Episode 134 | The Product Test (9 Attributes that Will Determine the Success of Your Product)
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I are going to be discussing the Product Test: 9 Attributes That Will Determine the Success of Your Product. This is Startups for the Rest of Us: Episode 134.
[00:17] 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.
[00:27] Mike: And I’m Mike.
[00:28] Rob: And we’re here to share our experiences to help you avoid the same mistakeswe’ve made. What’s the word this week, Mike?
[00:32] Mike: Well, we’ve got an e-mail from Jay Adams who says, “Dear Mike and Rob, first off, you guys rock. I’ve been listening to the podcast for a couple of years. And I really appreciate how you share real world facts and advice about your startup experiences. I finally started my own company focused on enterprise server management and security software called SystemFrontier.com. I’ve formed an LLC in January of 2012, released an MBP in October and got my first paying customer in December. I left a very good IT career on March of this year to go fulltime. I’ve been consulting through my business to help gets the lights on until sales pick up. I’ve got a long way to go but I’m all in. My family has been very supportive and hearing about other single founder experiences just to help me know there’s light at the end of the tunnel. I’d just wanted to say thanks.”
[01:09] Rob: Awesome. So, where’s our page? We need [Laughter] we need to get a page up of people who’ve quit their job. So, this is the first e-mail we’ve received after our call for people who were able to gain freedom from the 9 to 5. So, very cool. Thanks for writing in.
[01:23] I was interviewed last week on I guess I called it a podcast but it’s more of a video blog thing. It’s called the GrowthHacker.tv and I like their tagline. It’s “Growth Hackers don’t watch cable.” So, there’s a bunch of pretty cool video interviews up there. You do need to enter your e-mail address to watch the videos. And I think you can watch some previous three. So, it’s kind of a freemium model. You can the watch the freemium three by giving your e-mail and then youhave to pay a month of subscription to watch the entire archive and future ones. But the interview went well. The guy asked some really good questions and the other folks they’ve interviewed on there were interesting as well. So, I figured it resonates with our audience and some folks might want to get in early while it’s because it’s just launched in the past few weeks.
[02:04] Mike: Pretty cool. Is now – is there a limit of the number of people who can get in or is it like they’re time limited or no?
[02:09] Rob: Neither of those, yeah. It’s just kind of a freemium model where they charge a monthly fee to access the videos.
[02:15] Mike: Very cool. So, I hired a new developer yesterday whose sole focus is going to be on building policy files for AuditShark. And I ran in to a bunch of issues getting him just initially set up but I was able to explain how things get built to him pretty easily. It seemed like he followed it along. Some of these issues, they were like code bugs that were due emerges but I was able to fixed those in less than 24 hours. So, at this point, he should be good to go and I would expect to see some of that stuff coming from him by the end of the week.
[02:42] Rob: Nice. Is this the last thing that you need done for your launch?
[02:46] Mike: It’s the last major thing, yeah.
[02:48] Rob: So, you’re –
[02:48] Mike: I mean there’s always going to be like little things here and there, you know, like the billing code is still kind of in progress but I don’t really need that to launch, you know. So –
[02:55] Rob: Right.
[02:56] Mike: But that should be done later this week, anyway. So, I’m not real concern about that. And then there’s a bunch of user experience stuff that I’m working on this week and touching base with some prospects and saying, “Hey, you know – you know, when would be a good time for you to start signing in and taking a look and see what’s there?” But I also have to kind of push off on that just a little bit until there’s more policies and stuff there because I’ve got to vent this guy’s work.
[03:18] Rob: Right. Yeah, that always takes quite a bit of time upfront to get a new developer up to speed both to find them and then to get them set up and then to start reviewing their work. I mean I guess there are some ways to shortcut that. I’ve done in the past where I haven’t – I’ve given folk kind of one off really localized task where they don’t need to access the source control. They don’t need to get the entire environment set up. They really — or I’ll send them like a console app and I’ll say like, “Here’s three table create scripts. Create them and then write this console app against those three tables.”
[03:50] It’s just in visual studio bare and get it running. Then I’ll take a look at their codes because if they don’t pass that, right, it’s a real…it’s a real thing that I need for the app but if they don’t do that well, if their communication isn’t good, if the code doesn’t work out, if there’s bugs, then I can cut them lose without investing all that time of getting an entire environment set up for them and all that other stuff. But unless you have something like that for them to do, then you kind of have to eat that upfront time of really getting them on boarded in to your team. And it’s definitely no small expense of your time and theirs.
[04:21] Mike: Yeah, I mean this is a little different because I’m just handling him the policy builder. He doesn’t have to have anything else. There’s no visual studio. There’s literally nothing else. I just said, “You know, bring your laptop over with, you know sequel server express installed and I’ll install everything.” And literally, we were done installing stuff in like 3 or 4 minutes and that’s what it.
[04:38] Rob: Okay.
[04:38] Mike: And then I started to sit with him the rest of the time going over, you know, how to build policies with – you know, showed him what I was looking for, showed him how it worked. And he was kind of off and running already. It didn’t take him more than one hour.
[04:47] Rob: Yeah, that’s nice. He came over, a local developer, huh?
[04:50] Mike: Yup, yup.
[04:51] Rob: Nice. I received an e-mail from – his name is Emil and he has an app called Helpjuice which is like a help desk app. And he says, “Man, I effing love your podcast. A couple of months ago, I couldn’t pay for a plane ticket to America and this is our current bank balance.” And he sent me a screenshot of Helpjuice’s bank balance which I thought that was cool. And he says, “…all because of listening to you. I wish I could connect more with you but I know you’re super busy.” A testimonial via e-mail that I wanted to share, I just thought it was pretty funny to see that, that screenshot of his bank balance.
[05:21] Mike: That’s awesome.
[05:22] Rob: Yeah, it’s cool. So, on another note, almost the opposite sentiment, we’ve got an e-mail this week from Rudy at HigherFlow and he is a long-time listener and he’s attended the last two MicroConfs. I‘m going to paraphrase his e-mail basically said, “I came away from MicroConf with renewed energy and a lot of ideas for moving HigherFlow forward. Unfortunately, before I could do any of it, my Rackspace cloud server had a complete unrecoverable failure. I had everything on one virtual server and the reason the cloud server is redundant and it would just fell over it to a new box if anything bad happened. To make things worse, the only backups that I have the snapshots of the virtual machine made daily by Rackspace. And their automated backups actually destroyed the backups that had already been made. So, the end result was a complete data loss.”
[06:06] He basically restarted with nothing. He reinstalled everything from scratch and then he had a database that dev build the database that was 10 months old. He basically lost 10 months of data and in fact, he says, “I don’t even know who my customers are or how to reach them because their contact information was in the database. Looking back, I can’t believe how stupid I was. Lots of lessons to be learned here and hopefully, this story can prevent some other founder for making the same mistakes. HigherFlow is up again and I’m moving over to either OrcsWebor Azure but whatever I do, you can bet I’ll have rock solid offsite backups.”
[06:39] So, certainly my condolences, both of our condolences go out to you, Rudy. That’s like it’s devastating to hear this. Fortunately, it is – it’s uncommon that this happens but it absolutely can happen and even when you do have backups this kind of stuff happen. So, folks that I know are zipping up entire directories or entire database backups and shipping them off to S3 on a nightly or a weekly basis, so that at worse, you lose, you know, handful of days of data.
[07:04] So, thanks for writing in, Rudy. Obviously, it’s really hard to hear that and to know that happened. But I do hope it serves as a reminder for all of us to get our backups in place and you know, so that this type of thing doesn’t happen to us.
[07:17] Mike: Yeah, I think the worst part of this whole story is just losing 10 full months of customer data because like he said he has no idea who his customers are at this point and if you don’t know who your customers are, it’s not like you can contact them to try and fix things either. And a lot of them are probably just going to drop off but I mean those backups are the critical part and it’s just – what do you do at that point? I mean he and I actually e-mail back and forth a little bit and he was tracking them for a while and everything was fine and then he just stopped tracking them because they were always fine and it just went wrong.
[07:49] Rob: Okay. So, today we are following up from what we talked about last episode. We talked last episode about the Founder Test which were 11 Founder Attributes That WillDetermine the Success of Your Product. And we looked at attributes that a founder can have that can, you know, either make you successful or not. This episode we’re going to talk about the Product Test: 9 Attributes That Will Determine the Success of Your Product.
[08:11] These are borrowed heavily from The Personal MBA written by Josh Kaufman. He was a MicroConf speaker this year. I listened to that book and really enjoyed it. And what I’ve done is I took his 10 factors and there were three of them that didn’t really apply to software and so, I removed those and then I replaced two of them with, you know, some stuff that does actuallyapply to software. So, what we have is 9 factors that apply more closely to our audience of bootstrap software entrepreneurs.
[08:40] So, attribute number one is urgency. And we’ve talked about this in the past where there are vitamin apps and there are aspirin apps. Vitamin apps are apps that, you know, someone may or may not want but there’s not a lot of urgency when they go to look for it whereas aspirin is something they have a dire or need for. They’re trying to cure their headache. They’re trying to convert something and they have a last minute deadline and it’s just a real urgent need and they need to fix now. That’s what we’re talking about here.
[09:06] Urgency does two things. One, it impacts the length of the sale cycle quite a bit, right? So, if someone has a more urgent need, then you can have a very fast sale cycle of someone typing a keyword in to your Google or search engine finding you and buying you…buying your product within 10 or 15 minutes. So, your sale cycle can be very short versus something that’s, you know, like let’s talk about automating our office or something. That’s going to have a long sale cycle because someone doesn’t need to do that right now. They’re getting by just fine with the substitute. As a result, you’re going to have to wait longer to make sales. You’re probably going to, you know, have to charge more money because you’re going to have to do more high-touch, that kind of stuff.
[09:45] Mike: I think one of the difficult things of this particular one is that when you’re trying to evaluate whether something is a vitamin or an aspirin, a lot of times it boils down to the situation that the person who is purchasing it is in. So, let’s take for example, a software] that converts a Word document in to, you know, ePub format. What you end up with is there will be people who have plenty of time to do that and then there’s going to be people who have very, very little time in order to get it done until you’re trying to sell to them. I mean you obviously have no idea what their situation is.
[10:16] So, there’s going to be some people who buy immediately. There’s other people who are going to look around a lot because they’re just kind of researching, you know, a process for something that they’re doing educational research at the time. So, for those people, the sale cycles can be a lot longer and it’s hard to determine how long the sale cycle is going to be until you know what the situation is for them.
[10:33] In terms of aspirin versus vitamin, you know, that’s a definite need. They need that particular job done and they can either do it manually or they can use software and the softwareis all – so it can save them a lot of time. So, in that case, I would say that that’s probably more of an aspirin than a vitamin. A vitamin is going to help you but not necessarily necessary at the moment. They probably have something else in place that they’re using.
[10:54] Rob: Right. So, you’re saying it’s situational that all of your sale cycle is may not be short but there will be some people who wait until the last minute and do have an urgent need for your product. And then some of them, they may take more time and be planning out and maybe will have a one-month sale cycle on those so that it’s not necessarily going to be uniform. The urgency may not be an absolute. It’s like and maybe a percentage of your sales are more urgent than others.
[11:18] Even if you think about it that way like if you have a game that is not a name brand game, your urgency is pretty low in general, right, because people mostly are just kind of cruising through. Let’s say I’m cruising through the iOS app store looking at featured games and I don’t have the urgency to buy any of them. I maybe wanting to fill some time or something, but in general that whole marketer, that whole niche is not going to be really urgent. Whereas something like a business app that solves a very specific and acute problem, my overall this has a lot more urgency. It’s just be higher on that 1 to 10 scale.
[11:49] Attribute number two is market size. And to be honest, I think for our purposes, you know, unless you’re a huge company finding an existing marketing channel meaning an actual way to get customers, I’ll say get traffic that people interested in your idea, figuring out how large that is, it’s actually a lot more important than figuring out overall market size because if I build a SaaS app for hair salons as an example, you can look, you know, at some demographic information to figure out, okay, there are 50,000 or a hundred thousand hair salons in the United States.
[12:22] So, that’s your whole market but that’s – it’s completely not relevant to you as a solo bootstrap founder. What’s actually relevant is what marketing channel, how am I going to contact those hair salons and how many of them can I contact and close each month. And that’s a much more relevant piece to this attribute number two I think than the overall look at it.
[12:44] Mike: I think that this is something that not a lot of people give enough thought to when they’re trying to build their product because you really need to be able to know exactly how it is that you’re going to reach these people or at least have a very good idea of what is going to work because if you can’t figure out how to reach these people, it doesn’t matter how good your product is or how well it solves their problem or how cost effective it is for them because if they don’t know about it, they’ll never buy it.
[13:08] Rob: Attribute number three is pricing potential. And the translation of this is basically how much can you charge for your product? So, if you can only charge a $9 dollar one-time fee, you’re probably pretty low on the pricing potential. You’re going to have a tough time growing the product unless you have a really large channel of customers who’s coming almost free. Whereas if you can charge, you know, a hundred bucks, 500 bucks a month, it’s just so much better opportunity, you might have a higher chance of success and then increasing revenue quickly.
[13:36] I think a lot of this comes down to two factors. One is, are you selling B2B or are you going B2C? These days I pretty much wouldn’t do a B2C idea. The B2B market, you can sell on value. Basically you save someone time, save them money or make them money. And there is…there is so much higher pricing potential in those areas and you know, often a lot less support. There’s just a lot of benefits to going with that.
[14:02] Mike: Yeah, I think at MicroConf Jason Cohen had pointed out that pretty much every speaker there were selling B2B in some way, shape or form. And Patrick McKenzie was kind of the sole stand out where he has the Bingo Card Creator where he’s selling it to individuals but at the same time he’s also a heavy proponent of selling B2Bs and he’s also got Appointment Reminder which is a formerly a B2B app.
[14:27] And I would definitely agree. It’s just going to B2C route is – I’m not saying as a recipe for disaster but at the same time, it’s very difficult to go down that road because there are so many different businesses out there that have established needs and when you’re selling based on need, it’s easier than selling based on what somebody wants.
[14:43] Rob: Yeah, I was the other one that has B2C because I have WeddingToolbox andapprentice lineman jobs. And he listed that up there along with Bingo Card Creator and said, “But both of these guys have since moved to B2B,” and everything we’ve launched since then has been B2B. So, it’s definitely the direction that the people moved. I think the exceptions, notable exceptions are if you’re dealing in mobile apps that it’s feasibly since the cost to acquire customer is so low there because so many people are in that ecosystem. It’s a little more reasonable to think about doing it there.
[15:14] You can always point out exceptions. There is – you know, there’s WinZip and FTP programs and that kind of stuff that just have these massive search channels. They’re typically have a lot of organic traffic. And it’s definitely possible. I mean there was a guy on MicroConf who had I’m trying to think it was like tens of thousands of downloads of his free like FTP client every month. And huge chunk of it just came from Legacy Search and he’s just been around for a long time and had a lot of long-tail stuff. That – and that’s great for him but if I were to pick amore ideal business model from the start and I was looking at this factor that we’re talking about here, price-potential, I would definitely be and then firmly in the B2B camp.
[15:54] Attribute four is cost of customer acquisition. So, this is how much does it cost you to find a new customer and to get them to use your app? It’s a pretty long path from the first time some hears about you until they get all the way through to a download or a trial and they’re actually paying you for your application. So, I mean there are several rules of thumb here. One is that online customers are always cheaper to reach than offline customers. There’s just so many more mechanisms. I mean this is basically the stuff we’ve talked about for the past hundred and thirty episodes.
[16:23] You know, another factor to keep in mind to kind of decrease customer acquisition cost is to try to pick something that has urgency so that you don’t have a long sale cycle and don’t need to spend a lot of labor on it because even if it’s your time, it’s still costing you money. In addition, finding businesses where there’s a single decision-maker can help make like a medium or a low-touch sale rather than having to hold someone’s hand.
[16:47] Now, it’s not the end of the world to have to do high-touch sales, right? But it’s just, you know, you got to know what you’re getting in to and you need some type of gifting or some type of desire to do that in terms of lowering your cost of acquisition or at least knowing where it is because if you’re charging 500 a month, it’s okay to have a high cost of customer acquisition, it’s okay to do high-touch sales but you have to know that going in at these two things are going to matched up so that you don’t have a low pricing potential and a high cost of customer acquisition which is unfortunately what, you know, some apps that I’m approached with have.
[17:20] Mike: One of the points that you’ve made in there was having a single decision-maker involved in the process and when you get in to more of the larger business or enterprisey sales, that’s when you start to have like committees and multiple people who are looking at a product and you know, the different decision-makers who are taking a look at it. And what’s really sucks about dealing with that type of sales situation is that you almost have to talk differently to the different people involved. So, if you’ve got a team of technical people, they’re going to want to know all the technical stuff and their manager is going to want to know all of the business stuff. So, you almost have to talk to both of them at the same time on your website and but in different ways. You have to say the same types of things but you approach it differently.
[18:02] So, for example, with the technical guys, you’re going to approach it very technically and say, “This is the time I can save you. This is how I can allow you to do your job easier and help make you look better to your boss,” versus, you know, on another page you might have it more for the benefits of using that products and you’re talking more about the business objectives and meeting those goals and helping provide services for them that are going to save the company money.
[18:26] Rob: Attribute five is the cost of value delivery. Not just a fancy way of saying how much does it cost you to service a customer? So, with a typical brick and mortar, if you had a restaurant, you know, you might look at how much the food cost and the weight stuff and that kind of stuff, electricity, all that. If you’re a software company, it’s a little different because your overhead is going to be a lot lower. Hopefully, you don’t have, you know, many employees. There’s just a lower per customer cost because things are so much more scalable.
[19:25] And the other thing is in general just support whether you do e-mail or phone, chat, what-have-you, those are, you know, tend to be a decent chunk of your cost as you deliver value through your app. Then the other one that depending on whether you need to hire a DBA, that’s the one I have, you know, a DBA with HitTail and it wasn’t a cost that I really thought of in advance but since we have a large database and I want multiple backups and be able to restore a point in time and he works every month. It’s a recurring cost for the business.
[19:56] And so, that’s kind of another one is, you know, your IT infrastructure because I think I always think about, yes, I normally need to pay designers, programmers, probably some copywriters, you know. There’s kinds of miscellaneous things of building and marketing the business but these are the ones that maybe have…have snuck in the backdoor as I have…as I’ve grown businesses.
[20:12] Mike: I think one of the cost of value delivery that is frequently overlooked is the support and on boarding. So, like for example, when a customer first signs on, getting them up to speed with what your product does, how it works and how it can quickly benefit them is something that you need to spend a lot of time and effort on. And if you do it right, you can bake that stuff in to the app so that it essentially walks them through the process of on boarding themselves and you can essentially automate that within the application.
[20:40] There are some applications that are going to be a lot more complicated that you’re not going to be able to do that. One thing I saw which was very interesting today was a sign up process for a product that a product itself is very complicated or could be and they actually had two different sign up forms. They had – it was on the same page and on the left-hand side, you could just say, “Please sign me up right away. This is what I want and you know, just dump mein to the application.” And on the right-hand side of the page it was something along the lines of, you know, get the enterprise treatment and you basically provided some a little bit different information, your name, phone number, et cetera. And they would contact you to help get you on board. And I thought that was a very interesting way to handle the on boarding process based on what the end user thought their needs were going to be.
[21:23] Rob: Yeah, that’s really – I haven’t heard of that. That’s a very interesting approach.
[21:26] Mike: Yeah, I’m totally staying with it for AuditShark. [Laughter]
[21:29] Rob: Yeah, I agree. I think that’d be well worth your time. Attribute number six is the uniqueness of your offer. And this just means how unique is the value that you’re offering in the market, how much can you differentiate yourself from your competitors. And I’ve actually translated it in to something else, how simple is your value proposition? Can you communicate it in three words or five words or the length of a Facebook ad headline or the length of a headline on an HTML page?
[21:58] So, I think there’s two sides of this, right? It’s the uniqueness and the simplicity. And what I’ve discovered is especially as a single founder bootstrapper, having a simple value proposition is really helpful because it instantly removes prospects who shouldn’t be using your app or shouldn’t be interested in it. And so, you can find people who really need that problem solved so that you can kind of tap in to the urgency factor which can help shorten your sale cycle which can help you determine how best to reach them and can help you, you know, lower your cost of acquisition to be honest.
[22:35] So, it’s like – it’s not just about being differentiated from your competitors but it’s actually how well can you communicate the single value proposition. So, I’ll give you an example, when I was split testing the Drip landing page, GetDrip.com, I had number of different headlines. And they revolved around several different value propositions. One of them said, “Reconnect with drive by visitors via e-mail.” Another one said, “Increase conversion rates by reconnecting with visitors.” Another one said, “Let’s use e-mail to create a double digit jumping your conversion rate.”
[23:08] And so, it was different ways of saying what sounds like the same thing but if you really look at it, it’s actually kind of a different value prop. And one of them performed way, way better. It was the double digit jump headline. I had a couple others as well but it’s, you know, being able to split test or to interview and actually talk to people and find out which of the – truly the values that they need out of your app can be very helpful for figuring out when you’re starting out, you need to be laser focused so that you can figure out who really needs your app and what problem you’re solving and that’s where this, you know, uniqueness and simplicity of your offer comes in.
[23:43] Mike: And as you said I mean that helps when you’re trying to optimize your overall conversion funnel because if people come to your website and they don’t think that that whatever it is that you have applies to them, they’re going to leave. So, you really want to be able to increase the conversion rates on whatever the landing pages are that you have. And if you’re able to clearly and effectively communicate whatever your value proposition is there, it’s going to increase the number of people who go through that funnel.
[24:09] In addition to that, it allows you to go in to AdWords and AdRoll and all these other places to leverage those types of paid traffic with some targeted keywords that you know already worked. Those targeted phrases that you’ve already tested, you’ve found what works and what doesn’t and you can put those out there and hopefully, scale up that side of your acquisition funnel.
[24:32] Rob: Attribute number seven is time to get to market. And in this, I’m actually adding money to get to market. So, you may not need a lot of money as a bootstrapper but as we talked about last episode, it can definitely help. So, you know, looking at this on a 1 to 10 scale, if you, you know, can get an app out in a weekend for $0, then that’s probably a 10. And if an app is going to take you a couple of years to develop and cost you 40 or $50,000 in terms of a bootstrapper’s budget, then that would be definitely on a lower end of the scale.
[25:06] Attribute number eight is evergreen potential. Basically, how long is your app going to be able to provide value? Does it rely on an API that’s going to change overnight? Does it rely on a social network like Friendster or Myspace that, you know, slowly loses interest overtime and that doesn’t have the customer base that it once did. Or is it something that that sticks around and has, you know, a 10, 20, 30-year lifespan where it can basically stick around forever providing its value?
[25:35] Mike: I think one of the key issues here is, you know, are you building on somebody else’s platform? And if you are, how long does that platform going to be around? Because if it’s not going to be around for a long time and granted a lot of time you look at any given platform, it’s very difficult to judge what the future that platform is going to be. But at this point, I think it’s pretty clear that, you know, Windows, Linux, and OS X are not going anywhere. You could probably reliably build on any of those three platforms and you’ll be fine.
[25:59] 15 years ago, you probably would have – you know, people would have given you funny looks for building on Apple’s platform because they’re like, well, you know, this has got a really, really low market share. It’s not doing well and I don’t see it turn around. But obviously, over the past 15 years that has changed dramatically. But then you look at other things like Twitter or Facebook or Myspace, those are kind of iffy, you know, who knows what the future of some of those is going to be. And if you were to look at those five years ago, it was completely not clear.
[26:25] At this point, Facebook is kind of a clear winner in terms of Facebook versus Myspace. Twitter doesn’t seem to be going anywhere. It seems like it would be a reasonably safe path but at the same time, you’re building on their API. They can change the rules underneath you no matter what and Facebook could do the same thing. So, those are the types of things that you have to be at least a little bit concern about when you’re evaluating different niches.
[26:47] Rob: Right and it’s not a “never do this” or “always do this” but it’s building on Twitter’s API has more danger than if you’re just building more of a self-contained app that can run by itself, right, building like an e-mail marketing software. Let’s say you build MailChimp versus you build a Twitter client three years ago like which one has more early win potential? It’s much more likely that e-mail is going to stick around and as it happens, there are Twitter clients that are basically going under or dramatically having to raise their prices or losing customers because of the Twitter API changes.
[27:16] And if you think about Zynga which is, you know, a game developer that developed most of its games on Facebook, well, at certain point, it had to diversified. It went public and the investors were just too concerned that the Zynga was too reliant on Facebook, on the platform knowing that Facebook had more control than Zynga should allow them to. So, it’s definitely something to keep in mind is its evergreen potential.
[27:40] And our ninth and final attribute is recurring revenue potential. Let it be said here for the tenth time on this podcast, everyone take a drink, any app I build from now on will always have recurring revenue. I’ve done the one-time software downloads and I am done with them because every month on the first day of the month, you have zero dollars in sales for that months and you’re scrambling to make it work.
[28:03] So, I’m not saying you should never do, you know, non-recurring revenue but personally, I will never do it. And so, I think this is something to keep in mind as you’re talking about building your app, if you want to grow revenue over time having recurring revenue and subscription is by far the best way to do that because you are then building on something every month.
[28:24] Mike: I couldn’t agree more. I mean the recurring revenue, if you’re not at least looking at ways to establish recurring revenue or to upsell your existing client base in to additional add on I mean you’re really spending a lot of time and effort redoing those sales every single month and what you really want to do is you want to be able to do something once and then resell it forever. And if you’ve got a downloadable products, you have to continue repeating that particular process as opposed to ripping the words of, you know, the software that you’ve already built in month after month.
[28:54] Rob: Yeah, and this is another where especially your first app, the first app you launched, I don’t think it needs to be recurring because I think you need some small wins early on and if you’ve never launched a software product, I do think it’s okay to launch a – like a one-time fee download something like a WordPress plugin or, you know, maybe a mobile app if you have that skill or something downloadable like, you know, Richard Chen has PHP Grid and I think that’s a really cool idea and he built it up and was able to quit his job.
[29:21] But now, now that you have that, the next step then is to think about how do I get to subscription revenue whether it’s with the existing product, finding a continuity program, some additional value you can offer, extra support, something like that. Or if it’s, you know, starting on an entirely new app and then you have the leeway, you have – you bought out so much of your time. You have that flexibility to then go after that long build.
[29:44] I remember the CEO of Constant Contact spoke at Business of Software last year and she said that it’s the long slow SaaS ramp of death [Phonetic] that SaaS app takes so long to build a revenue because just one at a time you’re finding customers for 20 bucks a month, 40 bucks a month and to try to build, you know, a really large revenue stream is a lot harder that way. But that revenue stream is such a flywheel and it lasts a long time.
[30:09] If you can buy yourself some time upfront by doing, you know, like I said some early wins, you’ll have more patience if you already able to quit your job and you’re already enjoying what you’re doing then if building that SaaS app, launching it and getting the revenue high, you know, it takes a year or two or three, that’s okay because you’re already in a position, you know, where you’re not just hitting your job the whole time.
[30:28] To recap the 9 Attributes That Will Determine the Success of Your Product are urgency. Number two, market size. Number three, pricing potential. Number four, cost of customer acquisition. Number five, cost of value delivery. Number six, uniqueness of your offer. Number seven, time and money to get to market. Number eight, evergreen potential and number nine, recurring revenue potential.
[30:56] Mike: If you have a question for us, you can call it in to our voicemail number at 1-888-801-9690. Or you can e-mail it to us at firstname.lastname@example.org. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us on 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.