Episode 111 | Co-founders and Equity, Personal Branding, Advice for a Recent Graduate, and More…
[00:00] Rob: In today’s episode of Startups for the Rest of Us, Mike and I are going to be discussing co-founders and equity, personal branding, advice for a recent graduate and answering more listener questions. This is Startups for the Rest of Us: Episode 111.
[00:23] Rob: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:32] Mike: And I’m Mike.
[00:33] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. Well, I recorded my first video training course last week. I had a videographer come to the house and I had someone interview me and we spent about…well it was about two hours behind the camera. I think he’ll edit it down to maybe 45 minutes to an hour of content. It’s about why startup should hire VAs and how to do it and the whole process and stuff. And it was absolutely terrifying but it was absolutely exhilarating at the same time to have all the cameras up there and just…I’m very comfortable now on podcasts and with screencast and that kind of stuff but it’s so different to be standing in front or sitting in front of an actual camera and knowing the people are going to watch later.
[01:15] Mike: Yeah, interesting. I hadn’t thought about like the lighting aspect of it. That would be I suppose a little bit intimidating if you haven’t really done it before or you’re not used to it. It’ll be almost be like being on TV all the time.
[01:25] Rob: Yeah, that was it and he…you know, he had a full lighting set up with all of those big white umbrella things that reflected inward and then he had a three-camera set up. So, you’re being watched from all angles and a microphone fix…I mean it’s just…it’s a different scene and he actually made it really professional. He made it feel a professional and so as a result, it was like, “Oh, man. I feel like I’m under the gun here with a producer or something.” But it was a lot of fun. Obviously, folks are…if you’re interested in hiring a VA and you want to know more about it. I probably will market it through…announce it through my e-mail newsletter at softwarebyrob.com. You could sign up for that in the upper right and that would be the main avenue that people can hear about that.
[02:02] Mike: Pretty cool. So, when do you think that would be out?
[02:04] Rob: I’m supposed to have the videos in the next week. I’m actually very excited. This is, you know, it’s different than any other video course I’ve ever seen because it is like two people in the same room. It’s not like a Mixergy interview where you’re over Skype. So, it’s two people in the same room discussing this topic and then it comes with the actual assets that I use, the job posting and some questions and a sample screencast. I mean it kind of all of that and I’m going to package it up and sell it as a video course. With these many things that are going on in January, this is lower priority. I mean you and I need to get MicroConf tickets sold. I have three marketing things that are completed for HitTail that we decided not to launch in December because things are slowing down. So, that will be in January. So, as a result, I think I’ll probably spend the time to write the e-mails and launch this course. It…either be late January or early February and then I have two more plans for the remainder of the year as time permits.
[02:56] Mike: Cool. Do you have a website and everything for that or no?
[02:58] Rob: I don’t and I don’t think I’ll launch a separate a website. I will probably host it through someone like Udemy and they have pretty cool deal for if you want to host courses like this. There’s no reason to go through or finding another domain and trying to market it separately and all that stuff. Maybe at some point but I think for now, I’m just going to do more of a low-profile launch and then I have some ideas on how I’ll market it past there and none of them require with setting up all the stuff that it takes to get a…being in process in place and the check out functionality and all that stuff.
[03:27] Mike: Cool.
[03:27] Rob: What else is going on?
[03:29] Mike: Well, I got a slightly depressing e-mail today from Verelo. If you remember Verelo was one of the sponsors at MicroConf. I had showed a screen shot of the server statistics of like ping times and things like that and how fast my server was responding and then I showed it after I had switched my website from where it was over to WP Engine. Do you remember that?
[03:50] Rob: Yeah.
[03:51] Mike: Unfortunately, they’re shutting down.
[03:52] Rob: What’s going on?
[03:53] Mike: It just sounded from the e-mail that I got those are funded company and things just were not progressing well enough. It seemed like they were behind some of their competitors and they just didn’t have kind of enough lead time in order to be able to do the things that they wanted to. So, there might have been some marketing challenges. There might had just been being late to the market and just not able to get enough traction because, you know, the people who would do that kind of stuff, they probably sign up for it and then afterwards, it’s like why are you going to switch from one provider to another because you’ve already went through all the leg work, chances are their pricing is not going to be exponentially better if you go some place else. Unless there’s this giant value proposition to switch what is it by you.
[04:31] Rob: Right. Yeah, that’s a bummer. They…because they were also in the Academy, right?
[04:34] Mike: I think they were, yeah.
[04:35] Rob: Do you know if they’re pivoting or if they’re absolutely like shutting everything down?
[04:39] Mike: I got the impression it’s completely shutting everything down. I think the —
[04:42] Rob: Okay.
[04:42] Mike: …founders are kind of moving on to another project to this point.
[04:45] Rob: Right. You know, if it’s slow growth, it’s always hard to justify that and if you have investors who want their money back, it’s maybe even harder.
[04:52] Mike: Right. Yeah, I mean maybe if they were…if they were self-funded, it might have turned out a little differently because they probably would have been able to kind of keep going. But, you know, it really depends on what their income stream was and I…I have no idea what that looked like. So…
[05:05] Rob: Right and that’s where to trip, right, if you have two people and you grow this business to 10 grand a month. It’s like, oh, that’s a nice…nice little chunk of change but if you have investors and then two founders and you’ve grown it to 10 grand a month, that’s…that’s nothing.
[05:16] Mike: Right.
[05:17] Rob: Like that a complete waste of everyone’s time, you know, because the returns are just so small.
[05:20] Mike: Uh huh.
[05:22] Rob: Well, I’m winding down. It’s…we’ve got about 12 days left in the year and every year, my wife and I each try to do a solo retreat. Stay in a hotel for one or two nights, no kids, no family and in fact, I don’t bring my laptop when I go. I might bring the iPad because that’s where my books are but I try not to do…trying to be online answering e-mails, any of that stuff, mostly pen and paper, mine’s planned for the first week of January. And that’s that time that I spend either planning my goals for the next year or I spend it really figuring out if I already know my goals like this year I do, right, because we actually did that in our goal’s episode. I really want to mark out like month by month, how am I going to do them, whether or not I really want to do all these things, maybe even look out past a year but it’s just a day or two to really focus and think about, you know, clear my head and kind of have more than clarity to really gain energy and momentum as the year starts.
[06:16] Mike: Cool. So, I was up till 3 a.m. last night hacking away a code. And remember how I said I want to stop doing code?
[06:22] Rob: I do.
[06:22] Mike: Yes, Don’t get me wrong. It was…it was fun to sit there and do this but I was hacking away this code to do some integrations for the some e-mail marketing that I’m doing. And it’s going pretty well but I ran in to some problems with KISSmetrics and literally just before this podcast started, I finally realized what the problems were because I was doing stuff. I started on it probably last night at around 10 o’clock at night and then I was working on it until about 3 a.m. And some of the data was there and some of it wasn’t and I realized just before we started the podcast that the problem I ran in to which was I had thought was caused by the fact that they say, “Oh, well, we don’t process a lot of these things or a lot of the data for two to six hours. So, maybe a little while.” I realized that it’s because the date range was set to the last seven days versus this month. So, what happened is like all the data that was going in before midnight was getting there by virtue or the fact that it was last seven days versus this month with…which sort of also included everything after midnight.
[07:18] Rob: Right because last seven days means the last seven complete days. So, if you’re in the middle of a day, it won’t show any from that…from that current day.
[07:26] Mike: Yup.
[07:26] Rob: Is that right?
[07:27] Mike: Yup.
[07:27] Rob: Okay. That’s always a bummer. Yeah, I’ve done made this exact same mistake in advertising dashboards. It seems to last seven days or last 30 days should be from now but they…they do this completed day thing and that always screws me up.
[07:40] Mike: I understand why it’s like that but I just wish there had been something in the UI where you’re choosing the date range where it says, “Such and such a date, to such and such date or to midnight —
[07:49] Rob: Right.
[07:49] Mike: …or something like that.
[07:50] Rob: Right and once you’re using this for a while and you have data, that’s…it’s not going to make a difference, right? Because it’ll be a few hours a day that it doesn’t show up but when you’re doing this integration and you’ve written all this custom code and you’re trying to test it, it’s…it’s kind of a pain.
[08:02] Mike: Uh huh but other than that I’ve also been outsourcing a bunch of new articles for the AuditShark website and that’s going pretty well. I’ve got I think 10 or 12 that are on my lists to I have written and I’ve gotten probably half a dozen of them back. So, far I’m very pleased with what the quality is of these different articles because a lot of them are definitions for things around security or compliance and the things that I could write but it’s just not really worth my time to go ahead and sit down and write them.
[08:29] Rob: Oh, absolutely. Writing is not only time consuming but it’s that good glucose, you know, that you really needed to save for high…kind of high productivity and high value actions and writing articles to go and kind of an FAQ or an article section of your site is not one of those things. So, that’s good to hear it’s been working out well. Are…did you hire a single writer or using one of the…the writer marketplaces?
[08:51] Mike: So, I’m using one of the marketplaces. I’m using the content authority right now but there’s others that I kind of poked around a little bit at and I was…I just kind of evaluated this with two initial articles thinking to myself, well, if this works out, I’ll continue using them and if it doesn’t, then maybe I’ll try some place else. Because at the end of the day, there’s kind of a certain quality bar that you want to hit and as long as it’s above that bar, you don’t necessarily care whether you’re paying 4 cents a word or 4 and half cents a word. It’s just…it’s immaterial at that point. The first couple of articles worked out, ordered a bunch more of those seemed to be working out. There’s one article that came back out of like six or seven that we’ve done so far that it’s a little iffy. It refers to a lot of legal jargon that would be referenceable elsewhere but I just don’t have those references and you know, it kind of sucks that it has that but we did put a limit on how many words the article was supposed to be. So —
[09:41] Rob: Yeah.
[09:41] Mike: …I was a little leery of it just like on their main page, everything looks fine but then when you start digging in, you’re going to like the FAQ, all the formatting there is all so screwed up. And I don’t know why but the content I was getting back was recently decent.
[09:54] Rob: So, I have a little bit of a rant here. I don’t know…have you been following the news with Instagram and how they updated their terms of service?
[10:00] Mike: Yeah, I haven’t followed it but I know that there was some little [Indiscernible] or something like that about it.
[10:06] Rob: It just continues to amaze me. These companies with no revenue model that just want to build mass audiences and then they’ve kind of figure out how to start making money and always has to do with advertising or with selling user created content or selling advertising around user created content. I don’t understand why they don’t have it in their terms of service from the beginning because that’s what Instagram did. They…they changed it and put language in that said they could like sell the photos that they have like an unlimited license to them or they have ownership even though you’re posting your photos. Facebook has done this, right? They do the privacy stuff. Twitter has screwed their API developers. I mean it’s just on and on and on these big companies with no revenue model just suddenly turn and do this.
[10:46] Now, the funny thing though is the reaction, it’s people who just become shocked by the fact that suddenly these companies do to make money that they…they think Instagram could just be free forever and that there was never going to be this. So, it’s kind of both sides of the coin are…are humorous to watch like really this is happening again, really there’s going to be another uproar. This is…it’s…it’s quite predictable and…
[11:07] Mike: Yeah, that’s just pretty sad.
[11:12] Rob: Actually, we have two voicemail questions for the day and then a number of text questions that came in via e-mail. So, let’s dive right in. The first one is from Justin Jackson and he says, “Hey, Rob and Mike. I love your podcast and I love the Micropreneur message. It seems like you have your hands in a lot of different baskets like you’re a jack of many trades and you don’t seem to be as stress out as some of these other entrepreneurs. I did some reading today by Adii who is the founder of WooThemes and he had an article that says ‘Passion will make you work more’ and then he has one that says ‘Jack of all trades, master of none’ basically saying that it decreases the quality of your work, your product or your services. I’m wondering if your experience as a micropreneur with no employees and multiple projects has been different or am I reading your life wrong? Have you found a secret to a balance life? Cheers. Justin Jackson.”
[11:59] So, there’s… there’s two main points here Justin is asking about. The first is about “Passion will make you work more” and the quote that he pulled out of there is “When you start a business, it’s fun at first but then it feels like you’re feeding the beast, daily you’re making a deal with the devil. You need to work more and more to maintain the business.” In my experience as a bootstrap entrepreneur, now, Adii is as well, right? He didn’t accept funding. But in my experience I’ve always felt like I’m able to work more when I want to and I think a lot of that comes back to really structuring my businesses around my life and around the kind of life that I want to live. And so outsourcing has been a huge part of that. Outsourcing, tier one, e-mail support and you know, hiring now most recently a product manager but having a number of folks hovers around between 7 and 9 contractors who work for me in any given month. I had been very deliberate about that and I know Adii has employees and so, you don’t know if he’s able to outsource essentially off load work from him to the employees he’s hired or if the employees are more of a burden, right, because that can also be the case.
[13:07] If you have 10 employees reporting to you, it’s different situation than if you have 10 contractors, independent contractors working on different things and they’re kind of set up to be more autonomous. That could be the difference here, right, is that Adii really is growing a startup that’s more like a traditional company and I’m not and I’ve never had that goal to do it. I want to grow my businesses as large as they can within these confines that I’ve set up and confines often have to do with as long as they don’t have major impingement on my life and they don’t require me to…to work ridiculous hours because I just…I don’t have it…I don’t know if my life structured to be able to handle that.
[13:44] Mike: I think my take on this is really it depends on what you’re trying to do and how you have decided to tackle the problem and part of it is…I see a lot of people who will try to build businesses and they’re trying to do everything either all at once or in very quick succession and they’re not taking the time to automate certain aspects of it so that they don’t have to do those things especially the things that they either are not good at or don’t want to be good at especially with developers. Developers have a hard time doing a lot of the marketing stuff and that’s really kind of the hardest part of them and part of it is because they procrastinate because they don’t want to do it because they don’t like it. And it just gets to a point where they’re not doing those things that they really need to be doing to make the business successful.
[14:26] So, they feel like they’re working a lot but they’re not actually doing the things that need to be done. I think that that’s probably part of it and you know, maybe that’s what their reference to feeding the beast and making a daily deal with the devil in order to get things done. The other part of it is being able to finish the things that you started because there’s a lot of people who are more than happy to start a brand new project but there’s that last mile that you really have to undergo in order to take a product to market and if you’re not able to kind of push through those challenges and get the product out the door, then you’re going to get to a point where things stop being as fun as they were in the beginning and you’re kind of give up before it’s time. So, I think that those are the sorts of things that play in to it. I think that it really has a lot to do with what your personality is and what your purpose behind making those decisions is.
[15:16] Rob: Yeah, I agree it has a lot to do with what you’re trying to build and bottom line, I mean Adii is a friend of mine. He spoke at MicroConf last year and you know, you can think of this, his single blog post here could have been just a snippet in time, right? He could have just been feeling this way on that particular day and wrote the blog post. It may not be the case for his entire startup. The other part of the question was about being a jack of all trades. So, the quote is “If you’re a jack of all trades, master of none, it decreases the quality of your work, your products and your services.” We do know a little lot of people hold this view point. And so, I think the implication here is saying should you not work on a number of different products at once, does that make you a jack of all trades?
[15:56] I would argue that I am not actually a jack of all trades because I don’t do design work. I don’t do…I do some copywriting but I also outsource a good chunk of that. I don’t do a ton of development. I do some of it. But for the most part, I focus heavily, heavily on being kind of the visionary for the entrepreneur role of my…my apps and my products. I focus on marketing. And that is really my core thing. I would say that I’m not a jack of all, I’m more of a master of, you know, the marketing and the vision stuff at least within…within my realm. I would agree that it’s a challenge to be a good designer, HTML, CSS guy, jQuery, developer, copywriter and founder, that does water you down because you only have so much good glucose in a day. You can’t spread it around all these activities.
[16:44] And so, as your business grows especially, you need to get people who are special, who specialized in something and who are masters of that area and I think you need to choose the one or two areas that you’re going to become a master of and not spread yourself all over the place. And so, well I may have ten products, I do kind of the same activity for all of them and if you put it under umbrella, it would be marketing like that’s where unachieved marketing guy at all of those area, you know, and all of those products and for the most part like the development, the support, these other areas are outsourced.
[17:19] Mike: Yeah, I was going to say something along those lines as well. I mean you’ve got, you know, all these different things that are kind of under your umbrella but when you start expanding things out, I would say that the two aspects you need to really kind of focus on and be a master of are one is marketing and two is project management. And if you can get those two things down, then the rest of it can be outsource because as a good project manager, you can make sure that the code gets done. You can make sure that the design work gets done and by people who are fully qualified to be doing it and because those things tend to be time intensive, you can outsource them and as a good project manager, you’ll make sure that they get it done in time and that all these different things are going in parallel and they get done in about the same time or in the time and frame that they need to get done and you can basically get all the work splice together.
[18:05] The other side of it is the marketing side which you basically need to be able to do that well in order to have a product that’s going to sell well and if you can combine those two aspects and become really good at both of them, then essentially it doesn’t matter how good a designer or how good a developer you are. I mean as long as you have the money to at least get started and the time to be able to invest in it, if you’ve got those two skills, the rest of it is largely immaterial.
[18:32] Rob: Next up, we have a voicemail call in question.
[18:35] Voicemail 1: I’m contacting you for some advice as somebody who’s recently graduated from a CMIS degree, the difference being between this and the Computer Science degree would be calculus. The whole reason I got the degree was to feel more confident both on the process of creating stuff online and hopefully, being able to do a majority of it myself. That said, I feel still stuck in the burning process. I live in an area where they don’t really have so many jobs to offer recent graduate. I support my wife’s military career and so, I’m kind of stuck. I can’t really move away.
[19:13] Am I deluded to think that I can learn to make online path while still supporting her career and being home for the kids. Would it better to gain experience working for somebody else regarding languages has giving inundated on which one to really focus on, maybe focusing on PHP since the servers that supported seems to be a lot cheaper than a .NET and I guess what can I be doing better? I’m on tutorial site Lynda.com net apps just…I guess practicing and honing and making up situations first. I…I just don’t seem to be getting past a hobby or skill level. Thank you so much for your time.
[19:53] Mike: So, thanks for the question. I think that the first thing you need to do is really decide what your end goal is because it sounded to me like you were unsure [0:20:00] whether or not you should go out and find a job doing fulltime development or whether you should be looking to build a business and you know, sell your own products online. And it sounds to me like there’s a lot of hesitation to do either one almost as if you make that decision and it’s going to be final and I don’t think that that decision whichever one you ultimately decide to do is going to be final. You can certainly choose one and then if things don’t work out or if you decided that you don’t like it, you can pivot later on and do something else. So, I would keep that in mind first and foremost because it’s not like you can’t change you mind later.
[20:34] The second thing is that you needed to decide what, as I said what your ultimate goal is, what you want to try and do. Start down that path. If you want to build products, then start building products. If you want to go out and get a job, go out and do that. Now, there are certain ways to find contract work online and some of them will pay well, some of them won’t but you definitely need to get started and get some sort of a portfolio if you want to go that route. So, if the local job market can’t support you, the internet is available to you. You can certainly go out and start looking there. In terms of finding a product to develop, that’s about talking to people who have problems and just trying to solve those problems for them. Develop a marketing strategy to reach out to those types of people who are having that problem and make sure that you have a solution for them. The one thing I would caution you about is don’t go building a product that you think people want and then try and sell it to them. Find what people actually are having problems with and then build the products to solve that problem.
[21:29] Rob: In addition, the caller mentioned that he went to college. He got a CMIS degree and that he didn’t feel like he was prepared to…to now build apps and I would second that. If you actually want to build web apps, don’t go to college to learn that because that’s not the best place. People I know who have…have really know how to build web apps, build web apps, right? They had to buy a book and then build the sample project or build the project of their own. Some of them do like tech…technical schools that are training schools for to actually get a job. College tends to be much more academic. I mean I got a Computer Engineering Degree from UC Davis and I came out knowing languages that were 10 and 15 years old that hadn’t been used in industry in a long time. He also mentioned that tutorials aren’t enough that he still feels like he doesn’t know how to build web apps and I would say, yeah, you’re right. They aren’t enough. You have to go and start building something, building a project because you’re going to learn more doing that than anything else.
[22:26] The question of PHP versus .NET versus Ruby, you know, what language you should use, if I were you and I was learning from scratch right now, I would go with either PHP or with Ruby on Rails. They’re just…they’re open source. They’re inexpensive to get in to. You can build, you know, really great web apps with them. So, pick one whichever suits your fantasy and do a little bit of research and figure out which one is going to work for you. The last part that I’ll address is he mentioned whether you should try to teach yourself or you should start trying to make some online apps like get…get a job from someone else, right, to actually have someone paying you to build their app to get the experience. I would say it depends on how much time you have in a given week. If you literally are working fulltime and have a wife and kids and you have five hours a week, then I would say now is probably not the time to take on contract work because that’s just enough time to learn anything valuable.
[23:19] If you can figure out a way to get between 10 and 20 hours a week of time, I think that’s reasonable to go on a site like eLance or oDesk or Rent a Coder. Like Mike said, the rates are going to be abysmally low especially on your first few projects until you gain some reputation and then you can raise your rates. You’re not doing it for the money though. You’re doing it to hash things out and…and to learn and it’s going to take you a lot longer to build something than it should because you’re still learning about experience of actually building production things and getting them live on the internet is going to be more valuable than six months of going through tutorials, bottom line. So, whether you have the confidence to do that now or whether you want to just come up with a small project that you think might take 20 or 40 hours to build that you give away for free online that you post to Hacker News to get some traffic and feedback just to see how your stuff holds up, then…then maybe that’s your first step to build the confidence that then you can now have at least a little bit of a resume and a portfolio to go on like I said eLance, oDesk, Rent a Coder, any site like that. And then actually start making a little bit of money to justify the time you’re spending and that’s how I would do it. I would reiterate on that until you have the chance to potentially go out and work for someone else.
[24:28] And I do think that working 40 hours for someone else and taking a salary and hopefully being, you know, trained on the job is the best way and the fastest way to learn to code. That’s how I learn to code. Be careful that you don’t get in to a job or it’s like you’re a software developer but half of your time is in meetings and half of your time is spent doing maintenance coding because you’re not actually going to learn much from that. So, you will have to be picky about jobs that you accept but that’s kind of the path that I would throw out.
[24:57] Our next question comes from Scott and it’s about consulting a new contract position and a SaaS app. And he says, “I’ve been consulting fulltime since spring doing web development. I’ve been developing my skills and learning consulting as a side business over the past six years. So, I’ve been growing my consulting business and working on a SaaS product that will launch by the end of the year. I recently got the opportunity to take a fulltime hourly contract web development position. Contract position could last a month, six months or be open ended. So, I don’t have a good idea of how long it will last. I’m looking for advice on how to handle this so that when a contract position ends suddenly, I don’t have a gap between a contract position ending and obtaining new consulting projects. This month, I’m going to be putting in crazy hours as I already have my usual consulting work lined up and the fulltime contract position starting. But I’m wondering what your thoughts are in handling these next few months. One thought is to choose better consulting projects/clients during this time and try to increase my hour and rate for project. Thanks again. Scott.”
[25:52] Mike: So, this is really a good question and I’ve been in this situation before where I was doing some consulting and doing part-time projects here and there and then a project landed in my lap that was going to be a fairly long-term project or at least I felt like it could be. But the question was if I undertake this project and it is let’s say 30 to 40-hour a week project and then how long is that going to last and how do you go about maintaining other clients that you’re working with and working for while you’re doing that one such that if it ends or when it ends, you don’t have nothing to go back to. There’s two different ways that I would approach this.
[26:29] The first one is to essentially solidify how long it is that they’re going to actually have you on retainer for. So, ask them upfront to find out. Get it in writing so that you know when it’s going to start, when it’s going to end. The second thing I would do is ask them for a renewal clause of some kind that says that, okay, if it’s going to be a 4-month project, they let you know 4 weeks in advance whether they’re going to extend it and you have to put that in front of them. You have to ask the questions because you are in that position. You can’t wait until the day before the contract ends and find out, “Oh, we’re not going to renew this. So, we’re done.” Because that put you in an extremely bad position and you know, it’s not going to be your fault but you’re the one who’s going to end up suffering for it. So, those are the two things that I would keep in mind.
[27:13] Another option would be to instead of working for them fulltime, work for them part-time and offer instead of 40 hours a week, do 30 hours a week or 25 or something like that. If that’s a possibility, then great. If it’s not, then if you’re looking to expand your consulting business, this might be an opportunity to do it. But again, if you start getting in to a consulting business, then you’re getting away from products and it’s very difficult to expand a consulting business and at the same time transition in to products.
[27:41] Rob: When I was consulting, I was offered fulltime contract positions and I never took them. I always negotiated them down which sounds crazy, right? It’s like you’re turning down work but I never wanted to be in this position where someone basically held my livelihood in their hands because now you have a single point of failure and you kind of have to do whatever they want or you have to walk and you have to find other work before you walk. It’s a tough situation to be in. Not something I would necessarily recommend doing as a contractor. I mean I think that’s one of the beauties of being a contractor is, is that you can put together multiple clients and have a client base so that you’re not be holding to a single point of failure or a single client who can demand things of you that are unreasonable but you have to put up with because they are…are paying your mortgage. So, I guess I’ll start with that.
[28:27] Fulltime contracts in general are somewhat dangerous. The only time I would ever consider one is if they were paying a very high rate and I knew that I could bank money quickly so then in the first couple of months, I have enough money to have a cushion of a couple of months in case the contract broke down. I definitely think during this time, you should make hay while the sun shines and you should continue pursuing other contracts and you should…this is not something I say often but I would consider putting the SaaS product on hold for now and building up a stash of cash from this fulltime contract and then from any other contract work you can put together and just talk to your…you know, if you’re married, talk to your wife and say, “Look I’m going to work hard for the next several months but it’s going to put me in a position to then shoo out of this once…once all this stops.”
[29:12] In addition, I would only look for those new contracts under a higher rate because there’s no reason that you should be accepting cheap contract work now. You’re in demand and you have…this is when you raise your rates. The third thing I would consider if it all possible is to hire some help. If you could hire a part time developer to assist you even if you have to review all their code and check all their coding yourself, it still could very well be worth, you know, helping during this time and if you take new projects on with the understanding that you are a lead developer and that you will…you have some help with it that you would be the point of contact but that you may hire and don’t say, “I’m going to outsource part of this,” say, “Yeah, I have someone who…who helps me with some things.”
[29:50] I definitely think that could be a good way. It’s like Mike said your tether [Phonetic] on the edge though of becoming a consulting firm, I don’t foresee this as going down the path. I really do see it as making some hay while the sun shines and trying to get money in to your account so that you have a cushion so that if this thing does suddenly end, that you…you don’t have to scramble for that next position. So, thanks for the question, Scott. Our next question is another voicemail.
[30:15] Voicemail 2: Hi, Rob and Mike. It’s Dave. Just want to call and make a quick comment. Just listened to episode 100. Congratulations on that. The…the sound bites from the founders were really great. I just really felt like you guys could have added a little bit after each one would have been really great to get your perspective on what they had to say. Second comment, Rob, I was wondering when I see you around on different kind of podcasts you seem to come across mainly as the startups guy. And I’m wondering if you prefer to be sort of the startups guy or if you’d rather be like the HitTail guy or what your thoughts are in terms of the two brands slash, you know, businesses that you try to run. So, I look forward to the next couple episodes. Congratulations again on 100. Take care. Bye-bye.
[30:57] Rob: So, I’m going to answer that part right now. Mike and I actually discussed this specifically and I remember Mike was like, you know, it’s a 100th episode, everyone’s heard enough from us for 99 episodes. Let’s let some other founders talk. We did about back and forth but I think we just wanted to give…give it room to breathe, you know, allow these truly gifted founders who’ve done great things to kind of speak…speak on their own. So, do appreciate the feedback though. So, the…the question for me was whether I want to be the HitTail guy or whether I want to be startups guy. I don’t just have two products that I’m running. I have ten products that I’m running and some of them are online courses, a book. Mike and I run the Micropreneur Academy. We have MicroConf. I have DotNetInvoice, a number of other software products. And so, it wouldn’t make sense for me to be essentially any one of those things. It just…it doesn’t work. I know that some people, you know, when you look at Joel Spolsky and he was the FogBugz guy for long time and then eventually, he moved on but he was what FogBugz guy for 12 years or something. He was the CEO. But that makes sense for him and 37signals guys, they have multiple products. They aren’t the Basecamp guys. They are 37signals guys, right? They have the umbrella over all their products.
[32:04] That’s what I have as well. I have my company that no one care…you don’t care about the name. It’s called the Numa Group and it owns both startup-related stuff and it’s all of the courses and the writings that I’ve done and then I have these software products that are actually doing…they are actually where I do my laboratory learning. And it just wouldn’t make sense to tie myself to any of those because not only do I have multiple but I may have exits from some of them. I make acquire new ones at any given time. I may shut them down or sell them or, you know, just different things go with that. So, I do have two sides to my businesses. I have the actual software products and then I have the teaching. And mostly when you hear me on the podcast, I’m in the teaching mode and so, that’s where I, you know, that’s why I am the startups guy.
[32:48] And I feel like being a teacher is something that I really enjoy and in orders to do that, you do have to have like a personal brand around that, right. You do have to be the startups guy in order for people to care about what you do and they’ll listen to you and to care about your teaching. Whereas HitTail, it can sell without someone being behind it, right? It doesn’t need a personality or a face to get people using it because it’s a tool and it has utility and you use it for that purpose, whereas if you are selling knowledge and information and doing courses, you do really need I believe a face behind it to be the most effective.
[33:23] Mike: I think one of the dangers with kind of branding yourself as a specific person is that if that business ever goes away for whatever reason, then you’re still kind of tie to that. So, for example, a lot of people think that Joel Spolsky still runs Fog Creek and that you know, my…my understanding is that he doesn’t. He works in an office that’s right next to them but he stepped down as the CEO several years ago but people…and I’ve talked to some people. They still think he’s the CEO and I don’t believe he is. I think Michael Pryor is these days. So, the danger of course is that if you are associated with the specific brand for so long then it becomes difficult to step away from that and speaking from a different brand.
[34:04] So, now people may look at him and say, “Oh, well, he’s the CEO of Stack Exchange and the Fog Creek Software,” and that’s not necessarily true. Let’s say he decided to go off and do something completely different. Let’s say instead of working with developers, he works with accountants. Well, that persona is going to kind of follow him around. So, it’s really about what you want to be known as not necessarily just promoting your business but part of it is promoting your kind of personal brand. You don’t want to tie yourself to things that are going to weigh on you later on but you definitely want to be known for the things that you want to be known for versus things that, you know, people are going to associate with you that are going to have certain connotations associated with it. You don’t necessarily want to carry it around to every single audience that you speak with.
[34:47] Rob: So, thanks for that question. Our next one is about co-founders and equity. It’s from Tim O and he says, “Hi, Mike and Rob. I love the podcast. Thanks for sharing your knowledge with the world. I have a question that might be interesting to answer in the show. I’ve started a marketplace for recruitments agencies and freelancers in Germany. Since I don’t know how to code, I outsource the coding to multiple freelancers and I’ve been particularly happy with the work of one developer considering offering him equity to get him even more engaged and to get more of his time without paying more cash. I was thinking of offering 1% of the company each month over the course of two years. After 24 months, he would own 24%, in addition, I would still pay him a small amount every month but I would expect him not to count the hours. Of course, I do not expect him to be only working for me. What are your thoughts on this? What are the things to consider?”
[35:38] Mike: I think that the question here is really whether or not giving him equity would be something that motivates him. And it almost seems to me like there might be some sort of underlying question about whether or not he wants equity or whether he’s not involved as much as you would like, whether or not you can simply afford to continue paying him or pay him as much as you want. There’s a few different factors that are in play here and I think that if it’s because you want to reduce your upfront burden of paying him, I’m not entirely convinced that that’s going to work unless his goal is to have some sort of equity in the work because some people just don’t. Some people are just not cut out to be business owners or they don’t want to and that’s perfectly okay. There’s nothing wrong with that but there is a certain mentality that you kind of have to have in order to be the owner of a product and owner of a business and not everyone has that and that’s something you really absolutely have to understand because equity may not be something he wants.
[36:34] And on the other hand, if it is something that he wants, then you can certainly offer that but you need to talk to him and find out, you know, what his goals are, whether or not he’s working for other people and if so, what sort of other commitments he has. If right now you’re just having problems of getting hours out of the person and you know, you raise the rate and you’re still not getting the hours out of it, then to me, it seems like there is some other sort of commitment and it’s not necessarily financially-driven. Maybe this person is just doing it because they enjoy it or they’re just learning new things and they just want to learn those things. But you really need to find out what his motivations are versus what yours are and that really takes an honest discussion with him to figure that out. I mean you can’t just guess at them and throw something against the wall and hope that it sticks. You need to ask him or talk to him to find out what his motivations are and find out whether they match up with yours are and then work to find some sort of a middle ground. I think that the idea of offering equity overtime is a wise decision, whatever those percentages work out to be if as long as they fit with what you want, that’s fine.
[37:39] Rob: Yeah, the vesting is key. I think you need to do that. I also agreed with Mike about talking to this guy and figuring out if it’s one of his goals to own part of a company. I think 24% is way, way too much to give. Typically like a founding engineer might get 5% and sometimes it’s even less. Sometimes it’s…with a large company that’s already raised funding, it might be like 1 or 2% and then, you know, CEOs might get 5 to 7%. You’re in a little bit of a different situation because you’re much smaller but I think 24 is too much and maybe a third of a percent or half of a percent a month is probably as high as I would even think about going. The real issue here is what is that equity actually mean because are you planning on selling? Because that’s what, you know, equity in a venture-funded company, they either going to have an IPO or you can get your money out or they’re going to sell it to someone so you can get your money out. But unless you plan to sell the company and have a reasonable chance of doing so, equity isn’t actually that helpful.
[38:38] If you plan to give dividends meaning that everytime you take some money out of the company that’s not your salary, you plan to give him his appropriate percentage, then maybe you can do that. But this…it’s weird. Equity is weird with small businesses. It just doesn’t work out the same way that it does with large venture funding companies. So, I don’t really have a good answer to this other than to…to really think this through and to document everything in a contract whatever you decide. Probably give him less than…than you think you need to upfront. If he wants a huge amount of equity, then he may need to go start his own thing like it’s just…it’s not going to work to give hired or hand a developer a quarter of your company over the course of two years.
[39:22] Mike: Equity in a small business is a completely different animal than it is in like, you know, a large business or public company where, you know, the expectation is that there’s going to be some sort of exit for it.
[39:36] Rob: Our next question comes from Tenveer [Phonetic] and he says, “Do you recommend that a non-developer with no real understanding of this field get involved in owning software. My day job is an SEO and marketing so I had focused on that while outsourcing development and support. I’d love to hear your thoughts about this and if you’ve ever met any people who are trying to do this.”
[39:36] Mike: Honestly, I think that it’s a great idea. I don’t think that you need to know a lot about software to hire people to build software for you. Now, it obviously needs to work and you want to make sure that you have some sort of mechanism to make sure that you’re not getting code that is unmaintainable in the future but if you can vet the developers that are coming in to do the work for you, I don’t see anything wrong with this. And if your background is in SEO and marketing and that’s the primary focus of what you’re going to be doing in the business, then I feel like that would be a great opportunity. It would certainly be helpful for most people to know a lot more about SEO and marketing before they’ve start in to a business where you’re selling things online as oppose to beating your head against the wall a lot trying to figure out what works, what doesn’t and not having the experience or background doing that because you’re going to end up making all these mistakes versus someone like you in your position where you’ve already got that background and experience and what you need is you need a product.
[40:51] The other thing that you might consider is buying something. So, if you go out to either a marketplace or you find a product online where they’re not doing very good with the SEO and marketing, then you buy the product outright and then resell it and you know, find some engineers who can kind of tweak the product to make it fit your own brand and then you do your SEO and marketing magic to get it out in to the marketplace and sell it better than they were.
[41:16] Rob: I think if you’re going to get in to software that you should make your first app small so that you can have an early win and learn how it’s really going to be because if you try to tackle a big app like let’s say a SaaS app, there’s so many things to think about in building and maintaining and deploying and keeping the hosting up, the 24/7 aspect. There are so much to know that it’s hard to learn all of that in one swing and you’re going to be much more likely to fail. But if you pick a small problem, then you work with the software developer for the first time and you build, say a WordPress plug-in or you don’t need to handle all of the aspects, all the technical aspects but you really need to spec it out. You’re going to learn how to do that and then you’re going to, you know, learn how to work with the developer. Then learn the elements of the marketing. You can then take that with you and ramp up in the more complex products as you go and I think that early win will help built some confidence in your, you know, in your ability to manage these projects because Mike is right, you don’t need to know how to code to do it but t does help.
[42:13] And I would encourage you to whatever language you’re going to have something built in to buy a book or go through some kind of online course on this just so you know enough to know how hard things are, what it takes to build them. You don’t have to write all the code. You don’t have to write any of the code of your product but to understand what it takes to connect to a database and display something dynamic, you know, in a web page is really important when it comes to managing developers. Well, thanks for all the questions. As always you can e-mail them to us at startupsfortherestofus.com or call in to our voicemail at 888-801-9690 and we really hope that our answers were helpful.
[42:54] Mike: Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.