Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike give their thoughts on the ultimate guide to email sequences. Based on an article they define an email sequence, discuss why you should create one, and list the different types of sequences and their purpose.
Items mentioned in this episode:
- The Ultimate Guide to Email Sequences Article
- Drip
-
What Got You Here Won’t Get You There: How Successful People Become Even More Successful
- Bluetick
- CartHook
Transcript
Rob [00:00]: In the episode of Startups for the Rest of Us you are about to experience, Mike and I give our thoughts, feelings, inspiration. What else Mike? Our perspiration on an article called ‘The Ultimate Guide to Email Sequences.’ This is Startups for the Rest of Us, Episode 333. Welcome to Startups for the Rest of Us, a podcast that helps developers, designers and entrepreneurs be awesome at building launching and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:35]: I’m Mike
Rob [00:36]: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What do you think about that new intro?
Mike [00:40]: I don’t know. I don’t think I’ve ever heard you read the intro that fast before.
Rob [00:45]: Yeah, I know. I kind of zipped through it. What’s going on with you?
Mike [00:48]: Still working on doing demos and stuff for Blue Tick. It’s interesting. I’m talking to more and more people who want to add teams and so far the apps are only geared towards single users just because of all the other things that need to go into it in terms of privacy and data sharing between different people, even within the same account. Right now, we’re working on trying to figure out how to extend the system to support people who are working in more of a team environment and figuring out how to essential overlay permissions within a subscription over the top of what we’ve got and without breaking things, obviously because that’s kind of important. It’s been a challenge so far so it’s more about [?]. Things are going well.
Rob [01:25]: All right. But you do have customers that are coming on board that don’t need team stuff, right? That’s got to be your short-term play while you architect, build or whatever you’re going to do with the team stuff. It doesn’t seem like teams should stop you from launching, right? Or at least it doesn’t seem like it should stop you from getting to that 25 customer mark.
Mike [01:43]: No. I’m definitely not stopping it but it’s like we have to figure out how it’s going to work and think about all the different places where we need to make changes and that’s really what we’re doing is we’re planning it and trying to identify where the challenging spots are and if there’s any other things that are going to need a change under the covers because of it and then again the privacy issues just because we’ve got access to people’s mailboxes. A quick example, like let’s say that somebody throws a-when you throw a new email address into the system, up until that point, we don’t download any of the contents of the emails associated with it. As soon as you do, then we go back and we say, “Okay, well, these were all the emails that were sent and received to that email address. Now we’re going to download the contents of them so that they can be then displayed inside the app.” Let’s say that you and I are in the same account and you’ve emailed your wife, for example, and I throw your wife’s email address in as a contact, well, it’s going to trigger that. Should things be shared? Should they not? It’s just a very difficult problem to work through and think about the implications of everything. That’s where we’re focused on. You’re right. It doesn’t stop us from moving forward on all the other stuff and I’m certainly not. My work around [?] at this point is, “Hey, let’s sign you up for multiple subscriptions and then we’ll figure it out.”
Rob [02:57]: Yeah, that’s nice. Having a work around is huge. That’s what we’ve realized over the years. Someone always wants something that you don’t have yet. If you can figure out a way to get them set up in a way that is at least reasonable and they can continue to use it until you get that feature built. It’s pretty nice. That’s the way to get a lot of customers. That’s why I found with the best sales folks are the ones who don’t just listen to the customer say, “I want permissions,” and so it says, they come to tack and say, “All right,” the product team and they say, “All right, you need to build permissions.” But it’s like, “No, there’s probably a work around and like you’re saying, being able to have multiple accounts is one way to do that.
Mike [03:34]: I had somebody who wanted to do something and I said, “Hey, let’s get out a call. I just want to talk for a minute or two,” because he was already a customer. He’s like, “Hey, can I add somebody else in?” We just got in a call and talked it out. All he wanted to do was be able to send the emails from another account as well. I was like, “You can do that today. You don’t need a full blown account or anything.” We basically just bypassed the issue entirely, which was nice because I added another user and it didn’t take any real extra work on my part in terms of engineering or anything like that. It was just a quick call to say, “What is it you’re looking for?” As soon as I found it out, he’s just, “Okay, yeah, let’s just do this.” Made it easy.
Rob [04:09]: Cool. On my end, I only had one thing this week. I am about a quarter of the way through a book called ‘What Got You Here won’t Get You There: How Successful People Become Even More Successful.’ The reason I’m pretty intrigued by it, it’s written by Marshall Goldsmith and Mark Reiter and one of them is a masterful consultant for successful people and what he’s seen in his patterns over the years as he’s worked with these folks is that a lot of successful people still have a major flaw in their personality that is holding them back. He basically goes through the 10 or 12 that he’s seen. One of them is you give too much feedback or you always feel like you need to chime in [?] on your team or you’re too negative and you always poke up the holes or you’re too casual. There’s just a bunch of different things. What I like about it is A, its from his experience with hundreds and hundreds of clients, perhaps thousands of clients and he basically says when you tell this to a successful person, that they have this issue, they almost always say yeah. They either deny it or they say, “Yeah, but that’s why I am successful. I’m successful because I see the negative in everything.” He’s starting to build a case against taking these flaws and not trying to fix them. That’s what a lot of folks will try to do because they say, “No, that will make me not who I am. I won’t be as successful.” It’s a fascinating topic of conversation. As he read through a bunch of the behaviors, most of them I was like, “Yeah, I don’t do that, I don’t do that.” And then there’s a few it’s like, “Ha, I may need to ask some people like am I on the border on some of these?”
Mike [05:44]: It’s interesting. It reminds me a little bit in some ways of Gabriel Weinberg had a blog post about how the things you do in terms of your marketing, they will work to a certain extent and then you get to a certain point and beyond that, those things just don’t work for you anymore. I can see the same thing in terms of personal development, growth and being able to lead the business. Some people have that ability to create a company and build it as a startup and then build it to 105, 100 or 1000 employees. There’s other people, they can get to a certain point and then after that a lot of them end up getting forced out of the business or taking a back seat to somebody else just because they really don’t have the skill set, the personality or the capabilities to take business to the next level. I can definitely see myself falling into some of those categories along the way. I think being able to recognize your faults, your inexperience or inflexibility in certain situations is probably a benefit more than a hindrance. Being able to say, “Yeah, I understand that and I will try to avoid that situation,” is a little different than denying it.
Rob [06:47]: Here’s what I like about this book. Again, I’m only a quarter the way through it but already it’s just surfaced a bunch of anti-patterns in terms of behavior and personality. It isn’t necessarily for successful people. Even if you feel like, “I’m not very successful,” it’s still going to bring up a bunch of patterns that you should think through yourself. That’s basically what I’m doing. It doesn’t come off as super, self-help or personal development book but that’s exactly what it is and it’s doing a really good job of it because it’s making me think quite a bit as I’m listening how can I improve in these areas. Those are the kinds of books I enjoy, the ones that make me think about my own behaviors or my own motivations and get me to improve on those.
Mike [07:27]: Awesome. Anything else going on this week?
Rob [07:29]: No. I think we’re just talking about this article here. I ran across it at webprofits.agency and its own their blog. We’ll obviously link it up in the show notes. The article is called ‘The Ultimate Guide to Email Sequences.’ What’s funny is I read through the article and I was like, “This is pretty, you know, this is a nice guy.” I figured we can touch on some points here because it’s a nice overview of all the different types of all email sequences. If you’re not using some of them, you probably should be. These are all handy things to improve conversions, improve attention and that kind of thing. Once we got on the call beforehand, you were saying this is actually webprofits.agency is Sujan Patel’s company. [?] like a growth consultancy agency. Sujan Patel is a speaker at MicroConf starter edition. He’s been a long time colleague of mine. He’s interviewed me several times, a really good guy. It’s kind of funny how small this world is of startups and marketing.
Mike [08:23]: Yes, so let’s dive right in.
Rob [08:25]: All right. The article starts off talking about what is an email sequence. It says, “Let’s define it. An email sequence is a series of emails sent based on pre-set time intervals or trigger based automations or both.” You can either be time-based, where it’s like you’re going to get this email and the next one is three days later and then the next one is five days late or it’s going to be based on an action like not logging into your software for a week or clicking a link in an email or clicking links in the last three emails, etc. The next question is so why create a sequence? The beauty of it is, this is from the article, email sequences are automated, right? When you use both timed and trigger-based emails, messages go out when they are most likely to have an impact. Speaking from my experience, the reason I like email sequences and email mini-courses and I’ve been using these in most of my businesses for going on-it’s more than a decade now, is because they are set it and forget it. Aside from updating content when it gets stale, putting one of these email sequences lifts whatever conversion rate you’re going for. If it lifts it, it just lifts it forever. For every new person that signs up, it’s an evergreen sequence, as opposed to-the alternative is broadcast emails, which are sent out to your whole list all at once. They go out once and then you have to create new content the following week.
Mike [09:44]: One of the pieces of that, that I like the most is the fact that it calls out the fact that you can send out these emails when they’re most likely to have that impact. Lately when I’ve been doing on my Blue Tick demos, one of the things that I like to call out is that there’s a specific email in the sequence that goes out at 7.12 a.m. which I am almost never up at that point. I am up but I’m not sitting down at my desk working. That email goes out at 7.12 and so far that’s the one that converts the most. There’s lots of people that get that particular email and then they come through and they sign up for a demo. It’s just interesting you can use those as different touch points when it’s going to be the most impactful. There’s other situations as well. It’s not just like the broadcast emails. It’s, let’s say, somebody goes to fill out a form and you know that they went there but then they didn’t fill it out or they abandoned their shopping cart. There’s a bunch of products out there that will identify who those people are and then allow you to communicate with them “Hey, you didn’t finish this. Did you forget? Did you get distracted?” There’s lots of reasons why somebody didn’t follow through with something and most of the time it just because they got distracted. It’s not because they went to the page and then decided, “Oh, I actively do not want to do this,” or they see something that makes them turn away from it. It’s more that something else came up that they needed to deal with and it took priority. Being able to nudge them in that direction and essentially bring them back to the table is super helpful.
Rob [11:04]: So now we’re going to take a quick look at the eight different types of sequences that they call out in this post. We’ll go through them fairly quickly due to time constraints but obviously you can refer to the link we’ll have in the show notes if you want to dig in any one of these. They have examples with screenshots and that kind of stuff. What I like about this list is it made me think are we doing all of these with Drip? Are all of them relevant? If not, how do I get that into somebody’s cue to implement this? To dive into the first one is to nurture sequences. This, again coming from the article, it says what it is, “An email message or series of messages designed to help introduce subscriber to your company. These messages may be used to deliver any promised opt-in bonuses, like a coupon code or a lead magnet and they should set subscriber expectations on the frequency and content of the messages they will receive in the future”. I like to think of these as lead nurturing. It’s trying to get someone a little more familiar, to go from straight cold to perhaps a warm or an interested prospect.
Mike [12:01]: The other thing this does is it keeps you top of mind. There’s plenty of newsletters that I’m sure you’ve signed up for as well as I have that you sign up for them and you hear from them once or twice and then you don’t hear from them for like a year or two years. Even if it’s just six months, your expectation was that you were going to be getting content on a more regular basis. When you don’t, the person is essentially restarting a relationship every single time they send an email. Yes, they are going to get some conversions but at the same time, they are not really maintaining those contacts as warm contacts. If you get an email every single week from a particular company, when you run across that particular problem in your business, you’re more likely to turn to them for assistance than somebody who drops in once every three to six months and that’s it.
Rob [12:44]: The second type of sequence is an engagement sequence. Reading from the article, “An engagement sequence aims to deepen the relationship with your subscriber. Once the subscribers have absorbed your nurture messages, engagement sequences can help nudge them to take smaller scale actions that will prime them for future conversion opportunities.” One example is an app called Pocket that attempts to engage its most active users with messages sent annually to the top 1% and 5% readers. Pocket is an app that allows you to read offline annually. I would almost want to do that more often like every month or every quarter or something. Maybe monthly is too much but every quarter. It’s like you’re in top 1% of readers. This is like engagement. It’s a little more personalized than nurturing and it’s people who may already be using your app or you have some type of knowledge of the actions they’re taking. Another example of this is Netflix which offers personalized recommendations with easy calls to action. I get an email every week or two and it’s like, “We just added a show to the Netflix catalogue that you’ll probably like.” There’s always a play button ‘add to my list’. I add a lot of those. They tend to be stuff along the lines of what I’m watching or what the kids are watching and that’s a way that it keeps our cue full thus engaging us further into using their service.
Mike [14:06]: I think the example Pocket, it seems to me a little misleading because that’s probably not-I don’t think that’s the best example that could be used here. That’s solely because it’s only targeting the top 1% or 5% of your subscribers. It feels to me like there’s probably engagement that you could do for all 100% of the people who are on your list. You could make it look more personalized and say, “Hey, we’ve got this for you just as a special gift for our reader. Here’s something you might be interested in,” and you can base that-you can split up your list in three or four different categories and based on things you’ve either tagged them with in the past or they’ve explicitly expressed interest in, you could use those things to engage them but the reality is you’re trying to get them to click on something to make sure they’re still active as a user. I think that’s just really a matter of making sure that you’re delivering stuff to them that they want and that they’re going to be interested in because if they’re not interested in anything you have to offer, you’d really want them off your list.
Rob [15:02]: The next type of sequence is a conversion sequence. Reading from the article, “Conversion sequences are your big guns. You’ve nurtured your subscribers and advanced your relationship with smaller scale engagement suggestions, now you’re ready to ask them to take action usually to purchase something. They give an example here, we did this earlier on with Drip. Earlier on it was a failed experiment. I think our actual sequence wasn’t great but we called it our ready to buy sequence or RTB. We looked at our most engaged users and prospects and we started talking to them about more direct comparisons like us versus MailChimp and here’s what we can actually do with Drip. It was less like high level, topic funnel educational stuff. We started digging into calls to action like, “You should sign up for a Drip trial and here’s why.” Conversion sequence is definitely something you’re going to want in the mix because if you don’t ask for the sale, you’re just so much less likely to get it.
Mike [15:52]: I think a conversion sequence is one of those places where you want to have a little bit more than the fine grain approach in terms of who it is that you’re targeting with this so that you can take those measurements effectively because if, let’s say you target your entire list and 20% of them aren’t well qualifies, it skews your statistics and most of us are driven by those statistics but if you look at that and say, “Oh, well, only 1% of my list converted,” it’s a little different if you look at that and say, “Let me cut off this bottom 80% because most of those people, I know that they’re not going to convert because they’re just not in the right spot, they’re not far enough along. These are the people we should be focused on,” and then pitching it to that 20% and saying, “Okay, what’s our conversion rate here? Do we have this correct,” and trying to figure out is the definition of your target prospects correct in your systems or is it not. That’s where you start looking at those conversion rates. It’s not so that you can’t look at both across the entire spectrum versus who you think are well qualified but I think going after directly those well qualified people is a better approach just because you can get more fine grain and you can identify who those people are and use that to extrapolate where you should channel your future marketing efforts.
Rob [16:58]: The fourth type of sequence is an on-boarding sequence, my favorite, I love these. The first time I launched one with [?]. Forget what it did, I think it tripled, maybe like 5x the trial conversion. It was some insane number but reading from the article, “You’ve got the customer, now don’t leave them hanging. On-boarding messages ensure your new customers understand how to use the product they’ve just purchased so they can get full use and enjoyment out of it right away.” They have a little info-graphic about seven different emails you can send. It’s like the, “Hello, welcome to our app. We can solve your problem. Hey, have you tried. Here’s a copy of an e-book and we do all these stuff.” If you haven’t gone through Drips on-boarding emails in a while, I would recommend signing up and checking it out because we’ve really honed and added a ton of stuff too. I’m pretty sure-I think we even have a video course in it that’s really a well produced video course. There’s just a lot to it. Tons to be set on on-boarding emails but just know of all these sequences, I actually think on-boarding emails may be the first one I dig into when I think about a new app. It’s like how are you going to get people to actually use your software now that they’ve signed up.
Mike [18:02]: What are your thoughts on in terms of the on-boarding process itself, the emails that you’re sending, customizing those specifically based on where the person is at and what sorts of things they’re doing in the app. When you look at an on-boarding sequence like this and you say, “Oh, here’s a general layout of what that looks like,” and then you still go to sign up for an app and they send you through an on-boarding sequence and I just did this recently with a CRM that I signed up for. I was getting emails saying, “Hey, by now you should have done this,” and it was like four or five emails into the trial for it and I’m like, “Yeah, I still haven’t done stuff too so why are you sending me stuff for like step four and five? It does not make sense here.” I did notice it. It stuck out in my mind that they’re sending me on-boarding emails and that’s great but I’m not even there. You really need to be pushing me towards getting step two done.
Rob [18:50]: It sounds like they just had theirs in some basic auto responder. It didn’t have any status of what you were up to. That’s one of the early things we build into Drip is since we have liquid templeting, there are on-boarding emails basically say, “If you have completed this step,” and I think we do it by tag, “If your tags include X, then display this messages otherwise display this other one.” We never get ahead of the steps. If you’ve done a step, you won’t get an email asking you to do that step again. There’re different ways to handle that, like I said, we use tags and liquid but with workflows, now you could do it probably even more clearly than that because you could just have the [?] stands right in the workflows. If you don’t have some type of intelligence, you need to be really vague. If you’re going to use a MailChimp auto responder for this, then you have to waffle around the issue. You can’t say you have or have not done this. You just need to be more broad with it or think about moving to a platform that has some type of automation so that you can be hat specific because you’re definitely going to engage people more and get better results if you are really specific with what they have and have not done yet. The fifth type of sequence is an abandoned cart recovery sequence and reading from the article, “A would-be buyer has left something in your shopping cart but left without purchasing. An abandoned cart recovery sequence may help bring them back.” They have an example from Shopify and of course I think of [?] when I read this because that’s what they started as, was abandoned cart recovery. There’re several apps out there that do it or you could do it. There’s people that use Drip or use MailChimp or whatever to do it. I guess you need some automation in order to do this well. I got abandoned cart sequence within the last week from a website that sells watches. I put something in there and I was thinking about it and I got distracted and it sent me a 10% coupon in like a day or two later and a couple of days later sent me a 15% off and I was like, “You know, I’m going to see if they send me 20%.” They never did but then I went back and used the 15% and it actually brought me back. I was on the fence about buying the watch but at 15% cheaper, it totally made sense. These things, not just anecdotally, these things really do a pretty good job. These are going to be emails that over time are going to make you a lot of money.
Mike [20:52]: Another thing you can do with these types of things, even though it’s not like an abandoned cart recover sequence, you can also use it for things like when somebody goes to click on a link inside of an email and you know that they’ve done that, maybe you have automation in place where if they click on the link then it tags them. I set this up in Drip for when people are going to the Blue Tick website and it’s asking for an invite. When they put in their email address, it flips them over to another page and if they do not fill out that form within 10 minutes, it starts them into a Drip sequence that sends them emails to get them back and fill out that form. You don’t have to limit this just to abandoned carts. You can do it for other key pieces of your sales process to get people to take that next step because obviously if they don’t take that next step, then they’re not going to advance in your sales process. You can use these types of automations to get them to that, whether it’s actually going through and putting their credit card information or even just filling out a survey request or form or giving you more information that you need to help advance them.
Rob [21:50]: This isn’t just for carts. Imagine you have a two step signing process for your SaaS App where the first step is your email and your password and the second step is credit card. This is what we do with Drip. If you make it through the first step, you essentially are abandoning a cart. If you leave and we have a sequence tied to that and made us have had good results, not just for selling physical goods. Our sixth type of sequence is a renewal sequence and reading from the article, “Email list subscribers become disengaged for any number of reasons no matter how many nurturing and engagement sequences you have in place. Maybe their inboxes are flooded or maybe they’re no longer interested in what you’re selling. In any case, a renewal sequence, also known as a re-engagement sequence, is your last effort to bring them back into the fold.” You could see this working if you’re selling physical goods but even with a SaaS App, if someone hasn’t logged in, in 10, 20 or 30 days depending on how often they should be logging in based on your knowledge of successful customers, this is a good way to do it. It doesn’t just have to be a ‘hey come back’, it can be when you start. Think about making it more valuable to them like a weekly summary of stats or a weekly summary of all the benefits that they’ve gotten out of your app that people could unsubscribe from of course. But if they get that kind of a default when they sign up, not only are you reinforcing in their mind all the value they’re getting out of it but this can keep them engaged if they would be normally apt to wonder off.
Mike [23:13]: This reminds me of analytics applications where you’re connected to some of your accounts and they give you daily or weekly stats on how some of your different tools are doing or how some of your different lead automations are going. For example I think KickoffLabs does this. When a new lead comes in, you can have them send you an email that gives you a summary of all the leads that came in the previous day. It helps them to say, “Hey, look, we’re still providing value to you, even though you haven’t logged in, like here’s the value that you’ve gotten out of this product.” That’s a good way to help remind people that not only do they have that tool around but it’s doing things for them and working for them and it’s a good reason for them to not cancel. You can also use them, as you said, to help bring people back if you notice that they haven’t logged in for a while or they haven’t taken certain activities and if those activities are directly tied to the value that they would get out of the product and they’re not doing them, then you can use those to re-engage those people, bring them back in to help get them moving. It’s a secondary step, if they don’t do those, then you can send them other things to help bring them back and recover them as a customer because they’re probably on their way out at that point especially if they’re not doing those key things they need to be doing to get value.
Rob [24:22]: Seventh type of sequence is an event sequence. Reading from the article it says, “Like a conversion sequence, an event sequence aims to encourage subscriber action. In this case, however, that action is attendance at an event for example a live in-person meet up or an online webinar. Events sequences rely on both timed messages and trigger-based emails for example people who register to attend the event but didn’t show up.”
Mike [24:48]: Some of the things that come to mind for this is if you have somebody who signs up for a meeting with you or you’ve register for a meeting with them, sending those follow-up emails, whether it’s 10 minutes before and then like a several hours before, this is a friendly reminder to them that, “Hey, we’ve got this call scheduled.” It helps cut down on the cancellations and no-shows but you can also use this in events or situations where you’ve got a sale going on where it’s going to end at Thursday at midnight, for example. You can time those emails to be sent out two days or one day in advance and then a couple of hours before things. We do this for MicroConf. We’ve done this for years that lead up to the deadline for those things where once that deadline passes, the price will go up, for example. That’s very effective. You can get people who are on the fence or just dropped off the radar, they’ll say, “Oh, I’ll get to it later,” and they forget all about it and it’s 3 O’clock in the afternoon and they get a reminder email about it, “Oh shoot, I’ve got to go do that because otherwise this will go away.” There’s that time sensitivity to it that can help drive the traffic in the sales.
Rob [25:50]: Our eighth and final type of sequence is called a follow-up sequence. Reading from the article, “Follow-up sequences are similar to the on-boarding sequence described above but where on-boarding messages are intended for new product users, follow-up sequences should be used whenever customers complete an action such as finishing an online course or purchasing a product. The goal of this sequence can include things that re-enforcing information learned, to keep of top mind awareness, driving referral or affiliate sales, reiterating sales messages, sharing details on the next event, etc.”
Mike [26:20]: These are kind of those transactional emails that you get for accomplishing certain tasks within different pieces of software. One thing I wondered about is the logistics of managing some of these because some of the things that people might do are so desperate. Maybe you have some insight on this. If you have, let’s say five different things that you want somebody to do in their app, if you have these things in place, do you send those five after every single one or should you wait a little while to potentially put yourself in a position where you can aggregate them and say, “Hey, you did this, this and this,” and you put it all in one email as opposed to five separate ones.
Rob [26:53]: I think it depends on how close together those things might happen because sending someone five emails in a day or two days is going to be irritating. I would definitely aggregate there. If these things are going to happen once a week or in most cases they’re going to be a week apart, then having more touch points is probably good. Those are the eight types of email sequences. The funny part is the latter half of this article is about what to look for in an email provider and I had already chosen this article and linked to it where we were going to go through it and then I read this section and I was thinking, “Oh-Oh, what if they like, totally talk about a competitor, they don’t mention Drip or something,” but as it turns out, they have MailChimp, Drip and Vero and the author actually speaks really highly of Drip and says it’s the one that they use. When I see screenshots later on, it actually shows all the Drip screens of doing automation, tags, short codes and that kind of stuff. It’s an article that’s supporting Drip but that has nothing to do with what we’re talking about in the podcast. I just found the content in this article super helpful. I wanted to share it with you, our listener.
Mike [27:57]: To recap the different types of sequences are: nurture sequences, engagement sequences, conversion sequences, on-boarding sequences-I’m saying sequences way too much here-abandoned carts, renewals, events and follow-up sequences. If you have a question for us, you can call it into our voicemail 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 comments. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 332 | A Prioritization Framework to Deal With Task Overload
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about a prioritization framework to deal with task overload. Based on a blog post by Anthony Eden, they discuss business problems and the purpose of creating a framework.
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 a prioritization framework to deal with task overload. This is ‘Startups for the Rest of Us’ episode 332.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products. Whether you’ve build your first product or you’re just thinking about it. I’m Mike.
Rob [00:25]: And I’m Rob.
Mike [00:26]: And we’re here to share experiences to help you avoid the same mistakes we’ve made. What’s going on this week Rob?
Rob [00:30]: You know you reminded me that I haven’t mentioned the conference that Drip is putting on. You know, it’s via Leadpages but it’s called Automated. And it’s the first marketing automation conference that we know about. So, we have Automatedconference.com and it’s virtual marketing automation conference April 12th through 13th. So, it’s during, I think is that MicroConf starter addition?
Mike [00:52]: Yes. It’s during MicroConf Starter Addition.
Rob [00:53]: Right. So, obviously, I will be prerecording my thing since it’s virtual. It’s nice to be able to do that. But if you’re interested at all it’s free and there’s a recording available after but I think that actually costs money. If you watch it live it’s free. And a really good speaker line up – Ezra Firestone, Laura Rotter, obviously, Clay Collins and Brennan Dunn, Anna from my team. There’s a lot of folks that are going to be dropping some mad knowledge on email marketing, marketing automation and that kind of stuff. So, check it out if you haven’t. It’s automatedconference.com.
Mike [01:23]: I almost feel bad because I think I feel like I have to correct you here. But the website says that the recordings are free if you register by the 13th.
Rob [01:30]: Oh, sorry. Thank you. I misread it. Yeah, it’s funny you know. It’s a trip – I mean I’m not putting it on myself, right. We have a conference organizer so I haven’t even been heavily involved in the planning of it. But that’s good. That’s a good way to do it. Is to give it away.
I know. Thank you for correcting that Mike. I appreciate it.
Mike [01:46]: It almost feels awkward.
Rob [01:49]: I know. Don’t worry about it. I’m glad you did so that everyone listening doesn’t feel like they have pay for the recordings.
So, how about you? What’s going on?
Mike [01:56]: Well, I did want to say congratulations over to the guys over at Snappa. They wrote in to us and said, “Hey, Mike and Rob. Huge fans and longtime listener. A lot of the strategies discussed in your show helped us grow our startup to $25,000 in monthly recurring revenue in 16 months without raising any funding. Just wanted to say thanks and looking forward to MicroConf next month in Vegas.”
Rob [02:14]: It’s pretty cool. Snappa.io and their value prop is to create marketing graphics in a snap to whip up graphics for social media ads, blogs and more without photoshop or graphic design skills. So, it’s kind of like an in-browser editor but completely designed to manipulate images and make them kind of marketing and ad worthy.
Mike [02:35]: Yeah. I mean the interesting thing about that – and saw this several months ago – was that they’ve kind of aimed it at the people who are doing advertising on Twitter and Facebook. Because all those things have image requirements that are slightly different from one another and they make it easy to kind of do all the things that you need to do to make the images social media ready or ad ready. And it’s really nice to just have a tool like that that you can just log in and – boom – you just make all those little tweaks and edits and now you’ve got your images. As opposed to having to send them out to a designer and say, “Hey, I need 10 different variations of this.” And figure out what the variations are that you need. It’s like they kind of have it built in.
Rob [03:10]: Seriously. I totally could have used this when I was running Facebook ads. I used to spend so much time in Pixelmator which is what I use on Mac to edit. And it was just redundant work over and over and over. And then I eventually outsourced it but it was always hard to keep a designer.
All the designers I find who are good, they’ll end up taking jobs. They don’t stay freelance. They either get really expensive or they take jobs. So, I was always either trying to find someone for this tiny project or doing it myself. And I really could have used a tool like this. So, congrats to Christopher Gimmer and the folks over at Snappa.io.
So, in terms of Drip updates, we’ve hit our stride. We hired, frankly he’s a UX/designer and he also slices stuff in HTML and he started like – it was several months ago now. Probably four or five months ago – but he’s really hitting stride with just cranking out front end stuff and we’ve always had like a really deep pool of rails developers on our team. And so, kind of our limiting bottleneck has often been for new features has been like front end work. And now that both Derek and – I say he’s the new guy, but he’s been with us like four or five months now – but now that he’s really hitting his stride it just feels like we’re shipping something. I think we’ve shipped like two or three fairly substantial features just last week. And, while we can’t maintain that pace all the time, I do think that we’re really hitting that stride of getting something meaningful out. And by meaningful I don’t just mean like a check box or a little tweak to this, a little tweak to that. But like an entire sequence of screens that does an entirely new flow. Like we added merge subscribers where you can merge Drip subscribers into one. We added global UTM settings so it’s several tabs of doing something that then defaults to all your links any time you put them in an email. Self-serve SPF decam which is the way you can verify your own sending domain and that’s like six or seven screens deep. And deals with the sendgrid api. So, there’s a ton of stuff that we’ve been tripping.
So, that feels good. I mean I realize Derek long ago looked me in the eye and said, “We are product people. Like the dopamine rush is from shipping features.” If you don’t ship features for a while, I start to forget that. And then having feature go out after feature, it reminds me of that’s really why I’m in this. You know? Is to get cool stuff out the door that customers are clamoring for. And then to hand that off to the marketing department and have them market and talk to support about it and have them say, “Oh this is so cool. It’s going to help our customers.” It’s a really good feeling. So, I’m kind of feeling – especially the last few weeks – just feeling up and optimistic about things.
Mike [05:31]: That’s cool. I stumbled across the merge and the UTM thing on my own when I was in there. Because I was automating my inbound lead fall for Bluetick and found those settings. I was like, “Oh, awesome.” And then I just sort of used them already. I haven’t seen the other one in terms of the DKIM stuff but I did use the other ones when I stumbled across them.
Speaking of that. I started automating my inbound lead funnel for Bluetick so I changed my homepage to have this ‘Request an Invite’ right on the homepage. That’s kind of the main call-to-action. And once you submit that, it sends the email address over into Drip and then there’s a workflow there that will wait for about 10 minutes or so because the next page after they do that is it takes them to a survey. And if they don’t fill out the survey, then Drip will start sending them a couple of reminders to say, “Hey, you haven’t filled this out. It would really help us out.” And, really, that’s essentially a prequalification mechanism for me. So, I look at that and, when the submit it, the form will remove them from that campaign in Drip and kind of put them into this sort of a holding area where when the form gets submitted it goes to a Google spreadsheet and I look at it and I can just mark it as either qualified or unqualified. And if it’s qualified then it sends it over into Bluetick and Bluetick invites them to a demo and then it creates a task and I can modify the text of the email that it gets sent to them based on what it is that they said to me inside of that survey.
I’ve started using this a couple of weeks ago and, so far, it’s working really, well because I can show people who’ve gone through that and they get to a demo exactly how they got there. And it’s just dog fooding it like a second level where I get to not only dog food it and use the product in a way that my customers would but I show them how I use it and I can show them their contact information and all the different touch points that they hit and why certain things happened.
There was one guy who replied to an email and he signed up for a demo. It was like from an email that was sent at like 7:00 in the morning. And I surely did not send that email. But he saw it and said, “Oh, yeah. I signed up for this and I filled out the survey and I didn’t respond to that first email. I should do this because you, basically, reminded me.” But it wasn’t me that sent it. It was Bluetick.
Rob [07:37]: That’s super cool, man. I mean, the dog fooding stuff we talked about a few weeks ago. But it’s a big deal. A: to get this automated to save you time. But B: to be using your own product and to be able to demo it during that process. So, you kind of have the luxury of having a product that is demo able during the sales process to the people who’ll be using it. Congratulations. It sounds cool.
Mike [07:58]: Yeah. It’s nice to be able to do that. And it’s just interesting to see the different reactions. Somebody had asked me about whether people frown upon seeing how the automation behind it is working and the fact that I’m not actually sending the emails. So far I haven’t gotten any push back. In fact, a lot of the people I’ve talked to have said, “I like that you do this because it shows me what my customers are going to see and, even though I have in the back of my mind, I know that it is probably automated. It doesn’t matter because it solves my problem.”
Rob [08:27]: Oh, I totally agree. If you were showing me that and I was your prospect, I would think that’s genius. Like the moment it pulled the curtain back and showed the ‘Wizard of Oz’ scene back there, I’d be like, “Dang, that’s it. I’m sold.” I think it’s a cool way to demo it.
So, before we dive into our main topic for the day. I wanted to revisit our goals. Kind of do a quick status update on the goals that we set back in December of 2016 because we’re almost through the first quarter of 2017. We haven’t in the past revisited them until a complete year later. And so, this time I figured we’d just take like a couple of minutes and quickly go through the goals and see how we’re making progress on those.
So, your first goal for 2017 was to log at least 100 days of exercise this coming year. And if you’re on track to do that then you would be approaching 25 days of exercise.
Mike [09:23]: Approaching 25. Yeah.
Rob [09:24]: Right.
Mike [09:24]: I’m probably at 15. Something like that. So, I’m definitely behind. It’s just not something I’ve been able to get to every single week. But there’s definitely those times where it’s not too hard to get to at least two or three a week. But then there’s other times where stuff comes up and I have to deal with it and I just kind of fall off the rails for like a week or so at a time. But I’m a little behind. It’s not outside of the realm of possibility for me to get it back up there though. So, I’m hoping to kind of play catch up a little bit.
How about you? I think you had a similar goal of two days of exercise a week. How are you doing?
Rob [09:55]: Yep. I would say I am exactly on pace. There were weeks like when we went to Cancun in late January for seven days. And I exercised every day. So, I had seven straight days because you just have a lot more time and it was gorgeous there so it was easy to get out and run. And then I’ve had a few weeks where I don’t do anything – which is a bummer. I wanted to be more consistent like two days a week. But recently, when we moved here we have an elliptical. I ran track for nine years. I ran the hurdles and my right knee is a little messed up. So, when I run on asphalt it’s actually kind of hard. I can do it but I kind of pay the price for it. So, we have an elliptical which is like a glider so you don’t have the impact. And that was busted for a while. And then I finally figured out how to fix it within the last month. And since then I’ve been at least two days a week. Between two and three. I am currently feeling quite good about that. And, frankly, I kind of need it to work off the old winter weight. And just walking around and riding my bike to work and all that. I can tell it’s starting to take a toll on me. So, I want to definitely keep up the two days a week. And, hopefully, it should be warm here in the next month or so to be able to start riding to work again.
How about you on your next one?
Mike [11:07]: So, my second one was blogging publicly at least every two weeks. And that’s a complete fail at this point. I’ve blogged once and I should be at least four I think. Is that about right?
Rob [11:17]: No. Six.
Mike [11:17]: No. Six. I should be at six by the end of this month.
Rob [11:21]: So, to me this feels like a distraction. To me your number one goal should be Bluetick getting 25 customers, getting to launch, all that stuff.
Mike [11:30]: It is.
Rob [11:30]: I know that this is a nice to have but even when you said it in December, if you go listen to the episode, I was kind of like, “Why do you want to do this?” I get why but do you really want to do this? Is this something that you think you’re actually going to do or is this kind of a punt and it’s basically replaced with your third goal that you’re about to go into?
Mike [11:50]: I think you’re right. I think it should just kind of be replaced and – If I’m going to do any sort of blogging, it would be more content articles and things like that for Bluetick. It wouldn’t really be on my personal blog. So, there’s really not much point to me doing that stuff. Maybe it could lead to book sales or something like that but that’s really not like a major priority for me at this point. Really it’s the third thing on the list which was making Bluetick profitable and that’s sucking up almost all of my time at this point.
Rob [12:15]: Cool. And we might as well just do your last one now. What’s your third goal that’s probably going to take precedent over this one?
Mike [12:20]: Well that is that. It’s making Bluetick profitable. And I think that’s going in the right direction. If people are signing on and demos are going well, I’ve got to start putting together my launch sequences and going out to my email list. But one of the things that I’ve been much more focused on lately is getting the product to the point where people can kind of self-onboard and without having me to sit there and say this is what you need to do or walk them through it.
I had a meeting yesterday with somebody who I kind of brought on on a temporary basis as a UI and UX consultant. I walked him through an onboarding process and he looked at it and he said, “There’s very obvious ways for you to improve this.” So, he’s going to sit down and work out what the priorities of those things are because it’s kind of difficult for me to understand what those priorities are because I’ve been so close to it for too long so I really want that external opinion to say, “This is what doesn’t make sense. This is what is easy to understand without any additional explanation. And here’s how we can go about approaching and tackling those problems. And this is the order that they should be done in.”
Rob [13:19]: Very cool. So, my second goal was to have one to three new angel investments. I have done zero so far. But there is one company that is doing kind of follow on round and I think I’m going to put more money into them. Given the pace that I’m likely going to do these and that it is such a sidebar for me, I would kind of include that under the umbrella. If I do follow on rounds, I know there’s less due diligence and less work to be done. But I think putting more money to work in startups is my intent here. I would say I’m on track to do one here in the next month or so and then we’ll see what the rest of the year brings.
And then my third goal was to not start any new projects. Just to run the three MicroConfs we’re running; the two podcasts; continue driving Drip forward; and take a break from kind of the chaos of always starting new stuff. One exception to that was if Sherry decides to write a Zenfounder book that I would be second author on that. And so far, this year due to health issues in her extended family, she has not begun that. But I have hopes that in the latter half of the year that might get going. So, so far, on track for that as well. I mean, it’s kind of a nongoal. We discussed in December it’s to not take on any new ambitious stuff and just kind of let things settle.
So, I think that’s about it. Do you want to dive into what we’re chatting about today?
Mike [14:33]: Sure. So, today’s episode what we’re going to be doing is we’re going to go through, essentially, a prioritization framework to help deal with task overload. I’ve started using this framework. This is based on Anthony Eden’s blog post called ‘Aligning Projects with Business Goals.” We’ll link that up in the show notes.
Anthony is from DNSimple. He had sketched this out inside of our private founder café community a couple of months ago. But he’s refined it since then and he put out a blog post on it. In this blog post he talks about the fact that he’s running this large team and it’s got a bunch of different people and they were able to kind of keep track of all the different things that needed to happen and what they’re priorities were. But as the team grew and as different people’s responsibilities changed it became more difficult to prioritize things across the entire business. So, he essentially developed this framework to figure out, “What should we be working on? What’s the most important? What’s really going to drive the bottom line for the business and help it stay in business and make them grown?”
Some of the basic problems that you’re trying to really solve with a framework like this is the fact that there’s always more to do. If you look in any given bug tracker, for example, or any task management system. It feels to me like anything I’ve ever used, the number of tasks that are in there go up over time rather than down. You think about these burndown charts and those are great if you have a sprint where the number of task is defined for a particular time frame. And it’s going to go down. But in the background, there’s always new things that are being added. So, those things are just being added faster than you can clear them out. And it almost doesn’t matter the size of your team because as you add people there’s more that you want to accomplish and there’s bigger things. But some of those things are not worth doing. And this helps you prioritize those things and really help clearly see what is and isn’t worth doing.
Rob [16:12]: Yeah. I agree with you on the to do list. That’s there’s always more work to do. That’s where I think sprints can be helpful because they do give you a sense of actually accomplishing something. You kind of limit the scope; you go for two weeks or a week – however long your sprints are – and then when you’re done, you do cross this big thing off the list. And then you’re able to reprioritize and attack new ones.
I think the other thing that I do with both my to do lists and with our issue tracker in terms of Drip is we are pretty guarded. I guess me personally I am very guarded about what actually goes on that to do list. I don’t just throw everything I think of on there. If I’m just brainstorming and thinking of notes of like, “Yeah, maybe I should do that.” I put it in a notebook. Or I put it in a separate Trello board. Typically, it’s in a notebook, to be honest. Because unless, I revisit it – unless it comes up again – unless I stumble upon it when I kind of flip through my notebook every now and again. And if I see it again and I’m like, “That’s genius. I have to do it.” Then that goes on the to do list.
But I see peoples to do lists sometimes and I’ll ask them, “Why is that on there?” And it’s like, “Well, it was an idea I had.” And it’s like, “Well, then it’s not a ‘to do.’ It’s just an idea. Figure out a different place to put it.” And the same thing with feature requests. You don’t want customer feature requests. You’re getting five of them a day. You do not go into your issue tracker. That’s not the place for them unless they’re completely cordoned off. Because otherwise it just fills it up with all this noise and you’re just going to have hundreds and hundreds and then thousands of feature requests or ideas or whatever. And you really want to have them in their own repo. What should be in your issue tracker is stuff that is actually at least in the realm of possibility that it’s going to be built.
Mike [17:44]: It’s interesting you say that because I put customer requests in there and then I put the customer’s name as a tag on it and then, once it gets to what I look at as kind of a critical mass – like if I see enough people are asking for that particular thing – then I reprioritize it to say to, “Hey, this is something that we’re actually going to look at.” But there’s a lot of things in there that one person asked for. There was a question that came up it and it just kind of gets into this – I think we categorized it with a special category that just basically says that it’s a customer request that we’re probably not going to do anytime in the near future unless we get a lot more people asking for it.
Rob [18:15]: Yeah. That makes sense. Here’s where that may start to break down. As an example, Drip gets more than 100 feature requests a month from external people. And we get about 25 requests per month from internal. So, we literally get – no joke – 125, at least, feature requests per month. And how many of those can you build. Five, maybe. So, after six months you’re going to have 720 things and you don’t want those in your main issue tracker. You want them off. They can still be in the same repository but they should be off on a separate view that you’d never have to look through if you’re actually trying to – I shouldn’t say never have to look through. You don’t have to look through every time you’re trying to pull stuff up in the development queue. You do want to review this queue, obviously, every month or every three months and kind of look through because certain ones are just going to come up over and over.
I found that trying to keep absolute exact count of these things is not helpful. The ones that bubble up to the top are the ones that you just know it. Like gut feeling you hear the requests over and over or you know that it’s a really good idea and it’s something that a lot of people will use.
Mike [19:15]: Yeah. At my scale, I don’t have that problem yet.
Rob [19:19]: Totally. Yeah.
Mike [19:20]: Kind of more to the point here is like there’s never enough resources to do everything. And even as you add resources, it almost doesn’t matter because the things that you want to do, you’re still just not going to have enough resources to do them. And there’s always these little things that get added which somebodies got to look at it and evaluate it and, even if you decide to do it, it just gets added onto the list. So, you need a way to prioritize these things. That can be really challenging to identify what is the most important thing when there are so many things to get done. And even if you have this shorter list, it almost doesn’t matter if you split it up into these are the critical things and these are the noncritical things.
I remember seeing a Dilbert cartoon about that. It’s like here’s how to get everything done. Create two lists, put all your critical stuff on one list, create all your noncritical stuff on the other list. Do them both and if you don’t, you’re a loser. It’s not possible to do everything. So, having this framework allows you to establish some objectivity and remove your personal, mental perceptions of the situation about what is important and what’s really not because it removes your own biases towards certain things. Let’s say you just talked to a customer and they say, “Well this is a problem.” Your natural inclination is to weight that more importantly because of the fact that you literally just talked to that customer versus using a framework that allows you to create it as – to take a step back from that and objectively evaluate it.
Rob [20:38]: Yeah. This is hard. Especially as, basically, a product owner or a product manager. Even if you don’t call yourself that, if you’re the founder for the first while – definitely through product market fit and probably after – you’re going to be a point person, a key player involved in deciding what gets done. And there’s always 10 times more or 20 times more that needs to get done or that could get done then you can actually get done. It’s like the 100 feature requests but you can build five. So, that’s always going to be there. So, then you have to figure out what is it that actually needs to get done. And there’s a bunch of different approaches to this and what we’re talking about today, of course, is the framework that Anthony Eden laid out in his posts.
Mike [21:19]: So, let’s start digging into this framework a little bit. The idea of this framework is that you classify the different things that you’re doing based on different criteria. What this does is it gives you a basis for measurement that can be applied uniformly across all of the different tasks. There’s some things that he recommends – it’s really just a spreadsheet and you have the title and description of the things that you’re working on. Then you put in different factors.
The first one is effort. Effort is essentially a broad measurement of how difficult or how time consuming it’s going to be to implement that. With this framework, you can use it either on a feature by feature basis or on a project by project basis. You can have, basically, subtasks in there and add them up and say this project this project is more important than that one. Maybe you’d do some averages in there. I think that might be a little bit more difficult just because there’s 50 tasks for one project and only 10 tasks for another. It might be difficult to add them up as raw numbers but you can see between those two projects if one comes up with a score of 25 and the other one the highest task comes out with a score of 10, the one that’s 25 is clearly more important to do.
Again, going back to that first one, effort is something you would put in as a column. And this rated one through three. It’s small, medium or large. The thing I really like about this is that it removes timings and time estimates associated with it. Small, medium and large – you can look at that and ballpark any particular task. You don’t have to be good it either. That’s the best part. Because we’re terrible at doing really good estimates. If you say something’s going to take you two hours, it might take three, it might take four. Is that considered small, medium or large? I would probably say small because it’s not a lot of effort. Medium, to me, would be like a couple of days. Maybe a day or two. And then larger would be at least a week if not two or three.
What about you? How would you kind of classify small, medium and large?
Rob [23:07]: I really like his approach here. I think in the old days as a consultant we had to give quotes that were basically down to the hour. We would have to say, “This is going to take six hours to build that feature.” And you just don’t need to do that when you’re building a product like this. So, I like the idea of effort; one, two and three; and whether you make your small, medium and large match exactly what Anthony’s saying in this post. Or whether, given your time frames, those are different durations of time. I think it’s really nice to keep it simple so that you’re not – you don’t want to put in so much time in analysis that this becomes cumbersome. You’re taking your best guess at it and having a one, two or a three, it’s a five second decision. With almost all features you’re going to be able to slam it in the bucket pretty easily.
Mike [23:50]: The next one Anthony lays out is urgency. And this is essentially a raw estimate of the time sensitivity for something. This is rated between zero and two. Zero is no deadline; one is a deadline within the next six months; and, then, two is a deadline within the next three months. What I found a little bit odd about this was that the deadline within the next three months, there’s nothing there that says, “This needs to be done right now.” I think that that’s both helpful and not helpful at that same time. Because if you’re trying to onboard a customer and they need it right this second, then it kind of puts a cap on how much the urgency impacts the total score. And we’ll get through the other three factors here but, once you go through these, there’s a calculation that you put on these based on the numbers that you assign and that comes out to a score for this particular task. It makes it easy to relate it to the other tasks.
Do you think it’s important to have a score in there for urgency with a deadline that’s less than three months?
Rob [24:43]: I do. So, here’s the thing. It depends on what time horizons you look out at. I think in your early days like where Bluetick is, I think you should probably have no deadline, two months and one month. Or no deadline, one month and two weeks. Because your timelines are so much more critical. Because you need to move way faster right now to try to get to product market fit as soon as possible. I think as a product matures and the team grows this could feasibly get longer. Even now with Drip, I’m thinking and looking ahead six months, nine months, but I’m not actually planning. I just have ideas of what we’re going to build. So, to me the zero, three and six month is a little too broad for us. I would probably, for us, have zero, one and two or zero, one and three months.
We typically plan fairly tight. We plan about 60 to 90 days out because I find that so much changes by the time you get there. New priorities come up, new feature ideas come up, competitors do things. And you have performance issues that suddenly you need to turn your head and try to scale. So, there’s a lot that can change in 90 days in the life of a startup so I would just compress this. But the gestalt of what he’s saying here is still the same.
Mike [25:54]: Yeah. And that’s something else to kind of point to as a side note. Even though some of these things are written down in such a way that there are those raw numbers of like six months and three months, feel free to change those things. Make whatever the framework you use fit into what it is that you’re actually doing because Anthony’s business is much further along than Bluetick, for example. Not everything that he has in here is going to directly apply to what I’m doing. That doesn’t mean that you can’t make some changes or modifications that will help if fit your situation better. So, if you look at it and it doesn’t quite fit what you’re doing, feel free to make those changes. Especially if it’s going to fit what you’re doing.
The third criteria in here is the impact. And what the impact is that it’s a value that indicates the potential impact on profitability. And this is rated anywhere from negative two to positive two. And negative two is a significant negative impact; zero is little to no impact; and, then, two is a significant impact. I really like this because there are some things that you are going to do which will probably have a negative impact on your profitability. They may make things worse for you. And then there’s other things where, if you do that – let’s say you make a pricing change and you increase prices – that could have a huge impact. And it’s just when you start adding those things, it allows this to adjust the priority up or down based on what those numbers come out to.
Rob [27:07]: Yeah. You know what I like about this? Often times when we’re talking about what features to build, I will ask whoever we’re talking to – typically it’s Derek or someone else on the team – and I’ll say, “Will this help us retain more customers,” – meaning keep them from cancelling – “Or will this get us new customers?” In essence, is it a marketable thing that new people will sign up for? And that’s what Anthony’s encapsulating with this impact score. And I like how simple it is and I like that it combines all of that into a single number.
Mike [27:36]: The fourth one is a risk factor. This is an indication of what is going to happen if this is not implemented. This is a very simple rating: zero to two which zero is little to no risk; one is some risk; and two is a significant risk. This risk factor could be a bunch of different things. For example, if there’s paperwork that you need to file with the government, then if you don’t do it then you could go out of business. Especially if it’s like a lawsuit that you have to respond to. And then there’s other things where it’s a feature that somebody had asked for. Is it really going to make a huge a difference to you if you don’t put hover text over a button, for example? Probably not. Does it help the application? Does it make the user experience better? Yes, but is it risky to not do it. And the answer, in that case, is obviously no.
Rob [28:21]: Yeah. I also think of stuff like scaling. There’s a risk factor of, “Do we need to upgrade the database server? Do we need to optimize the piece of code to make it five times faster?” And it’s like maybe all the other ones before are like the impact will be really kind of zero. Like it’s no impact to customers. The urgency, well, it could be the next three months but as soon as you introduce a risk factor of, “If we don’t do this, we risk slowing down. We risk performance issues. We risk upsetting people.” I think that’s a nice piece that this captures.
Mike [28:53]: Or you risk some sort of security setting. It’s like, “Hey. We need to make some sort of a structural change in the database and if we don’t do this, then there’s a risk that customer data could leak from one customer into another.” So, that’s another way that risk can kind of fall into it.
The last one that he has here is innovation. This is an indicator of what type of influence that the task has on your long-term growth. This is rated from zero to two. Zero is little to none; one is ahead of the curve; and, then, a two is groundbreaking. I’ll be honest. I wasn’t real fond of the term innovation, so – I forget what put it on my spreadsheet – but I had changed that to say how is this going to impact long term growth. I think that’s actually what I called it was long term growth opportunity. This is very nice to be able to relate that back and say, “This is not going to make any difference or it’s going to make a huge difference.” And I think you can also consider this in relation to what your competitors are doing and what your long-term vision for the product looks like. If this is going to open up new doors for you to go into a completely new market, then that would be either a one or two. But if it doesn’t do any of that, then it’s probably a zero.
Rob [30:02]: Yeah. I think a lot of things would be a zero. Kind of day to day of I need to add these settings. I need to add this screen. You think about merging subscribers in Drip, like we talked about earlier. Is that really innovative? To be honest, it is one. It’s ahead of the curve because most apps don’t have it. But it’s not groundbreaking. Like when workflows or something like that really jumped us ahead. So, I can see where this applies.
I don’t necessarily think of it in terms of innovation. I typically think of it in terms of impact. Once we get down and see the multipliers, I want to see how innovation plays against impact because I could see removing innovation altogether because most of the time I don’t want to innovate unless it has a major impact. Does that make sense?
Mike [30:42]: It does. But remember, the third one on this list was impact. So, that’s why I went through and started changing some of these names.
Rob [30:48]: Right. I was going to say; I’m only going to build an innovative thing if the impact is high. So, I’m not sure why I also need to say it’s innovative. Because the impact is going to be high and the innovation is going to be high. It’s almost like, to me, innovation tracks with impact. If all these go together in the same direction, they’re correlated, then there’s no reason to have them. You should just have one number. The only reason that you should have all five of these is if they go in different directions based on what you’re building. That’s what I’m still trying to get my head around is how impact and innovation, I think, are different.
Mike [31:16]: And that’s why I said that I played around with the terms when I put them in my spreadsheet because the difference between impact and innovation was not very clear. I changed impact to say short term profitability impact. And then innovation was long term growth impact.
Rob [31:32]: Oh, nice. Okay. That’s cool. I like that actually.
Mike [31:35]: Yeah. It separates out, “Hey. You need to do this.” And it’s more of the profitability impact is like, “What’s the direct result that’s going to be short term for us in terms of financials?” And then the long-term growth, “What is this going to look like for us six months, 12 months down the road?” We may do something that doesn’t really change anything now but what would be the impact of that in 12 months? And it it’s something small in the UI, very little innovation associated with it. But something like with Drip – workflows – it’s probably going to have a small impact now but 12 months down the road, 18 months down the road, it’s huge because it gives you so many more things to do.
Rob [32:14]: So now that we have a spreadsheet, you put down all of your scores for all of your different feature ideas or even if they’re not features. It’s just development ticket ideas basically. How do we score these things?
Mike [32:26]: The calculation that he has is you take each of these things and you multiply them by different numbers and you add or subtract them based on what they are. So, the impact and urgency you multiply each of them by three and add it to get the score. The risk factor you multiply by four. And then the innovation you multiply by two. You add those numbers together and then you subtract the effort times three. The larger something is – and remember that effort can either be one, two or three so you’re going to be subtracting either three, six or nine from your final score.
So, something might be very risky if you don’t do it now and it could have a huge impact. But if the effort is large, it could really reduce the score associated with that. I went through this a couple of months ago when Anthony had first posted this in Founder Café was that there were things that I felt were much more important and then looking at the score that came out of it – which he calls priority but I like to call it score just because it’s a numerical calculation – it’s very easy to look at those scores and just sort by that score and see relative to each thing what is really important to the business and what’s not. And I found there were things that rated up there as like 15 or 17 and then there were things that I thought were more important and they only rated like nine or 10.
I feel like there was a dividing line between things that were less than a score of 10 and things that were more. Those things that were more than 10 really felt like they were truly important.
Rob [33:48]: Yeah. I think this can be a really nice kind of guide to help you not just make gut feeling decisions and – I don’t know that I would go directly down these in priority order and build in that order – but I think it can give you a really nice framework or guide as the best way. Maybe if something was a five, I might make it more than a seven or a higher priority than a seven because I know of somethings maybe not captured in just these numbers or in the multipliers or whatever. But, that aside, as you look through these it seems like all the bases are covered and, if you put accurate numbers in each of these and you multiply out the score, I think there’s a lot of value in doing that.
Mike [34:25]: Yeah. I actually thought about that because I was looking at the things that scored lower than I thought they should. And I really tried to go back through the different columns and say, “Is this score justified? Should this be more urgent? Should it have a larger impact?” And I could make some variances here and there. But realistically, when I started looking at everything together and scoring them in the same way, I really couldn’t forcibly take that score any higher. And it’s not to say that you can’t prioritize starting something in advance because, obviously, if something is a large-scale project that’s going to take you three or four months to complete, you have to remember it’s going to take three or four months to complete and you may have to start it now in parallel to you doing other things. But you’re not going to be able to start it today and be finished with it tomorrow. That’s just not going to happen. So, you do have to take that into account when planning. But I think that it does help you in terms of deciding objectively what you should start planning to do versus the things that fall much lower on the list that just aren’t as important as you thought they were and maybe you put them on the list and assign them to somebody and they actually don’t need to be done.
Rob [35:30]: Yeah. I think this could be helpful definitely for when you’re getting started as kind of product owner. If you just have so much stuff on your plate that it’s hard to decide and you kind of need a guide. I really think that there’s some value here.
So, if you want to dig into that a little more, we will link that up in that show notes. It’s on blog.dnsimple.com. And thanks to Anthony Eden for sharing that with the Founder Café community and now the Startups for the Rest of Us community.
If you have a question for us, call our voicemail number 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt. It’s used under creative comments. Subscribe to us in iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening and we’ll see you next time.
Episode 331 | Transitioning from Productized Services to SaaS with Brian Casel
Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Brian Casel, Founder of AudienceOps, about transitioning from productized services to SaaS. Brian discusses what AudienceOps was like 6 months into development, he touches on team management and how he handles developing a new product while supporting an existing one.
Items mentioned in this episode:
- Audience Ops
- Ops Calendar
- Brian on Twitter
- Brian’s website & newsletter
- Brian’s Productize course
- Boostrapped Web Podcast
- Big Snow Tiny Conf
Transcript
Mike [00:00]: In this episode of ‘Startups for The Rest of Us,’ I’m going to be talking to Brian Casel about transitioning from productized services to SaaS. This is ‘Startups for The Rest of Us’ episode 331.
Mike [00:17]: Welcome to ‘Startups for The Rest of Us,’ the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you built your first product or you’re just thinking about it.
I’m Mike.
Brian [00:25]: And I’m Brian.
Mike [00:26]: And we’re here to share experience to help you avoid the same mistakes we’ve made. How are you doing this week, Brian?
Brian [00:30]: Doing good, Mike. Thanks for having me on.
Mike [00:31]: Yeah, no problem. So, for the audience here, in case they’re not familiar with who you are, Brian Casel was the founder of Restaurant Engine which he sold a couple of years ago. He’s also been a speaker at MicroConf and he is the current founder and CEO of Audience Ops. And then he’s also the co-host of Big Snow Tiny Conf which I attended a few weeks ago, and he’s also the co-host of the Bootstrapped Web Podcast with Jordan Gal. Did I leave anything out?
Brian [00:57]: Yup. That’s about everything I’m focused on right now. I also write about productized services and things on personal blog. But yeah, these days I’m really pretty much all in on the audience apps business, that’s what I’ve been doing.
Mike [01:10]: Yup, and we’ll link a bunch of those things up in the show notes. But one of the things I want to talk to you today about was the fact that you’re essentially running a business that is a productized service called Audience Ops. And for the listeners who aren’t familiar with it, can you give a brief description of what Audience Ops is and what it does?
Brian [01:26]: Yeah. So, Audience Ops is a content marketing company. And we’re going on almost two years now since I started it. And so basically, we make it easy for businesses to do content and do it well. And now, as we’re going into 2017 here, we’ve kind of expanded our line of different products to help accomplish that goal. So we’ve had our service side of the business and basically, there are two versions of the service now. There’s the content service where we write the content.
We basically write your blog content for you and manage the whole process from start to finish. And now we have Audience Ops Express where if you’re doing content, you can send us your drafts and we will handle all of the legwork to get it published like proofreading the images, the formatting setup, transcribing your audio or video, whatever it is that you can basically send on limited content pieces to us and we’ll handle all the legwork from there.
So that’s the service side of it. And then this year, we’re now in the process of launching our software called Ops Calendar. And that’s essentially a content calendar tool that streamlines and automates a lot of the parts of the production process for doing content. So it’s got like smart checklist which automate recurring tasks and delegating those based on one year content as publishing. You can track analytics to see traffic and conversion numbers on a post by post basis right there in your calendar.
You can manage a list of content ideas and have those going to your calendar and into production schedule social media. So it kind of pulls all the disjointed pieces of doing content marketing all together in one place. And so that tool has been in development for the last six months. And right now in March 2017, we’re just now rolling it out to – so we’ve had some beta costumers in it and now we’re starting to roll it out to customers on our early access list.
Mike [03:11]: So before Audience Ops, you had run Restaurant Engine. Now, would you have classified that as a productized service?
Brian [03:18]: Yeah. So I think Restaurant Engine evolved into a productized service. It started like purely as a SaaS. It was a website builder for restaurants. And what I learned in the first year or two was that those customers really valued the done-for-you aspect. I was doing concierge onboarding just to get people onboard. Like, we will set up your website for you, started doing that for free just to get them onboard. And then I started charging for it and then we started requiring that service for all customers. And eventually, it became kind of that software plus service productized service model, if you will.
I mean, that’s where I really started to learn the value of combining software with service. So not only providing the tool but providing the done-for-you aspect. But then when I started Audience Ops, having really sunk my teeth into that productized service model, I decided to start that business with the productized service model first as a way to launch it, establish it, grow revenue really quickly and also just grow its, like its brand if you will and our credibility in the content marketing space which now two years into it are what we started this process about 18 months into it, we’re able to expand into other products for this same space doing content marketing.
Mike [04:32]: I think what I find interesting about the journey is that you started out with Restaurant Engine trying to build it into a SaaS product and realized that that was not going to work and you transitioned it into a productized service. And then when you started Audience Ops, you kind of made the deliberate choice of, “Hey, I’m going to create this as a productized service because I know how to sell that.” And then now two years into it, you’re looking at creating a SaaS based on that productized service.
Brian [04:56]: Yeah, essentially. I identified a few specific pain points through the process of delivering our service and doing content on a regular weekly basis, and we’ve used a variety of different tools and we still do. But having identified those pains through the process of doing content, that’s what led to the initial concept for Ops Calendar and then that also led to validating that other people have those pain points too which eventually led to investing and building it and getting it out there.
Mike [05:28]: From I guess a boarder perspective, you seem to have done the gamut of all the different types of products. You’ve had your productized course which is especially an info product. And then you’ve also had a productized service and now you’re working on a SaaS product, and previously as I said before, Restaurant Engine was intended to be a SaaS product and it didn’t turn out that way.
But I guess, could you contrast a little bit the differences between starting in a productized service versus starting a SaaS? Because obviously, I think that there’s timeline differences and there’s experience differences and there’s all these things that go into one versus the other. For the listeners, can you contrast those things a little bit which one’s easier? What are some of the pros and cons of doing a productized service, for example, versus a SaaS application or just kind of the classic SaaS?
Brian [06:13]: Yeah, sure. So, in my view, just from like a viability standpoint, the idea of building and launching a SaaS product requires a pretty heavy investment of time and money. Whether you’re a developer or not, and I consider myself a non-technical founder. I mean, I do the design and the frontend stuff but I don’t code the backend. So in my case to build a SaaS software, I knew going into it, that would require investing quite a bit of money into hiring other developers but also a lot of my time. And I knew from experience of running Restaurant Engine that it takes several months to, maybe longer, to even build the initial version that users can actually use and then a year or longer to even make it a viable recurring revenue business that could potentially replace part or all of your income.
And so, that was the math that I was looking at in 2015, when I was looking to get into my next business. I was considering various ideas. Coming out of Restaurant Engine, I was looking at different ideas of what I should kind of sink my teeth into as my next business. And I look at making it a productized service first because I knew that that’s something that I can actually launch to paying customers very, very quickly, even charge a higher price point for it and have a recurring revenue model with that.
And literally within the first 30 days, we had our first clients onboard for Audience Ops for our done-for-you content service. And that grew pretty quickly over the first 18 months to a point where it enabled me to build a team around it, build a process and a system, and then ultimately, well, really early on, really, I was able to remove myself from the day-to-day process of delivering that service because I had the team and the systems in place.
So that freed me up to focus on growing into other products. I wouldn’t have really been able to make the math work on building a software from the very beginning and that’s why I went with the productized service. But secondly I wouldn’t have identified the pain points associated with doing content in terms of how it would relate to a software tool until a year or two into it. So I think both kind of led to that.
Mike [08:24]: Right. So it’s partially a function of the runway, so to speak, and the time that it takes to get up and running. And then there’s the other side of it is the learning component about how do I actually solve this problem in a way that makes sense for the customers of the product.
Brian [08:38]: Yeah, absolutely. I mean, this is a fully self-funded business. That’s how I’ve always handled it throughout all of my businesses up until now and still going forward. And so, we’re very cash flow sensitive kind of profit first type of mentality from start to finish. And that’s ultimately what made it possible for me to even consider investing thousands of dollars a month to just hire developers, not to mention the cost of marketing a new SaaS product. So yeah, lie this business has been working off of the profits from the productized service and then that continues to fund the development going forward.
Mike [09:13]: One of the things I wanted you to help kind of contrast for the list of terms is the difference in financial and starting that service based or productized service business versus starting a SaaS. So, you’re about six months in on the SaaS application. You said you’re spending a couple of thousand dollars a month for developers. So, ballpark are we talking somewhere between $12,000 and $20,000 that you’ve put into building the SaaS so far?
Brian [09:37]: Yeah. I’d say that’s about accurate probably closer to 20 so far.
Mike [09:41]: Okay. So, about negative 20 and this is after 6 months. And for the Audience Ops service, in six months, roughly what was the revenue?
Brian [09:50]: Well, six months in, it’s probably somewhere around maybe 10k to 15k a month MRR. And so early on in like the first three to six months, I actually took it deliberately very slow. We took on a few clients early on and then we kind of paused the service to get our process as in team employees, and then started to ramp up against starting from six months, probably around the 12-month mark. I think we were up to somewhere around 30k MRR. And I think it was probably around that point, around 10 to 12 months into the business.
I mean, I basically had my own salary kind of covered. I’ve always just kind of paid myself the base amount of what I need to live and support my family. And so, again, as the productized service, I’ve been able to cover that from pretty early on in the business. But then by around 10 to 12 months in is when I started to put aside whatever extra profit that was left over after all expenses were paid from the business and after I was covered. And I’ve put it aside maybe roughly 2,000 to 3,000 a month in profit. And that grew and that deviated from month to month.
So, I started doing that around 10 to 12 months in. And then by around 18 months is when I had a bit of a savings, like a business savings account saved up, and then I invested that to start. That basically jumpstarted the investment into hiring developers, but still through this day, the services continue to fund the development going forward.
Mike [11:19]: Yeah. And I kind of want to make that distinction very clear because just in terms of finances loan, SaaS scene is kind of a holy grail on the software world because it’s recurring revenue. But at the same time, if you’re looking at a productized service, you said to yourself that Audience Ops was making around $15,000 a month and you just literally said, you were taking it slow. You could’ve probably pushed on the gas harder if you wanted to. But six months in, you’re pointing $15,000 a month from it. Whereas six months in on the development of the SaaS, you’re still technically a zero because you’re not charging customers yet. You’ve spent closer to $20,000 on it so you’re at the negative.
And just kind of do the math on those and you’re probably at – if I had a guess, we’re probably at $60,000 in revenue from the productized service versus zero and plus you’re also running the deficit because you’ve spent $20,000 on it. And it’s just a very start contrast between those two things. And I think it begs the question, if you’re doing well with that productized service or it’s easy to build something like that and get it up and running and make it profitable, why would somebody even ever want to do a SaaS?
Brian [12:22]: Yeah, that’s a good question. So, we see this a lot, right? You look at those top-line MRR revenue numbers and they seem so dreamy. I refer it to many and they would seem very dreamy to me looking at it just a couple of years ago. The reality of the productized service model is that there are a lot of cost associated with it. Obviously, there’s more people involved. Like, we have a pretty large team. Our team is fully remove all over the world but all of our writers and all of our project managers are in the U.S.
So as the revenue goes up and as we bring on clients, our costs go up and our team grows. And that’s what led me to the decision that, “Okay, this year in 2017, I need to look at diversifying our product line and growing into more scalable products such as software and even our Audience Ops Express services is a little bit more scalable than our content service.” That’s not other say that the content service is not able grow and scale. It’s just not as scalable as something like a software service.
The tradeoff of course is that the productized service can grow much quicker. It can remain profitable the whole way through. Whereas the SaaS, even if you’re charging somewhere around $99 a month or more for a B2B software which may seem like a relatively higher, I don’t know, these days it’s all relative price points, right, but it just takes a long time to get enough customers to make that viable. And I realized that going in. And so that’s why I continued to work both sides of it basically the service side and the software side.
And with the service especially a recurring productized service, we deal with a lot of the same issues that a typical SaaS would turn and optimizing our onboarding process and retention and that sort of stuff. So yeah, it all kind of plays into it.
Mike [14:14]: Yeah. I mean, I think that there’s that confusion when you start looking at those numbers and saying, “Oh, well, the business is making $15,000 a month and it’s a service business.” But you don’t realize that there’s got to be probably five or six different people involved and they’re all working part-time in a business like that. And it’s the manual labor or just in general the labor cost associated with running any productized service are all around providing those services because it’s not like the software side where whether you’re running something once or 50 million times, it almost doesn’t matter to you. The cost is almost the same versus if you have to pay somebody to do something once, maybe it’s $50. You have to pay them 100 time to do it, it’s 5,000.
Brian [14:54]: Well, yeah. I mean, the way that I was looking at it especially going into this year was as the service keeps growing. Like, if the service were to double or triple in size in terms of clients and revenue, that would mean that our team would close to double at least. And then I started to look at like, “Well, what does that picture look like?” And then that’s just a very large team with lots of people and I wanted to get into. I still want to keep the team relatively small.
The other side of this is people think about productized service is like, “Well, that’s just kind of consulting or that’s like freelancing or building an agency,” and yes, it is manual services. There’s no doubt about that. But the way that I approach it is it’s a very focused, systematic, process driven service where we really do one thing and we have a very defined production line, and I’ve got people in place who handle very specific pieces of the process.
So unlike an agency which might take on anything and everything. If you’re a marketing agency or a design, development agency, like you take on so many different projects and different types of clients, for us, we bring on a client. They go through our standard onboarding process then they go into our standard delivery model for content and production and publishing and it works pretty well. We’ve got a fantastic team of talented people but they all really rely on our processes. And that’s what enables me to not be involved in the day-to-day service stuff.
I do coach the team a bit and I work on our processes and things but my role is really to make sure that the operation runs efficiently and then to free up most of my time to work with the developers and design the SaaS and then think about marketing and all that kind of stuff.
Mike [16:33]: Right. I guess the underlying point there is that when you start a business or anybody starts a business, the person who is the founder generally can do most things. And it’s very easy to, I think, fall onto a trap where you look at something whether it’s a specific problem or a service that somebody’s offering and say, “Well, I can do that faster and cheaper and offer it at even a better price or maybe a higher price,” because you’re offering higher quality. And then you almost trick yourself into thinking that, “Oh, well, if I scale this up, let me just multiply myself by 10 and I’ll have 10 times revenue, 10 times the profit margin.”
And I think what inevitably happens is your profit margins tend to go down because there’s management overhead that you don’t take into account as you build out the team. And I imagine at this point, your Audience Ops is at a point where you’ve got middle management, so to speak, that are managing teams of different people whether writers or the people who are posting the content. I mean, there’s a lot of stuff that goes into it and people don’t take into account that there’s that management overhead that will eat into the profit margins.
Brian[17:32]: Yeah, exactly. I mean, we pay the writers and we also have like client managers who are client facing. So I’ve kind of delegated the client facing communication stuff even like calls and emails and stuff. And then we have a team manager and her job is kind of more internally and she kind of keeps track of the people on the team and keeping them updated. And then I’m looped in like I have every two weeks to do a call with the managers and I’m in touch with everybody on the team pretty regularly.
So, I would say there’s one more piece to this on how the productized service relates to the SaaS. It’s not just about a funding source to invest in the SaaS. It’s also, I built it as Audience Ops the company. We’re a content marketing company and like I said, we wouldn’t have identified the pain points that would led to the SaaS product unless we have done the service. But also, I think it gives us a lot of credibility in terms of building software tools or even our training stuff if we hadn’t done content marketing at this level of scale and we continue to do it and I use content marketing heavily in my previous company.
So I think those kinds, like establishing the service and the company as a content marketing focused company with that sort of credibility leads in nicely to – it’s almost like an obvious next step for us to release software tools for doing content market.
Mike [18:54]: Now, I guess kind of playing off for that a little bit. Because there’s overlap in terms of what the service does and what the Ops Calendar does, what sort of team over lap did you have with the new product, with the calendar itself. Because obviously, you’ve got all the writers and the managers in place to essentially optimize the entire process around publishing content for your customers. How much of that were you able to reuse when building the Ops Calendar?
Brian [19:19]: Yeah, it’s a good question. Really largely, the people working on the Ops Calendar and the service are mostly separate. I mean, we’re all in the same slack room together but I did have to go out and hire. So we have two developers who I brought on specifically to work on Ops Calendar, just given the technology that that’s built with, we didn’t have that type of developer in house. We did have a WordPress developer who I’ve been working on with.
So Audience Ops also sells a couple of small WordPress plug-ins like our content upgrades plug-in and we built and launched that over a year ago at a really great WordPress developer who builds that and he continues to maintain that plug-in. So I did loop him in on Ops Calendar. So we have just released the WordPress integration between our calendar tool and your WordPress site. And so, since he’s the WordPress expert and I had been working with him before, I brought him in just for that piece. But beyond that, really from day to day in terms of developing the product, I’ve been working with the developers and then the team is a bit separate.
I am of course looping the team in on the progress of Ops Calendar and right now as the tool has kind of matured a little bit, now we’re starting to actually work it into our process for delivering content for our clients and for ourselves. And I’m starting to use it for my own content on my own blog. And so the team on Audience Ops is essentially a customer, if you will, of Ops Calendar, obviously we got paying for it but it’s working through a process and clients of Audience Ops service were using Ops Calendar to serve them as well so they could access to it as well.
Mike [21:00]: Right. The underlying challenge I think is that you had to essentially bring on new team members in order to develop this product just because you didn’t have that talent or the focus that you could divide off from what they were currently doing into building this new product. It was really, you bring in a couple of extra people and put an umbrella around them or kind of a small divider that says, “Hey, you guys are going to work over here on this other thing and we’re not going to merge things together or have you guys work together on stuff until you reach a certain point where the product is essentially usable by the team,” and that could take several months between four and six months. You said that you’re at about right now, correct?
Brian [21:38]: Yeah, exactly. Yup.
Mike [21:40]: So, I guess what are the challenges associated with running those two different things side by side, because you’ve obviously got to keep the Audience Ops system up and running and making sure everybody is doing what they’re supposed to do, what your customers are getting service so you’re bringing on new customers. And at the same time, you’re also building this second product that has – I mean, you obviously got like the beta customers who signed up for it and agreed to pay for it early on. But what are the challenges associated with managing those two desperate teams? Because I think that there’s very big differences between them and the goals that they have and the responsibilities?
Brian [22:14]: Yeah. I’d say just the challenge for me personally is managing multiple things at the same time. So I do jump back and forth between working with the team on the service, coaching the managers, or improving our processes and systems there to these days really spending most of my time working with the developers and I handle kind of like the design and the user experience and the product, kind of managing the product on the SaaS side. That’s really where I spend most of my energy. I’d say a third thing that I do is just overall marketing for the business, working at our marketing funnels and making plans there.
Yeah. So I mean, it’s kind of tough to jump back and forth between those things but at the same time, I do think that that’s part of the role of the founder in a way. Obviously, I’m not doing everything myself. A lot of it is kind of managing and giving input on things. So a lot of the technical time-consuming work of coding software or writing content, that stuff is not necessarily on my plate. I’m taking more of a strategic level giving input, giving direction, and that sort of stuff. And that’s what I spend most of my time doing. That’s where I think where I add the most value to the team.
I think that, again, the services and the software are so connected. It’s not like what I did years ago when I was launching Restaurant Engine where I – like on the side I was doing web design consulting work, and then in my nights and weekends or early mornings or whatever, I would plug away at my little SaaS, bootstrapped SaaS startup where they’re completely separate worlds, and I don’t feel like that today. Like today, I’m really just building this Audience Ops business that has a line of different products but they all really serve the same mission which is to make doing content easy and effective for businesses, and yes, just kind of pushing on that in different areas of the business.
Mike [24:07]: So, I guess now that you have built this productized service and then in addition, you went in and started the SaaS application o the side and it’s obviously all in to the same umbrella, I think that there’s definitely a lot of advantages to what you have done versus I think that somebody have talked to MicroConf several years ago about having products that were very, very different from one another and not related. So you couldn’t leverage the same audiences and obviously in this case, you have created things in such a way that those audiences do overlap. They do kind of lead into each other in the same ecosystem. And I’m curious to know what is it that in building the SaaS app kind of under that umbrella, what would you have done differently next time that you maybe saw as mistakes or things that held you back this time going through that process?
Brian [24:52]: I think probably the classic thing that most especially non-technical founders face is just the pace of development. I think I had a bit of a learning curve early on there. And I’m not totally new to developing software. I had worked on Restaurant Engine and other things in the past. But I think on the one hand, we made a pretty good pace. Like, we’re actually launching it to paying customers now six months in, but at the same time, just having an understanding of like, “All right. We’re going to have all these features built out and ready to launch by certain dates.” I had probably two or three months into the development process. I had a wakeup call to see, “Okay. This is actually how long it takes to build even just the baseline architecture and the core parts of the app.”
And then what ends up happening was about four months into development, I decided to hire a second developer. So I have one full-time developer and now the second developer is on part-time just for the sake of increasing speed and being able to have two people work on different features simultaneously. And so that’s helped to speed things up a bit but yeah, that was one of the challenges I think.
Mike [25:56]: It’s interesting that you bring that up because I think you and I had talked a while back about the pace of development and I kind of – I actually warned you at the time because I ran into the exact same thing where I underestimated things and how long they would take and even after that, you kind of experienced the same thing. And I don’t think this is unique. I think that everyone does this to some extent. They look at something and say, “Oh, well, this is how long I think it’s going to take.” And then, things go sideways or there’s other things you just miss and don’t take into account. And it takes so much longer than you ever think that it’s going to. And I’m curious to know what your thoughts on why that is. I have my own thoughts and I kind of want to get your take on it though.
Brian [26:34]: Well, yeah, I mean, I’m sure you’re in tuned with the technical aspects of what takes so long. But for my perspective as, I don’t know, I kind of consider myself a semi-technical person. So –
Mike [26:45]: But I don’t think that that’s the problem. So like I’m a technical person and I still get it wrong. So I’m curious to know like as a non-technical person, what do you see is the problems and then maybe we can kind of collaborate to figure out, “Okay. Why is it that everybody gets this wrong, not just technical or non-technical people?”
Brian [26:59]: Well, I think one reason why we’re actually now able to get it out the door to customers like only 6 months in and not 12 months in is because I’ve started to make more decisions about, what are the features that we actually need and what are the features that can come later. And I think early on, I had a much longer list of features that I wanted to launch with. But now, as we get to this point, I’m a little bit more ruthless about speed and get it out the door. We have a very high bar for quality. So every feature that we do build has to meet a certain level of quality in terms of user experience and functionality and lack of bugs and all that.
But the decision to do that other big feature later instead of now, pushing those things off, definitely helps. And the way that I’ve been able to do that is by really being in constant contact with our customers especially that we have a group of 14 beta customers who prepaid and they were the first users to start using it a couple of months ago. I mean, regular communication with them as well as people on the early access list. And what I’ve been able to find out is there are few features that people just keep upvoting or keep asking about and keep hammering that these are the ones that they really care about. And then are few other features that I think are nice to have that we will certainly use. Other people may find nice to use but they don’t necessarily have to be in this version that we’re sending out to customers today. And so I think there’s that decision process.
I think the other thing is one thing again as like a semi-technical founder in the fact that I had to hire those developers that are new. So that we were just getting to know each other in the first month or two of working together. And part of the reason why it went so slowly early on was because they were not necessarily aware of how technical I could be for them to explain some of the technical challenges.
And so what would happen a couple of times early on was they’d hit some walls, some technical challenges with one of the requirements that I put in. And then they would kind of go and try to work on it and troubleshoot it for three, four, or five days at a time and I’m not aware of what that technical challenge is. But if they brought it to my attention earlier, then I could tell you, “Oh. Well, okay, I understand what the challenge is. We could just tweak the design in this way and just eliminate days of development from a user experience that’s not a big deal.”
So it took about a month or two for me and my developer to really get on the same page in terms of how we can communicate technical challenges. And once we got that kind of squared away, we’re able to move much faster because we actually are able to collaborate on those technical hurdles even though I can’t do the coding myself, I can help think through, “Okay, for a design standpoint, we can re-architect it at this way or, okay, this is what’s really important that that piece is not as important,” and we can communicate that much clear and that helps us move a lot faster.
Mike [29:55]: Yeah. Being able to prioritize those things is kind of critical and so incredibly important to the entire process that it’s hard to underemphasize how much that plays a factor into the speed of the development, how quickly you get things out the door. And one thing that you had said, the one word that jumped out while you’re talking was the word “ruthless” and being ruthless in terms of saying, “We are not going to do that right now because that’s not important.”
And one thing that kind of jumps to mind, Brian, as an example of when I was working on Bluetick was there was a password reset feature that you could literally see on the front page. You go there and you enter in your email address. And you would expect that it would email you and say, “Hey. Here is your new password or here’s a mechanism for using that.” And over the course of nine months, I had literally three people use it and it didn’t work any of those three times because it was never wired up. It was like we never implemented that feature. It was there, you could see it but then I would get emails from people saying, “Hey, I tried the password reset. It didn’t work. How do I get my password reset?” And I would manually do it.
But it would’ve taken a while to get that done. It doesn’t sound hard and it really isn’t but it takes a couple of days to get it right. And that was something, I kind of made the conscious decision to say, “This actually isn’t that important.” It was on the designs so it ended up in the UI. But that’s one of those things where I made the conscious decision that I’m not going to do this. And I’m sure you have your own examples of things where you’re like, “Let’s just remove that.”
Brian [31:20]: Yeah, absolutely. I mean, again, I’m constantly in contact with people who come through the early access list or the beta users and I’m always asking them, “Why are you asking about that? What are you trying to accomplish? Or what was it about the other tools that fell short for you?” And I’m always trying to get their underlying goal or their frustration, and then I’m trying to figure out like, “Well, can our app already do that or what is the feature that they’ll be waiting for?”
Just the other thing that I see just a lot in this community is I think a lack of a sense of urgency. And this comes back to the whole self-funding aspect. I mean, and also from a marketing standpoint and rolling out and launching a new product. I feel the sense of urgency because, A, we can’t just develop this thing forever and not have revenue, that we’ll run out of money too quickly. But B, people are joining this early access list and they’ve been joining it for six months or more and every day that ticks by that I’m not contacting them or inviting them to start using the app, I feel like ticks away at like the chance that they actually will still need the app when I do send them that email invite.
So, I’m trying to minimize that length of time as much as possible and I think right now we’re at the – I think that the app is beyond an MVP stage at this point but it’s like the minimum viable level of development that I can start to have customers use the thing, and even start to give me feedback and objections about, “Okay. Some users may use it but some users still may have objections.” And I’ve been getting that kind of feedback from beta customers but I think now is that next step to get it out the door.
Mike [33:02]: Yeah. I totally agree with what you just said about waiting too long for getting those people in there and having them use it. I mean, I literally run into that with Bluetick where because some of the development cycles took so long and the tech stack just took too long to get pieces in there. It got to the point where some people who were on that early access list, they kind of looked at and said, “Look, it’s been so long that either this just doesn’t turn out to be a need for me right now or it’s not a good fit, or let’s revisit this in a few months because right now it’s not a good time.” It’s disappointing but at the same time I also kind of expected that not every single one of those early access customers would eventually become a paying customer and you have to expect that. But at the same time, because it’s been so long on my side, some of those people are just not going to convert because they’ve either found other solutions or they’ve realized, “Hey, this isn’t actually a dire pressing need that I have.”
Brian [33:53]: Yeah. One thing that I’ve been doing. And so everybody who joins the early access list on the next page, they see a survey. And they’ve answered a bunch of questions that goes to my email inbox. I read and I reply to just about every single one of those. And what I do is, I just place a star on those responses to that survey that I think are just really engaged. And so, the ones who just send like a one-word answer to the questions, I probably won’t star them. But the ones who send three, four, five paragraphs and then they reply to my email and we have a whole email exchange, I give them a star.
And so those are going to be the prioritized people who I invite first and the first batch and the second batch. And so, yeah, I want to make sure that those people who clearly have this pain and they’re actively seeking a solution and they’re willing to give me all this feedback before even seeing the thing, I want to make sure that they get in there first.
Mike [34:45]: Awesome. Well, I guess any parting words of wisdom for somebody who is potentially thinking about transitioning from a productized service into building a SaaS.
Brian [34:55]: Yeah. I mean, again, I think I see it really as that bridge to build the company first and then expand into doing something like a SaaS. And I think the key is to get the productized service running to a point where it doesn’t require you to be in there in the day to day, so that you can free up all that extra time and mental energy to think about, “Okay, where does this thing go next and where are those opportunities for the next product that would make sense in this line of products from this business?” At least that’s how I’ve been thinking about it. And so I think the key is to put those systems in process and in place to free yourself up.
Mike [35:32]: Awesome. Well, Brian, I just want to say thanks a lot for coming on and talking to people about how to transition from a productized service into a SaaS. What are the best places where people can find you if they want to look up more information or get in touch with you about this?
Brian [35:43]: Sure. So, the site is audienceops.com, that’s where the services are and Ops Calendar is over at opscalendar.com. And my personal site is CasJm.com and that’s where I write a lot about productized services and my personal newsletter. And then I co-host the podcast with Jordan Gal, Bootstrapped Web.
Mike [36:03]: And then people can also get in touch with you on Twitter at CasJam, right?
Brian [36:06]: Yes. Yeah. I still use Twitter.
Mike [36:10]: Yes, that’s an iffy question these days. We’ll see what happens with Twitter.
Brian [36:13]: Right.
Mike [36:14]: Well, Brian, again, thanks so much for coming on. I really appreciate it. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt used under creative comments. Subscribe to us in iTunes by searching for ‘startups’ and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening and we’ll see you next time.
Episode 330 | Switching from Enterprise to the SMB Market, Staying Small Indefinitely, Dealing with Raises, and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about switching from enterprise to the SMB market, staying small indefinitely, dealing with raises, and take more listener questions.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of ‘Startups for The Rest of Us,’ Mike and I discussed switching from enterprise to the SMB market, staying small, and definitely dealing with employee raises and more listener questions. This is Startups for The Rest of Us episode 330.
Rob [00:23]: Welcome to ‘Startups for The Rest of Us,’ the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you built your first product or you’re just thinking about it.
I’m Rob.
Mike [00:33]: And I’m Mike.
Rob [00:33]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike [00:37]: Well, I don’t feel like I’ve made a ton of progress this past week basically because I’ve been dealing with taxes, but I did manage to convert a couple of more of my preorders in the paid subscriptions and added another customer on top of that to Blueticks. So, things are progressing I think like any other product launch ever. Like, they’re never quite as fast as you’d like but they are moving forward. So, it’s good to see.
Rob [00:58]: Yeah. Well, I mean, it’s not really a product launch, right? It’s just more of a product – it’s a customer development in the early. I’d say it’s like a prelaunch, right, early access maybe.
Mike [01:07]: Yeah. Yeah, that’s probably a more accurate description because I haven’t really gone through like a major – like a launch to a list or anything like that. I’m still kind of working through issues as I onboard people and trying to iron out the rough edges and stuff because there are certainly some of those that I’m trying to make sure that people aren’t running into or when they do that it’s lessened to some degree either through KB articles or through onboarding emails and stuff like that.
Rob [01:31]: Yeah, nice to develop that stuff at this point. So, if we bring the ‘Startups for The Rest of Us’ drinking game back, remember a couple of years ago? Should we do that every time you say that you added two more customers?
Mike [01:43]: I don’t know, it depends on what the rules are I guess.
Rob [01:46]: Right, right. [?] on my end also got my taxes out, so I am notorious for filing, what is it, extensions and wind up getting everything into my accountant in like late April or may and then he gets it out in June or July and it’s become a pain in the butt. So this year, I got everything done super early and I’m hoping to have everything filed on time. But I’m curious, you mentioned you didn’t get a ton of progress this week because of taxes. My taxes since everything is in zero and we share a bookkeeper actually, right.
I have two business plus you’re my shared business with MicroConf, but since tax is zero and the bookkeeper had done. I mean, my Drip and [Newmor?] group taxes literally took me less than 30 minutes a piece because I basically give my – my accountant already has access to it and I just kind of give him some heads up about different things. And then my personal stuff took a little more because it’s all piece of paper all over the place and you get all these W2s, but it probably took me less than two hours. So literally, maybe three hours to get everything done. Did it take you more than that and why?
Mike [02:45]: So on the academy stuff, there was some things that were classified wrong because of the – basically because of PayPal and selling things in Europe. So whenever something goes through our accounting software, it ends up creating three or four different transactions for the same ones because it does transferred from Euros to US Dollars and then back and forth. And then there’s an additional charge and if those aren’t classified correctly and mashed up correctly, then there are certain numbers that are off. And there were numbers that were off and I had to go through and find them, so.
Rob [03:19]: Boo, that’s no good.
Mike [03:20]: Yeah. I kind of got a system at this point for figuring it out but then on my own business taxes, there are some things that were misclassified the previous year because we were going to try in different revenue and we couldn’t do that because of when we sold tickets to MicroConf because we did it in the previous years. And then years passed, we didn’t do that in, I think, 2015. My accounting software is in zero as well, and there’s things in there that were not fixed the previous year. So like the numbers were way off and I honestly still don’t know how to fix them. I sent it over to my CPA eventually and just said, “Look, this is what these are. I know why it’s that way and I just don’t know how to fix it.”
Rob [03:59]: Got it. But how much did all that take you? Was it like a day?
Mike [03:59]: It was probably two, something like that.
Rob [04:05]: Really? That’s insane.
Mike [04:06]: Well, it’s just like finding the transactions that are wrong. And it’s like sometimes are not as easy to find as they should be. I honestly wasted too much time on certain piece. I mean, it’s not like it was two full days but it was like kind of hanging over me for that two days or so.
Rob [04:23]: That’s the thing I found, man, is as much as I’ve been able to hire people to help out with stuff like this, because I have a CPA and I have legal counsel and I have a bookkeeper and yet taxes still take several hours to get done. And when Drip was still independent, I had like a remote executive assistant/ops person. She was doing a bunch of ops work but I still found that there was hours a week that I was sitting there and not marketing, not looking at features or working with customers, but I was just doing stuff HR payroll, even though again, I had an ops person who was doing that, I was still involved in it. And that’s – I don’t know, man.
I think it’s a hard thing I found getting passed no matter how much I hire, no matter how much I find good people to do the things. The stuff slips through and you wind up doing stuff that isn’t necessarily fun. And that’s, I mean to be honest, post acquisition, I really enjoyed – I don’t have to do any HR now, and I don’t have to do – the only reason I’m doing taxes for Drip is because it existed last year until July, right? So we had to file for that but I’m actually kind of looking forward to things simplifying because the overhead me admin work around running a business is just, I don’t know, man, it’s probably my least favorite part of the whole deal.
Mike [05:34]: Yeah. I mean, the other thing that has kind of factored into it which isn’t directly related to it is that like my wife is looking to potentially acquire a fitness studio that is in our town. And so I’ve had to do like got through a lot of paperwork and tax things and stuff to look at, is it a good deal, is it something that she wants to go through with, is there actually a business there. So that kind of factor some of that time in there, which I don’t know how much time that actually was because it wasn’t like I was tracking the time. But I kind of lump it into that process.
Rob [06:04]: Very good. Anything else going on with you?
Mike [06:06]: No, not really. I mean I’ve got a few more demo schedule and going to be going through those over the next week or so but I’m starting to shift my focus over to like really detailing what my customer acquisition funnel looks like and why or not some of the automation behind it. So, taking somebody from, “Hey, they’re on my email list,” and then moving them over into like a survey and then getting the answers from that and then kind of picking and choosing who I’m onboarding and in what order. And then kind of wiring everything up to help automate that process a little bit.
Rob [06:33]: Nice. It’s good to start thinking of that stuff at this point. All right. So we have a lot of listener questions today, some really good ones. And then we’re getting a little bit behind. Some of these are from, well, this one’s from October of last year. So good old four-five months ago, and there may even be some that are older than this. So, apologies on that but I wanted to work through some of them so people aren’t waiting so long.
This one is from Daniel Cao and he says, “I’m an avid listener. Thanks for being so generous with your knowledge. We have an enterprise level SaaS product that we successful sell for $5,000 a month. However, each sale takes six to nine months and it’s a slow process. We can adapt the product to be suitable for SMB sized business, so that’s small to medium businesses, but they seem to only be able to bear $200 to $300 per month as a price point. We really want to pursue the SMB market but we see it’s 20 times as much work for the same end result financially. Are we insane? Should we just take the enterprise? Or is there something magical that happens when you go for the higher volume of small value customers. Many things.”
Mike [07:36]: I think the question whether you go in that, the direction of the SMB market and try to position your product there really depends a lot on what your longer term goals are for the business and whether that’s – a market that’s even really viable. I mean, if it’s taking you 20 times as much work for the exact same revenue, that alone should say no don’t do it. And I don’t know if there’s any way to kind of slice that or position it in a way that it doesn’t make it like that. I mean, you can always – like over time, you can generally drive the cost of a business down. And it sounds to me like this is one of those situations where the upfront cost of making it or fitting the products into the SMB market is going to be quite substantial.
But if you’re making $5,000 a month from each customer that you bring on, then yeah, it sounds like that’s a reasonably good way to position it and you could potentially like support yourselves while you transition the products. Is it worth doing that? I don’t know. I mean, I would take a look at that and say, “Well, how much lower can you really drive the prices? Are you going to be able to maintain the same level of support with those SMB customers? And dependent on the complexity of the product, you may or may not be able to. It sounds to me like my inclination just kind of a glance based on the 20x number. Is it you probably don’t want to go in that direction just because I think it will be very difficult to drop the acquisition cost by that much to support the work level that it takes to get those customers onboard.
There’s also the fact that some types of products just they seem like they would be a good fit for the SMB market but they just aren’t. Those customers as you said, they don’t want to pay as much as an enterprise customer. And the reality is that they don’t really need it that much. They may think that they do or they want to be in a position where, “Hey, we’re sort of a big company,” and they feel like they’re important but the reality is that, they’re not in the same situation as those enterprise customers and they just will not buy it or not buy it at the levels that you want them to. And at that point, it becomes a losing proposition.
Rob [09:30]: Yeah. In almost all cases, you want to get your prices up higher even if the sales process takes a long time. And the answer to the six to nine-month sales cycle is to just have more and more of those enterprises in the pipeline so that you’re constantly closing them, right. So if you only have five in your pipeline and you all started them today, then yeah, it’s going to be six to nine months until you close those five. But if you five that come in your pipeline today and five tomorrow and five the next day and five, then starting six to nine months from now, you’re just going to be closing a few them basically every day or every week or whatever.
And that’s where you want to get. Based on the information you’ve said, I don’t think there’s any way I would try to do a lower price offering at this point. The only reason I would consider doing lower price is if you’re in innovator’s dilemma situation where someone else is building a simpler, lower-cost version and they’re taking your customers from you. And someday you may have to do that if you become a big cumbersome entity like the Marketos and the HubSpots. Not that I’m such that cumbersome but Infusionsoft, Eloqua. I mean, basically, we’ve innovated Drip innovator dilemma them from underneath, simpler, lower cost, easier to use. But you’re not saying that here. You’re saying, “Should you go there so that you cut down on these lead times?”
I’ve never heard of an approach where you try to go cheap and go for volume because trying to get that volume is it’s a pain. It’s so much work. It’s harder to support. You’re going to need a lot more features because you’re going to have this broader swath of people having 10,000 customers versus having 500 or 200 customers. It’s the whole different ball game. So, if you look at how Jason Lim can talk and he’s kind of B2B SaaS, one of the experts in the world, his whole thing is start cheap or start as expensive as you can but you’re not a brand name so you got to start cheap and then work your way up. And you’re talking about going the opposite direction.
And I would almost not even consider this out of hand. Obviously, you never want to say never and there are exceptions to this. But I would guess it’s probably 1 in 500 businesses that should actually do what you’re suggesting. And so I’d say odds are pretty heavily against trying to go for SMBs. I think the last part of your question was, is there something magical that happens when you go after this market and the answer is not. It’s still a ton of work and it’s just a lot more customers to try to sell and support. So thanks for your question, Daniel, hope that helps.
Next question is from Rob at onlinetravelmap.com. And he says, “Hi, Rob and Mike. Thanks for making such a great resource. I’m working my way through the Blank and Dorf book, ‘The Startup Owner’s Manual.’ And I’m on the customer discovery part of customer development. They say to create three things that I’m having a hard time seeing other entrepreneurs create. First is an influence map, second is a customer archetype, and the third is a day in the life of. Did you create these for your businesses? And if so, how? I ask because it seems like more info than people would want to contribute.”
So for those who haven’t read ‘The Startup Owner’s Manual,’ Steve Blank is a guy who come up with the concept of customer development and later a student of his era agrees borrowed customer development as well as some of his other concepts and developed the Lean Startup. So Steve Blank has founded and/or been a venture capitalist. He’s founded a number of companies. He took several of them public. He had a bunch of axis. I mean, this guy knows what he’s doing. He’s been an entrepreneur in the trenches.
So in this book, ‘The Startup Owner’s Manual,’ they talked about different things. It’s like don’t create a business plan but create these influence map and the customer archetype and a day in the life and that kind of stuff. So, I guess and now that we know what that is, did you create these for your businesses and if so, how? You want to kick this off, Mike?
Mike [12:59]: Sure. I probably didn’t sit down and go through like those specific concepts like the way that he would’ve recommended and say, if he’s got templates and stuff like that, I’d certainly didn’t use them. I mean, I did write down people who I thought would be good influences or people that I could leverage to get to more customers. And I also wrote down some conceptual stuff about like who is the type of person who would use this, are they paying for it, or are they just using it and their boss is paying for it and stuff like that. I did not really go through a day in a life of but I thought about how the product itself would be use.
So, I did to some extent I would say did do these things but I probably didn’t document it to the nines when I was going through and writing it all out. The other thing is I didn’t plan these things in advance because – or at least not so far in advance that it turned out to be useless because it would’ve been based on pure assumptions. So, essentially what I did was before I really started to go down the path of building it, I thought about who it was that could help me and wrote down a list of names. And then I also thought about the people that I was having conversations with when I was going through validations and saying, “Okay. Is it possible or is it going to be difficult for me to get in front of more of those types of people?” So I used that to kind of identify what marketing channels to use.
But again, like of the life of, I didn’t really think too much about that just because I was focused more on how is somebody going to use this as opposed to if it’s consultant use or a freelancer, what does their day look like? I know that they get pulled in all sort of different directions and quite frankly, the best position for them to be in is to not really be in my product that’s doing other things. It’s supposed to work in the background for them.
Rob [14:37]: Yeah, and for me, no I’ve absolutely never created these things but I create my own versions of them. I just think what is the value proposition, what is it going to take to get this many people to the site, this many people to the funnel to grow this fast, what are the possible channels for that. I didn’t draw an influence map but I definitely had a list of folks who I thought could be – could help me out in some way, affiliates, that kind of stuff. But I mean, this is a bulleted list and a Google Doc, right. I just told that I had the HitTail marketing game plan and then I had the Drip one. It was all the marketing ideas that came up as I went through it.
Customer archetypes, you know, again, I didn’t do ‘The Startup Owner’s Manual’ but I wrote out, who do I think like the top three possible customers for these apps are, where are they, and you just kind of build this out, just research it and then forgot how you can advertise on those place. Or is it more organic, are they going to Quora? Then maybe I should answer questions on Quora, that kind of stuff. A day in a life, never done it. I know a little bit about it. I don’t know how that would be helpful for me. But the thing is, the problem is I do think the stuff is helpful for beginners but it’s like it just gets too deep.
You get this 600-page book like the ‘The Startup Owner’s Manual’ and they have this whole section on TAM and SAM, right, it’s like total addressable market and served the addressable market and target marketing, blah, blah, blah. And it’s like you have to go to think about those things but I think people just spend way too much time looking at this stuff. I mean, especially if you’re bootstrapping, the TAM doesn’t matter. The total addressable market does not matter for trying to build a $10,000 a month business.
It matters if you’re trying to raise funding because they need to know it’s a $100 million marketing and you need to prove that. So, so much of this is not relevant towards bootstrappers. I mean, you can grow a seven-figure business and never want to do any of these things. But with that said, I think the issue is that they have you thinking through based on all of these key resource hypothesis and the customer relationships hypothesis. I think thinking through them once is probably good but when you think about bootstrapping a business, it’s like, am I building something people want? How do I get there quickly and then how do I let people know about it?
Those are the three questions I ask and that’s what – the day we launched Drip, I had a 12-page Google Doc which is a bunch of bullets and notes and thoughts and just every podcast that I heard that gave me ideas that I thought could work I put on there. And by the end, I have this big list of tactics that I was then able to develop into a strategy and to leverage that and figure out what works and what doesn’t. And then from there you go to a spreadsheet. There’s a whole other system down there but these are theoretical and they’re business model planning. And Steve Blank is an academic. He did launch several startups but he’s a professor now.
And so he thinks in terms of these broad frameworks and often these broad frameworks are pretty high level and are pretty MBA type stuff. And in my experience, MBA type stuff does not tend to help you when you’re actually having wherever meet the road. It tends to help you really well if you’re raising funding, if you want to do a pitch, if you want to talk about, but nuts and bolts of actually getting customers is just a whole different story. I’d be really careful with spending a ton of time on these things you’re talking about, but I do think it’s helpful to do these extremely thin and quick versions of each of them and try to think through what are the questions that they’re trying to have me think through because I do think there’s benefit there.
Mike [17:36]: I think the important thing to bring up here at this point is that the reason why it’s helpful when you’re looking at going out for funding is that it forces you to think about things that you probably haven’t put a whole lot of time and effort into or that consideration, so that if you get into a situation where VC or an angel investor ask you a detailed question about something like this, then you’ll have an answer off the top of your head because you have looked at that specific question before and you won’t have to um and uh over it and come up with something on the spot. You’ve already thought about it in advance. That’s where it’s helpful.
It’s not helpful in terms of implementing your business and actually doing anything, because I think that what you’ll find is that, you can put together this plan and do all this stuff in advance, but things are going to change as soon as you start talking to customers and that’s really where – that’s where all the other things that Rob just talked about and moving quickly and having those lose spreadsheets and Google Docs that you work from, that’s the most important at that point. When you’re talking to VCs, they just want you to know that you have done your homework and really thought in depth about these things. And if you can answer some obscure question, then they’re more likely to fund you because of that because you can answer that obscure question.
Rob [18:46]: Right, and I mean, it comes back this quote that I say a lot which is about how I prefer to build businesses instead of slide decks, right, and this comes back to all the stuff we’ll probably look really good in the slide deck when you’re raising funding but it just doesn’t question how much. It’s really worth in the long term in terms of actually when we’re meeting the road. So I hope that helps, Rob.
For our next question, it comes from Liam Elliott and he says, “Hey, guys. First of all, I love this show. I want to pick a startup to run with but I’ll be in university for at least two and a half years starting in September. Is it possible for me to plan for growth as a one-man show? I want to avoid having to make the difficult decision of business or school somewhere down the road. Do you have any advice or war stories about the consequences of resisting natural growth in order to maintain availability for another area of life such as work or school during a predetermined period?”
Mike [19:38]: I feel like there’s a kind of a false assumption here that everything is going to be successful, and that growth is going to become very quickly and very easily and you’re going to have to make a decision down the road of, “Oh, do I stay in school or do I go with this business and do that instead?” I think if you look at widely publicized examples of people doing exactly that, you end up looking at people like Bill Gates or Steve Jobs. And those come to mind when you look at that stuff, but I don’t think that there’s too many other examples that do.
So, it kind of skews your view of what really happens when you’re trying to build something. I think that if you’re going to a university and you’ve still got two and half years ahead of you, then I would use that time to essentially build a business and practice with a lot of things where there’s marketing or a product development or doing anything related to customer development in order to put yourself in a position where when you get out into the real world and you have to actually start paying bills as opposed to taking classes all the time and not having to worry about that stuff. Then you’re in a better position to be able to grow the business.
From my own personal experience, I only know of one person who was going to college and ended up building a successful business while he was in college, and the end result of it was that he was one class short of getting his degree in photography and decided [?] I don’t care because he realized that his business was making more than enough money that he didn’t have to worry about it. But he had also started this business back in high school and he’d been running it since he was, I think, 17 or 18. And by the time he was 21-22, I mean, the business was making close to 7 figures and this was back in the shareware days and there was not a ton of competition. So ti was a very different environment at that point. And he still runs the business today but he also runs a couple of others as well.
So I can’t think of too many examples that really fit that mold of where somebody’s going to college and they build a very successful business and then they have to choose, do I want to grow this thing even more at the expense of quitting school.
Rob [21:34]: Yeah. I think that’s a good point. I think the odds of it happening are pretty slim. I think I’d be less worried about it growing and having you to decide and more worried about it just being a time suck, right, because even if it’s not growing, it can still be a huge time suck that you’re investing a bunch of time in. I think one thing to think about is like this is perfect for kind of the start small stay small approach which is the book I wrote in six-seven years ago. And it’s where you look for really small niches, right. You look for have [?] website just hold a few thousand a month. I had an in-voice that sold several thousand a month but very small, very self-contained markets, almost no competition. I had a few others ahead.
There were some e-books in different markets and they were just so small. I mean, they were literally between 500 and 5,00 a month each. And there was very little work to be done on a month-to-month basis and they were never going to grow to be $10,000, $20,000, $30,000-businesses. But that’s the like the perfect, I can imagine a better business to have while I’m going to school. Not much work, no danger of growing, not a competition so I don’t really have to fight it off. So that’s probably where I would think of going down more of this micro approaches like having whatever your talent is. I don’t know if it’s WordPress, plug-ins, or Photoshop add-ons or a Shopify app.
I mean, there’s these little tiny markets you can get into where it isn’t a ton of work and it generates a bit of money but you’re not endanger of this thing growing even if it grows to as big as it can be. It’s still only a few grand a month. So it’s an interesting thought experiment and I appreciate the question, Liam. I hope that’s helpful.
The next question is from a guy Louis and he says, “Hey, guys. You’ve responded to a number of my questions in the past and I appreciate that. I have another one. How do each of you approach scaling support? I heard Jordan [Gaul?] mentioned a StatusPage.io runs 10,000 customers, 1,600 of which are paid. They bring in 2.4 million AOR yet they only have one full-time equivalent support role. My business is growing via channel partners who while currently taking up a lot of my time, are helping me streamline support so I’m ready in the future to take on more. Currently, I use videos, flowcharts, and manuals, plus an online ticketing system, but I wanted to know what else I could consider to help reduce common questions and problems. What are your thoughts?”
So one clarification here is the StatusPage.io thing with 10,000 customers and one support person is a little bit of a – I don’t know. Maybe –
Mike [23:51]: Edge case.
Rob [23:52]: It’s an edge case, that’s a good way to put it. Because think about how simple – I mean I used – we used to have StatusPage.io replaced for it. It’s a simple app. There’s not much fare, so there’s not much to support. An app I own years ago was HitTail. It was a simple app. We had one part-time support person even though we had – I’m trying to think of how many thousands of customers we had. It’s just there wasn’t that much to do when you just get set up and then things run on autopilot. It’s very different. It depends on what your app is but you look at an app like Drip or an app like direction Bluetick has headed, Bidsketch, these are much more complicated apps, a lot of moving parts, a lot of things to get configured, a lot of things to think about, dozens, 50, 100 different screens of background process. I mean, there’s just a ton of things to know.
It’s just apples to oranges, right. There’s a reason that in StatusPages that one reasons can support 1,600 paid whereas in an app like Drip, maybe that’s five people that need to do the same thing. So, that’s not your question, I realize, but I wouldn’t try to think that every app can have that ratio. But back to your actual question of he says he uses videos, flowcharts, and manuals, plus online ticketing system. I’m assuming that a Help Scout or Zendesk, he’s wondering what else he can do to reduce common questions and problems. Go.
Mike [25:00]: Yeah. There’s only so much that you can do and I think that there was an attendee talk last year by a Ben Orenstein who talked about how he tried all these different things and he was watching from people’s shoulders as they were going through his app and he’s like, “Oh, they didn’t realize that they needed to do this. So let me put some text around that.” And he went to the next person and watched them and they didn’t see the text. He’s like, “Oh, well, maybe I need to make the button bigger.”
And he made it bigger and it still didn’t matter. And he tried all these different things and the reality is that there’s so much variation between customers that it’s very difficult to do one thing or even sometimes a combination of things inside of your app that will completely eliminate all support questions or problems that come up with that one particular feature. And if you would extrapolate that across the entire app, there’s no way to eliminate them all especially in any sort of application that has a level of complexity to it, above like a static HTML web page. And even that, you’re probably going to get questions about.
So there’s a lot of things that you can do. It sounds to me like you’re doing a lot of the things that I would probably tend towards. I would take a look at your support tickets and see if you can classify them or categorize them in such a way that you were able to identify the places where you are getting a lot of questions about and see if there’s ways to either put some wizards in or streamline the user experience so that maybe it’s a multistep process or something along those lines.
I’ve also seen apps that are out there that you can kind of integrate into your application that allow you to have a help page on the specific page of your application that points you directly to the KB articles that are relevant directly to that one page. But even with that, you still have to educate people that that’s where they can go for help on that particular page. So, there’s always going to be places where people overlook stuff and there’s literally nothing you can do to stop that.
Rob [26:49]: Yup. I mean, it’s blocking and tackling, I think, right? I think you get something. You’re going to have something, some in-app help, having a chat widget can be nice although you’re going to need more people if you offer that kind of real-time support. And certainly videos, flowcharts, and by manuals, I’m assuming you mean online knowledge base not a big 300-pound paper thing that you ship to someone like in the old days. I mean, our KB has been super, super helpful and people search that all the time. They want to find the answer right away. They typically want. It depends on your audience but they typically want to find an answer without emailing support because they know it’s going to take a while to get a response. So the more you can build that out, the better you are. So I don’t know if any magics over bullets here. I just think the more info you can get out there in a searchable fashion, the better off you’re going to be.
One hack that we do use, maybe this is something that I can throw out, is I went in. RKB runs on WordPress, and I hacked it since I still know a little bit of PHP. And I wired it up so that any time a question or anything’s typed into the box and we don’t have a result for it, we pop it into, in essence we send an email into an inbox. And then we have someone go through those once a week. And there’s a bunch of junk and there’s a bunch of stuff that we’re never going to do if we found people phrasing things differently, obvious repeated searches that we should build. So we wind up building KB articles based on basically people not finding information and we found that over time that the amount of searches that aren’t being found are the ratios reduced. So, that’s one clever hack but that’s not individually going to scale your support up, but everything – it sounds like you’re on the right track at this point.
And I think for our last question of the day, we’re going to take it from Dave. And he’s asking about raises and when to give raises and how do deal with them. He says, “We have 12 employees and every 6 months we evaluate them, have one-on-one meetings and give them raises. My employees are great and I don’t have any qualms in that area. We’ve been lucky enough that our employees like us and stick with us but this creates a small problem which is that after an employee has been with us for one and a half to two years, they’ve received several considerable raises. For example, my lead developer who started with us less than two years ago with 18 bucks an hour is now up to $31 an hour. That’s the biggest jump. But there are others who are heading in that direction. For that amount, I could almost squeeze in another developer which we badly need.
Now the company has grown and the employees are now more experienced and more valuable, but still it feels difficult to just by paying the same guy that used to pay 18 bucks an hour, $31 an hour. It isn’t a large a company and it’s not the type of place where people jump to upper levels of management and start adding values in ways they weren’t before. Actually, most people are doing what they did two years ago, fix bugs, add features, etc. At the same time, now that we’ve set this pace of raises, I wonder what the expectations are and what would be the reaction if I all of a sudden we said, ‘Sorry but you’ve reached your limit.’ In short, how do you deal with raises? How is it tied into the growth of the company? What do you think is fair”
Mike [29:36]: So I’ve never been in a position where I effectively doubled somebody’s salary over the course of a year and a half or two years. I think that that is asking for trouble in many ways, but it’s also hard to go back and change things if you feel like you’ve made a mistake in that particular situation. I think when you get to a certain point, you also have to probably let people know where the business is at and what your priorities are moving forward. And to kind of that point what I would say is go take a look – we’ll post this in the show notes but I would go take a look at [?] profit-sharing program that they put together. And it sounds to me like that might be an appropriate way to go where you’re not necessarily guarantying somebody that they’re going to get a particular raise, but at the same time, you’re encouraging them to work smarter and do things that are going to increase the profitability of the company without directly giving them money regardless of whether the business does well or not.
So, as the business owner, and this is an odd thing about entrepreneurship is that as a the business owner, you are the person who’s undertaking the vast majority of the risk. And if you can do a profit-sharing of some kind where you essentially shift some of that risk back to the employees to some extent, I mean, obviously, it’s like you want to pay them a fair salary but instead of giving them exponential raises every year which you can instead do is say, “Okay. We’ll give you a small raise and we’re going to implement this profit-sharing that allows people to get a much larger upside than they would otherwise in a way that is not guaranteed.” So I think that that’s probably the direction that I would go with something like this.
Rob [31:08]: Yeah, that was going to be my first suggestion is to not make it raises but to make it somehow based on profit in essence. You can’t base it on revenue either, right, because if you guys are growing then there’s not going to be a ton of profit, but if you can share in that then everybody shares in the upside. The other thing – I mean, I think this should be a cautionary tale for people listening. Obviously, I think giving someone a raise in two years from 18 to 31 is, unless they were drastically into market is just way too fast the pace and you have set an expectation now with these folks. So I think the answer, if you haven’t done that, it’s like don’t do that. You can give a raise every year, it’s typical. People tend to I think expect that. And I think that’s a good thing and if they’re solid that that’s fair. But going above and beyond has repercussions. There’s a reason that people don’t often give hefty raises every six months.
The other thing I would think about is what is market rate in essence, like where this person lives based on where their location is. What is market rate for what they’re doing? And if they’re over-market substantially, say, Marcus, 25, and they’re at 31 then have a conversation with them and let them know like, “Look, I know that market rate, you’re over-market rate, we really value but we just can’t continue to bump you up at this pace if it’s only one person who’s way over-market. And there are salary surveys and such. If people are still under-market, then perhaps you can just slow down the pace and just say, “Hey guys, we’ve grown to the point now where we need to do. We’re not going to raise every six months or we’re not even going to evaluate you every six months. We’re going to do it every year instead and you can slow the pace down there.”
I mean, there are options here and none of them are super easy because of the expectation that you’ve set, but I think that you’re asking the right question and definitely thinking about it well because then I think if you were to be flippant and just suddenly change policy, I do think that you’re going to need to have some conversations for sure. And I like what Mike said. I think I like the profit sharing idea just because it then becomes relative to the company’s success.
Mike [32:55]: I think the most important part of all that moving forward though is being a little bit more transparent about not just the company’s finances. And you obviously don’t have to share absolutely everything but let people know, “Hey, this is where the business is. This is the goals that we’re trying to achieve and the reason we don’t want to give you a massive raise moving forward or this year is because we need to grow the business. We need to hire support people. We need to do all these things. So we need to allocate the business resources which in this case is money.”
And then you can introduce the profit sharing, but it starts with those conversations. If you don’t have those conversations, you just drop it on people, then I think you’re probably going to start introducing more problems than anything else. I mean, you have to have those preliminary discussions first and set expectations around what the schedule going forward for raises is and have some preliminary discussions just to kind of float the idea.
I learned a long time ago that I took some leadership classes back in college and one of the things that they recommended was that, if you’re going to a group of people and you want to get their support on something, never walk in the door and just drop the idea on the group because what will happen is the people will shoot it down and there’s always a couple of people who are going to shoot it down because they’re not going to be happy with it. And everyone else doesn’t know which side to go on because they haven’t really heard about it before, so they don’t have all the facts.
And if you do that in this case like this, you’re going to just run into problems. So, float the idea to people. Talk to them a little bit about it beforehand. Get their input and you can actually – if it’s a small enough group with only 12 people, you could probably do that with every single person and just say, “Hey, let’s just keep this between us because I want to float the idea behind. What do you think?” And then everybody feels like they at least got some sort of a say in it or communicated with you about it.
Rob [34:34]: Good. Really good strategy there. So that’s actually how I approach the Drip acquisition with our employees. I went to everybody one by one. It was very time-consuming to have it, because I pretty much cover 30 to 60 minutes per team member. And there were some that were in person, some remote. Some of the conversations were different than others. And it was time-consuming but in retrospect, it was exactly the right way to do it because if I got everybody together, people don’t want to speak up. They don’t want to ask questions. But when you’re doing it one on one, that’s just so much easier. And again, it’s way more time-consuming but there are certain issues that I think warrant that in talking about an acquisition or employee pay, I think are probably two issues that do warrant it.
Mike [35:13]: Well, thanks for listening, everyone. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt used under creative comments. 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.