Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike put together a list of the most common things that are working and effective for SaaS landing pages.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of Startups for the Rest of Us, Mike and I discuss the 10 elements of highly effective SaaS landing pages. This is Startups for the Rest of us, episode 256.
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 [00:28]: And I’m Mike.
Rob [00:29]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So [what are this week?] sir?
Mike [00:33]: Well I caught a nasty virus over the weekend so I was hugging the toilet the other day. I could not keep food down. So it’s what? Wednesday now, and I’m just kind of getting back into the swing of things and trying to catch up from having not gotten anything done the past several days, but it was pretty brutal.
Rob [00:49]: Do you get sick a lot?
Mike [00:50]: No. I almost never get sick. I’ll get sick like once every couple of years and that’s about it. But when it comes, it’s just brutal. I’ll be in bed for a couple of days just because I just can’t get out of bed. I remember making fun of you a little bit because you said that you were sick once, and you were so sick that you couldn’t even listen to podcasts, I was that sick. I remember [?] it was like, “Oh, I shouldn’t have made fun of him.”
Rob [01:14]: I totally know what Rob is talking about right now. That is funny. So, we’ve gotten a lot of comments on last week’s episode, episode 255, where you talked about moving on from AuditShark and that whole decision. You’ve received Tweets, you’ve received DM’s, we’ve received several e-mails, there’s more than a dozen comments on the podcast blog with folks just talking about how they felt this was one of our best episodes and basically wishing you luck and appreciating that you put yourself out there with the vulnerability and were willing to discuss this. I think it really hits home with people to see, it’s not only vulnerability, that’s a big part of it, but it’s also just to see you or anyone come out and talk about mistakes that they’ve made and to basically help show other folks how not to make those mistakes. I think that was really the point of last week, was to kind of bring it all to the front so, A: You could kind of have a post mortem. But then, the entire listener base for this podcast can kind of peer into it and think to themselves, “Wow, am I doing that right now?” or “Am I going to do that with my next product?” And really take it as al lesson for the community rather than a single person hiding away in a basement making these mistakes and no one learning from it. How have you felt about the response?
Mike [02:29]: It’s been overwhelmingly positive. I haven’t really seen anything negative about it, just a lot of thanks and appreciation. I don’t know. I guess it’s humbling. It’s more than I could have expected or hoped for. I guess. I don’t know. It was one of those episodes where, it was coming and I knew it was coming for a while, and I was kind of dreading it at the same time.
Rob [02:48]: Very cool. So let’s move on to what we are talking about this week. We received an e-mail from Stefan at vividwebcopy.com. He says, “Hi Rob and Mike. How about an episode SaaS landing page design?” And Stefan is actually, it looks like he is a copywriter, vividwebcopy.com, if you want to go check his stuff out. But Mike and I have a lot of thoughts on this topic, and so we wanted to weigh in. And I specifically put together this list. I was trying to boil it down into the most effective elements that I see that go into these landing pages that work and I want to talk about the typical SaaS landing page rather than going outside the box. Obviously, if you know the rules and you’ve been doing this and you’re an expert, UX guy or UI woman, you can break the rules. You don’t need to listen to something like this. But if you’re wondering about the most common and most effective things in general that are working for SaaS landing pages, that’s what we’re going to be talking about. And this typically a SaaS home page, although it can be often you copy your homepage to make landing pages for, say, Facebook ads and other stuff, because your homepage should really be that landing page that gets someone acquainted with your product quickly. So we’re not going to talk about long form landing pages, like getdrip.com right now, is a long form sales letter in essence. We’re going to talk about that because we are going to talk about the more traditional SaaS landing pages and you could see examples of these at places like bidsketch.com, planscope.io, getambassador.com, hittail.com, all of those are the more traditional scene that we’re going to be talking about. So to dive in, the first element of highly affective SaaS landing pages are to design it for first time visitors, to get in the mindset that you really want a first time visitor to come, get acquainted, and go down a very specific path that you’re outlining for them. If you have customers who are coming to your homepage to log in, they will find the log in box. Don’t make that prominent, don’t put that right smack in the best part of the screen right above the fold, this is for first time visitors, trying to educate them, get their interest [peaked?], have them figure out if it’s for them, and then get them to take the next step in the action. So often times, I will see a log in or a sign in button right in the same top navigation that you’re trying to sell to people and I disagree with that approach. I think it should be a tiny link above or maybe far off to the right. Like, there should be a separation because your customers are going to find a way to log in, don’t worry about that, but your goal is really to get those first time visitors to follow this path that you have in mind.
Mike [05:14]: Yeah. And the essence behind that is just to not give them false paths that they’re going to go down and waste time because it’s very easy to, and I’ve done this myself, I’d go to a web page and you just land on it and then there’s a log in button and you’re like, “Oh well, I kind of want to see the pricing and see what that stuff is like” and maybe it’s not obvious where to see some of that stuff, so you click log in and then it’s just giving you a username and a password fields to have you log in and there’s nothing else. There’s nowhere else for you to go on that page so then you end up going back and you get a little bit confused about where to go. So the whole idea of this is to make sure that when somebody is coming to your page, and they don’t know anything about your site or your application that you’re essentially walking them through everything. So that’s why Rob is talking about designing it for the first time visitor. You have to make a blanket assumption that the person coming to your site knows absolutely nothing. So because you’re designing these pages for the first time visitor, you have to figure out what the goal of that page is, what is it that you want them to do, why should they care about your product, and what are the next steps that you want them to take? Do you want to ask them for a trial, do you want to get them to get into pipeline there, do you want them to come back to your website in the future? Rob, you had a great talk a few years ago at the business software which was – I forget the exact title but it was something along the lines of, “The purpose of your website is not to get them to buy your app, it’s to get them to come back to your website.”
Rob [06:33]: Yeah. It was called “The number one goal of your website” and it just talked about how returning visitors are between six and twenty times more likely to purchase from you. I mean, very few people purchase on the first try. There are exceptions to that. If you have a price point, I’d say starting between maybe $10 a month, we’re talking SaaS here right. But anywhere under, let’s say $15-$20 a month and you have a high curiosity factor where you’re kind of giving someone something that they kind of curious about trying. So an example of this could be like HitTail. HitTail has this promise of, “We’re going to give you keywords that you’ve never seen before.” There’s this high curiosity of like, “Wow. What are my keywords going to be? And I can get them right away?” So you’re very likely to be able to sign up to directly for a trial and not actually need to go through an educational process first. It’s a low commitment thing. Most apps are not like that, I’ll say. I mean if you have a proposal app or even a marketing app or affiliate software, that kind of stuff is less about curiosity and it’s more about, “Wow, does this fit me? Why is this better than other things that I’ve seen?” and getting [signed?] before a trial right away is just a lot lower, there are lower odds to doing that and that’s where you need to start thinking about, “Okay, I shouldn’t push this trial right away but how can I start educating and how can I bring them back to my site in the future?” And bringing them back, of course, these days, re-targeting is a big one, and then getting folks on your e-mail list. These are the two biggest drivers of being able to start to build a relationship and bring people back. So instead of having a few people signed up, you get that 6 to 20 times higher likelihood of folks signing up. The second element of highly effective SaaS landing pages is to have a gripping headline. And I have a pretty simple formula for this that I’ve talked about in the past, but it’s to just have three things in place. The first is to make a promise in the headline, the second thing is to have an action word, like a verb, and the third one is to either have a directly stated “You” or “imply you” meaning, that you’re talking to the person who is reading the headline. So as an example, I’ll come back to HitTail again, because it fits this well. The headline at hittail.com is “Guaranteed to increase your organic traffic” and the promise is that it’s guaranteed to increase traffic, the action, the verb, is “Increase” and then there’s a “You”, it’s “your, you, or you’re”. You rarely should be talking about your app. Here’s another headline for HitTail that wouldn’t work nearly as well, “The best long tail SEO keyword tool.” Because there’s no promise, there’s no action and there’s no you. So I’m not saying that this is a hard and fast rule that all headlines need to follow, but I’ve found that it’s a really good starting point for me. When I sit down to write a brand new headline, I say, “What can I write first that follows these three rules?” and then I start massaging and thinking of other headline ideas. So I think it’s a good solid framework to begin with.
Mike [09:23]: Yeah. When you’re coming up with the headlines, it’s definitely all about the person who’s visiting the site, and again, it goes back to who is coming there and what are they coming for. But when they’re looking at the page, they’re going to be thinking, “What’s in it for me?” And this simple formula really gives them a good idea of what’s in it for them. You’ve got that promise, the action and you’re talking specifically about them. You don’t want to be talking about your app or the things that it does or how it works or anything like that. You want to be telling them how it’s going to benefit them.
Rob [09:51]: If you want more information on headline writing, you can head over to copyhackers.com and they have 7 different e-books and book two is $19 and it’s called “Headlines, subheads, and value Propositions” and that’s definitely a decent place to start. There’s a lot of info on headlines but that’s nice because it’s specifically for software and startups. Third element of effective SaaS landing pages are to have at least one visual element here at the top of the page. So as Mike and I walk through this list, I want you to imagine it as going from top to bottom. It really is a prescriptive order of starting with that headline, having a visual element either next to it or below it. And then from there, we go to element 4, element 5. Again, these are not hard and fast rules, once you know what you are doing you can mess with these things. But when you are starting out as a framework, this is a good solid place to start from. So this third element which is visual elements, I’m thinking of something like a video, short video, less than 90 seconds for sure or an image. And if you go to the web page of hittail.com, you’ll see an image that describes what HitTail does just with a couple of circles and some arrows. So it’s almost like a video, it doesn’t move but it has enough text and some arrows that it shows you what it does in that image and I think that’s important. I think just having an image of a random person sitting there clip art staring at a screen, I don’t think it’s helpful because it doesn’t actually talk about your value proposition or talk about your benefits or demonstrates something. I think this visual element needs to serve a purpose. So either an image that actually serves a purpose, a short video that gives some high level benefits, or the third one that really is ideal but is a lot harder to pull off, is an e-mail capture form related to the functionality of your application. So I don’t mean something that says, “Hey, here’s some education about this topic of how to find more affiliates or how to be an e-mail marketer of SEO, but actually starts to demo the functionality of your app. So an example of this is if you go to the bidsketch.com homepage, and you’ll see that Ruben has a form there where you enter your e-mail and it doesn’t sign you up for a course, it doesn’t send you education, it actually creates a proposal, it e-mails you a proposal basically demoing the functionality of the app. And so, although, he will send follow-up e-mails after that, that first one you get is essentially your first [foray?] into seeing how the app actually works. And I think if you’re able to pull that off in a way that’s pretty elegant and actually shows people how your app’s working, I think that’s a big win as well.
Mike [12:18]: Yeah. If you look at the Bidsketch website right there on that homepage it says, “Get a sneak peak at a sample proposal” so that kind of meets the element two that you said, a gripping headline, where it follows that simple formula for promised action and then talking about you, and then has that email capture form which says, “Send it to me” which gives you that sample proposal. So you get a couple of different things there and those two elements are combined. And Ruben has been doing this for a long time, so he has been able to effectively put those things together. And it may take you a couple of times to do this sort of thing but again, the goal of this episode is to kind of lay these things out and talk about the different elements and how they can be added to the page and in which order they should be added in order to give you a starting point. Once you’ve done this and you start testing it and checking with your customers to see how well it’s converting, then you can start playing around with these things, but this is just the framework that we’re following through.
Rob [13:09]: And the fourth element is to provide a couple of benefits, not too many, typically use the rule of three here where I would veer on the side of having 3, 6 or 9. Probably, the fewer the better, it kind of depends. If you go to planscope.io, you’ll see that right down below his visual element which is a video, Brennan has three benefits, [?] more estimates, one sentence describing what that means, “deliver better projects and grow your business”. It’s a really nice example of, boom, having three left to right, three benefits of what you’re going to get using planscope. If you go to hittail.com, you’ll actually see it’s three sets of three and each set is aimed at a specific market segment that is using HitTail essentially gets value, it’s SEOs, it’s internet marketers, and it’s e-commerce folks, and those are kind of the key three core areas that use HitTail, so both of them work. I think the thing that I would recommend is, when you’re providing benefits like this, stay grounded. The biggest mistake I see with benefits is that people go so high level that it doesn’t even make sense anymore, like it’s so vague that any app could do it. So I really don’t like benefits like, “Saves you time, makes you more money” because doesn’t every app do one of those two things? I mean, really that’s the point today, is that every business application needs to do that. So I think if you find yourself saying that, like come down one or two steps to be a little more specific, and again, like Brennan says on Planscope, “Win more estimates.” If you went up a step you could say, “Make more money” but that isn’t helpful. You got to drop it down one level or two. Deliver better projects to grow your business. These are things that there is some tangibility to them. And if you’re having trouble thinking of these benefits, what I would tend to do is to- if you make a list of benefits and a lot of them seem like features, like actual features you have built into the app, then read that feature and say, “All right, we built XYZ feature so that” “So that” is the key phrase there and you complete that sentence. So we have built this keyword suggestion tool so that you will get more keywords that you can then get more traffic from blah blah blah. And that’s your benefit after that “So that” period of the sentence.
Mike [15:18]: When you’re describing these benefits, whether you’re going with 3, 6 or 9 it doesn’t really matter. The headlines are going to be I think a little bit on the generic side because they tend to be only several, 3 to 5 words for the title of that benefit. I mean if you have them separated out into 3, 6 or 9 sections, the words there are going to be relatively tight. But then underneath it, when you start talking about what the details of that benefit, you can be very specific about it. So for example on planscope.io, Brennan says, “Win more estimates,” and then underneath it, he says, “Our collaborative estimating features help Planscope customers close 2 to 3 times more clients. And that piece right there, closing 2 to 3 times more clients, is helpful in a couple of different ways. One, it tells you exactly what the benefit is and two, it is very specific. And the fact that it’s able to close 2 to 3 times more client projects, means more money for you and that is, in a way implied but it is also led from the “win more” estimates headline. So keep those sorts of things in mind when you’re putting together those benefits. Another thing that you can do is you can take those benefits and separate them out onto different pages and talk more specifically about those. A lot of times when people are building a website for a new SaaS product, it can be difficult to figure out what information needs to go on the different pages. So make it simple, just start out by outlining the different benefits and don’t talk too much about them. And then later on, as you start to grow the site and you expand the footprint of the website, then you can talk about those benefits individually on their own pages and then you can link to them from your homepage some place. But I don’t think that you need to do that from day one and you don’t want to overwhelm somebody on your homepage with every single piece of information you possibly have, because that becomes a long form sales page. And I don’t think that’s what you want to start out with. You want to start out with educating them about your product, and then if they start if they start drilling into your website and are interested in those other features, you can talk more about them and you’ll be able to get more information about them according to your bounce rates and how long people are staying on the different pages by looking at the analytics behind those pages as people are visiting them.
Rob [17:24]: I’d also like to point out, I just noticed on Planscope’s homepage, their headline is “Gain total control of your agency” and that fits right into the three elements I said before of making a promise, having an action and having “you or your” in the headline. Element five of highly effective SaaS landing pages is social proof. This one is very common and very necessary. I do not think this is optional. Social proof can come in many forms and actually believe that having all three of them is ideal. The first and most common one people think of are testimonials from customers. I always recommend you have head shots with those as well if possible. So you have a head shot of a person and the name linked to their website. You don’t want anonymous testimonials or just a first name or something. And then edit their testimonial down to just the core part, so if it can be 10 words or 15 words, you’re doing really well. Pretty much the best SaaS landing pages I see have testimonials. The next piece to have, press logos, whether you’ve been mentioned, whether online or offline press. If people are going to recognize that logo, have that in there. And the third one is to put a vanity metric in there. So if your app has analyzed a billion keywords, if you’ve sent out $100 million of proposals or your clients have through your app, if you’re a web host and there were 9 billion page views through your network last month. I mean these are very much vanity metrics. They are not business driven and they don’t help your bottom line, but they are basically bragging rights to show you that other people are using it and that you held up under the stress and that you have experience in this field, and all of this ties into basically socially proving that your app is something that someone should consider.
Mike [19:04]: Yeah. Part of the social proof is just all these things that you talked about, the testimonials and the press logos, those are essentially trust factors and people want to be able to trust your app but you need to give them a reason to, you need to give them proof of some kind. So the fact that you were mentioned on msn.com or CNN, or wherever, those are trust factors, the same with testimonials, especially if you start including head shots of the people who said the things about you. Those are also considered trust factors. When you start talking about those things that Rob just mentioned in terms of the vanity metrics and the number of keywords processed, the amount of money that is embedded in the proposals that are sent out or the page views last month, those are also trust factors but they are internally related. So there’s two types, there’s the external ones that you don’t necessarily have control over and then there’s the internal ones which you do. You could obviously fudge those numbers. But when somebody’s looking at that website, they are not going to sit there and think, “Oh, this person is pulling my chain.” And as long as the other things match up, they are just going to believe those numbers. They don’t have to be accurate, they can be incriminated on a daily, or monthly basis, or what have you, but there has to be some semblance of trust there for them to take those numbers and internally process them and believe them. And the same thing goes for those external loads, I mean if it’s something that they’re going to recognize, definitely use it and it’s essentially your piggy backing on the trust of that other website. So as I said, the logos of other major news outlets or anything like that. You’re piggy backing on their credibility to essentially enhance your own.
Rob [20:35]: And just to clarify, you said, the vanity metric doesn’t necessarily need to be accurate, you can update it once a month or whatever. I’d agree with that, I think as long as your low rather than high, you’re [airing?] on the side of caution, right. It doesn’t need to be an exact thing pulling from your database as a live feed.
Mike [20:50]: Yeah, exactly. That’s more what I meant than anything else. It doesn’t need to be up to the second. That’s really what it comes down to.
Rob [20:56]: All right. So our sixth element of effective landing pages. This one’s an optional one, its features. It’s having features on your home page. So not benefits, and this is further down the page, remember we’re going in order from top to bottom. I have seen this done really well with some very specific features that set you apart. And in fact, if you couch it like that, and you specifically say “No other app has this feature or these are the features that our customers like most” or something like that and just give a few of them. You’re not giving a whole run down of everything but you’re trying to call it out and show why you’re different. You have to be very specific at some point during this journey and if you feel like you can do it by putting some features on the homepage and then folks can click through at the bottom of the homepage and get to like a tour or a features page with more specific mechanics of your app, I think it’s not a bad idea. I think if you’re not sure, probably don’t do this step but I have seen it done really well. The reason that I like when people start getting into features, definitely, on the website somewhere, you need a features page. Because if you’re just talking about benefits all the time, no one knows what your app actually does. If you go to a website for like an IBM software product or some Salesforce product that each own [bazillions?] of products, it seems like all you tend to find is benefits with a lot of marketing speak and it’s really hard to just get a list of what does this app do. And it’s hard for folks to figure out what you do if you never get down to the features. So you definitely need a features page somewhere and I think a few that call you out on your homepage is not a bad thing. Our seventh element is to look at your top nav and have four items or fewer in that top navigation and that includes your home link. So you really only have room for a couple more. So I would typically have something like home on the left, and then either a tour or how it works, which is kind of the same thing. It’s explaining the basic flow of your app. Sometimes it depends on if you want to include a bunch of features on that page, probably another discussion but sometimes a tour is just- if your flow is fairly complicated and you’re trying to teach people what your app does, then you’d have a separate features page and that could also be in the top nav. And then you can basically have a pricing page. I’ve also seen it done well to have another page that basically says [why, app name?]. So if you’re base camp, it says, “why base camp” or why should you choose base camp. That’s if you have a ton of press mentions, social proof or just so much more to say. In fact, with HitTail, we have a “Why” page in our top nav and the reason is, there was so many press mentions because the previous owner was actually a PR firm. There were mentions on TechCrunch and in multiple newspapers and offline magazines, just all kinds of stuff. So there were so many quotes that I found that I didn’t want to stuff them on the homepage, didn’t want to stuff them in the tour. Although, I sprinkled them all over the place. We really needed a dedicated page. It’s just another way to build credibility and that someone can click to and think through and then offer social proof.
Mike [23:47]: These elements in the top navigation are probably going to get hit a lot more than anything else. We’re going to talk a little bit more about the elements at the bottom of the page. but at the top navigation, those are the things that people see right at the top of the page and they are far more likely to get the users to click through to those than anything that you’ll find in the footer. And I’ve used this strategy before where I’ve embedded links in the footer and I’ve used this strategy before where I’ve embedded links in the footer purely for SEO purposes to get Google to essentially spider other pages on the site. But the reality is, if you start looking at the analytics for that, the users who are coming to your website, virtually, never follow through and click through a lot of those links. So you want to make sure that the pages on your site that you want to get the most traffic to for people who are hitting your site and you want them to learn more about your product or what it is that you are going to do for them, make sure that those links are in that top navigation.
Rob [24:40]: Our eighth element is to have an exit path at the bottom of every page. In essence, this is a button that takes someone to the next step of your flow. You want to think of this as a specific journey that you are leading someone through. So when they hit your homepage, you don’t want a bunch of extraneous links, you want a few options at the top. If you even have a top nav, which is probably another discussion. I’ve seen folks run experiments that I’ve worked where you basically remove the top nav and someone really only has one flow to go. You can scroll down and read and at the bottom, there’s kind of a tour button that leads you to the tour and you’re basically leading them through a flow. But in this case, having an exit path at the bottom of every page is something I think you have to have and I think a lot of people don’t do this. It’s to think, “Boy, after they read this homepage, they get to the bottom, so maybe they’ve read the social proof and the benefits and maybe a feature or two, what is next? What do they really want to know?” And then take them maybe through a tour and then perhaps take them to features or you could start letting them know, “Hey, you can sign up for a trial,” there’s some options to think through. You really want to have one main and then maybe a secondary, call to action, down at the bottom there. But not having this exit path at the bottom, then makes your reader get to the bottom, and look around, probably click on something in your footer or scroll all the way back to the top of the page and you’ve lost them, you’ve lost control of their journey because now they’re just wandering around clicking random stuff and that’s not an ideal scenario if you want to lead them through a path of education.
Mike [26:03]: If you take a look at, I’ll use HitTail’s webpage for example, if you go in, right on the main page at the top navigation, you’ve got home tour plans and then why HitTail and you already explained why you have the “why HitTail” there. But embedded in the text in the middle of the page, it says “Increase your traffic” with the big orange button or take a tour. Well that’s the second link in your navigation. So if somebody does click that, they go to that tour page and then at the bottom of that, there is essentially this call to action which says “Your free trial awaits, grow your traffic” And then you click on that, that goes to the third thing in the top navigation which is essentially the plans and trying to get somebody to sign up for a trial. So there are definitely times where the call to action at the bottom of your pages is essentially going to mirror what they would see at the top navigation, but that’s not always the case. They may well be an extended set of tour pages, for example, or additional educational content that you’re going to put in front of them to help essentially walk them through the process of getting to point where you’ve educated them enough such that they are going to sign up for your product or at least sign up for and e-mail course or something along those lines to be able to bring them back. And it kind of depends on where it is in the sales funnel that those people are likely to be. The one thing that I have seen a lot of, and this is especially prevalent in a lot of word press themes, is that they have this “scroll to top of page” widget that will pop up. That’s not something that you want to put in there. If you can disable that, go ahead and disable it because the fact of the matter is, if you have a long enough page that it needs something like that, they’ve already scrolled through the page, they don’t need another thing at the bottom popping up to say, “Hey, would you like to scroll all the way up to the top to see all the stuff that you just scrolled past?” No, they clearly know how to use a scroll bar. So if you can get rid of those things, get rid of them.
Rob [27:44]: Element number nine is something I already covered when I was talking eight, but it’s to basically limit the number of links and buttons that you have on the page. It’s essentially limit the number of decisions that folk need to make as they’re reading though it. Be opinionated about where you vision should go. Think through this flow, it takes time. Think through the journey. But it will absolutely increase the number of folks get the proper kind of education that you’re trying to give them. And our tenth and final element is put everything else within reason into your footer. So typically we will see footers on homepages say something like about contact, terms of service, blog, affiliates etc., and I think that’s perfectly fine. I think having 6, 7, 8 links down there is fine. And something we’ve done with Drip, because we have a PI docks and we have like a press kit, I didn’t want a link out to all of those, we just have a docs link at the bottom and it links to kind of a nested page. So you can obviously start nesting things at some point. but I am not a believer in having 20 links down here, but I do think that having the basic pages that you’re going to have in a marketing side and basically linking to all of them from the footer when you’re starting, is the way to go. I would not put an e-mail sign-up form down here. I see people doing that and no one is ever going to submit that. If you really want folks to sign up for your course or whatever, I would not put it in the footer and frankly, I probably wouldn’t put it in the header either because that’s really your educational call to action of trying to get someone to learn more and click through to a trial. I would tend to use a little JavaScript widget like something you get from Drip or [Sumumi?] or OptinMOnster, instead of trying to plug this thing down in the footer and that will give you control to have it pop up at certain times or not and just a lot better control of when to make it visible and when not to.
Mike [29:24]: Something else that’s helpful to put down at the footer is some sort of a site map so that it’s easier for the search engines to spider your website and get to all of the different pages that are going to be embedded in your site. I think if you rely too much on dynamic html that essentially is put there through JavaScript or anything like that, to display based on who’s visiting your pages, that can be a little bit difficult to have the search engine spider your website. You could also submit a site map to Google but, again, having a site map there that is human readable and, I don’t mean by human readable xml, I mean a link that just goes to a site map where it lists all the different pages and all the different sections on your site. As your website expands and starts filling more pages, that becomes more important because sometimes people can get lost on your website. You may know exactly where everything is but again, your website isn’t for you, it’s for the people who don’t know anything about you and want to learn.
Rob [30:18]: I haven’t been building site maps recently as we build new sites. Definitely, we do this, the xml site map that search engines use and they’re pretty good at crawling anyways, but it’s always nice to help them out. The human readable one, I need to look. We still have one for HitTail because one existed when I acquired it. You know, when we update it and stuff, it’s been kind of a pain as we add new pages to have to add them there too. I’d need to look to see how many people actually use it because I genuinely don’t know how many visitors that page gets in a given month. I’d be curious to see if those are still used. I know it’s something that we did 10 or 15 years ago when you designed a site but it’s not something that I typically put in sites these days.
Mike [30:55]: Yeah. I find that there’s a lot of sites that I go to that if they are large enough, there is so much content there that you don’t necessarily know where you last saw something, for example, and the site maps can really help out with that, but it depends a lot on how mature the product is. I don’t think that, up front, you need a site map but I think that in longer term, as your product gets bigger and bigger, you probably do.
Rob [31:16]: So to recap, our ten elements of highly effective SaaS landing pages are; number one, to design for first time visitors; number two, to write a gripping headline; number three; to have a visual element; number four, to provide three benefits or to think it in the rule of three; number five, to provide social proof; number six is an optional one to provide features on the homepage; number seven, to have four or fewer items in the top navigation; number eight, have an exit path at the bottom of every page; number nine, limit the number of links and buttons; and number ten, put everything else within reason in your footer.
Mike [31:50]: Well that wraps us up. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re out of control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 255 | Moving on From AuditShark
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about Mike’s decision to move on from AuditShark. They discuss events and reasons leading up to Mike’s decision as well as lessons learned along the way.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of Startups For the Rest of Us, Rob and I are going to be talking about me moving on from AuditShark. This is Startups For the Rest of Us, episode 255.
Welcome to Startups For the Rest of Us, the podcast helps developers, designers and entrepreneurs be awesome at launching software products. Whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob [00:23]: And I’m Rob.
Mike [00:24]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
Rob [00:29]: Well, I’ve been diving pretty heavy into paid acquisition for the past few days. Just spending the money to look at different approaches to it, trying different images, headlines, optimizations, all kinds of stuff. And since I’m dipping my toe back in the water after having not done it for quite some time, there’s almost like infinite possibilities. So I feel like I have to rule them out one by one again because so many of the ad networks change over time. And so if you look at AdWords or Facebook, even from last year to this year, there are so many new options. And without knowing which one’s going to work, I just have to plug some money in, run some ads, figure out how it’s going to work and then switch the approach to see which works better. So that’s probably the next week or two of my workweek.
Mike [01:12]: Do you have a budget in mind for how much you’re spending?
Rob [01:14]: A lot.
Mike [01:18]: I always think the exact same thing when I look at paid advertising. It’s just like, I hate doing this.
Rob [01:23]: The optimization, especially, is painful because you don’t have the ROI yet. So last time I did this it took me about five grand to figure it out. And from then on, I had a positive ROI, I was with HitTail. This time, I don’t know how much it will take, but I spent between $1500 and $2000 yesterday testing things, and I’ll probably spend a similar amount today. The thing is as if you have a smaller budget, you can do this over a longer period of time. You don’t have to spend that much every day. But you learn so, so much faster if you have budget that you can work through because you learn very quickly what’s working and what’s not. And you’re able to leave it running for longer and get larger numbers, more impressions, more clicks, and it just gives you a more solid feeling for the data you have. It will definitely be a chunk of money but I absolutely look at it as an investment. Last time I was able to make it work. It [channeled that scales?] so well. It’s not cheap, but once it works, it’s pretty crazy how many trials you can drive using this approach.
Mike [02:26]: It’s basically printing money at that point, once you’ve got it working.
Rob [02:29]: Yeah, it really is. Yeah, it’s pretty insane.
Mike [02:31]: Cool.
Rob [02:33]: How about you? What’s going on?
Mike [02:34]: Well, a quick announcement to anyone who’s interested in going to, essentially [?] to a mastermind group and a ski vacation rolled into a business trip, you can head over to bigsnowtinyconf.com or to bigsnowtinyconfwest.com. The first one is going to be up in Vermont. It’s going to be in the winter sometime. I forget whether it’s January or February. But basically, they’re going to be selling tickets in the next couple of days and they have a mailing list put together. And then the other one is in Colorado, which is put together by a friend of MicroConf, Dave Rodenbaugh. The first one is put together by Brian Castle. He also has a hand in the bigsnowtinyconfwest with Dave.
Rob [03:09]: All right. So what are we talking about today?
Mike [03:12]: Well, I think today you’re going to be walking us through me moving on from AuditShark. So I’ll kind of let you drive the show today and we’ll see where it ends up.
Rob [03:21]: This is a big decision, man. I realize the magnitude and the gravity with which you’ve treated this decision. So there’s a lot to discuss, all the way from reasons to end results, to some of the marketing challenges you faced. I think I want to kick it off with giving some type of timeline. And it’s a pretty loose timeline that we tried to put together right before the show, to give folks an idea of what AuditShark is and where you’ve taken the turns over the past several years. So AuditShark is basically software, it’s a service and it is auditing software for servers and networks and client machines.
Mike [03:59]: Quick correction. It’s not actually software as a service. It was downloadable at the end of it. It started out as SaaS, but not –
Rob [04:05]: Okay. This is good to know. Yeah, you’re right. So it started out as Saas and then it was downloadable. You’re right. You started coding in 2010, you had a full-time consulting gig, and from what I recall, you had the idea and were starting to build it but it was a huge effort, like it was going to take a long time. And we, at some point, talked about how long you thought it was going to take and it was like a year or more of coding. I think you got kind of an alpha or enough to show your initial audience, which was banks, small banks. That was around 2011 at some point. And there was some mixed stuff that happened [right there?]. There was a mixed understanding. You had talked to a few banks and then when you actually revisited it there was like a misunderstanding in the discussion and, if I recall, some of the banks didn’t get back to you and then other ones said, “We didn’t really need this tool,” or there was a word that was defined differently, or something like that. That didn’t work. So then you started, in 2012, looking for other markets. You looked at SaaS. Eventually moved onto more looking at enterprise stuff. So it was 2012. And then in 2013 is when you were having the health issues and you had a big motivation block where you had months, if not quarters at a time, when you said you just weren’t really making progress. And in 2014 you finally quit consulting. You went full-time on AuditShark and you set yourself a deadline. You said by some point in 2015 you wanted to have revenue and you wanted this thing to be working, otherwise you were going to pull the plug. And obviously, that time has come.
Mike [05:33]: Yeah, that’s a pretty accurate depiction of what the timeline looked like. Early on I was actually, essentially taking the product and cloning existing functionality from other products that were out in the market. I’ll be honest, I feel like in some ways that held me back very early on because I was very scared or very hesitant to, essentially, show my work to other people or to go out and piggyback on those products. Even though they were being end-of-life, it didn’t matter to me. The reality is that I can be sued 10 years down the road and it doesn’t really matter whether those products were end-of-life or not. But there was that underlying fear in my head that I didn’t necessarily want to run into any sort of legal entanglements. I think that early on that affected me more. I think I kind of ignored it as time went on but it was definitely a factor early.
Rob [06:18]: Right. And my memory of the early days, again, this was like five years ago, was that you wanted to build it but that you didn’t have a lot of time. And I questioned how serious you were about it at that time. I didn’t feel like you were putting in 20, 25 hours a week at night, coding until two in the morning. It kind of seemed like you coded on it when you had time and that it was going to take a really long time at that pace.
Mike [06:43]: Yeah. That’s right. And I also hired some contractors to help me out with some of the coding. Some of them worked out and some of them didn’t. I think that the fact that there was a programming language built into it, that really threw some of the developers for a loop. They didn’t know what to make of it. They didn’t know how to use it. It was confusing to them because they had to not only know C# programming, but they also had to know how to deal with databases and they also had to know how to deal with a lot of the front end stuff and then the back end code. And in addition to all of that, they had to understand this programming language that was kind of like LISP. I think that that skill set was just really difficult to find and the people that I was finding couldn’t handle it. But I couldn’t necessarily afford to hire much more skilled people because of budgetary constraints.
Rob [07:31]: In retrospect, do you feel like you managed them well and delegated well or do you think you made mistakes there, too?
Mike [07:36]: Oh, I definitely made mistakes there. I’m probably not different than other people where you think that you’re good at most things. And I will kind of be blunt about it. I’m probably not the greatest manager in the world. I’d like to think that I am, and I’d like to think that I’m very well organized. But when it comes to assigning tasks, there are definitely places where I’ll write something down or tell somebody to do something and it’s difficult to get the idea across to somebody, especially if it’s a difficult concept. So that’s where things like the screencast and things like that come in. And they’re helpful, but I didn’t necessarily always do them either. And even sometimes when I did them, there were times when somebody would come back with something that was just blatantly incorrect and I was like, “I don’t understand how you could of misinterpreted this because I was very clear here.” So there were certainly cases where the fault was definitely on me and then there were cases where, for whatever reason, they just didn’t understand or didn’t figure out what it is that I wanted them to do.
Rob [08:30]: Let’s dive in here because we have a pretty extensive outline of kind of every angle of this decision to move on. And I think listeners will be interested to hear you’re reasoning, the roadblocks you hit along the way, who you’ve used as sounding boards, just all kinds of angles of this. Let’s start with the reasons that you’ve decided to move on from AuditShark. Obviously, it’s a huge decision. You have five years, on and off, invested in this as well as a chunk of money. This is not a decision that you’ve taken lightly. So talk us through what made you finally decide to move on?
Mike [09:03]: Well, last year, I kind of set a deadline for myself and I said, “Okay, in order for AuditShark to really do something substantial, I really need to dedicate more time to it.” Essentially, at that point, what I decided to do was, “Okay, if this is going to happen, I need to be able to just dedicate the time to it.” So I ended up quitting consulting and that was last June. So from June until now, I’ve basically been full-time on my own business and mostly working on AuditShark. Now one of the big problems that I was having while I was doing consulting, and essentially funding the development of the product, was that I couldn’t effectively do the sales and marketing. So like if I needed to be on a phone call, it was very difficult for me to arrange that because of my travel schedule. And I think that on our 200th episode, my wife had mentioned how there were some years where I was on the road 45 weeks a year. So that was definitely a problem for me in being able to carve out that time. Because if I’m on site with a customer, I can’t exactly step out to accept a phone call or step out every couple of hours to start making an hour’s worth of phone calls. It’s just not easy to do that. So quitting consulting allowed me to make those phone calls myself. I could have hired somebody, but at the same time, had I hired somebody, I wouldn’t necessarily have been the one learning how to do all that stuff or learning the subtle nuances of what people were saying. And that would have been difficult to get from a sales rep back to me. And in addition, I didn’t necessarily have the money to hire a full-time sales rep. And I’m really not comfortable hiring somebody on like a commission-based, especially for product that isn’t established and doesn’t have a solid revenue stream that’s coming in. I just don’t feel good about that.
Rob [10:43]: Right. I would agree. You never got to product market [?], so you as the founder/CEO really needs to be the first salesperson. So it was obvious that the sales approach wasn’t going to work. But at that point when you realized that, did you ever think, “Boy, this product is just not something that I can do as a single founder and I should pull the plug now?”
Mike [11:01]: The thought crossed my mind a bunch of times. It’s not to say that I didn’t think about it or it didn’t weigh on me but when you’re in the middle of it, it’s like what do you do? What are your options at that point? If you’re looking at that saying, well, this isn’t flying right now, it’s not going anywhere, what can I do about it? So I would say that it’s one of those situations where it’s the analysis paralysis, where you’ve got so many options you don’t necessarily know what to do so you don’t do anything. I’ll be honest, I just didn’t know what to do. So in many of those cases, I just didn’t do anything. I didn’t make a decision one way or the other, I just kind of let things ride the way the way that they were going and kept doing motion but not necessarily any forward progress.
Rob [11:39]: And I can imagine that with, essentially, the [?] costs that you had of a few years of work, because when you made this switch, and I think when you realized that it was going to be phone calls during the day and one-on-one sales, this might have been what 2012, 2013? So you were already two or three years into it. You were already tens of thousands of dollars into it. I imagine the sunk costs had to have entered your mind at that point, of like, I could just shut this thing down because this is going to be hard to sell or this is just a hurdle, a roadblock, and I can figure out how to get over it. Is that kind of your thought process?
Mike [12:12]: Yeah, but I mean, something else that factors into it is how do you know whether or not it’s going to be something you can get through unless you try it. If you look at the Dip from Seth Godin’s books, how do you know you’re there? Unless you try to push through it, I mean, if you give up right then, clearly you’ve failed it or whatever it is that you’re doing. But if you at least give it a shot and try and push through it, then you have a chance at making it through. And you won’t know until you try that. So it made it difficult to kind of make a decision one way or the other.
Rob [12:41]: Yeah. It’s hard because there’s the school of thought of you should get something out there in seven days and then let it fail really quickly. And there’s Lean Startup with just iterating and iterating and pivoting and pivoting. And then there’s the opposite school of thought that you need to sit there and hammer on things for six months or a year before you’re going to see if it works. And I think part of that is personality driven. Folks listening to this, I think if you tend to flit around and move from place to place, from project to project, you should probably stick with things longer than you feel comfortable with. And I think if you’re listening and you tend to be more bullheaded about it and you stick with things too long, then you should think about cutting your losses sooner. And having known you, Mike, for what- we’ve known each other for ten years, but known you pretty well for five or six, I would say you [?] on the side of pushing with things, of being more stubborn with it. And that is like a great strength in certain cases, but I feel like in AuditShark’s case it may not have been. It may have kept you doing it past the point where it made sense.
Mike [13:42]: I would definitely agree with that. And it’s hard to know, necessarily, in advance whether or not the stubbornness can be a pro or a con until it’s too late.
Rob [13:52]: That’s right. And if you’re company becomes a $100 million company and you were stubborn, then you’re a visionary and a genius. And if your company tanks, then you were an idiot. You know what I’m saying? It’s like it’s all in the outcome.
Mike [14:03]: Well, I appreciate that.
Rob [14:05]: Yeah. [?]
Mike [14:06]: That’s okay. No, I understand. I knew what you were saying. I knew what you were saying.
Rob [14:12]: So somewhere around late 2013, 2014, you kind of made the switch and moved into this enterprise market and you started talking to more enterprises and the sales cycle got long and challenging. So that was another factor, I think, in your decision to shut it down. Is that right?
Mike [14:26]:Yeah. The enterprise sales is just really hard. And I think that there are definitely cases where it could work and there are some people who are built for that kind of thing. I don’t know that I really am. I prefer things to move a little bit quicker. I’ve still got a customer in my sales pipeline who’s been there, going on 20 months now. And it’s an enterprise deal they’ve got between 35,000 and 70,000 end points. But the reality is that, even if that deal came in tomorrow, I don’t ultimately believe that it would change the long-term outlook or the sales cycles. So it would bring in probably $300,000 in revenue but I don’t necessarily have a good scalable way to get in front of a lot of other people like that. So that makes it difficult. And in addition, I had somebody who was basically asking me for information about AuditShark and we went back and forth a little bit and they’re like, “Check back with me in three months.” And then, “Check back with me in six months.” So I started doing some research, come to find out that this person was actually project manager for a product inside their company that basically does what AuditShark does. Of course that’s heavily depressing. It’s very demoralizing at that point. You feel like you’ve been strung along.
Rob [15:37]: Yeah, that’s tough. We had several offline conversations over the past kind of year, I think, as you’ve pushed into this enterprise market. And there have been stops and starts. There has been progress. There was a light at the end of the tunnel at a certain point where you thought that you were going to be able to make this work. To be honest, as an outsider looking in, the past 12 months has been your most focused and, I’d say, productive period of time, working on AuditShark, in my opinion. Because you actually sat down and you made the sales calls and you were doing demos and you were doing webinars and doing marketing and that stuff. It’s like the first three or four years you were working on the product and trying to figure out what to built and trying to- it was more product focused. A lot less marketing focused. But you really were dug in and executing this past nine to 12 months. But this enterprise sale cycle, and just enterprise sales in general, has really been an uphill battle, I think.
Mike [16:31]: Yeah, and just for some of the listeners who haven’t listened to some of the earlier podcast episodes or heard what AuditShark really was for or what it was built on, I was essentially taking an enterprise level product that had sold recently well in the market and creating a smaller version of it that would have a lower price point and would address the same types of needs but for smaller businesses. I wasn’t necessarily looking to go to the enterprise market. I was going to say, hey let me take this enterprise solution and re-work it a bit for small and medium sized businesses. And when the banks didn’t work out, and then as a SaaS offering for small businesses it didn’t work out, then I said, okay, well that worked before in the enterprise market. That’s probably where I should go with it. And ultimately, it seems like the enterprise market is just really not a good fit for me personally. And the last reason I have for walking away from this is that I feel that some of the people that I’ve been targeting and talking to, who are in positions where they are tasked with solving this problem, don’t necessarily care about the problem themselves. And that’s really hard to take. As a developer, as an entrepreneur, you’re trying to solve problems for people and make their lives better. But if they don’t care about the problem, then why should you? It makes it really hard to care about their outcomes when they don’t care about it either.
Rob [17:52]: And we’ll talk a little later about some lessons learned from that, right? Because I think trying to get more validation up front could have had you learn that before spending the time to build the product. Maybe it could have. I think it’s arguable. But it’s definitely possible. So what’s the end result really? What are your sunk costs?
Mike [18:13]: Neglecting the time that I’ve spent on it, and if you kind of add in profit versus the money that I spent, I’m probably down about $50,000 in sunk costs. There’s about a third of that that I paid to a contractor who kept promising to deliver and updated version of the product for, it was probably close to four months. And that was complete mismanagement on my part. And I talked to my mastermind group kind of at length about that because it had been going on and on. And finally, it just got to a point where I was like, look, I need something from you. I need to see something and what I got was not what I expected. And I was just like, all right, I’m done with this. This whole contract is done.
Rob [18:49]: Right. That’s a bummer.
Mike [18:51]: Yeah. Probably a third of that $50,000 was spent on that.
Rob [18:55]: Right. You mentioned your mastermind group. I know you’ve had a bunch of sounding boards, folks you’ve talked to about this. Especially over the past year or two as you’ve been trying to make a decision about it. Who are folks who you’ve relied on for that?
Mike [00:19:09]: Yeah, so Dave Rodenbaugh and [?] are in my mastermind group. So I talked to them pretty frequently about it every couple of weeks. And then at Microconf Europe, I had a number of conversations with different people. Like Steven [?] and Patrick McKenzie. Even as far back as Microconf in Vegas, I talked to Steli Efti for quite a while about it because, obviously, as CEO of Close.io, he has a lot of insight into sales cycles. So I felt like talking to him would, at least, help me understand whether or not I was going in the right direction or the things that I was doing or not doing that I should be. And the end result of that was that if you’ve lost motivation and the needle isn’t moving then it’s going to be an uphill slog. And somebody specifically said, “You’re a reasonably smart guy and there’s a near-infinite problems you could be solving. You should probably be working on something that you enjoy rather than something you don’t.” And it stung, but at the same time I needed to hear it.
Rob [20:04]: Yeah. It all depends on what state of mind you’re in. If you’re in the first couple months and you’re all fired up about something being a good business and someone tells you that, you’re going to tend to ignore it. All of us would tend to ignore that if you’re fired up about it. If you’re at the end of your rope and you’re frustrated and you’ve been working on it for multiple years and it’s not working, when you hear that it’s going to sting, but I think it’s good feedback to hear because it makes you reconsider continuing to invest in this product that just doesn’t have legs.
Mike [20:29]: Right. And obviously there’s all the mental challenges that go with it, but it’s something that I’ve talked about on this podcast before and there’s a certain amount of obligation to succeed, I’ll say. And not to say that everything I touch is going to turn to gold, because I certainly don’t expect that, but I really felt like I had the insight into this particular problem and how to solve it to be able to push my way through and solve the marketing challenges. And I felt like a lot of the marketing challenges that I ran into, especially in enterprise space. The enterprise space is really very much relationship driven. I do not like the mode of operation. I do not like that mode of sales.
Rob [21:10]: So with all the feedback in mind from folks you’ve spoken to and given your reasons above, I know that you had in essence, set a deadline for yourself at a certain point last year. Can you talk us through really the final straw or the final deadline and how that worked out? You gave yourself the freedom to really decide to move on. How did that all work?
Mike [21:29]: Yeah. I had this initial deadline that I had set up, which was a year from going full-time on it. And I got near the end of that deadline and I was kind of worried about it because obviously, things were still not going very well and I was trying different things. And one of the things that I had tried was the AuditShark lock down service. That allowed me to kind of push things out a little bit because as soon as I started doing that, I got some immediate sales from it and I was able and go out and do some security reviews for a couple of people. And I sold two of them very, very quickly, and then there was a third one that was supposed to come it and ultimately, they ended up backing out. But I sold several thousands of dollars of those services very, very quickly. So I looked at that and said, well, maybe this is the part that has legs. Maybe this is where the product is destined to go. So I gave myself a little bit of extra time. My mastermind group members were on board with that. They said, “Look, this got some revenue very, very quickly. You should probably spend a little bit more time on it, even it takes an extra month or too,” because a lot of the other things you haven’t tried so far have worked. And it’s like you’re at the end of that timeline and suddenly, boom, something changes. And it didn’t feel right to just pull the plug at that point. So I extended the deadline by a little bit. But ultimately, it didn’t seem like that really made much of a difference. And also, the initial traction that I got from that was from warm leads, not necessarily cold leads. And I don’t know how long it would take some of those people to invest in the lock down service. But at the end of the day, I don’t think that the lock down service is something that I would want to do long-term anyway.
Rob [23:00]: Right. Yeah. So the combination of it, it’s like if you go with enterprise you didn’t really have a passion for doing enterprise sales. And if you did the lock down, you could probably sell it to more smaller, medium sized businesses but didn’t turn into something that you wanted to do. And, like you said, you didn’t know how to repeat that and you didn’t want to spend another six months trying to find cold leads and convert them with lock down. Your time had come, your deadline had passed.
Mike [23:24]: Right. I mean, you can only pivot some many times before. You can technically pivot forever but at some point you got to call it quits.
Rob [23:32]: Yeah, there’s always more suggestions. We could sit here and say, “Okay, so lock down had a little bit of traction, Mike. How are we going to plan to get more people to the website? And then you can do webinars and you can do this and do that” but it’s like you’re done. When you’re done, you’re done. So what are your plans with AuditShark, what are you going to do with it?
Mike [23:46]: Well, I think, for the time being, I’m just going to leave the website up and leave things on “Autopilot.” I’ll probably add a pricing page in there with just some sort of [low ball?] price and some sort of upper limit on the number of machines that you can use it on. But the reality is I’m not going to do very much with it at all. I did talk to a broker who said that he thought that I could definitely find a buyer for it because there’s definitely people who would be interested in this type of product. But the other suggestion that I heard was that the site definitely gets reasonable traffic on some of the pages that are super competitive. So for example if you search Google for SOX Compliance, I actually rank higher than Wikipedia for SOX Compliance. And if you look in the Google keywords tool, it shows that it’s a highly competitive term. So I’m getting like more than half of all internet searches for SOX Compliance. And that page is generating between 15 and 20 leads a week right now, for me. So I think that there’s definitely value in terms of advertising. But again, it kind of goes back to this situation of like in a way I’m kind of done and I don’t want to put a lot of time of effort into it, so I’m going to leave the site up for the time being but I’m not going to do a whole heck of a lot with it at this point.
Rob [24:54]: Yeah. It’s tough, man, because, I think my opinion on this is that leaving it up, if you make one sale magically or two sales for a few hundred bucks, it’s probably not going to be worth your time to support them. And I think that if someone downloads it and uses it and runs into any bugs, then you’re now on the hook for fixing that. If they run into support issues getting set up, you’re going to have to help them. And since you’re not planning on building this business, I’d be kind of hesitant to keep it for sale, to be honest. Even if you leave the site up for now until you’re really done with it, you may just want to remove the buy it now button and either have just a “contact us” button or like no way to purchase on the site. Just to avoid having to get your code, which has not been heavily production tested on hundreds of installs. So it probably still has some bugs to avoid a customer buying that and putting it on their stuff and then having to support it. Because, you know, what’s worse than selling zero copies of a piece of software, selling two copies of a piece of software. Because then you’re on the hook to support it and it’s a lot harder to just shut it down and walk away at that point.
Mike [25:54]: Yeah. For me, I think, there’s this mental barrier to going into [IS?] and clicking stop on the website. I feel like that’s really what it is. There’s two sides of this. There’s the logical side which says, “Look, this is done. This isn’t going anywhere and all the paths that you have to success are paths that you don’t necessarily want to do.” So there’s really no point. But then there’s the emotional side of it which is like, “I’ve put all this time and effort into it and to go in and hit that stop button” so that website no longer shows up, it’s kind of painful.
Rob [00:26:26]: It’s too soon.
Mike [26:28]: Yeah, kind of too soon. Mentally, I feel like it’s there but at the same time, it’s hard to just do that.
Rob [26:35]: I think that will ease up over time. I think now that you’ve made this decision, it still hurts and then, in a few months, I bet it will be a lot easier to do that.
Mike [26:43]: Yeah. And that’s what I think as well. I’m just going to kind of let the website ride for the time being and for the most part ignore it.
Rob [26:50]: So let’s talk about lessons learned. I think you’ve learned a lot during this process. I think other folks listening to the podcast have too. There’s been a lot of heartfelt discussions and the comments over the past several of years as we’ve had episodes that have focused on your building and launching and decision points around AuditShark. Talk us through some of the things that you feel like you’ve taken away from this experience.
Mike [27:09]: Well, I think that I’ve definitely realized that there are certain cases where the answers are not so cut and dry. So, for example, when we talked before about the timeline a little bit, and in 2013 there were some heath issues that I ran into. But I almost feel like those obscured my motivation issues or maybe compounded them because I don’t think that, kind of looking back in retrospect, at the time I was like, oh yeah, my health issues. I’ve got these under control now and now I can get to work and I can actually get things done. And I feel like because of maybe underlying motivation issues were obscured by the health issues. I think that it was not necessarily as clear to me that there’s two different things going on here, not just one. And it’s not obvious until much later. I was talking to Patrick McKenzie and he said the exact same thing happened to him on Appointment Reminder, where the product wasn’t necessarily getting very much traction and he ran into health issues. And then even after some of those cleared up, it still took him a good year and a half or two years of a very difficult grind to get the product to where he wanted it to be. And he’s the one who actually told me that the heath issues very much obscure the motivation issues. I think at Microconf Europe he called this the [Peldi?] test.
Rob [28:22]: Right. Like do you really want to work on this thing?
Mike [28:24]: Right.
Rob [28:25]: Are you going to be happy working with this group of customers and working on this product for the next 10 years? That’s really his question. I think there’s also a big question around validation. You’ve made some calls and you had a couple of banks that you had spoken to, but talk us through something that you would do differently these days regarding the early validation of AuditShark’s need.
Mike [28:25]: I would talk to a lot more of them. I talked to five and I felt like because I walked in the door and sat right in front of the person who was running the IT and talked to them directly, that I had a good handle on it. And then in addition, all my background and experience at the startup a long time ago, building exactly this type of product. Because I knew all the subtle nuances and I did all the consulting around it, but at the end of the day, I did not understand the needs of the small banks. Because what I was trying to do was I was trying to take a large enterprise product and put it down into a very small niche market with banks. And I didn’t do enough validation around that piece of it. I still feel like the product itself and this particular problem needs to be solved in the enterprise space, but clearly, as I said, that’s not a place that I’m going to go or able to go. But I definitely could have done a much better job validating those banks before I went off and built code for 12 to 18 months. And I think that had I done a better job of that, I might have realized much sooner that the banks were not going to be a good fit for the product. And ultimately, I wouldn’t have had to pivot because I would have never built to begin with.
Rob [29:53]: Right. Yeah, and then something I’ll add, that we talked about offline is that, you took too long between the idea and talking to the banks and getting to beta, right? It was like 18 months or more and that’s a long time. There were reasons for it. You have contractors that fell through. You had traveling. And you had all of that stuff, but it just becomes too long and it makes the journey too long so that it’s not fun anymore. It’s hard to keep motivation up over the course of 18 months or two years working on a product with no real validation.
Mike [30:22]: Yeah. And it’s interesting. I’ve talked to some people where they’ve heard about some of the inter details and inter-workings of how everything has happened and they’re shocked that I was able to maintain, I guess, stay on course for as long as I have.
Rob [30:37]: Yeah. And that comes back to that strength of being stubborn. I think you have that strength of being able to continue plugging away at something for a very long time and I think that’s why you stuck with it, and it’s both a strength and a weakness depending on the context.
Mike [30:51]: Yeah, the other thing that I think really was a big deal was when the banks, I was initially targeting, did a 180 on me. That should have been a gigantic red flag for me to reevaluate the entire thing instead of just simply pivoting. Because I had this product that I had built, I took it to them and they said, “Oh yeah, we must have misunderstood” or there was miscommunication. This is how we’re solving that. We don’t really need this. It’s an interesting thing but we don’t need it. And I think at that point, I probably should have done a complete reevaluation rather than simply trying to pivot. And I think that was big mistake that I don’t think I realized until recently. I can’t really remember ever hearing that lesson from anyone else before, but I think if you get to the point where you need to pivot, you need to evaluate everything at that point instead of just is this going to work or what’s going to be the most likely place for this, because it’s entirely possible that all the research and everything else that you’ve done before that point is essentially irrelevant at that point.
Rob [31:48]: Right. And you were in problem solving mode of like, “I’ve run into a problem, the banks didn’t pan out. How do I fix this problem in the context of this product? So how do I find different customers? How do I find customers for this app?”Whereas, maybe you shouldn’t have been evaluating how do I fix the problem but should I fix the problem and should I even continue with this product at all?
Mike [32:09]: Yeah. That’s a very subtle distinction, but extremely important, too.
Rob [32:13]: Yeah.
Mike [32:14]: I think there was also a certain amount of obligation that I felt because I had talked about AuditShark on the podcast. I almost felt obligated to continue. And I feel like looking back on it, that was also a mistake that I made. Sometimes the right decision is to call it quits and move on.
Rob [32:28]: Right. And I think that obligation probably extended beyond that and maybe even tied into the amount of money you invested and certainly the amount of time you’d invested. It just comes back to the sunk cost.
Mike [32:40]: One other thing I want to bring up is that I think when you’re looking for a channel for your product, and I think that on this podcast we tend to err on the side of telling people go for SEO or paid advertising, all these online mechanisms, and I think that once it gets to offline stuff you have to do a little bit more research on it. Because what I didn’t realize in going after the enterprise market was that the enterprise market is much more relationship driven than it is anything else. And I didn’t realize that up front and I should have. Because I’ve done enterprise sales before but probably not to the extent that an enterprise sales rep would have. I’ve been in the capacity as like a sales engineer and working through problems with people and doing proof of concepts and things like that, but when it gets into the part where you’re actually selling the software and getting to the point of purchase orders and things like that, it’s very, very relationship driven. And sometimes people will just ask you for proof of concept or a demo for the sole reason that they want to pit you against another vendor. And I’ve run into that. It’s a hard position to be in but those relationships that those larger businesses have, they’re there for a reason. So when I big business runs into a problem, they’re going to call up their large value [added?] reseller and say, hey, we have this problem, what do you have for us? What tools do you know of that can solve this particular problem? And they’re going to rattle off two of three and usually the top one that they come out with is going to be the one that gives them the best margin that they’re reselling. And I don’t have those relationships and I don’t really want to sell a product that is more sold on relationships than it is sold on technical merit.
Rob [34:15]: I think there’s a roadblock or a pretty big uphill battle if you’re a single founder bootstrapping a company and you’re trying to enter this market. I don’t know of any single founders who are bootstrapping, selling into the enterprise. I’m sure there’s one or two. There’s probably a counter example. But for the most part, the folks we know are not doing that because of the amount of time investment that it takes, the amount of cost, the lead time, and the sales cycles. There’s just all these reasons. So, I think when you initially launched or were going to start building back in 2010, you weren’t planning on going after enterprise. But there was a point in 2013, 2014, when you said this is what I have to do, and I think that if you had known what you know now about the enterprise sale cycle, that would have probably caused you to, hopefully, rethink the decision.
Mike [35:02]: Well, that’s another pivot point where I should have reevaluated much more than just where is this going to work. When I pivoted from banks to small businesses I should have reevaluated a heck of a lot more than I did. And then when going from there to the enterprise, I should have evaluated whether the enterprise is a good place for me to be in. I didn’t do it in either of those cases. And I think both of those were mistakes.
Rob [35:02]: So what’s next for you? You’re moving on, but what are you moving on to?
Mike [35:28]: I’ve kind of talked about this offline, but there’s a ton of stuff that needs to be done on the Micropreneur Academy and Founder Cafe, so I think I’m going to take some time to revamp some of the guts of that stuff over the next couple of months. And then right now I’m also testing out a couple of different ideas to see if they have any legs. Two ideas I’m testing right now. One of them is more of a one-on-one email follow-up. Because one of the issues I ran into when I was trying to do the enterprise sales was there were people who I would email them or I would call them and they just would not get back to me. And it would take a number of emails or contact attempts to try and get them either on the phone or get some sort of response. There was one, I think I talked about it were it was eight emails over the course of 16 weeks, or 16 emails over 16 weeks or something like that. It was a very long period of time. It was a very high number of emails to me and phone calls. And finally I got a response on the 16th one. I forget the details of that but it was a lot. And it was all with no response of any kind and then suddenly, kind of out of the blue, they’re like, “Oh, yeah. By the way. We’d love to set up a meeting for Tuesday.” It was weird the way that that works. And I’ve talked to a couple of people about this. There’s definitely some opportunities there where they want some sort of automated sequence for people who, not fall off the bandwagon, but fall off the radar or kind of move away from the negotiating table, to just help bring them back. So I’ve got an idea that I’m testing for that and I’ve talked to a few people about it, but I’m not so sure I want to go in that direction. And then the other one, this one’s a little bit fuzzier. It’s sort of an idea around spreadsheet automation. So there’s lots of people out there who build reports from spreadsheets or take data from different sources, kind of aggregated together, or imported into databases. And I think that some sort of spreadsheet manipulation product or something that builds reports from multiple spreadsheets and splices things together, or even just something very, very dead simple that takes spreadsheets and imports them into a database might be something that people would be interested in. Again, I’m still working out details on those things. I haven’t started writing code or anything like that, beyond some very, very brief prototypes that’s about it. But I’m kind of sifting through about 5,000 keywords right now to see if there’s an SEO play for that and then talking to people about that. I’ve already had a few conversations. One of them didn’t. So, we’ll see how it goes. But I’m not going to do anything until I get to probably 20 or 30 people.
Rob [37:49]: Well it’s been a long journey, sir. I know this is a big decision for you. So it’s cool that you’re willing to come on the show and kind of detail all the decision points and what’s gone on over the past several years so folks can get a better idea of what was going on at what point. And frankly, so we can all learn from the mistakes that we’d made, like we say in out intro.
Mike [38:10]: Yeah, I’ll be honest. This is a fairly painful set of mistakes. It’s not even just one mistake, it’s a bunch of them, not necessarily sequential. There’s definitely some things that went well and there’s some things that didn’t. I learned a lot along the way. Ultimately, it didn’t necessarily turn out the way I wanted it to. But not everything does. But at the end of the day I want to be doing something that I enjoy and have fun doing and am helping people who legitimately want to be helped. And there were a lot of things that just didn’t necessarily fall into place along the way. So, as I said, it’s kind of painful. I know logically that it’s the right move, emotionally it’s still a little painful, but hopefully that will go away over time.
Rob [38:51]: I imagine there’s also a bit of a weight lifted off your shoulders.
Mike [38:55]: Yes and no. There is and there isn’t, I guess. I’ve got all the technical cruft left around that it’s going to be there for a while. It’s almost like you break up with somebody and their stuff is still in your house.
Rob [39:07]: Yeah. You just can’t get away from it.
Mike [39:10]: I don’t know how else to put it other than that.
Rob [39:12]: Yeah. Well, I think that probably wraps us up for today. So if you have a question for us, whether about this episode or another one, call our voicemail number at 888-801-9690. You can e-mail 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 in iTunes by searching for startups, and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 254 | Planning Your Move from Day Job to Product
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about planning your move from day job to product. They give you seven milestones to follow to help you get closer to working from your business full time.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of Startups For The Rest Of Us, Mike and I will discuss planning your move from day job to product. This is Startups For The Rest Of Us, episode 254.
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 [00:28]: And I’m Mike.
Rob [00:29]: We’re here to share our experiences to help you avoid the same mistakes we’ve made. [What are this week?], Mike?
Mike [00:34]: I’ve only been back from MicroConf for a couple of days now, so I haven’t gotten a whole lot of work again. But aside from that, I bought a new car and it’s been the most painful experience I’ve had all year.
Rob [00:44]: All right.
Mike [00:45]: That’s like two or three years. For whatever reason, like they don’t make it easy to get a price quotes, and I kind of get the reason, but it’s just painful to get price quotes from anybody without having to actually walk in the door. It just sucks.
Rob [00:57]: Even on this day on age of the internet, car buying still not solved.
Mike [01:01]: Like I said, I understand why they do it because they don’t want you to go around to like 10 different dealers and get a price quote from them and then shop it around to them. But still, it’s just like you think it would be easier.
Rob [01:12]: You’ve done a lot of enterprise software sales, now you know what it feels like to be on the other end of that. Am I right?
Mike [01:19]: I appreciate that.
Rob [01:20]: Totally. Me as well, I’ve been back to work essentially two days. I did some work over the weekend to try to catch up on e-mail. I had a big backlog, but I spent the last two days kind of cranking though and getting caught up and really figuring out the focus of the next couple of months because it’s kind of time to continue building what we started during the summer with Drip. We’ve been doing webinars. We ran a contest. We have the content [?] going. We have a ton of integrations going. There is just a lot going on. While I was away in Europe, I was able to keep pretty close tabs on that.
What is nice is with [Slack?] and e-mail and get GitHub with Codetree on top of that. It was just easy for me to keep an eye on and figure out what was going on, to kind of keep up [the tabs?] with it. The nice part about being in Europe for that month was that I was able to do a lot of thinking and I had enough space because I was separate from the office, that I wasn’t kind of caught up in the day to day as much.
I made a bunch of notes about some entirely new projects that I want take on, some new angles about marketing and on the sales side. We actually need some inside sales help and I’m going to be looking for someone part-time to help with that. There is a lot of interesting stuff that’s on the dock and I’ll probably talk about it once more if it’s implemented. But, kind of planning right now about the next 60 to 90 days of what I see the marketing and sales winding up and then also working with [Derrick?] on figuring out what the next 60 to 90 days of the product is going to look like.
Mike [02:51]: Do you have an idea of how you’re going to go about planning that stuff? Is it going to be based largely on, I guess, interpretation of what customers are asking for or do you have specific things in mind that you know need to be done and it’s just more matter of prioritizing at this point?
Rob [03:06]: It’s the ladder, yeah. We have a couple of hundred feature request, additions, tweaks, some of which have come from internally of how we want to make the tool better for our own use. I use Drip- we use it for MicroConf. I use it for my book. I use it for the podcast. I use it for Drip and HitTail. I use it for ZenFounder and Startups For The Rest of Us podcast. I have a [?] of use cases on my own and we use it internally. Everybody in there is kind of putting feature request in.
Then we have customers constantly asking for stuff so the list is long. The challenge is prioritizing and figuring out what is the next thing that is going to either retain the most customers or get us the most new customers, and that’s really the evaluation process we are going through.
Mike [03:54]: Cool. What are we talking about this week?
Rob [03:57]: This week, we got an e-mail from [Casey Collins?] and he asked a question that spurred me to basically outline an entire episode, and his e-mail reads, “I’d been interested in hearing an episode on how and when to make the leap from the day job to working for your business full-time. I’m working a standard full-time job and just starting to build my SaaS app. What goals or milestones should I set to gauge whether or not I’m ready to make that leap.”
We’ve prepared seven milestones that I think you should target along this path. It may not be the same in every case, but this is a nice general framework to kind of get you going. Under each milestone, we have some action items you should take to kind of make sure that milestone is accomplished or to help you get to that milestone.
To kick us off, the first milestone is preparation, it’s really pre-milestone. There is a couple of things here that I think are key if you are going to embark on this journey and try to get from salary gig to making a living from product or even a productized consulting service. The first thing I think you want to keep in mind is that having a runway of some kind, some type of cash runway is amazing.
If you can get three months of living expenses, awesome. If you can get six months, even better. Because, even once you make the leap and you have an app that’s covering a good chunk of your income, it is so nice to have that comfort and the lack of stress by knowing that there is a chunk of cash in the back that you can turn to if you need to in like a dire situation or in case anything goes wrong as you make this jump to living off your product.
Mike [05:33]: I think something that kind of goes along tightly with that is making sure that you don’t have a lot of debt when you are trying to start a business. Debt itself can be crushing especially if you are floating a lot of money on credit cards or different debts that you’ve accumulated, whether it’s student loans, or mortgage, or car payment, or even just things where you have refinance something. Or you have financing on something for like your house, whether it’s like roof or siding or anything like.
Any of those debts, they basically weigh you down and they can make it much more difficult and much more stressful to start a business because you have all this interest in extra debt that you’re paying on a monthly basis. Yes, in some cases, it’s very valid, but it also hurts a lot because you have to pay attention to that and there is mental [?] associated with all that stuff. It’s not just about reducing the cost of your day to day living expenses, it’s about reducing the outgoing cash flow on monthly basis as well. Not just [?] cash itself, but the interest associated with it too.
Rob [06:31]: If I were in a position where I had $10 or $20,000 of credit card debt and I was considering going and start a product business, I would not start a product business. Instead, I would take my evening and weekend hours and I would do freelance work and I would pay that debt full before I did it. That’s just my style. I think that’s probably the best advice in most situations.
But, as you said, it’s just like anchors it, like sucks the cash out of you and it’s really going to be that much harder to start to make a full-time living off a product. It’s not hard enough without having that as well. I think the second piece of this preparation milestone is to get buy-in from the key people in your life. That’s most likely a significant other, whether it’s a girlfriend, spouse, husband, kids who are old enough, maybe it’s them, maybe if you still live with your parents, it’s them. But it’s someone around you who is going to be impacted by this. I think that’s the biggest deal, right, is are they going to be impacted by taking this leap?
If you share finances with someone else that someone who kind of needs to do the buy-in, and I think a husband or wife is a perfect example of this. Without getting their buy-in, A: you’re not really treating them with respect, like you’re going to be making financial decisions that could negatively impact the partnership and could negatively impact both of you and that person deserves a say before you do that.
Then the other thing is it can cause a real rift. I mean, businesses can cause divorce and it cause people to split up and that’s not something you want to do. I think having that conversation really before you start building this app and going on this [?] pretty tough journey is a good step to take.
Mike [08:11]: I think sometimes it’s difficult to explain exactly why it is that you want to do this. Because, building your own business is a heck of a lot harder and more involved than just going out and getting a full-time job, and you get the income from that full-time or the consulting revenue fairly quickly. Trying to relay that information about, “Oh, this is why I want to do this” and if you’re looking down the road a long term fulfillment or the monetary rewards down the road, it’s not always clear cut to most people.
I find that my brain tends to be wired a lot differently in terms of how I look at things like that than other people I know who are not entrepreneurs or not doing their own thing. They have a 9 to 5 job, they go to it, and they come home and they don’t really see how, “Oh, why is it that you’re working on this thing that you’re not seeing any benefits from it right now” and it could be very difficult to explain that kind of stuff.
You really do need to be on the same page, not just in why you want to do it, but what are the long term benefits of it. Let’s assume that you are successful and that also goes along with making sure that you’re relaying information about how things are going to your significant other, because they need to know how things are going, because they are invested in the relationship, maybe not necessarily in the business they want you to be successful, but as a by-product like it does affect your relationship and it really can hurt it over time.
Rob [09:30]: Yeah, I agree. I also think that I would consider giving someone who had a lot of questions about this and really wanted to begin with, give them the book “The End of Jobs.” Taylor Pearson came on the podcast awhile back but it helps explain why entrepreneurship is actually a logical choice and can be as good as or better than employment, especially moving forward, and it makes it kind of logical argument around that.
Last step for preparation is to put together a spreadsheet with estimates of how long it’s going to take to build what you need. At this point, it’s going to be more of a guess because I’m assuming you’re just starting conversations with customers or future customers at this point so you may not know exactly what you want. But a problem I see with some folks who are building products, actually, many of them, is that they don’t have any concept of how long it’s going to take them to build what they are building, and they just sit down to build the next page in the website, really, without a spec telling them what the overall scope of things is and no concept of when they will be done.
When I say spec, I don’t mean that you write some type of full functional spec like you would if you’re a consulting firm, I mean, a few lines on an Excel spreadsheet or a Google Doc that basically says, “Here are the high level” whether you want to do it from database up or top down from the UI element.
I’d typically go from UI stuff and you say, “How much each page is going to take you” and then you add some leeway time and you add some database architecture time, and some deployment time, and you can get a reasonable estimate, even if you’re not that great at estimating. If you’re within 30%-40%, that will help you know, is this a true year development project you’re tackling or is this a 3-month development project you’re tackling. Knowing that from the start is huge, and I think doing that, I feel like you’re flying blind and you have no concept of what it is you’re building and how long it’s going to take.
My other kind of final act for this is there is this cool function in Excel and in Google spreadsheets, called Workday. If you put all the numbers in, forget how many hours it is, you could put workday in and you can figure out what date that you’re going to complete this project, and it will give you the date as of today if you work certain amount of hours per week.
Then, if you don’t work in a week, that date pushes out and so this is a very tangible and real way to watch your date slip, really, without any work acquired on your [?]. Every time you log into this thing, you’re going to see, “Oh man, I’m not going to launch until February of next year” and you really need to get on this thing.
I think this is a key component to preparation as to have a concept of the scope of what you’re building, even if that changes, you’ll be within a month or two of it and when you’re working part-time like this nights and weekends, having this is I think a big kind of sanity checker to be able to have an idea of how long you’re going to be working on this on the side.
Mike [12:14]: Yeah. I think that’s a great suggestion. I didn’t know about the workday function, I use FogBugz and Teamwork and couple of other tools. But the interesting thing about that is that it’s almost like if you’re using a GPS and tells you that you’re going to arrive at 5:10 PM or something like that and you hit traffic, and suddenly it’s taking you longer and it continually pushes out.
At the end of the day, of course, when you’re 30 seconds away, of course, it’s going to be extremely accurate. But the further you are out, it is less accurate and that helps to give you an idea of how far you’ve realistically are from it. Because the further you are away from something, the more difficult it is to estimate it and I find that when you have a lot of test that you’re not necessarily as familiar with doing because you don’t do them on a regular basis, you can be wildly inaccurate by as much as 10x of how close you are with just your initial estimate.
Then even the things that you are familiar with, those things are very often inaccurate as well. I’ve seen developers who are like, “Oh, this will only take a couple of hours” and inevitably, it takes two or three days. I think I saw something recently where it basically said, “Take any estimate you have in order of magnitude in order to make it accurate.” I wouldn’t say that that’s necessarily far-fetched in many cases.
Rob [13:26]: That was our first milestone preparation. Milestone number two is to have one person commit to paying you for your product, and this is standard customer development, right. It’s getting that commitment and trying to validate the idea [?]. Notice no one has written any code yet, don’t go often build your product. In fact, Casey had said, “I’ve just started building my SaaS app.”
Casey, I would advise you to stop building your SaaS app and go do this instead. I say one person committing to pay you, that’s the first milestone and really, the next one, we will kind of combine it with this, is to get 10 people to commit to paying you. Name a price, get 10 people to commit and this is going to happen in person conversations, either in person, via Skype, or via e-mail, but it’s going to be one on one conversations. You can do this with split testing and sending bulk e-mail and using surveys. Right now is the time to dig in and really get 10 people, and don’t write a line of code until you have those 10 people.
That’s what we did with Drip. I’ve refused to get started on it until we had some commitments and I knew that we had enough interest that it was worth digging in and starting to write code.
Mike [14:32]: I think that step is really hard for a lot of people, because they don’t have anything that they can really show to people, yet, you’re kind of asking for people to make commitments to pay you for something that just simply doesn’t exist. The term that comes to mind is [vapor?] [?] “Oh, you’re selling something that just doesn’t exist.”
In some cases, the advice is, “Oh, you should definitely take somebody’s money and there is a counter advice which says that you shouldn’t, at a very least, get the commitment. But those two things are just kind of a natural progression. If you get somebody to commit paying you money, that’s only one more step to get them to actually give you the money. If you don’t deliver, if you don’t follow through, then give the money back. It’s not that big of a deal.
I was talking to a couple of entrepreneurs who deal in the real estate space and they were having a hard time doing this and I kind of put it in perspective for them because I was like, “Well, how much are they paying for some of their leads and how much are they making from some of the different things that they are doing” and of course, it’s thousands and thousands of dollars because it’s a percentage of the real estate transaction.
I was like, “You’re asking them for a commitment of $100 to $200 which is not a big deal and later on, few weeks later, we talked and they are like, “Oh yeah, I went out and I did that and I got three people to give me a $100.” And they are like, “Oh yeah, it was no big deal at all. The other person just didn’t even blink.” They are like, “Oh, $100?” “Sure, no problem, whatever.” Because in the [grand scheme?] things to that business, that $100 does not make a difference, but to an individual, it might.
It does depend a little bit on the type of business that you’re talking to. But getting that commitment means a lot and it helps you really determine, whether or not, it’s something that people are willing to pay for. Whether you ask for the credit card or you just ask them for that commitment, each of those things are a step that takes you a little bit further and it really just depends on how far you want to go.
Rob [16:14]: I agree with you that this is hard for most people and most people don’t do it actually, and this was very hard for me when we were getting Drip started because we wanted to build the thing. We just knew that everybody was going to throw money at us when it was done, and these conversations are hard. They are uncomfortable because you have an idea of what you want and you feel like when people tell you that they don’t quite understand what you are really saying, they don’t really get what you want to build.
But this is when the iron meets iron and the sparks fly and you have to figure out your vision for your product is correct, or if you need to make adjustments, or if you’re just not describing it well enough. This is where- I didn’t have anything to show. We had no screenshots. If I were to do it again, I would probably try to produce a screenshot or two or a flow diagram or something to demonstrate it, but all I had was a list of bullet points and it was just a value proposition.
You don’t need to walk through and say, “These are all the screens that are going to be in there and then you’re going to click this button and then that.” That’s not the point. The point is would you pay for something that does this, that gives you this end result, that’s what you’re selling here. You’re really selling a solution to a problem rather than an actual piece of software at this point, and you’re just finding out, “Is this enough for a problem that you would pay X dollars to have it solved.”
If you can get commitments for that, then you have to solve the problem, and maybe the software you have in mind right now, solves that problem and maybe it doesn’t, but at least to just start. If you launch that version 0.5 and it doesn’t quite solve it, then you iterate on it until it does solve that problem. But if you valid that this problem has a need, and people are willing to pay $100 a month for this thing, that’s a really good start, that’s 10x better start than most founders I know have these days, when they start writing code.
The second piece of the second milestone, which is basically to get 1 or 10 people to commit to paying you is to start building your launch list. It’s what to do right after you do get those commitments or as you’re going about getting those commitments. The traditional advice that I would give is to get a landing page up and start collecting e-mails from day minus one before you start writing any code, but you and I had a discussion offline, and doesn’t have to be an e-mail address that you ask for, it’s going to depend on your market.
If your audience is online, then yes, an e-mail address and a first name is fantastic, super helpful. But maybe you could ask for phone number instead if you feel like that’s going to be a quicker or an easier way to get in touch with people, or maybe you can just have a button right there that says, “Hey, if you want to hear about it when it launches, if you’re all in, give us your e-mail or otherwise, click this button right here and this will call me on Skype.”
There is like click to call services all over the place where they can click and they can either have a phone conversation with you right now, or they can schedule one. I can imagine some developers listening to this might think [you?] I don’t want to be talking to people, right, you just want to go in a basement and write code. I’m not saying you’re going to have to talk to people every time you sell every copy of your product. But at this point, this early in the game, if you’re trying to build something that people want, you have to get into conversations with people in order to figure out if what you’re building is going to solve their problem.
Mike [19:13]: I think that’s probably the most painful part of this is because we are so used to writing code that like that’s all we want to do and it does make sense because that’s kind of your comfort zone. It’s what you’re familiar with and you’re trying to talk to people about something that is very nebulous, it’s an unknown, you’re just trying to get to the heart of, “Okay, well, what is it that you would actually pay for as oppose to solving a problem” that somebody came to you and said, “I have this problem, solve it for me and please write code to solve this.”
What you’re doing is you’re kind of going at it from another angle which you’re just not comfortable with, trying to say, “Well, what problems do you have and are they painful enough that you will pay me for them or pay for a solution to them.” It’s just because of that, I’ll say, that awkward angle of approach, it makes it difficult for most people that are trying to make that mental leap.
Rob [19:57]: The last piece I’ll say about this building your launch list is we get this e-mail a lot saying, “How do I drive traffic to a pre-launch landing page?” and frankly, [?] you would do it after launch, you can do it pre-launch. There is SEO, there is pay-per-click that was mentioned in forums, there is in person conversations, there is called e-mails, and there is all types of stuff.
The point is not to get hung up with figuring out the silver bullet that’s going to drive this. The point is, at this point, really trying to validate the idea, make sure some people will pay you for it, and trying to build as large of an interest list as you can. Milestone number three is to get that first paying customer and this is that point, you’re still pre-launch, right?
But let’s say you’re approaching launch. I think this is when you probably have a beta version that does something and it does something well enough that some person says, “Hey, I’m really willing to kind of take a leap on you.” You give that credit card form, maybe you’ve let him use the app, you’ve let him tried out, get some value out of it, and then you ask him the big question [?] getting enough value out of this to pay X dollars for this app, whether it’s one time or monthly, and this is a big milestone. It’s milestone number three, which is basically to get some amount of money in your bank account from someone who is willing to buy your app.
Mike [21:14]: You’ll notice that this kind of comes before the full launch for the product. I think the last thing you probably want to do is to launch your app and have a ton of people using it, and only to find out that there are major problems with it, or there are things that you hadn’t considered in solving the problem that other people are having. I’m kind of a big fan of like the slow launch, where you take the product, you put it out there to like one or two people and get that feedback from them that you need in order to help make it better, but to also help flush out the bugs because you’re not going to have a perfect product from day one, and you want to start getting that feedbacks, so you can have conversations around some of the deficiencies of the product. Because there will be deficiencies, it’s not going to be perfect out the door.
The other thing that that does as kind of a side effect is that when somebody comes to you and says, “Hey, I like this and all but it would be great if it did this.” If you’ve already had those conversations, you kind of have a ready answers for those types of objections, and you can use that to help push people in one direction or the other, either that’s to say, “No. We are not going to do that because it just doesn’t make sense, it’s not in the road-map” or you can kind of twist that and say, “Well, yes, it is. That’s something that we are going to do and we are putting it in next week. Can I call you then or can we talk about it and revisit this conversation at that point?”
It puts you in a position such that you can have those conversations, you can have intelligent answers immediately at your tongue so you don’t have to sit around and agonize over what should I do here because you’ve already have the conversations, you know what the answer is.
Rob [22:44]: Milestone number four is to actually launch. Obviously, we can and have devoted entire podcast episodes to launching so I don’t think we should [?] this point. But what I do want to call out is that launching is maybe your halfway point. It might even be your third of the way point, because you barely have any revenue at this point. You kind of know that you might solve a problem for a small group of people.
I mean, you are really, really early in the game, so don’t feel like the launch is the finish line. The launch is when you e-mail your whole list and you try to convert as many as possible, you should have a really good launch day in terms of how many people you convert because this is your biggest interest list, make sure not to [conf the app?] to everyone on your interest list. It’s like the catastrophic mistake I’ve seen folks make. [You have?] 500 people on your list, it’s the most interested people you’ve gathered over the past six months while you’re building it and then you just give it away free to everybody on the launch list just to try to get them to use that and that’s not a good way to go.
If you actually want to make some revenue and get to the point where you can quit your job. This is milestone number four. It’s essentially getting to launch, getting through it, and getting some paying customers. Milestone number five is getting that first paying customer post launch from a cold lead. This is really starting your marketing after you’ve gone through your e-mail list or I should really say, continuing your marketing, because you should’ve already started it when you’re building your launch list, but it’s continuing to do those things and getting that first paying customer who signs up after launch.
This is really getting that first paying customer after you launch and now you’re building up towards that point of your quit my job income. I really should’ve added one more point to the preparation milestone, something you should’ve done before this is to figure out what is that number that you need to quit your job. It’s not your salary replacement, right, you might make $15,000 a month in your salary. But if you can cut your expenses and live on $7000 or $8000 a month, then that’s what you’re looking to do.
That should’ve been up in step one, is figure out your number, figure out the number that you need to hit. Right now, we are at milestone number five and you have your first paying customer from your cold lead after your launch, and you should be working your way towards that quit your job number that you figured out.
Mike [25:01]: I think part of the process that you go through after getting this first customer is to identify ways to make acquiring that customer or that type of customer repeatable. It’s really difficult, I think, mainly because there is such a small sample set here that you’ve only got one, what is it going to take to get another or should you go off in a different direction?
I think that most cases, you really want to try and figure out, “Can I repeat this?” and if not, “Are there adjacent areas where I would be able to easily get more customers?” so it’s about trying to expand from that one customer that you have into other people who are also cold leads, how do you go about [?], can you set up e-mail campaigns, how do you drive traffic, should you work on paid advertising.
These were all questions that you kind of have to answer and figure out which channels are going to work for you and which ones aren’t, and that’s not always easy to do, but there are definitely great resources out there like the Traction Book from Gabriel Weinberg and Justin Mares, that talks about all the different marketing channels you can try, and how to go into those and start testing them to see what will work for you, and what will not and what are the kind of the low hanging fruit for your type of business based on where your business is today.
Rob [26:13]: This is what I like to call, the scratching and clawing phase, because you’re basically doing anything, even stuff that isn’t repeatable to try to get to your number. As you said, you might be doing things that aren’t repeatable but you’re trying to figure out how to make them repeatable. The ones that work so so, you kindly leave behind, and the ones that work the best, even they are very time consuming or require a lot of manual effort, you still need to do them.
This is where your [?] things that are not going to scale at all. Because they don’t need to scale, they just need to get you to that $7, $8, $10,000 a month mark where you can quit your job. The last two milestones are really very similar. I put milestone six as hitting an arbitrary 50% of your income and this is having a net profit after expenses 50% of your income number that you need to quit your job.
Frankly, it’s just a milestone to celebrate more than anything. I don’t think there is any action items to take care other than to high five yourself and maybe have a nice sip of scotch on your way to reaching this income. This might take a few months, this might take a year. It depends on so many factors, but it’s when your heads down and you’re hustling, I find that having these milestones that you can celebrate with your mastermind group or with your significant other become a really big deal on your way to milestone seven, which is hitting that full income number that you need to quit your job.
As I said before, don’t try to replace your salary, just figure out how much it is you need to live and focus on that. The other thing I would look at is just decimating your expenses. Mike, you talked earlier about getting rid of debt, I know a friend who like sold a rental house that he had own for a long time and I think it was like upside down, so the rent wasn’t paying the mortgage and he went to this whole process of selling that before he tried to do this. I sold thousands of dollars of stuff on eBay and Craigslist as I was trying to make this transition. I mean, talk about scratching and clawing and doing things that weren’t going to work long term.
This is when you really have to kind of go to the mattresses and figure out what is it that I need to do, it’s not you’re responsible in order to kind of push me pass this point to where I feel comfortable, that I can leave my gig for the product income I have. Because, it’s never going to feel fantastic, right, it’s never going to be like, “Oh my goodness, I have so much income and I have so much free time and I’m just going to leave when I want to.”
You’re not going to have enough time before you have enough income, if that makes sense. I mean, you are going to be working 40 hours during a week for your day job and then 30 hours a week at night way before you have enough income to actually leave the job. You really have to kind of maximize this thing if you want to leave the job as early as you can.
Mike [28:51]: This is one of those situations where it’s unclear early on but as your income from the side project becomes much closer to your full-time income, this is where that runway becomes super important. Because, if you have that runway and you’re able to reach, let’s say, the 50% of your income, well, suddenly, if you had six months of runway before you started this process, once you’ve reached that 50% of your income mark, you now have 12 months of runway, not just six. Because, you essentially have all this money in the bank and the money that you have coming in on a monthly basis, essentially, extends that runway for you.
As your monthly income goes up, your runway gets longer and longer. Obviously, there is subtleties in there where the business starts to tank or things aren’t going so well, your runway can decrease as oppose to increase. But it’s helpful to have that, it really helps from a piece of mind standpoint and being able to, as Rob just said, decimate your expenses and get all of those things off the table. They help to avoid eating away your runway, and getting rid of those expenses that you just simply don’t need.
Rob [29:56]: Last thing I will add about reaching this seventh milestone of kind of your full income that you need is to think about how stable that income is, is it going to fluctuate? Because obviously, if it is a bunch of one time sales and you know that you’ve started zero at the start of the next month, then maybe you need more margin, maybe you need more runway. But if you have something that’s pretty consistent, even if it’s not a subscription, but let’s say it’s a WordPress plugin or it’s a website that has nice, solid, organic SEO and it’s pretty consistent month after month, then I think that you have a little more reason to be confident in that.
Obviously, if you have true subscriptions like SaaS apps or membership website or something like that, then maybe you need a little less margin and can leave as you approach that number. I don’t necessarily know that you need to hit that number if you can see your growth number is going up and you have a trajectory that you know within a month or two you are going to hit it all together.
I stopped doing consulting when my product income hit somewhere around 70% to 80% of my number, and remember, my number was way less than what I was making consulting. But when I got to that 70% of that number that I knew that I needed to make a rent and take care of the family and such, I knew I probably make it work for the next three or four months and kind of grow the revenue to get there because I was pretty desperate to get away from work and for other people.
Mike [31:16]: Yeah. All of this is about risk tolerance at the end of the day. I mean, that income stability and being able to cut your expenses, it’s a way to help mitigate the risks of going off and doing your own thing and not being reliant upon an employer for W2 form or 40 hours a week or what have you. You want to be able to being control of your own destiny and sometimes that means taking a little bit of risk. That doesn’t necessarily mean that you should put it all on the line and take an extended amount of risk. But there are certain cases where it does make sense to do that and it’s all about risk mitigation.
I’ve talked to people before where they think, “Oh, you’re an entrepreneur. I can never do that. It’s too risky.” The reality is that almost every entrepreneur I’ve ever talked most of them don’t like taking huge risks. They like to figure out what the risks are and do whatever they can to minimize or mitigate them or make sure that it’s not going to be a problem. It’s not about having high risk tolerance, it’s about making sure that the risks that are there that you are aware of, you try and do as much as you can to get rid of those risks. The reality is like that’s what this entire outline is about, it’s about how can I minimize the risk of going out on my own.
Rob [32:23]: I’m glad you brought that up. I’m actually listening to an audiobook right now, called The Self-Made Billionaire Effect. It is that small group who researched and studied a bunch of self-made billionaires. They had a list of 600 and then they randomly narrow it down to 120. They tried to do a scientific study of them and their predispositions and distill some of the characteristics and the behaviors and one of the things they said is that they did tend to have lower risk tolerances.
They were not these crazy risk takers like the world mythologizes and the press talks about. Not that we are trying to build billion dollar businesses here, but I do think that the sentiment is shared. That most of these successful founders I know are pretty methodical and consistent and they don’t tend to just jump around and take these massive risks like I think people think they do.
Mike [33:09]: That wraps us up for today. If you have a question for us, you can call it in to our voice mail number at 1-888-801-9690, or you can 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. You can subscribe to us in iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 253 | Key Takeaways from MicroConf Europe 2015
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.