular side of things is the unpredictability of the output. So if you do something, in the example of Joel Spolky’s “Big Macs vs. The Naked Chef,” on the Big Mac side they’re all cookie cutter. You know exactly what the input is and you know exactly what the output is and you need somebody to just execute that. But if you’re dealing with a problem where the end result is not necessarily known and you don’t even know if that’s the best result, I think that’s where the unpredictability is and if you can’t predict it, then you need good people. Process will help but it doesn’t guarantee success. It doesn’t guarantee that you’re going to get the best possible result. Even having good people doesn’t necessarily do that, but I think that it improves your chances. Maybe that’s really an additional element that needs to be taken into account is how predictable is the output? How predictable is the stuff that you’re putting into? For example if you got a process that’s executing and you have to evaluate the quality of the data going into it, well, you have to have good people in order to do that. Just process is not going to get you very far.
Rob [16:05]: Yeah, and let me point out that I think I have the advantage of kind of a little bit of naivety, right? We’re at five employees at this point. I think when you hit 10, 15 or 20, no matter how well you hire, perhaps you need to bring more process into it and there might not be any way around it. But somehow in the back of my mind, I want to try to avoid this heavy burden of – I’ve worked at companies where there were four developers and it was so much fun, and then we grew to 24 developers and it was awful. I hated it and I left, and that’s the traditional path that I see a lot of the dev teams go down and frankly just a lot of companies that as you get and add process, it becomes less fun.
Mike [16:42]: But I guess that introduces the question, is it because the team’s got bigger or is it because they lowered the standards and quality of the people they were bringing in?
Rob [16:50]: Yeah, they definitely lowered the standards and the quality of the people they were bringing in and they added a ton of process I think as a result. Maybe they would have added it anyways. But they couldn’t have gone to 24 people if they had raised some funding and they couldn’t have gone to 24 people without lowering the standard because there just aren’t’ enough candidates.
Mike [17:07]: Well, I wonder if there’s a correlation there between the quality of the people versus the amount of process.
Rob [17:13]: Right.
Mike [17:13]: It’s an interesting question.
Rob [17:14]: Well, it’s interesting to think like even Peldi who started Balsamiq, they hit, I don’t know, 12 employees? He spoke two years ago at MicroConf and he said they hit around 12 employees and that he had to introduce a decent amount of process. Actually that was one of the things he talked about in his talk was all the standard operating docs and the procedures, the stuff that he put in place. I was a bit surprised by that because I kind of thought of him as like a nimble startup, and I was thinking he was kind of in that camp of keeping it small and keeping it simple and keeping it lean and not putting much process on it. But A), maybe I was incorrect, maybe he just leans more towards process in general. It’s definitely a personality thing. Or B), maybe at 12, it becomes hard to do it. Although I can’t think of a couple of counter examples. I think like Xerox PARC back in the day, these research centers where they have PhDs and really, really smart people doing crazy exceptional things. I’ve heard that they have very flat management structures, they have almost no process, and they kind of just move forward in research stuff. I guess more of a scientific thing, and obviously you can’t put a process behind scientific research.
Mike [18:15]: No, but I would assume that once something gets to the point where it seems like it’s a viable product, there’s probably some sort of process in place to take it out of the research facility and put it into the market, and from there it becomes a full-fledged product then put a development team behind it and everything else. So there’s a point in which R&D is really not process driven, it’s more people driven, and then at some point when you start to scale it, that’s when you have to bring in that process. So maybe it’s that scaling side of things as well. That could factor into it. I like the idea of saying, “Okay, well, if there’s unpredictability in the output, that’s a factor in how much process you need. If there’s lower skills, you need more process. If it’s more creative stuff, you need less process.”
So it think the underlying question here is, what is right for you though? What stage is your business in? What fits your own personality? What kind of business do you want to build? You could build a very large company very quickly but you’re going to have to have a lot process versus if you want to stay small, you can probably get away with very little process especially if you have a small team. So those are the two different things that somebody might need to think about, and again it boils down to personal preference. You could probably forego a lot of process and grow slowly over time just by concentrating on hiring the best people in the world.
Rob [19:30]: Yep, I would agree with that. I think as a listener, that’s the point. Really the point of this conversation is not to use you or I as necessarily as the example, but for the listener it’s like, “What are your goals?” Because I definitely think that depending on where you want to head, it has a lot to say about what you are going to have to do in terms of putting process in place or of hiring the best people out there. A mix of both would be ideal, wouldn’t it?
Mike [19:55]: Yes, it would. Well, I think that about wraps us up for today. If you have a question for us, call it in to our voicemail number at 1-888-801-9690 or email to us at questions@startupsfortherestofus.com. Our theme music is excerpt from “We’re Out of Control” by Moot used under Creative Comments. Subscribe to us in iTunes by searching for Startups and visit startupsfortherestofus.com where you’ll find a full transcript of each episode. Thanks for listening, and we’ll see you next time.
Episode 246 | 9 Reasons Why People Won’t Buy Your Product (And How to Fix Them)
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about reasons people won’t buy your product and how to fix it. They discuss common objections people have about products and why it prevents them from making a purchase.
Items mentioned in this episode:
Transcript
Mike [00:01]: In this episode of Startups for the Rest of Us, Rob and I will be talking about reasons why people won’t buy your product and how to fix them. This is Starters for the Rest of Us, episode 246.
Welcome to Startups for the Rest of Us, the podcast for developers, designers, entrepreneurs in all software products, whether you’ve built your first product or your just thinking about it. I’m Mike.
Rob [00:25]: And I’m Rob.
Mike [00:26]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Rob?
Rob [00:30] I’m doing pretty good. I’m ramping up for a bunch of webinars. I’m doing a webinar with lead pages this week following up on the contest that I did a few weeks ago giving away some lead pages for Drip, and then we’re ramping up a couple Drip webinars. There’s an educational one, one that’s further down the funnel for people who are already using Drip or more curious about how it actually works. So, this is the fun part, this is where as creative people we get to kind of dive into outlines of things and figuring out what we’re going to say. It’s kind of like writing a talk but it’s a lot shorter and you’re going to be doing it online. So, it’s also fun to look at the whole funnel and figure out where we need a little few emails here and a few mini courses here and how to integrate Drip with whatever we’re going to use for the webinars and all this stuff. So, it’s exciting. I like launching new experiments like this.
Mike [01:21]: The best thing about doing those kinds of things is that you don’t have to get it right on the first time because it’s not like a talk where you go out there and you give the talk and essentially it’s over with. You might or might not be able to reuse it, but like with a webinar you tend to do those repeatedly so you can errate on them over time and find out more information about what worked and what didn’t. And that’s what I really liked about those things, it’s just the re-usability of it and the fact that it doesn’t need to be perfect the first time and even if you completely screw it up you can always try it again the next week.
Rob [01:51]: Yep, I totally agree. And the webinars I’ve done so far have been kind of third party things, drip hasn’t put on our own webinars yet, but I’ve still had a really god time just interacting with the people on the calls, and the questions that come out of it are intelligent and challenging. So, it’s been fun. It’s kind of like you know when we go to MicroConf, when you speak at a conference it’s always kind of exhilarating to do it. You get a little nervous, you deliver and then you have a Q&A part and then it just winds up being fun in the end and that’s kind of how webinars have been for me so far.
Mike [02:23]: Very cool. Well, I’ve been trying to adjust to the kids’ schedule while they’ve been home for the summer and it’s proven to be bit of a challenge because my wife, she owns her own fitness studio so she does some personal training, she also does group exercise classes. And because the kids are home for the summer and there are certain weeks where they are at different activities, whether it’s art camp or karate camp, some of those things are all day affairs and some of them are not. So, sometimes they’re home for half a day, sometimes they’re home the entire day, and going back and forth between my wife and I trying to figure out, “Okay, who’s watching the kids, who’s going to be able to do work?” We actually kind of broke down. Earlier today we had somebody come over and watch the kids for a little while. There’s another family who lives in the area and we hired somebody to come watch, not only our kids but their kids at the same time because their parents, they both work from home sometimes. So when the kids are both home- and they’ve got three kids, so when the kids are home you’re just not getting nearly as much work done. So, hopefully that issue will resolve itself sooner rather than later.
Rob [03:25]: Yeah, I never try to work with the kids at home. That’s catastrophic. I get too frustrated, and I guess I should say I never try to work with the kids at home when I’m watching them. Like, we have a nanny essentially that watches the kids a couple hours a day and also picks them up from camp. Because my five year old is in a camp that ends at noon every day and so she picks them up and watches them for a few hours and then picks her son up at four and it allows me to have a full workday. So that’s a no-brainer man, I think you made the right choice. I think if you’re listening to this and you find yourself in this situation, go back and listen to “Zenfounder”, episode 1, because Sharon and I delved into this. We talk about our Sunday huddle approach, how we hire people to kind of drive our kids around. It’s essentially a nanny, but part time is not necessarily the best quality time, so try not to drive all over town picking kids up. Rather we try to spend time when we can with them in the afternoons and evenings. So, what are we talking about today?
Mike [04:20]: Well, today’s topic comes from Niles. I met Niles over at MicroConf Europe last year and he says, “Hi guys, I just came across this post and thought it would make s great topic for the show.” And I run over and read the post and it was over on inbound.org and it was a post called “Nine Reasons I won’t Buy Your SaaS Tool”. And I read through the article, it was interesting but I also felt like it came from the perspective of somebody who doesn’t make the decisions about it based as if they were the business owner; it was more like personalized objections to it than anything else. I just felt like there was a different take that we take on this article and use it to come up with our own ideas about what sorts of objections people have about different products and why they wouldn’t come through and actually do a purchase. Whether it’s just going from a trial to actually purchasing it as a SaaS product or just if you have a book or something like that and if you’re selling it and it’s a one-time purchase, just buying that whether it’s downloadable software or book, etc. But I think that there’s a lot of different objections that people have and what I wanted to do was go through a list of what those objections are and then kind of highlight how you would go about overcoming some of those different objections.
So, to kick us off, the first reason why a prospect wouldn’t buy a product is that they don’t understand what it is that you’re offering. So, in this case they come to your website and they are looking at your product offering and they don’t really understand what it does or how it works or what it does for them. And sometimes this is just a problem with the marketing messaging itself. If you’re not really clear about what the value is that they get out of it. If you’re talking more about the features and the functionality than what it is that they get out of it, the results they’re going to get, those are places where they’re not going to understand what it is that you’re offering and what the benefits that they’re going to get from it.
Rob [06:02]: It’s easy to err on two sides of this coin and go too far to an extreme, and if you go too much into the features too quickly then people don’t understand the real value their getting out of it; and if you go too much into the value their going to get out of it and the benefits then it can actually be hard to figure out what your tool actually does. So, imagine if we had a social media tool like Hootsuite: right on the home page you could say these are the features it has and just start listing them down and people are going to have a tough time absorbing all that information without some type of context. So, that’s a mistake. Or if you went to the other side and you could say, “It makes social media effortless”, or, “It makes all you social media interactions like a dream or something. And you’re almost like too high level at that point. It’s like, what does that even really mean? And unless you dig down quick on that page and start explaining how it does that then look at a few features. I believe you need a nice balance of those things. You can’t just go after benefits, benefits, benefits because it’s just as easy to lose someone going that direction as it is to lose someone by getting out into the weeds of features too quickly.
Mike [07:15]: So, in your mind, what is a good mix between those two things? Is it 50/50, is it 70/30? Are there any sorts of rules of thumb that you can come up with that kind of guide you in terms of the number of benefits or the amount of benefits you should talk about versus the feature?
Rob [07:20]: Yeah, the rule that I use, or kind of my loose rule of thumb, is that the headline should be, I want it to be a promise rather than a description of the product. Sometimes you can put a description and it works. Drip, I do that with, right. It says, “Light weight marketing automation that doesn’t suck”. Now, that’s not a promise; that’s actually a description of the tool. That’s typically not the way I would go. There are some reasons that I’ve done that. But if you go to the homepage of HitTail the headline is a promise. It says, “Guaranteed to increase your organic search traffic”. Okay, so that right there is a benefit; it’s not a feature. So, I start with that so I typically would want some text digging down into that, of how it does that. So, it’s still benefits. You’re not talking about features yet, but you’re now talking about more specific. Like with HitTail’s example we unearth the keywords that you should be targeting but aren’t. Then I like to start digging into a couple of features and those are typically in some bullet points or in short snippets and on the homepage I believe that having maybe three features kind of digging into those, three to six features, is not a bad way to go once you’ve made kind of that nice promise at the top. Especially if you have- I typically have some testimonials above that before I dig into features, and I also like to have some prominent press links above that of folks who’ve written articles of that. So, I wouldn’t say I have mixed, like you say 50/50, but that’s how I think about a page in terms of first make a promise, then talk a little bit about how it’s going to do it and always keeping in mind that you’re trying to use “you” language, like “you, you” the prospect rather that “me, me”, the person who’s selling something and then slowly digging into more and more details. So, it’s that inverted pyramid idea of starting fairly broad and then working down into the features. Now that’s a homepage or a landing page. Obviously I think you should then have a full features page that digs into the nitty gritty of what your tool does, because that’s where you can go off in the weeds and if you don’t have a features page people can have the question, really basic question of like, “So then what does your tool actually do and how does it do it?” And I think that’s a benefit of having that features page that the people can dig into it if they have more questions.
Mike [09:24]: The second reason people won’t buy your product is that they’ll look at the website that you have and say I don’t have that problem. And this really just a fundamental problem with the traffic sources that you have. So, whether you’re targeting the wrong people in AdWords or whatever paid advertising you’re doing or if you’re advertising for your product using the wrong social media or the wrong blog articles, any sorts of news outlets where it’s just not applicable or if you are trying to get from like Digg or Reddit and it’s just not the right audience. There’s lots of different ways to get a lot of traffic to your website but just because you get traffic doesn’t mean that it’s targeted traffic and you have to get that targeted traffic because if the traffic is not targeted they’re probably not going to have that problem and they are going to have absolutely no reason to stick around or buy your product.
Rob [10:12]: Yeah, targeting traffic is hard especially if you’re sending a bunch of stuff to your homepage. I think the less traffic you send to your homepage the better and the more traffic you send to individual landing pages that essentially look like you home page but that you’ve changed the headline to really resonate with the traffic source that’s hitting it, but you can’t always do that, but certainly if you are running paid acquisition, if you’re doing SEO, you can set up separate pages that target certain keywords. There’s a lot of ways to do this, and what’s interesting is your tool probably solves a bunch of different problems, but you can’t say that in a headline. And if you say the wrong one to the wrong audience then they will wonder off and have this objection of, “I don’t have that problem.” And so, the more specific you can get with your headline and you can say, “Boom, do you have this problem? Do you spend way too many hours managing your social media? Or do you no have enough organic search traffic?” Very specific thing that’s targeted to those people, you’re just going to stand a better chance of them continue to read the page which eventually often leads to them converting for you.
Mike [11:16]: And I think you can have this problem on any given page on your website. As you kind of indicated, the homepage is not often the best page to be converting people into trials or customers because it’s too generic, you don’t know the type of person who is going there. They may have just heard about your tool from somebody else or just typed it into a search engine or something along those lines. But if they come to a specific page, especially if you’ve optimized that page using SEO you can generally get a good idea of what type of person is coming to that page. So, obviously there’s bit of a difference if you’re using paid advertising because then you can have a little bit more fine-grained control over it versus if somebody writes an article about your website or your application, you don’t always have as much fine-grained control over what it is that they say or how they pitch it to their audience or how they talk about your product. But if you find that those links are coming back to your site you can certainly morph your pages to talk directly to that audience especially if you’re seeing that there’s a lot of traffic coming from some of those different sources.
Rob [12:15]: A third reason why people might not buy your product is that they don’t trust you. I think there’s a number of ways that someone could mistrust you. They could look at the site and think that it’s just a little too slimy or that it’s a little too, it looks like a scam, right. And I think that comes to a design problem. Your language could be over-sales-y, you could be pushing too hard and it could feel like you’re trying too hard and that could be a copy-writing problem. I think aside from those, a big one is that someone might not trust that you can deliver on the promises you’re making on that homepage or on that landing page. And probably the best way I know of to get around that is to use, essentially lead nurturing right. Instead of getting someone to sign right up, because they may not trust that you’re going to deliver or it may take too long to get set up or whatever they’re not believing that you’re saying, but you offer something very small in exchange for an email address. And so you can do an email mini-course educating them on how you’re going to solve their problem or how they could solve it by themselves on their own without buying your software. Or you can give them a tools list or PDF or why paper or something. And then once you have their email address you can email them a small min-course once a week and build that trust up.. Build up the knowledge to them that you’re an expert and that you can solve this problem and that you have done it. You can send them case studies, you can send them your credentials, quotes and testimonials, all that kind of stuff. I mean you just have so much more time to do that if you have the email address than if you try to pitch everything on a webpage while someone is skimming through that between their lunch hour and their one o’clock meeting.
Mike [13:50]: I think in addition to some of the things that you talked about, the lead nurturing thing I think historically has been overly simplified. I think in the past if you looked even five years ago or so, if you looked at the basic sales fall for any given product on the internet it was somebody comes to your website, they sign up for a trial and then they purchase the product or they don’t. The overly simplified piece of it was that lead nurturing that you talked about where they come to your website and you just met them. They don’t know anything about you yet, yet you’re trying to sell them on a product and they just don’t have that trust yet. And I think that’s- you talked about it pretty in depth- but I think that that’s the piece that a lot of people miss when they are trying to set up their website. They’re skipping over that piece and they’re not thinking about what it is that I can offer people that will help establish that trust before we even get to the point where I’m asking them to sign up for a trial. And like I said, that’s just something that I think people have kind of glossed over. I’d say it happens a lot less now than it did three or four years ago, but it’s starting to come to the forefront, like this is an important piece. And I think a hard part about that is just the length of time that it takes to go from, “This is a new lead and I’m nurturing that lead”, but it’s hard to tell how long that lead nurturing is going to take. Sometimes it can take days, sometimes it can take six months and sometimes it can take a year. And that nebulous piece of it, the time frame for that, is what makes it so difficult for people.
Rob [15:12]: Our fourth reason of why people won’t buy your product is that they are happy enough with what they currently have. And this is a tough one to get around. I think it’s pretty common that there’s going to be an incumbent in pretty much every market that you enter into, and frankly most people don’t enjoy change, and they are not going to go out of their way even if they can get some type of incremental benefit, they’re not going to go out of their way to switch to your product. And you know, Mike, as you noted here in the outline, the biggest competitor to most bug tracing software is probably spreadsheets, it’s probably some hacked together thing that people have done and if it works well enough then why would someone change? And so to think about getting around that objection you really have to show not just incremental value but you have to show dramatic savings of time, dramatic savings of money or how you can make someone a lot more money or how you can really remove the pain from their life and I think that’s a big thing. We talked about this B to B pain thing, right? You really have to figure out what that pain is, and you have to go after it, and you have truly understand what the pain is, why they’re feeling it and you have to talk about that on your homepage and in your marketing and in your copy. And if you’re kind of vague around that and you feel like you’re kind of solving a problem for a certain group of people that’s not good enough. You have to be a lot more specific about it or you have maximize folk trying out your app or becoming customers of you, you really need to understand that pain.
Mike [16:41] And number four is closely related to number five which is that it’s too hard to switch from what I’m doing today. And if what they’re doing today currently is just they are trying to sign up for a bug tracking software and all they are using is spreadsheets, one of the ways to overcome that is having a mechanism to load that spreadsheet into the software. There’s technical ways to do this particular piece of it ,and you can say, “Okay, I’m going to build an import mechanism for all of my competitors and allow then to upload a spreadsheet that will import stuff.” But you’re still asking them to do work in some way, shape or form. They have to figure out what that export process is, they have to make sure the data is formatted properly, and then imported into your system.
The other way to go about this is to offer some sort of a concierge on-boarding service where you offer to, either for free or as a paid service, import the data in some way, shape or form. And I distinctly remember Patrick McKenzie talking about this for appointment reminder where he offered a free data import regardless of what type of system you were currently using. And some people would send him spreadsheets, some people would send him PDF files, and he would just take that data and import it into an appointment reminder. And sometimes he literally had to sit there and copy paste things, sometimes he had to type things in, but at the end of the day what he was doing, he was removing the pain of switching from whatever their current system was to using his software. And I think that that pain of switching is very underrated. I mean, most people heavily discount on how much effort and mental overhead there is to getting rid of that because signing up for a new service is basically asking somebody to do work, and that’s not what they signed up for. They signed up to get rid of some of the work that they have to do and some of the pain points that they have. By forcing them to do this stuff manually, it is just a barrier for them to sign up for your service. So, if you can remove that barrier in any way, shape, or form then it’s going to get you to do it. My wife’s evaluating some different options right now because she has one, and the problem that she has is, “Oh, I’m going to have to take all my existing appointments and everything else and I’m going to have to move them into this new software and I don’t want to have to do that.” So, it’s definitely a real thing that people have to deal with and they do take it into consideration.
Rob [18:53] Yeah, in launching Drip, Derek and I sat down and said, “What are people biggest switching cost and how can we get around those?” and concierge service is one way, doing it for them. Building importers is another way. Even helping prepare people, like creating internal marketing docs. Let’s say it’s a doc that allows a developer to sell the product to convince his boss that they should be able to use this. Something your future customer can use to convince their higher ups, I’m getting all of these things work and I’ve seen them all done but to sit down and really give thought how is it to switch, why is it harder to switch and what is in our power to offer folks to try to eliminate that switching cost, and it’s very powerful.
Mike [19:37]: Yeah, which you’ve kind of alluded to and I’ve seen this done in the enterprise world where they have these kind of marketing documents where they will talk about what sort of problems are that people are facing and how to overcome those challenges with a new piece of software. Some of those things are as you said, you do it for them and you can talk about those things, but giving them the tools that they need to be able to justify internally because they’re going to ask the question “how do we going to go about switching and what are the pain points going to be of switching?” and if you can provide them that information and give some ammunition and be able to say, “Hey, let’s take this tool that isn’t doing the job for us and get rid of It and this is exactly how we are going to switch over, this is our road map to moving over into this new system.” If you can get that, and sometimes it takes standing up for your competitors, but at the end of the day sometimes you have to do what you have to do.
Rob [20:22]: Our sixth reason why people won’t buy your product is if they can’t figure out how to use it. And this is a pretty common one, right? Someone downloads a trial or they sign up for a trial and they can’t figure out how to enter stuff or they don’t know what they should do or they just kind of give up. And that typically means your product is too complicated or your on-boarding isn’t good enough. If it’s on-boarding that’s a fixable thing, there’s kind of a formula for this right. You’re going to want to send folks some emails on how to get on boarded, preferably very timely and spell out things they’ve already done and what they have left to do and obviously having some kind of walk through or some kind of setup within the app as well. If an app is just too complicated and software isn’t the answer, then you may need high-touch sales to explain it. If you’ve solved a complicate problem, you’ve built a complex solution, and you’re selling in to folks where the price point is worthwhile then people aren’t going to on-board to something like that when it’s really hard to get set up. And that’s why Enterprise Tools sells for so much money right. They sell for a $100,000 or a million dollars often because there’s so much effort, I mean there’s so much effort involved in building, there are so much sales effort involved in getting people on-board and it’s such a lag. And so I kind of think of it as one of those two things, either your product is too complicated in which case you need to up your game and go high-touch or you’re just not on–boarding well enough and you need to look at that.
Mike [21:44]: Yeah, I think what the misconception with some of the Enterprise level products is that people look at the price and say, “Oh, that product is so not worth that.” And in most case they’re right, the software isn’t worth that. It shouldn’t take that much effort to build the software, but what you’re paying for isn’t the software; you’re paying for the sales effort that is required to get in front of the customers and do the work to get them set up. That’s definitely something that heavily factors into the price in there. But, if software becomes shelf ware then it’s not providing any value, so you definitely need to figure out how it is you’re going to demonstrate that value. Because if it’s a SaaS product for example and people are signing up for a trial, if they can’t figure out how to use it and they are not getting the value out of it, they’re definitely not going to pay for it. You have to go through and figure out what those pain points are for them and why it is that they’re not able to use the software. And maybe it is too complicated, maybe you need to switch it to much more of a service-based offering rather than a software offerings. Sometimes that’s the answer. But at the end of the day as the entrepreneur your job is to figure those things out, it’s not to build a certain type of product or a certain type of company. It’s to figure out what those types of problems are and then fix them with the business.
Rob [22:52]: And that’s where the old-school, big ticket price, enterprise sales had an advantage because they didn’t have subscribers and when you’re providing a subscription service you have to deliver to the customer every month or they will cancel. And so if they are not using they are going to cancel. Whereas if you were Oracle or Ceeble or People Soft back in the day or even today I suppose, you can sell a six-figure or a seven-figure deal and all the effort is upfront convincing them to buy it and you don’t have to follow through and actually provide that much value. Obviously that sucks, I mean but I’ve seen it happen. I’ve been at large enterprises where there’s been this great sales job and then folks don’t follow through but the value is kind of provided all upfront and so was most of the money, aside from kind of the annual maintenance twenty percent that is typical.
Mike [23:40]: The seventh reason why somebody might not buy your product is that they forgot about you. They came to your website, they looked around a little bit then somebody walked into their office, and they got busy and they closed down their laptop and walked away or closed their browser and went to do other work that came up and they just didn’t sign up for anything, they didn’t download anything. So, by the time they get back to their desk and they decide they have a free minute, at that point they’ve forgotten what it is that they came to your website for to begin with. So, in cases like that you need to use something like re-targeting to help bring them back. If you were lucky enough to get their email address because they did sign up for something then you need to actually go through the process of actually emailing them on a regular basis. And I’ve done this in the past where I’ve collected email addresses and then just not emailed people for like two or three months and that’s the worst thing you can possibly do because they were interested at one point but two or three months down the road, unless you are getting in front of them and talking to them chances are good they either forgot about you or the problem was just not high enough on their list of priorities to come back to you, or they found something else to solve the problem and you weren’t it because you weren’t talking to them. So, making sure that you’re going back and getting in front of those people and getting either a yes or a no is, that’s essentially you job. It’s not your job to kind of self-select and say, “Oh, this person didn’t email us or sign up for a trial so I’m not going to bother them anymore,” and that’s absolutely wrong, that’s the wrong approach to take. You need to get through to them and you need to talk to them until they either say yes or go away.
The eighth reason why somebody might not buy your product is that they’ve tried similar things before, and those things didn’t work for them. And I’ve done this myself where I’ve signed up for a product and it didn’t work out and then I maybe signed up for one more and that didn’t work out, and suddenly I just give up on the whole genre of that particular type of product. You might have found this with something like Time Tracking or To Do lists. People switch to those types of applications on a fairly regular basis, and at some point I think people just get frustrated and they decide, “Look, none of these products work so, none of these products I’ve tried so far work so none of them are going to work.” And this isn’t necessarily true, especially if you’re taking a different approach to a particular problem. And if you’re taking a different approach than other people and other competitors in your space, what you need to do is educate people about why your approach is different. Maybe the competitors you’re looking at are doing it wrong. Maybe they’re not telling the story about how they went and decided to create this product because they were having that particular problem and nobody else was solving it for them and show people that the process needs to be molded to fit into this software. And sometimes that’s just the case, the vendors will create a product based on their own internal ideas of how a particular process should work and it’ll educate their customers as they’ll come on board about how they can modify their own internal processes tobe more efficient and to get more things done and then when the customer’s trying out the software, because there’s a mismatch between what the customer’s process is and what the vendor’s process is, those things don’t mix so they don’t work and eventually the customers get frustrated and they say, “Look, I’m done with this,” and they do the same thing with the next product, and the next product and the next product and eventually they kind of just check out of the whole thing. You can use education marketing to help correct this, but sometimes there’s also a problem with the problem solution fit. Maybe you’re not solving the right problem. Maybe the customers have a slightly different problem, and that takes customer development and you have to talk to people who’ve signed up, people who just cancelled and verify that you actually do have that problem solution fit. Because sometimes your promises don’t match what the customer expectations are and you need to know that earlier and sooner rather than later.
Rob [27:22]: I tend to think about this in two ways: if you’re in kind of a new space or a new market then the odds of them, of your customers having tried so many things that their tired of it are pretty low. And so I wouldn’t typically use this as a factor unless you’re hearing this from people who are canceling. My guess is you won’t be. But if you’re in a mature market where there are a lot of tools, or it’s been around for ten, fifteen, twenty years, then there probably are going to be some older tools, some incumbents that are higher priced, that’s real hard to use, that are cumbersome, it’s kind of the same story we see with QuickBooks or Quicken and accounting space and the big marketing automation tools or email marketing software. I mean you really see as tools get older they just get cumbersome. In that case it’s probably a good bet that people have in fact tried other tools and really don’t like them. We’ve used this term of “refugee” from Exproduct, Infusionsoft Refugee or Quickbooks refugee. It’s someone who is trying to flee that product that product because they don’t like it so much that they’re willing to use kind of anything else. And in that case that’s actually a really interesting marketing angle. It’s a really interesting copy-writing angle. It’s an interesting touch point that you can use in an email course, in a headline, in a sales letter, on a homepage, to basically call it out, just, “Have you tries a bunch of different products and they haven’t worked for you? Are you tired of this incumbent software that’s really expensive and hasn’t worked for you?” And you just tackle it head-on and then you present why your software isn’t that and how you’re kind of of a new paradigm.
Mike [28:54]: And the ninth reason why somebody might not buy you product is that they look at it and they say it’s too expensive. And in these cases, I think that if somebody looks at the product and says that it’s too expensive it tends to be an objection but it’s coming from some other place. Either they’re not seeing the value in it or there are features that they’re specifically looking for that are in a pricing tier that they’re not comfortable paying for that pricing tier because maybe it’s a one person sho pand the specific feature that they want is in a $100 tier versus the $20 tier. There’s a lot of different reasons why they may not be able to see the value. They also may not even believe that the value is there. And that might be an education problem, but it’s rarely the case that you’re offering the product and somebody looks at it and says out of hand that that’s too expensive. My guess is that there’s something else at play. It’s not necessarily that it’s too expensive, it’s more that they don’t see the value or they’re not looking at the right things and it’s up to you to kind of correct what it is that they’re looking it or educate them. I just don’t think that in most cases, unless your product is completely outrageously priced in comparison to all the competitors out there, it’s hard to overprice something if you’re not also delivering the value.
Rob [30:05]: Yeah, you’re always going to have some pricing objections to what you billed. I don’t think I’ve ever had a product priced even as low as you can possibly go and still not have someone tell you that it’s overpriced. But the point at which you might actually think you might be overpriced is when fifty percent of your people are canceling because of that. You really have to hear it a lot in order to actually start thinking about lowering prices in my opinion.
The other thing is, I talked about this last MicroConf, and it was in reference to Drip and it was in reference when we first launched, we had a bunch of people using it and cancellations were coming through and a number of people said very similar things. They said, “this is a great tool, I love the usability, it’s easy to use but I just couldn’t justify it in light of the price,” and they would say that, it was very similarly, it was too expensive for what it does, that kind of stuff. Now, you could look at that one way and say, “Wow, that’s too expensive. We need to lower our prices.” Derek and I looked at it another way. I wanted to go after something called aspirational pricing, which is basically saying, “I don’t want to charge less that $50 a month.” It was at the $49 a month price range, so how can we build enough value in the product that we are worth $49 a month? And these days that’s more how I think about rather that trying to lower prices to meet expectations, how can you build enough that their expectations are met at or above your current price point?
Mike [31:26]: Yeah, I think that exact topic came up in one of my mastermind group discussions which was, don’t drop the price, add value to it. And I think that you can probably generically apply that advice across the board to virtually any product on the market. Don’t discount the price, always add value.
Rob [31:43]: So, to recap our nine reasons why people won’t buy you product. Number one, they don’t understand what you offering. Number two, they don’t have that problem. Number three, they don’t trust you. Number four, they’re happy enough with what they currently are using. Number five, it’s too hard to switch from what they’re using today. Number six, they couldn’t figure out how to use your product. Number seven, they forgot about you. Number eight, they’ve tried similar things before and they didn’t work and number nine, you’re just too expensive.
That wraps us up. 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 Comments. Subscribe to us on iTunes by searching for Startups, and visit us at startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 245 | Tips for Fighting Stress and Anxiety as a Founder
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about tips for fighting stress and anxiety as a founder.
Items mentioned in this episode:
- LeadFuze
- Bidsketch
- CartHook
- Useronboard.com
- Penzu
- Helpguide.org
- A Guide to the Good Life: The Ancient Art of Stoic Joy
Transcript
Mike [00:00]: In this episode of Startups For The Rest Of Us, Rob and I are going to be talking about tips for fighting stress and anxiety as a founder. This is startups for the rest of us episode 245.
Mike [00:16]: Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products. Whether you’ve built your first product, or you’re just thinking about it. I’m Mike.
Rob [00:25]: And I’m Rob.
Mike [00:25]: And we’re here to share experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
Rob [00:30]: Well, me and the family were up in Oregon last week and I had a pretty cool meetup with a few founders out there with Ruben from Bidsketch, Jordan Gull from CartHook, and the Bootstrap Web Podcast, and Samuel Hulick from useronboard.com. It was cool to hang out with them for a couple of hours and as usual, 10:30 rolls around and I just wanted to sit there and keep talking. I had hours more on conversation than I wanted to have but we had the bail and I had like a 35-minute drive back to this music camp that I was out my kids. So, I wanted to say thanks to those guys for hanging out and if you’re in Portland, next time I’m up there because I’m up there probably once a year during the summer to hang out with you, how about you?
Mike [01:10]: Well, as the listeners know I was in Hershey, Pennsylvania last week for a family vacation and I had a really good time recording the terror of my children on the rollercoasters.
Rob [01:21]: Yeah, that’s always fun. I saw those pictures on Facebook. It was pretty hilarious.
Mike [01:24]: I think the part where he said, “Is it over yet?” halfway through the rollercoaster was probably the best one.
Rob [01:29]: That’s the best, yeah. So update on a couple of [?] marketing approach as we started the past couple of weeks. One is I’ve started using LeadFuze from Justin Miguel, he’s a founder café at Micropreneur Academy Member and we met him at MicroConf and LeadFuze, F-U-Z-E, and it’s basically outbound email and it’s been really interesting. It’s already been more successful than the previous outbound, the three-month outbound email campaign that I ran with another provider and we’re like two weeks in and we already have more leads from this. So there, I don’t know if it’s the market they chose or if it’s the approach they’re taking but it’s interesting. I’ll have to see, I want to wait about a month or two and kind of see what volume we get because my experience with outbound email like this is that it’s great for really high-price services right because you might get 10 leads or 15 leads a month, but when you’re doing more a SAS that’s lower price, 50 or 100 bucks a month, that 10 or 15 new people to talk to doesn’t often move a needle unless they’re pretty high price. So, in vertex allow but certainly the frontend results have been positive so far.
Mike [02:35]: Cool. And you also recently ran a contest for LeadPages, right?
Rob [02:39]: That’s right. Yeah, so basically, we use the KingSumo plugin which is a wordpress plugin for Map Sumo and ran a contest, one winner would win five years of LeadPages which is worth like $4,000. And, overall, I mean the contest with tons of Tweets I mean there’s a [?] rally to it where you enter and then if you Tweet and other people user length then you get like three extra entries or whatever. Overall, there’s a ton of bus during the contest. We ran ads, we mailed our list. We kind of did what you would expect to promote, but in the end the results were not where I wanted them to be instead of getting several thousand new emails. It was substantially lower than that. So, we did a post-mortem and I couldn’t pinpoint anything that I felt like we did wrong. Part of thinks that contest are so common place now that maybe they’re not the kind of the purple palette that used to be. Part of me thinks perhaps we misexecuted on something but it is what it is at this point and I don’t foresee doing another one in the near term but we’ll see what happens a few months down the line. So, what are we talking about today?
Mike [03:42]: Well, today we’re going to be talking about tips for fighting stress and anxiety as a founder and I kind of came over this idea because last week, I was on vacation and it occurred to me that this is probably one of the first vacations I’ve taken in a while where I didn’t feel stressed at all while I was on vacation and I kind of thought back about why that was and kind of came to the conclusion that one of the things that I did just dramatically differently this time was that I basically saved up money to pay for the vacation first so that I could go on vacation and enjoy it rather than thinking about all the things that I needed to do when I got back and how I was going to pay for the vacation afterwards. So kind of like frontloaded of what my savings were going to be for that and it occurred to me that there were a number of different places where I was feeling some stress and anxiety about the business and what things were going on and so I sat down and actually kind of did a stress review to figure out like what things in my life, in my business were stressing me out and I did this before I went on vacation and realize that there were a lot of ways that I can address some of those issues and by the end of my vacation, aside from getting sick was a little bit stressful. I was completely stress-free. It was not a stressful vacation in any way, shape, or form and I didn’t worry about anything the entire time. It was fantastic.
Rob [04:55]: That’s great. I mean that’s kind of the purpose of a vacation right is to get away and not feel stressed. I find sometimes it’s a mix bag where if you go away, it can make you a stressed out if A, if anything goes bad back at the office that you can’t handle then of course you’re going to get stressed out. And the other way is I feel like if I leave and there’s something undone or I realize that there’s a big push that we want to do and I’m not there and able to kind of participate in it, that always makes vacation kind of suck because it’s like you’re not being part of moving the business forward. But, when things are going well and you stuck away for a short amount of time, like I said, I think that’s the purpose of this to come back super refreshed and motivated, and ready to go. And so you’ve been back for a couple of days at work since vacation is over, have you had a lot of motivation to kind of get to work and get stuff done?
Mike [05:42]: Well, I’m kind of on the tailend of being sick. I started getting really sick on Thursday. So, and then through Thursday, Fridays, Saturday, and even up until today, I mean right now it’s Wednesday and we’re recording for next week, and I’m still feeling kind of the lingering effects of it. So, I’m not getting as much sleep as I probably could have but in terms of my motivation and my ability to get things done, it’s still there. It’s just I feel terrible throughout the day is really what it comes down through. But it has nothing to do with being stressed out or worried or having things to do that I’m procrastinating on and not getting done. It’s just my face just doesn’t feel good.
Rob [06:15]: Right. Yeah, that’s a bummer. Cool. So, let’s dive in to these tactics you have.
Mike [06:19]: Sure. So, basically, we’re going to walk through four different stages of taking a look at the stress and anxiety that you’re facing and talk a little bit about what to do in each of these, I’ll call them faces because it’s kind of an analysis of the anxiety and stress that you’re facing. And the first one is think about the big picture of what’s going on. And this is about identifying the things that stressing you out and understanding and recognizing the different science of that stress. So, for example, if you’re procrastinating on certain things or you’re avoiding certain types of work, or if you’re spending a lot of time thinking about a specific problem or a specific subset of problems that you’re facing during your business or your personal life, let’s say that you’ve got some bills that you’re trying to pay down and maybe it’s credit card debt or something like that. Or if it’s just the marketing strategy that you’re trying out and it’s not working and it’s frustrating. So, all of those things are things that can kind of contribute to the stress that you’re facing and are ultimately going to essentially drag you down in other ways that are not necessarily easy to quantify but will definitely impact your business in the bottom line. So, some of the science of this are if you’re overindulging into something whether it’s videogames or if you’re smoking a lot more or you’re drinking a lot more, eating, watching TV or movies and just [?] out in front of the TV at night, doing drugs that you shouldn’t be doing or sleeping much more or much less than you typically do, any sort of withdraw from social situations. So if you’re avoiding going out with your friends, or essentially just avoiding talking or interacting with people in general because you think to yourself, “Oh, I’ve got all this work to do, so instead of going and hanging out with my friends, I’m going to do this work and try and get it done.” And what I found tends to happen is that you end up spending more time in front of your computer trying to get work done than you do actually get in any of the work done. And it kind of comes about as much more a surface is a much more of a form of procrastination than anything else, and to me that’s when I know that I’m stressed out or I’m anxious about stuff is like I start procrastinating. And the natural reaction for me is to sit in front of my computer more or try and get more work done, but that never happens. It always end up putting me in a position where I end up procrastinating when I’m sitting in front of my computer and I’m still not getting as much work done which is essentially a vicious cycle. So, you spend more time in front of your computer, trying to get stuff done. It’s not getting done. You procrastinate and then it makes you want to spend more time there because you’re not getting things done. To me, that’s just the vicious cycle and to me that’s the sign that I need to do something about it.
Rob [08:46]: Yeah. I think the big signs for me personally is when I notice that I have this kind of feeling of stress or anxiety and I can’t pinpoint where it’s coming from and I always take that as a point to where I need to stop and think about when started and what kicked me into it. And oftentimes, I’ll find that it’s some ridiculous thing like an email I got from someone that was confusing or that means that I have to do some work tomorrow or that, I don’t know, it’s something that didn’t go exactly the way I wanted to but it isn’t actually that big of a deal but it somehow triggered a reaction in me that I then carry with me for an hour or two, or three. And as soon as I can pinpoint, “Oh, that’s why I’m upset? Like that’s why I’m feeling this?” That’s when I’m able to let it go, right, and to either do a short, I won’t even say it’s a meditation but it’s kind of just a short check in and saying, “All right. I’m letting this go because there’s no other reason that I should be feeling this way.” But the other thing, I think the excess of angry you talked about, I think overindulging them and I found myself definitely watching too much TV at times, not this year as more in 2014 where I had kind of a, yeah, just kind of tough battle with there’s some cash flow and there were other things going on there trying to grow drip that I was frustrated with and I think all the indicators that you mentioned about zoning out and withdrawing from social situations or things that I’ve certainly experienced.
Mike [10:10]: Right. So, as I said, step one or stage one I guess is just thinking about the big picture of what’s going on and recognizing that there is some sort of stress or anxiety that you’re facing. And then stage two is really just identifying what those stressors are. So, what I find it helpful is to list all of the different things that may or may not be stressing me out or frustrating me. And it’s helpful to just write them down and say what it is, why it’s stressful and what is about that particular thing that is stressful. So, one of the things that I find helpful doing this is keeping a personal journal. So I use a service called penzu.com or you can just go in and you can have it send you emails and notifications about when you’re supposed to be doing anything in your journal and I just have it send me a reminder that for certain things, so for example I keep a sleep journal that just says, “Hey, how did you sleep last night?” And what it does it helps me keep track of how well I’ve been sleeping and whether or not I’ve been well or sleeping poorly, and it helps me just pay attention to it. So it’s not about measuring it so much as it is about just kind of being aware of what my sleeping patterns look like. I used to use a [?] to actually measure how much sleep I was getting on any given night but they went out of business and the machine went on the [fret?] so I haven’t found anything else to kind of replace that yet, but I found that this journaling application has helped me to understand when I am and when I’m not getting good sleep. And you can use a journal and application for anything so you could use it for your personal life, use it as an end-of-day check-in, you could use it for sleep, you could use it as an exercise journal for example. I mean there’s lots of different things that you can use where the activity isn’t easy to measure but by journaling about it, you can give yourself an opportunity to just think about whatever it is that’s going on. And by listening to those things, you’re essentially identifying them, and once you’ve identified them, you can move onto stage three which is just dealing with that stress. And there’s a lot of different ways that you can deal with it and kind of the five that I came up with was you can ignore it, you can avoid it, you can outsource that stress, you can eliminate it, or you can adapt. So, let’s talk about those five different things in order. And the first one is ignore it. There are certain types of stresses that you can just completely ignore them. So for example, one of them is negative blog comments. If you have a blog that you’re writing and we talked about this a little bit in a previous episode where we talked about dealing with haters, but if you a blog you’re inevitably going to get people leaving blog comments on there and if you’re in anyway controversial, there are people who are going to believe negative blog comments and just reading those is extremely detrimental, I mean we talked about it quite a bit before but the way to avoid that stress by reading those things is just completely ignore those comments. You don’t have to even read them. There’s pros and cons to not reading the comments on your blog, but if you’re getting enough comments you’re recognizing the negative ones throw you off for a couple of hours, or for a couple of days, it might be worth considering just ignoring them entirely.
Rob [13:01]: Yeah. There’s definitely a pretty large group of stressors that you can outright ignore I think, blog comments and hacker news comments, and Twitter comments and frankly feedback or input from people you don’t know or that’s unsolicited or that you didn’t ask for I think is typically something that you kind of have to learn to ignore as you build up an audience or as you build up a customer base because there’s always going to be somebody, you know, someone off case of one in a thousand or one in ten thousand people who’s going to say things that stresses you out and learning to kind of deal with that and not let others have the power, that power over you I think is definitely one way to avoid the stress because frankly, at this point, if every time I heard a negative comment about something that I’m involved with all that we do in terms of MicroConf, the blog, the podcast, all the apps, everything; if I got upset every time someone made a negative comment, yeah, I would be stressed quite a bit. And so, I think getting a little more fixed scanned and learning to ignore those things that should be ignored, is a learn skill.
Mike [14:10]: Right. And just to kind of clarify a little bit. There is a slight difference between ignoring the entire thing versus not letting to get you, I think because there are fine line between those two so that you can take it one of those two different ways. The second one in this list is to avoid at something entirely. So, one of the things that I found is that overcommitting for me can be a big stress and nobody likes to say no to somebody especially if somebody comes and says, “Hey, can you help me out with this?” I love to say yes to anyone who comes to me and ask for help, but at the same time it’s not always possible. So, especially if people come to you and earlier on, I think in most of our careers, we always have family who come to us and say, “Hey, can you help fix my computer?” And I used to kind of jump and say, “Oh, yeah. I can totally help you out with that.” And overtime, I got to the point where I realized that not only was that not helpful for me or for them because they weren’t necessarily learning to fix or address the wrong problems. They were just basically passing them off to me, but I was committing to things that I didn’t necessarily have time for, and at this point, I definitely don’t have time for them. So, it is a lot easier to be able to say no to those types of things, and saying no can be really, really hard and that’s one of the issues that a lot of us are going to have to face at some point. You’re just going to have to say no sometimes even if it doesn’t feel good at the time but you have to understand that sometimes saying no is the right decision for you in the long run.
Rob [15:27]: Yeah, earlier on in my career, I said yes to everything and I think that’s probably advice I would give to most people is to take advantage of it as many opportunities as you can early and then as things build up for you, you have to start switching that to a mix of yes or no and then at a certain point, nobody comes your default answer, and that’s been my default answer for a few years now where I don’t have time to think about it, or if unless it’s like what [Derek?] [?] says, et cetera, hell yes or a no and that’s at a certain point how it has to get if you are overcommitting and I think most of us overcommit. This is not just about business, right, this is about personal life and this about overcommitting your kids to play three sports and do gym and ballet and all the stuff and you’re driving all over the place, that can be crazy even though you’re not overcommitting yourself, you’re kind of overcommitting your time and your family and spending a lot of time in the road, these are things we’ve chosen internally, as a family to kind of pick one thing and invest heavily in it. So my kids each playing instrument and then maybe they do one sport that kind of comes and go and gives us a gap. Some families may work to do three or four things at once, but we know that overcommitting in our personal lives can be as bad as just committing to help everyone who emails you which just becomes impractical at a certain point.
Mike [16:42]: Yeah. I mean even this past year, my kids were just currently entering karate and they were doing karate two days a week and then they had soccer another two weeks a week, and they both decided that in this coming fall, they don’t want to play soccer because they’re already doing karate and they know that it takes up a lot of their time and they have to basically be there for one or the other almost every single day of the week. And they just decided they didn’t want to do that. So they’re going to take a year off and kind of see how things go which is kind of very admirable of them. We didn’t fight it, we just said, “Okay. If you want to take a year off from soccer, that’s fine.” But karate like for your kids, it’s music for our kids it’s karate and they just do that and it’s kind of their primary thing but it’s nice to kind of be aware of those types of things that they are both business related and personal life related. So the third strategy for dealing with some of these things is to outsource it. And this usually comes with certain types of tasks especially if you tend to procrastinate on any of these types of task. And one thing that I did a while back was I started outsourcing a lot of the financial stuff for my business and I kind of got to the point where I almost wanted to go over to doing on the personal side as well because I hate seeing money come out of my bank account especially in large quantities. So, I hired a bookkeeper other basically manage all the books and handle them and it’s not that I completely ignore them, it’s just I’m not looking at them on a daily or weekly basis in order to figure out what bills to pay or whether I need to pull money from one account or the other like that stuff is just taken care of for me and I don’t have to worry about it anymore. And when I did that was I hired a bookkeeper to do all that stuff for me and she pays the American Express bills. She goes in and she runs the payroll. And I don’t have to worry about it. I just basically just ignore it and trust that she’s doing the right things, and if there’s a problem, I’ll deal with it but otherwise, I just don’t want to be involved in that kind of thing. Another type of thing that you might want to outsource is if you’re running any sort of a SAS products where there are cancellations on a semi-regular basis. Well, you want to reach out to those people and ask them why they cancelled but if you are the one getting the email every single time there is a cancellation, then that may very well be a source of stress for you. So, a better strategy would be to hand that off to a support rep or to hire somebody who’s sole job is to go out there and email those people and aggregate their replies and put them into a spreadsheet so that you can review it maybe once a month or something like that. And what that does is it essentially offloads it and aggregates it all into an hour at the end of every month that you look at that spreadsheet versus once a week or two or three times a week you’re getting these emails that you have to go in and you have to make sure that the account is cancelled and you have to go out and send an email to that person or ask them why they cancelled and then you see the response. All that stuff can be detrimental and instead, if you’re outsourcing that responsibility to somebody else, you are consolidating all of that into one single interaction instead of 15 or 20 throughout the course of the month.
Rob [19:27]: Yeah. Virtual assistants, bookkeepers, I mean we’ve covered this before but these are the things that had a major impact on my ability to get more done and to be less stressed about it when I made that shift from trying to do everything myself to hiring these folks out and I don’t know, I can’t say enough good things about it and I think that the cancellation stuff you said is a good deal. I think customer complaints get old and having one or two support people who can kind of feel bad upfront after you’ve dealt with stuff for a few months and you get a feel for it and the complaints or the feedback aren’t helpful anymore and you know that it’s either someone just being angry or it’s not a good fit for your product or whatever. As long as it’s not something that you’re not missing or ignoring, then it’s definitely something that I think there’s value [?] yourself from this type of feedback and that virtual assistant that can certainly help by handling score for you.
Mike [20:20]: The fourth strategy for dealing with these situations is to see if you can eliminate the source of whatever the stress is. So, if you can fix the underlined problems, then the symptoms of the stress go away. So for me, for example, the vacation stresses that I used to feel was that I would worry about paying for it afterwards but of course when you’re on vacation, then that becomes an issue that you think about why you’re on vacation. So you don’t enjoy your vacation nearly as much. And instead, for me, I just decided to say for it beforehand and that way, when I was on vacation, we would go out to breakfast, we would go out to lunch, we go out to dinner, and I just didn’t care how much it was going to cost because I knew that I already had the money to pay for it. I wasn’t going to have to go out and do any sort of consulting work or pick up a couple of extra weeks of work or work extra hours or anything like that. It was already paid for. It was already taken care of and handled. So, I was just able to enjoy myself completely as opposed to worrying about what was going to happen down the road. And there’s other places where you can eliminate those sources of stress and we talked about some of them more already about being able to outsource or just avoid them, but at the core of this is being able to completely eliminate the source of whatever that stress is.
Rob [21:26]: And I think we tend to have more options than we think. I think that there’s a learned helplessness that some folks fall into is kind of trap and you can say, “Well, I’m stressed out because of this and I can’t change it.” But there’s almost always a way to change it, and it may not be something obvious or it maybe something that’s difficult to do but sitting down and taking a retreat to figure out if it’s big enough and worth it, or just spending 20 minutes in writing down 10 solid ideas of how to eliminate something. One of those is going to kind of come about and be a feasible idea, I would bet. Even if you have something like, “Well, I don’t have enough cash to pay for this.” Well, it’s you’re not tied to your current income if you’re an entrepreneur. And so, could you do a really quick info product. Could you just go sell some consulting really quickly if you have a name recognition or you have some old clients, like there are a number of ways to get around things that seem insurmountable but you actually sit down and think about them, there tends to be a way to get around them. Another thing I would do is talk to folks in your mastermind, right and say, “This is a problem I have. It’s really bothering me. Can you help me figure out ways, think of some ways that I could get around that?” I think that’s just a strategy that can help a lot as well.”
Mike [22:38]: The fifth strategy for dealing with some of these stresses is to adapt to it. Are there ways that you can change how you think about the problem or can you reframe it? Or can you adjust your standards? If you’re building something and you’re disappointed or frustrated with how things are going, maybe it’s time to adjust your standards about what your expectations were for that particular thing, whether it’s for a product or whether it’s for a particular marketing strategy that you’re trying. Focus on the positive elements of what it is that you’re doing and make sure that they are realistic, because if you’re trying to do something and let’s say you’re trying to build an email list of 25,000 people and you’ve never built an email list before, then 25,000 is probably a ridiculously high number that is just out of your reach, so it’s going to be frustrating, it’s going to be stressful. And just by reframing and adjusting your expectations about what your current capabilities are, then you can reduce the stress that’s going to be caused by that. Let’s say that you’ve set a deadline of 12 months to get that, and it could be very, very difficult for you to do that. But, if you look at that and say, “Well, I’ve never done this before. This is a learning experience for me and I will learn how to do this better in the future.” That right there has reframed your expectations to say no, it’s not about getting the 25,000 subscribers. It’s about getting as close to that as I can and learning as much about the process as I can, not about that end piece of it. So, in a way, you’re kind of adjusting what your goals are and what your expectations around those goals are.
Rob [24:04]: You know, one thing that helped me with this is this book called A Guide to the Good Life: The Ancient Art of Stoic Joy. And I was a bit skeptical of going to it. I mean it’s kind of been an interesting title and stoic is something that seems to be kind of all the rage or whatever and a lot of people are talking about it. But, to be honest, I really enjoyed this book and it’s written by a philosophy professor I think he is and I love the way he ties everything together and basically, the idea of stoicism is not to be some cold-hearted person who never feels anything. But it’s to not hang onto everything. It’s to not be stressed about everything. I mean that’s really what it comes down to. There’s some other elements to it and I took so many notes from listening to this book about different ways. They have things about dealing with difficult people. They have things about even with your internal strife and it’s just a mindset thing. It’s just kind of a life philosophy. So if this is something that you struggle with which I certainly do kind of feeling stressed often and having kind of an ongoing anxiety, I definitely recommend this book, A Guide to the Good Life: The Ancient Art of Stoic Joy.
Mike [25:09]: Yeah, I’ve read that. I would definitely recommend that as well although I guess you listened to it instead of read it, so.
Rob [25:15]: Right. Right. And so, in terms of reframing it and adjusting your standards of focusing on the positive elements, I mean that’s really kind of the main core message of the entire book.
Mike [25:25]: I think the last part of today’s podcast is going to be about some of the different stress recovery activities that you can use to help deal with some of the existing stress and I think if you just go and do a quick Google search on how to relieve stress, you’ll find a lot of, I’ll call them really basic types of things that really do work. So, for example, you’ll find things like walking and exercise, going on vacation, socializing, listening to music, doing any sort of meditation, yoga or massage, self-reflection tends to be up there as well, I find journaling helpful for example and then any sort of movies or comedy shows, or anything that gets you to laugh, those are all typical stress recovery activities, but those are things that are essentially coping mechanisms for existing stress that you may or may not be able to do anything about, and if it’s possible to completely get rid of those stressors, then that’s definitely a profitable course of action than to deal with the symptoms after the fact.
Rob [26:20]: I found that under the right circumstance working helps me relieve stress. It depends, and it’s not if I’m working super long days and it doesn’t help me, but if I’ve been away from work, and I’m stressed about something that needs to get done or stressed about something that I’m uncertain about, then sitting down and making a plan and kind of writing it all out in a notebook or writing it all out and just making sure that I can see the vision in the next 30 or 60 days, that helps me quite a bit if I’m stressed about kind of an unknown because I think that’s something that freaks a lot of people out, me included is not knowing what’s next, right? It’s about having this kind of unknown blackness over the next 30 to 60 days that you can’t see or it’s about having a specific scenario like, “Boy, I have this big webinar next week and I have no idea what I’m going to talk about or I have this talk to deliver and I don’t know what to do or the business is not growing and I don’t know what to do.” As soon as I have a plan of action or game plan, that’s when my stress tends to go away and then I want to go into work mode and actually execute, grind it out, and get stuff done. And so, I think that could be another way is to kind of make a plan on how to do things to remove that kind of unknown that stands ahead of you.
Mike [27:26]: Yeah. It’s interesting you bring that up. That actually made its entry into one of my talks from MicroConf I think the year before last where I talked about the fact that fear of the unknown is something that people are much more afraid of than negative consequences and it’s not knowing what’s going to happen or how you’re going to deal with the particular situation is way more stressful than knowing that things are going to turn out poorly and I could definitely see how if you don’t know what is happening in your business or how you’re going to deal with stuff, it’s sitting down and going through some of that work and some of that planning effort can help out. But obviously, if you’re procrastinating about working then that’s not going to help, but there are certain circumstance where I can definitely say that helping out a lot.
Rob [28:06]: Yeah. And I think if you go back and watch the two talks from MicroConf where Sherry basically covers this type of stuff in her talks about how to kind of stay mentally fit and stable while you’re starting up. She has a lot of good mechanism and even a breathing exercise that can help with this kind of thing.
Mike [28:24]: One of things that we’re going to do in this episode is we’re going to link up in the show notes to helpguide.org and there is a specific article on stress management that you might want to take a look at. It’s got a lot of good information on not just how to go through and take a look at some of the different stressors in your life, but how to go about coping with them as well and they’ve got six or seven different stress management techniques that you can use. Some of this podcast episode was pulled from that but not a lot. So, there’s a heck of a lot more good information in there. So if you’re feeling any kind of stress about your, either your business or your personal life, definitely head over to that link or check it out.
Rob [28:59]: As a closing comment, I can’t think of a time when I was stressed about work when my business was growing. So, I think that one of the remedies for feeling stressed at least for me is to be successful. It’s to be getting the end results that I’m shooting for in my work and I think that wraps us up for today. If you have a question for us, call our voicemail number at 888-801-9690 or email us to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Out of Control by Moot used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, we’ll see you next time.
Episode 244 | Competition, Transparency and Funding with Baremetrics Founder Josh Pigford
Show Notes
In this episode of Startups For The Rest Of Us, Rob interviews Josh Pigford, the founder of baremetrics about competition, transparency, and funding.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of Startups For The Rest Of Us, I talked with Josh Pigford, founder of Baremetrics about the good and bad of competition, transparency, and funding. This is Startups For The Rest Of Us episode 244.
Rob [00:21]: 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 and Mike is on vacation and we’re here to share our experiences to help you avoid the same mistakes we’ve made. So Mike is out-of-town in Hershey, Pennsylvania with his family and so this week I decided to bring Josh Pigford, founder of Baremetrics on the show because he has a lot of unique experience. He has bootstrapped a SAS business for the past couple of years and it had a great growth trajectory and amidst that, he’s had a ton of competition crop-up. He’s also raised a small round of funding to help with his growth and he’s been very transparent with all of their numbers actually published a dashboard with all of the growth numbers and the lifetime value in turn and pretty much opened a kimono on it and that’s at demo.baremetrics.com. So I talked to Josh about all three of those topics because of anyone I know he’s really in the midst of the throws of competition, funding, and transparency, so I hope you enjoy his takes on these topics. Let’s dive right into the interview. So today I have the pleasure of speaking with Josh Pigford. You probably know as the founder of Baremetrics. You haven’t heard about Baremetrics that they are one in click analytics for stripe. So for using the subscription API with stripe particularly if you have a SAS app, Baremetrics gives you a really cool dashboard of all your numbers and your turn and lifetime value and all that kind of stuff typically the stuff that you spend a week or two with the developer trying to build out so it’s not something that most SAS providers want to spend their time doing, and Josh has the pretty unique story that he’s had strong growth since he launched. He got out ahead of the market and then raised a little bit of funding and that’s why I wanted to have him on the show today to talk about it. So, thanks Josh for taking the time to join us.
Josh Pigford [02:13]: Thanks for having me, Rob.
Rob [02:14]: Absolutely. All right. So I want to cover a couple of topics today in particular. The first one I want to start with is transparency. Transparency is something that you’ve been a big advocate of in the sense that from really early on in Baremetrics history, you wanted to kind of have a live demo of Baremetrics, of the dashboard, and so you’ve just opened the kimono and essentially, you show all the numbers for Baremetrics that’s at demo.Baremetrics.com for those who want to go check it out, and it’s your live numbers obviously you’ve obfuscated those customer names in there that are changed for the protection of the innocent but you have real lifetime value and your real monthly occurring revenue and all that stuff. Tell me a little bit about the motivation for it and if you think that’s been a plus or a minus for Baremetrics’s growth.
Josh Pigford [02:58]: Sure, sure. So we back in, I guess been a year and a half now, so February 2014, I had this idea like I need a demo for the software and I mean I guess I didn’t have to have one but it just seems like it was the easiest way to convey the value and honestly, it was all kind of the result of my own laziness so I thought I needed a demo and I could spend a ton of time pumping out like fake data and trying to generate enough fake data to look like I have a legit dashboard but I mean there’s a lot to Baremetrics so like there’s a dozen plus metrics in each of those, have their own individual metrics pages with even more in depth data on all of those. It would’ve taken so much time to put all together and I thought or I could just add a line of code and make my own stuff public. So, I went with the lazy route and at that time, we weren’t making a ton of money, we’re kind of doing like I don’t know, a few thousand bucks a month and so just decided, “I will put it out there.” And there’s I guess a little bit of altruism to it in the sense that I’ve been building software for the web for a decade and I always appreciated other people kind of given me a look into what their startup looks like successful or not, and there’s a little bit of that aspect of it but I mean it initially was a bit of laziness that turned into something bigger.
Rob [04:16]: Sure. And now that you are obviously substantially more than a few thousand dollars a month and since your revenue is public, I don’t have it [?] but it looks like I think your MRR right now is 32,000 or 33,000. Now that this takes a little bit bigger and you have competition and that kind of stuff, do you – and maybe regret is too strong of a word but do you still think it wasn’t a right choice and are you happy every day when you wake up and see your numbers in public?
Josh Pigford [04:38]: So it’s a mixture. It was at the right move, absolutely, I mean so many things came out of it so, kind of the biggest plus was that Buffer, another startup decided to make their stuff public through Baremetrics as well. And then they’re substantially larger. I think their MRR is like $400,000 a month or maybe like 500,000. So it’s a lot of money and a lot of people follow them. And so that would not have happen had I not made mine public because like kind of that wasn’t even an option to make all these revenue public, or at least not in this like easy one-click setup. So, I don’t regret it. It was definitely the right move but man, did it bring up a number of copycats that poured in after that was substantial. So, yeah, but there’s been a couple of I would say legitimate competitors but the [?] 90+% of them, a lot of them just literally, directly ripped off like the design and everything. So, it’s one of those things like it’s sort of a bit of a gold rush in a sense that the way I certainly can’t compare of like their metrics to the app store but I mean in the same way that you hear somebody makes a lot of money on the app store, “Oh, I can do iPhone apps too.” And they copy lots of people and it’s sort of the same as you see but they’re not much more scaled but that’s kind of happened here. And so that’s just really annoying more than anything like that’s the part that’s so frustrating and then the other aspects of it like because we have to be kind of private, we don’t want to surface individual customer’s data. I feel like we have to give a somewhat scaled back demo. And so, the fear is that that kind of almost implies. The Baremetrics doesn’t do as much as it can, but it does we just can’t show it all from the privacies side of it, so.
Rob [06:23]: That’s interesting. Yeah, I hadn’t thought of that. So, as you’re clicking and digging into detail, you can’t necessarily show every screen of –
Josh Pigford [06:29]: Exactly. Like I can show a couple of screenshots here and there but I mean I can’t let you, we get into the okay well especially when we start talking about like customer profiles and stuff. We have to, at that point have to generate a lot of fake data because we can’t show any kind of customer identifiable information there. So, we’re looking at different ways to handle that but it’s like there’s pros and cons but the pros is far with the cons.
Rob [06:52]: Yeah. Right. And so it sounds like you do feel like it brought some competition once folks saw your growth curve, but the pros were that it gave you this plastering on.
Josh Pigford [07:00]: Sure. Like if you look at our graph, like MRR for instance, the big inflection point is when Buffer made their stuff public because it just instantly brought a ton of exposure. And so it changes the angle of the graph permanently. And so, yeah, from that perspective, it was unquestionably the right move.
Rob [07:19]: Right. And for folks who want to check that out, it’s at buffer.Baremetrics.com. Another thought in transparency, I want to hear, I get your thought on it. I think there’s been a movement towards it and I think the first time I heard someone devolves at the revenue a few years ago, I can’t even think of who was like [?] has done it for a while, you have become famous for doing it. It blew me away right it’s this totally unique groundbreaking thing. More and more companies are doing it now, do you feel like it might be losing some of its impact and losing the maybe the bump that if someone came out today, let’s just say I came out today and exposed all of drips back in stuff, do you feel like it would still be worth doing or that the pros maybe kind of getting water down and a lot of people are doing it?
Josh Pigford [08:04]: I don’t know that I would suggest, I mean that’s kind of mixed back here because we sort of kind of partnered with Buffer and so it just opened startup thing where so baremetrics.com/open. You can see, I don’t know, it’s going to be seven or eight different startups that have all made their Baremetrics dashboards public. And like there’s this aspect of like wanting to support people being transparent because I think it can be interesting. The problem is, transparency just solely for transparency stake I would say has lost its kind of gimmicky at this point. I think when you can use it to tell some kind of story, right, like for us, the story it tells is like the Baremetrics story, right? Like it is a demo of our software. It makes complete sense from that perspective and the fact that the numbers, or our actual numbers kind of has this like, “Oh, that’s neat” kind of aspect of it that’s I think kind of been going a long way to maybe adding some sort of face to the company, but like [Josh Mo’s?] random billing software or like I don’t know, maybe he sells some subscription T-shirts or something like or his numbers are all that interesting, probably not to all startups but maybe to other T-shirt companies. And so, like if he’s taking the role of trying to help other T-shirt companies like show you how to start them and kind of the ups and downs, okay, like I think that can be interesting. Or like on a regular basis taking a look at your numbers and saying, “Okay. We had a big spike in user turn, let’s talk through that publicly about like why that happened and how we can fix it because I think that’s helpful to other startups.” But I think a lot of people just like start posing their numbers like because that’s just what people do, and I think there’s a little bit of vanity to it as well like I was guilty of it at first in the sense of like I would post on Twitter like our MRRs are X and some of that was just I’m excited because “Wait, hey, the company is growing.” But I mean to some extent sure, I’m like I feel like I was bragging to some extent too and so, I tried to be a little bit more humble about it at this point but –
Rob [10:07]: Sure. Yeah. I’ve definitely caught some people or in my mind like I feel like certain people are transparent to truly help others and then some folks, I do get the bragging vibe from them of like, “Look at me, look how cool I am.” That thing, and it gets an easy trap to fall into for sure.
Josh Pigford [10:25]: Yeah. And especially early on, like and if you feel like you get a little it attraction and especially we’re like it’s easy to look at yourself from the lens of basically the people that are in your little circle of influence and if maybe you’re doing better than the 10 guys that you hang out with then it’s like it can quickly it can kind of become a bragging thing but like if you’re doing it just to kind of be like a shell off, I think it kind of turns people off.
Rob [10:49]: Right, right. Yeah, there’s an interesting thing I was thinking about. It’s like there’s ongoing transparency which is kind of what you’ve done and what Buffer has done and then I think there’s like point in time transparency which you just touched on where you might write a single blog post about how churn went up, this is what it was, this is what we got it to, and here is what we did, and that’s super helpful, right? But you’re not necessarily just saying, “Here’s my churn every day. You can come and look at it. I think that point in time aspect is something that I’ve personally lean towards like I will, you better MicroConfs, I will often devote everything. I do it once a year if that and it’s not necessarily a commitment that I’ve made but I have an open source, or not open source but I have made everything open but I think there’s some value in transparency. I guess it’s just, yeah, I just wanted to hear your take on it.
Josh Pigford [11:32]: Well, I mean earlier on, the first and that is six to eight months after I made our stuff public, I would do a monthly blog post like, “Hey, here’s the July update of our numbers.” And what kind of touched on what worked and what didn’t but I mean to some extent it was like it was a point in time thing and not necessarily all that useful, and so we stopped doing those but like to me there’s a lot more value so content marketing works really well for us and specifically made once a week writing, end up of a blog post as I’m able to push up that week but like trying to just genuinely be helpful to other people and for us our target markets and other startups so rather entrepreneurs and so that’s sort of an easy thing for us, but I think like transparency when like when it matters to other people is what’s more interesting, right? Like I remember a couple of MicroConfs ago, we talked about making your numbers public like the one where you have shown, not this past but like a couple of months ago but the one before that would drip yeah, and how that just like showing the growth of that was so interesting to me and kind of opened my eyes a little bit about like, “Oh, okay.” So like that’s probably what something more successful looks like, well actually that might have been three years go.
Rob [12:55]: It might have been HitTail.
Josh Pigford [12:56]: HitTail, that was what it was.
Rob [12:57]: Yeah. So, this is when you were back before Baremetrics, right? This was when you –
Josh Pigford [12:59]: Yeah, yeah. So this was PopSurvey and contemporary and like stuff was in my head, I kind of go in okay but also at the same time and sight it was awful, and now that I’ve like you to have a different level of success there. And so, but when I saw like how HitTail, how you’re able to grow that and it’s like that’s when I sort of thinking like okay, like, “I could potentially make some software that could make a lot more money than it’s making right now and I just needed to find a different thing to do that with but that’s where it was super helpful, right?” So for you to release those numbers, because it was a motivator for me.
Rob [13:31]: Right. Yeah, that’s a good point. I want to switch it up a little bit and talk about funding because you’ve been a bootstrapper for a decade or more. You launched PopSurvey, you had Temper, I’m sure there’s many others that I haven’t heard of that you bootstrap. When you launched Baremetrics, it was getting great, growth numbers and at a certain point you were offered funding. The numbers were public, I’m pretty sure. It’s a half million dollars and you took the funding. And I know that there are some folks out there that say, “You should always take funding. You should never take funding.” And I’m not in either of those camps and I know that you weren’t either, so I’d like to hear what your motivation was and what your decision process was like when you were considering, do I keep Baremetrics all my own or do I take some money and essentially move faster but now have some investors that I’m working with?
Josh Pigford [14:21]: Yeah. So for me, there had been this point where Baremetrics was doing from like a growth perspective, talking in percentages, I think was doing between like 20% and 50% every month growth with MRR and so at that point, and our numbers are public so those are the kind of growth rates were investors start like, “Oh, that’s kind of interesting. How can I have the piece of the pie?” So I started getting all these phone calls or emails or whatever and I humored a few people but for the most part it was just kind of the typical like I’m just not comfortable with giving that much of the company and we just aren’t really jiving or you sound like a jerk, like all these kinds of things where it just wouldn’t sit right with me and I was fine with where we were at like I think when most of the funding email started, it was me for the most part and then like I had just hired another engineer. And so like, we’re doing fine and I didn’t have any really big aspirations at the time but I was still kind of riding the wave of like, “Oh, this works.” And so, yeah, then this $500,000 thing came up and just the terms ultimately like I mean honestly, if you start thinking of the health of the business and maybe what my goals are for the business, I would’ve been an idiot to not take it and I think that’s where my mind shifted change was like I was proud of the bootstrap aspect of it but when you start looking at things from a different perspective of like well the things that we could do with this money and what are the sacrifices relative to that. If the sacrifices aren’t anything I’m opposed to then well yeah, why not? So the evaluation, there’s 500,000 for at a $10 million evaluation which equates to 5% and –
Rob [16:06]: So they don’t have control?
Josh Pigford [16:07]: No, and so technically, so it’s a safe like they don’t even have the shares. They get the shares in the event that we sell or that we raise an all-around –
Rob [16:14]: Raising it around. Right. So it’s essentially a convertible note, right, it’s a loan –
Josh Pigford [16:19]: But it’s not even that, I don’t have to pay it back unless like if I shut the business down, if there’s no time, there’s no date attached to anything, like nobody’s hand can possibly force me in any perspective. So, like it would’ve been dumb for me to not take it.
Rob [16:35]: Yeah. Those are some very generous terms.
Josh Pigford [16:37]: Right.
Rob [16:38]: And when you’re making that decision, there’s this money in the table and obviously the terms are favorable and that’s the interesting part is I have stopped saying, “I won’t take funding.” And I’ve started asking myself these questions like when I go and refuse or whatever like, “Under what circumstance would I?” And it’s a different way to ask it but obviously, there were very appealing terms. You took the money. Did you know when you took this half million dollars, how you were going to spend it?
Josh Pigford [17:03]: Yeah, absolutely. I was itching to hire some people like after I started thinking through, when that was suggested as, “Hey, we can put in this amount of money.” Like I instantly started sitting down and brainstorming of all the ways that I could spend it and ways that what does Baremetrics need to grow and to see the goals through that I had that can keep Baremetrics growing and people ultimately what was going to make that happen. So, that was an easy one, for sure.
Rob [17:34]: And how long? Has it been about a year now?
Josh Pigford [17:36]: So, it’s been 10, let’s see, we closed on the deal in I think September.
Rob [17:42]: Okay. So like 9 months, 9-10 months, yeah.
Josh Pigford [17:44]: Yeah. Somewhere around there.
Rob [17:45]: So now you have some perspective and some distance from it, was it the right choice? Was it a good choice for you?
Josh Pigford [17:51]: Yes, absolutely the right choice. I think in [?] sight, I think I would’ve done a few things differently. There was a little bit of a, “Holy crap. There’s half a million dollars today in my bank account now. Woohoo. Let’s spend some money, right?” And I mean part of it is the investor wants you to spend their money. They’re giving it to you not so it just sits there in a bank account but at the same time like I probably spent too fast and at the time I was still maintaining the like 20%-30% average growth rate per month and then like shortly thereafter, it started the growth rate, it started like not tanking but it wasn’t 20% or 30% or more.
Rob [18:28]: Leveling out.
Josh Pigford [18:29]: Right. It’s just like that was inevitable but it happened over the course of 30 to 60 days like it happened pretty quick and I think from that perspective, I’ve kind of ended up overshooting early on how much I was spending. So we’re like at a point now like we should be fine without like needing to raise any more money but it’s just like having to be a little more cautious with our spending money at this point.
Rob [18:51]: Right. Yeah. When you’re growing like that, it’s easy to get ahead of yourself and say, “Well, in six months, we’re going to be at 50,000 or 60,000 recurring revenue and therefore we need to staff up to all of these people and it’s easier to spend money quick when you’re growing up fast, I know the feeling. Now, you leveled off after you raised the money, did you catch any flock from your investors? Did they expect that or were they kind of concerned when that happened?
Josh Pigford [19:11]: Yeah. So, they’ve just been helpful. We have a roadmap wise with the stuff that’s on the roadmap is partially influenced by customers. It’s partially influenced by like investor input about ways that we could potentially expand from a market perspective. And so, if anything, they certainly weren’t like, “Oh man, this is best bad news.” Like sort of, “Hey, yeah. There are some things that you work on to probably fix these things and so that’s us kind of getting [?] now.”
Rob [19:40]: Right. Now, typically, if you’re going to raise an angel round, the majority of folks are going to give you this money, expect the series A then a series B and they want $100,000,000 evaluation, right, or they want $100,000,000 market. Was that the expectation that was communicated to you or did you guys talk about kind of the fun strapping around where you said, I’m going to raise this single round, I want to use it to get the profitability and build a nice profitable business, was any of that discussed?
Josh Pigford [20:05]: So some of those discussed, like if we think of the purpose of my funding round, my money technically came from General Catalyst which is a big VC. They’re not typically like angel round investors. But as part of this stripe specific fund the faith created and they’re like one of the main investors in stripe. So, and for them it’s like it’s a mixture of sure, they want their money back with some returns on it but it’s also this sort of load confidence in the stripe ecosystem for them so like marketing play is not necessarily the right phrase but it’s like for them, it was just as much about saying like, “Let’s beef up. Stripe, they’ve got however much hundreds of millions of dollars put into the stripe. So, if they can make stripe more successful, then this is like then that kind of pays off indirectly for them.
Rob [20:56]: It’s almost like a strategic, it’s a strategic investment for them, right? And to build the ecosystem.
Josh Pigford [21:01]: Exactly. And so that’s kind of again, like that was one of the way that I was sort of unique from that perspective. And so that’s sort of when I also have a little bit stress from the, “Oh, man. I’ve got to get their money back” from a I’m a good human being perspective like I don’t want to lose their money but at the same time they’re not like screaming at me about anything [crosstalk] –
Rob [21:22]: Yeah. That’s nice. So, to kind of wrap up the funding portion, we talked about the advantages and kind of the no brainer aspect of raising this round for you, you’re nine or ten months out, have there been any major kind of negatives or regrets or like bad things that have brought about?
Josh Pigford [21:38]: Not really. I think in hindsight I would be a lot more careful, and this is just naiveté on my part without the evaluation side of things because of you think of it in terms of how much of the company are getting up like okay, at the end of the day kind of giving up 5%, fine, whatever. Like I would give up more, right? So I have thought like, hey, what about I could actually technically add onto the same round even nine months later and that would be great, more money, right? But the probably is I kind of got like a Silicon Valley evaluation which in a lot of times are a little inflated. And so, it makes it a lot harder for me to raise additional funds if I wanted to because a small time investor is like, that’s not worth it for them at that evaluation because they’ve got such a tiny piece of the pie. So, I think in hindsight I probably even though like they suggested the evaluation, I can hindsight I probably would’ve should’ve downplate that a little bit so they get easier to raise more.
Rob [22:41]: Yeah, right. Instead of potentially having to have a downround later or –
Josh Pigford [22:45]: Exactly, right. Because nobody will stop so –
Rob [22:47]: Right. Do you watch Silicon Valley on HBO?
Josh Pigford [22:49]: Yeah, it’s great.
Rob [22:50]: I love that show. So remember when he negotiates with the VC because he wants a [?] evaluation?
Josh Pigford [22:55]: Right, like that’s that.
Rob [22:56]: Yeah, yeah. I totally get it.
Josh Pigford [22:58]: And it was sort of one more point here to the whole evaluation thing like I raise money from a big VC fund whereas there is a whole slew of by single person angel investors, a lot of them completely disconnected from the tech scene who would love to give people money for pretty decent evaluations and like not have a lot of demands about things, like I think that’s sort of where the dogmatic bootstrapper mindset comes from is all the really awful junk that they read on tech grunge and that’s not the norm like. That’s not what most of the investment world looks like just because the rest of it is just boring, it makes for bad news. So, I think like if people are interested in like say they just want $100,000 like a really long way for them. You can probably find one angel investor or a few angel investors who would come in together at a decent evaluation to give you that money and that would just be genuinely helpful or maybe they’re completely hands off and they just kind of want to get their hands dirty in the tech space. So, I think if people are interested in that they should like ignore the hype that they read elsewhere and just kind of start poking around places like AngelList to find like individual angel investors who were just kind of want to help people out because they exist for sure.
Rob [24:22]: Right. Yeah. I like the term colon from customer that I usually call it fund strapping and that’s where you raise a small seed round of I like to think of it as between 100,000 and 500,000, I’m kind of being arbitrary about that but I think that’s probably the range you’d want to do it and you raise it from between one and five angels and it’s like you said, they don’t take control, they’re going to board sit. They can’t kick you out and then you use it essentially to get to profitability and it’s more of the way that traditional businesses are funded say a restaurant or a carwash or dry cleaner, you’re just probably going to have a lot of higher profit margin than those, so it’s an interesting part.
Josh Pigford [24:55]: And I don’t want see, that’s the thing like there is I guess a small possibility that it would make sense for us to try to raise a series A or something like that, but what I am stanchly opposed to is having to be the founder, a founder who just raises money all the time because there are so many that do have to do that where the CEO is essentially the guy who like, okay. He raised around well, six months later he’s going to start again because it takes six months to close another realm. He has to keep doing that over and over and I hate that junk. So, I have no intention of doing that. Profitability for me is the goal.
Rob [25:32]: Right. Yeah, I think of it, I use the phrase building slide decks instead of building a business, right? And I prefer to build the business, so [crosstalk]. Cool. Okay. So, our last topic of the day is competition. I like to think that any time you have a good idea and you execute on it and you achieve some success, you are going to by nature bring competition into your space and you have done that well, you had a good idea with one-click analytics for stripe. You obviously have success and more public about it and so many competitors have sprung up around Baremetrics. Do you think that competition is good? By I say good I mean beneficial to you or because you kind of hear both mindsets of well, competition validates the market but you are already in the market, you had already validated that was working so do you feel like, boy, having more competition is helpful and it’s generating more attention around the space or do you feel like the more crowded it gets, the harder it is to be heard above the noise?
Josh Pigford [26:30]: So, to me I think of it from the point of view of the customer, right. So, competition is ultimately good for customer which I think ultimately is good for us because we’ll hear indirectly a customer say like, “Hey, I was checking out their competition and they had X feature which means, translates to they solve X problem that I have.” So, can you solve that problem for me? Well, maybe not right now but if I hear it from enough people, then yeah, we’ll try to solve that problem for you. And I think that it’s good from that perspective or it stops being good is when there are two dozen people or companies who are all kind of the same. And so, we’re trying really hard, I think this sort of space, this sort of like analytics that you don’t have to think about or work to set up kind of set up a space. We’re at a point where we’re kind of start to kind of fork where there’s a lot of people playing the baseline metrics game where click here, connect to stripe account and you get MRR lifetime value cheering all these stuff. But on that level, it’s not like it’s useful but there has to be something else pass that I think for it to be really valuable but that also it’s really difficult to build but that’s where I feel like we’re starting to kind of fork off on our own is trying to move away from my numbers game and move into the genuinely useful for making business decisions game like helping people understand why things are, what they are, and how to fix them and that kind of thing. And so I think the prevalence of so many competitors right now has helped pushed us in that direction which I think is ultimately a positive thing, but I mean like holy crap is that annoying.
Rob [28:09]: You’ve seen people pop out with your whatever and I don’t know anybody who’s done this but I would have to imagine because I’ve seen it with my stuff, people are popping up probably using your same tagline, probably using names that are similar to use, probably using designs that are similar to yours.
Josh Pigford [28:22]: Oh, sure. That’s amazing, I mean almost there’s one that I’ve seen making the rounds a lot more maybe their content stuff like the stuff that they randomly post on their blog I’ve seen a lot and I’ll go to their software or whatever. It is a direct rip off of Baremetrics and it’s just like how do you sleep at night? And people are using our logo but like changing from a different shade of blue or something, I mean just stupid stuff that’s like at the end of the day, copycats, their motivation is purely to try to make a quick buck and in a year they won’t exist. But for the year that they are around like, I mean you’re like the annoying kid at school that keeps tapping me on the shoulder like, go away. That’s kind of how I feel about them.
Rob [29:04]: Yeah, no, that make sense. You were in the space where the onboarding is really easy, right? It’s one click to get in, it seems like that would be a double edged sword. It’s easy to get people onboard but then it’s easy for people to switch. Yeah.
Josh Pigford [29:16]: Switching cost are way too low right now and so yes, that is probably our number one problem from like a charm perspective is that switching cost are so low which is in the short-term good for a customer because it gives them a lot of options. At the same time, it makes for a customer who doesn’t want to get invested in their software which maybe for them, that sounds like a good thing. But, I think when you’re like so wishy-washy about trying to solve at the end of the day solve your own business problems, being wishy-washy and not saying like, “Here’s what we’re going to use. Here’s what we’re going to stick with, and this is what we’re going to base our business around.” When you stop acting like that, you end up with stuff that’s just not useful at all. And so, yeah, so we’ve got a bunch of stuff that’s coming out soon that the switching cost will be much higher and that sounds a little like just rude, but at the same time, I think it ultimately will make for software that people in the long-term get a lot more value out of.
Rob [30:11]: Right. Well, I mean it’s hard if you have 20 people in the space, or 15 people in the space with no maybe one clear leader and everybody else is kind of milling around creating noise. The customer is actually not getting the best software because everybody is competing whereas if they’re only two or three in the space and they’re really [dooking?] it out, then you’re going to get some awesome new features, right? You’re going to be innovating against each other and that kind of stuff. So, I think it’s interesting that it’s essentially, it’s like the one-click stripe analytics as you said has almost become a baseline for a lot of these products and you know how to rise above it which in the short-term is probably painful and it’s annoying to see all the competition but in the long-term it’s going to make for better products and just going to make you move pretty fast which I think is better for customer.
Josh Pigford [30:55]: Yeah, 100% agree with that.
Rob [30:57]: Cool. All right. So you’ve actually have a customer, I don’t know how – or I’m sorry, not a customer but a competitor crop-up who’s offering one-click stripe analytics for free, so they’re just kind of doing a free-mium model, when you first heard that news, I can imagine the look on your face, was that brutal was it were you kind of like, “Yup. I knew this day would come.”
Josh Pigford [31:17]: I was totally wasn’t surprised. I think start kind of poking around to see okay first, how are you even doing that? Because that gets expensive to store massive amounts of data and processes, like it’s expensive. So it’s like how are you guys pulling that off, and then you start realizing, okay. This is actually like a lead generator for their other business that which is a completely legitimate business, the other one is and lots of people love them but it’s like when you’re like releasing tool just as a lead generator, then no way does that software sort of stand the test of time because it’s ultimately like a loss leader for you and that’s just so hard to maintain especially on a small team. So they don’t worry me and our customers feedback on that has been basically the same that like, “Hey, we’re using this other one because it’s free but like no way would we ever stop using you guys. Their stuff is just not good.” So, it doesn’t bother me and in reality, so in the next month or so, hopefully, we’ll actually have a free version. I think this plays into our long-term plan, like in the short-term we actually may take a little bit of a hit but in the short-term, yeah, we’ll start playing a little bit of the free game, the free-mium game and see how it plays out. We haven’t, because we’ve never had a free plan, I mean a year and a half in and we’ve never tested it. So, it seems a little short-sided of me to not at least humor that as a possibility.
Rob [32:43]: Right. As a test, and so that, I mean it was kind of my next question is like so how do you compete with free because obviously this is going to happen to anyone who has a good idea and has some success, we’re eventually going to get a free competitor and it sounds like so far, number one is you know the game. You’ve been doing this now for 18 months, 2 years. And so, you know what it takes to really run this service in terms of cost and team size and then continue to innovate. And number two, is potentially fight fire with fire, maybe release a free version and to continue to build in an innovator, you have to stay ahead of the game. You have to keep building features that they don’t have.
Josh Pigford [33:19]: Exactly. It’s just one of those things where you kind of have to just, I know what our goals are and I can’t make any assumptions about what my competitors’ goals are. I like the types of problems that one competitor is solving for their customer base however small it may be is not necessarily the same as what I’m doing. And so, it would be super short-sided of me to say like, “Oh, well they just launched some feature. I need to do the same thing.” No, not necessarily, like their customers may want that but our customers may not. Or, the way that we solve that problem is totally different. So, I think it’s just being hyper focused on what it is that you do and you do well is kind of the way to not worry about competition.
Rob [34:05]: Well said. All right, sir. So, folks want to keep up with you online aside from checking out baremetrics.com, what you get is one-click SAS analytics for stripe. How would folks keep up with you whether it’s blog url or Twitter handle?
Josh Pigford [34:20]: So Twitter is @Shpigford and I that’s really about it. I don’t blog much anymore.
Rob [34:26]: All right. I would recommend your podcast which is called Founder’s Journey.
Josh Pigford [34:30]: Yup.
Rob [34:30]: Is that right? I’ve been listening to it for the past couple of months and it’s essentially you reading some blog post that you’re posting on the Baremetrics blog and adlibbing, you’re adding more stuff which has been kind of cool.
Josh Pigford [34:42]:
Rob [34:43]: Very good. Well, thanks again for coming on the show today, man.
Josh Pigford [34:46]: Thanks for having me, Rob.
Rob [34:47]: That wraps us up for today. Thanks again to Josh for coming on the show. If you have a question for us, call our voicemail number at 1-888-801-9690 or email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Out of Control by Moot used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, and we’ll see you next time.
