Episode 135 | Five Year Startup Plan, What the Best Podcasts Get Right, How to Spend $10k on Marketing, and More Listener Questions…
[00:00] Mike: This is Startups for the Rest of Us: Episode 135.
[00:11] Mike: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
[00:19] Rob: And I’m Rob.
[00:20] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
[00:24] Rob: Well, we got a pretty cool write-up by Toby Osbourn. He did a really good write-up about episode 133 where we talked about the Founder Test. Not only did he write it up, he actually added his own insights. He summarized our points and then added like extra resources that he would offer for each of the 11 points we raised.
[00:44] So, I basically in the show notes for 133, I was going to put — Toby already did a better job than we will writing this up but I did and I just said for, you know, an exceptional summary and additional points go here and so, I just linked him right over. Obviously, we’ll link it up in the show notes for this episode since I’m mentioning it as well. But I did brought it for this out there. If you hear an episode and you do a write-up like this and you basically do a better job than our show notes, I mean we don’t tend to write detailed show notes. So, you find compelled to write about this, you’re highly likely to get some type of a link or a mention like this.
[01:19] Frankly, having a good write up like this helps everyone. It helps us because then there’s a good documentation of it and we don’t have to create it and obviously, it helps you because it will get you some traffic. So, if a bunch of people start doing it every week, you know, have a little bit of a problem but I can imagine that that actually will happen.
[01:35] Mike: So, definitely, do let us know if you’ve done a write-up on any of the episodes that we’ve done. In terms of the stuff, I’ve been working on, I’m still working out how to outsource all of my bookkeeping. The paperwork and website log ins are the biggest pain in the neck. I called American Express to find out what my options were in terms of creating an account for somebody and they said, “Oh well…” one of their suggestions was to give the person my username and password to log in as bank –
[01:58] Rob: Oh my gosh. It’s the worst ever. [Laughter] Yeah, I’ve been surprised at how hard this role-based access control is, right. PayPal actually does a decent, a reasonable job. It’s not great but compared to the other financial providers, they do probably one of the best jobs. I agree and anytime I’m getting a bookkeeper set up, it’s a pretty painful process. It takes a lot more time.
[02:19] Mike: The biggest problem I have is just all the paperwork, the actual pieces of paper that I’m still getting in trying to figure out how to get them over to my bookkeeper. Well, I could have it to come in through e-mail but at the same time, it’s like how do I have my bookkeeper go in and actually pay my American Express bill and things like that. I still haven’t quite figured out exactly how I’m going to deal with all that stuff.
[02:36] I mean I could have it, you know, sent to like mailbox forwarding and have it sent over as a PDF and then they pay it somehow but at the same time, then they’re going to have to deal with going in to QuickBooks or something like that to print out the checks and everything else and then actually mail them out as opposed to do everything electronically and online.
[02:53] Rob: Yeah. So, at my credit card, I pay it obviously which is like a direct deposit or an ACH thing and that’s one click for me so, I’m going to – I’m not having my bookkeeper do that. Everything else is paid through an automated fashion, either online or through the credit card. Hey, so you’re in Long Island.
[03:10] Mike: Oh, yes, I went to a wedding this past Saturday and it was absolutely insane. The wedding itself, you know, it’s very nice short ceremony but once the wedding was over, we went out and you know, they have like a pre-dinner reception. Well, we went to this reception and there were 11 different food stations.
[3:27] Rob: Wow.
[3:27] Mike: So, three of these stations were nothing but alcohol. There was like a tequila sunrise stations. There was a vodka station and a tequila station. Oh, that doesn’t include after we got in to the actual reception area where, you know, there was a sit-down dinner where they have a shot bar and it was literally called shot bar.
[03:43] Rob: Wow, that’s crazy. Who…who are these people? I need friends like this.
[03:47] Mike: I was thinking that too. I need more friends like this.
[03:50] Rob: Yeah.
[03:53] Rob: There’s two patterns that I’m seeing emerge that are kind of starting to irritate me. I’m irritated by two things in this kind of startup space, the startup training space. First thing is since everybody is interviewing people and putting it out as like some type of book or e-book or video training course or something, it’s – you know, this was something new 5 or 6 years ago and now, I’m getting contacted once or twice a week to be somehow written up in someway. It used to be flattering but now it’s just like there are too many – it’s not, oh, I’m popular, it’s there are so many more of this been created. And so, that’s a little bit – it’s kind of like, huh, when does this stop? And then there’s kind of a glut I think or going to be a glut of that.
[04:30] The second thing that it’s irritating is people are doing something once and then writing a book or creating a course on it. If you’re really good at like synthesizing, doing something once – synthesizing what made it work and what made it fail, okay but typically, you have to do it a few times. You have to have some failures. You have to kind of experience what someone who didn’t do it right the first time felt and then so that you know kind of how to address the course.
[04:56] Mike: There are certain people who make excellent teachers and there are certain people who don’t and I definitely can see where you’re coming from in terms of, you know, seeing a lot more of these types of courses coming out. You know, some of them are good. Some of them aren’t and I think the issue is that the market will be sort of flooded and it’s going to be difficult for people to figure out which ones are worth going after or which ones are worth purchasing. And what’s going to happen is the people who have the bad ones are going to end up selling some and they’re going to be encouraged to make more and you’re not really going to get the leaders who are really rising at the top.
[05:31] And it’s not to say that the people who aren’t really good at building those things or doing those things – so for example, take Patrick McKenzie. He has an e-mail course. It’s fantastic. I can see somebody else coming out with one that is not as good but because somebody might be outside of Patrick McKenzie’s circles would buy that other one and may but two or three other ones and realize, “Oh, well, these all suck.” And then either give up on that whole, the genre of info products or just, you know, keep buying them and essentially leading on the people who are not building good stuff so that it encourages them to build more bad stuff.
[06:06] Rob: Yeah, I think some key points about Patrick McKenzie’s course, number one, he didn’t interview people. He did it from his own knowledge. And number two, he had done e-mail marketing so many times. He didn’t try to do it once and then teaches. So, he is the exact opposite of kind of the two things I just said which I think puts him in this camp of – my hope I guess is that the market decides, right, that an expert like him, an expert in this field will have success and will sell really well and that someone who’d creates a lesser course or just more of a copycat course that’s just kind of grouping some expertise, I just feel like the interview stuff, it groups expertise and tries to draw patterns across them and – well, that can be useful. I don’t feel like it’s nearly –
[06:48] Mike: Not universal.
[06:48] Rob: …as good as – yeah.
[06:50] Mike: It’s almost the difference between doing the research yourself versus trying to extrapolate an end result from what other people have encountered because essentially you end up with this natural bias or self-selection bias. In some ways, I almost see there’s like you’re going out and doing a master’s degree to build this book versus somebody who’s just kind of picking and choosing from what other people have encountered or have done and not necessarily really doing the research themselves and going through those, you know, months or years of failures and successes to really figure out what works and what doesn’t based on their own testing.
[07:24] Rob: Right and maybe it’s that the people, you know, some of the people who are doing their own testing are just they’re too busy, right, so they aren’t putting out these products. And so, there’s someone on the outside who’s come — more of being a journalist and just asking questions and then compiling it. I’ve seen the volume of e-mails go up and actually have this—there are conversations with a couple other founders and we’re just trying to decide like why they’re suddenly spiked up when they’re, you know, there were none of these things a year ago and then all of a sudden there’s this big thing to interview people and compile it together as an info product or a book of some kind. And I guess a few people who had early success with it now everybody is jumping on. The market will decide.
[07:58] Mike: Hopefully, hopefully.
[07:58] Rob: Yeah.
[08:02] Mike: Today, we’re going to be answering a bunch of listener questions. So, the first question we have is from Michael Schlacter [Phonetic] and he says, “Hey, Rob and Mike, I have a bit of an odd question to ask you guys. Do you think it’s possible to learn programming and start attempting startups within 5 years for someone with no prior programming experience? This is coming from a 19-year old working at Target as a fulltime cashier. I’m locked in a dead end job at minimum wage. College is not an option as I was expelled from my previous college and as a result pretty much disowned. I can’t afford to transfer out of community college to learn Computer Science. Do you guys think it’s possible to learn enough programming in a few years to start making money off of it and if it is, any recommended methods of learning? Sorry for asking this ridiculous question, I understand if you don’t have an answer.”
[08:39] Rob: So, first of all, that’s a bummer and I’m glad Michael gave us a lot of detail because someone in his position the answer is probably going to be different than if he was a 45-year old person out of a desk job.
[08:48] First of all, don’t think – I mean we talked a little bit in the past about how the value of college in getting like a bachelor’s degree in Computer Science is just not anywhere near worth the time and the effort versus just going out and either teaching yourself from books going to like a focused training course or a technical school, something that really focuses in getting you actionable skills.
[09:10] But I was in Michael’s shoes. I graduated with a bachelor’s degree in Computer Engineering but I didn’t have any marketable skills really. I have some but I didn’t really know the languages that people are using in web development. And I was working construction during the day. I was a Project Manager and then at night I was going to the library and getting books on Perl and HTML. This is 1998. So, technology is a little bit different.
[09:34] These days it would be Ruby, PHP, I mean I would do pick one of those because all the tools are free and as long as you have a computer at home, you can download all the development tools and I would start teaching myself one of those languages. But I would get on Craigslist, oDesk, Elance and I would try to take on some low end jobs meaning jobs that are small and jobs that don’t pay heck of a lot and that maybe, you know, 5 hours or maybe they’re only paying 5 or 10 bucks. But if you are working at Target making minimum wage then this is, you know, a decent amount of money at least it’s worth your time to learn on them.
[10:07] And then slowly build up, slowly build up that reputation, build up your experience, build up your portfolio. And I absolutely think that just trying to go to startups within 5 years is possible but I think taking in smaller first steps first. I think you learn to do what, you know, what I just said and then you slowly ramp that up and you raise your rate. So, you’re making 20, 40, 50, 60 bucks an hour and it’s actually that’s when you can obviously get out of the job, you know, of making minimum wage and you can build up just yourself build up a brand and be a freelancer.
[10:38] And that’s probably the first goal I would set is to try to meet your current income maybe within a year, maybe within 12 months of today working nights and weekends teaching yourself to code and then trying to build a client base. Say 12 months from I want to have met that income and once you get there and you can – you’re able to quit that Target job, then you’re going to start learning much, much faster and I think from there, it will accelerate.
[11:01] Mike: Yeah, I don’t – I don’t really have anything to add. I mean Rob hit the nail on the head. If you’re making minimum wage now, I don’t see any reason why you couldn’t very quickly get to the point in programming Ruby or PHP or something like that where you would be able to supplant that income on oDesk. Now, granted I don’t think that that’s a long-term strategy, you know, outsourcing yourself through oDesk but at the same time if you are based here in the US, you should definitely be able to supplant that minimum wage salary reasonably quickly and reasonably quickly to me would definitely be within a year. It maybe as little as 6 months or 3 months –
[11:35] Rob: I agree.
[11:36] Mike: …it really depends on exactly what it is that you’re trying to do.
[11:38] Rob: No, I agree and that’s a good point you raised is that the oDesk strategy is it’s just to get your foot in the door. That’s not a sustainable thing. You want to find clients outside of that because that’s where you’re actually going to not be just in a low dollar competition.
[11:50] Mike: So, Michael thanks for your question. Hopefully, that helps out.
[11:53] Rob: Our next question is more about – it’s a link from Brian Casel and Brian, you might know him. We mentioned SweetProcess.com a few months ago. It’s a SaaS app. He is looking at starting a startup podcast, a BootstrappedWeb.com. And so, in prep for that, he wrote a blog post and it says, “What do the best podcasts get right?” And he dropped me an e-mail with it because he wanted to hear our thoughts on this and potentially some other thoughts, you know, as he’s starting to get his podcast going, I’m sure he’d love to hear some other things we, that you and I know that maybe make this podcast worked or other podcast that we listen to.
[12:28] And so, we’ll link this up in the show notes for sure but basically he said, “What makes a podcast great?” And he goes down the list. He says its consistency. It comes out – he said, “Startup for the Rest of Us comes out every Tuesday morning, every Thursday it’s Lifestyle Business Podcast and Mixergy is pretty much everyday.” So, having a consistent release schedule is one. Having a consistent structure whether it’s content, lengths, segments, topics, advertisement, guest or no guest is another one that he likes.
[12:52] Pre-recording preparation is the third. So putting some time or thought and tweet in advance so that it’s not purely loosen it’s spontaneous. It actually makes better use of the listener’s time. And then the last point he said is vulnerability. It’s actually getting a little bit personal. So, not just always talking about what other people are doing or just talking about five ways to do this but actually starting to get in to your own experience.
[13:15] I definitely agree with his four points here. The consistency is a big deal. For me, I love having a podcast. I know the Lifestyle Business is every Thursday and I look forward to listening to it. I think structure of episode itself is something that a lot of people don’t realize when they’re starting a podcast and the ones that don’t have that pre-recording prep and that wander, they’ve just make it harder like I have to really like the host and like what they’re doing on a personal level in order for me to engage. Otherwise, I’ll last one or two episodes and I’m gone.
[13:43] I also think that having some type of pretty tight time constraint typically in my head it’s between 20 and 40 minutes, that’s where a podcast should be. When it gets too short, there’s not enough value and once they started getting to an hour, I really need to be delivered a lot of value in order to listen to something for an hour even when it’s on time and a half or double speed.
[14:02] I also think one other thing he mentions vulnerability here. I know that our podcast actually took a bit of a jump up once you and I started talking more about the projects that we were working on because at first we were just educating people on five ways to do this and seven ways to do that and then we really started talking about some project we were working on and I think that drew people in and made us more human. It added the vulnerable element.
[14:24] So, I think that having a mix of both education and vulnerability is good. I think sticking to just one I don’t know. It kind of makes it more of one sided thing and makes it less interesting. And I think the one thing that’s left off of this list in my head is almost no podcast with just one host works unless it’s an interview show. I listen to some podcast where it’s just one person talking and it gets old really fast not having the back and forth banter. I think if you’re trying to start one and you’re just starting as one person, you kind of have to do interviews even though I think interview podcast have kind of been done.
[14:54] Mike: I think structure is a little bit less important. I think that in terms of the content — I think in terms of the length itself that kind of structure to it, I think that that should probably be consistent because I totally agree with you that if it’s too short, you don’t get enough out of it. If it’s too long, it tends to ramble. The structure itself can be different from one episode to the next. So, for example, our podcast sometimes we’ll talk about specific topics, other times we’ll do listener questions. We’ve had a couple of guest on. I think that that doesn’t necessarily matter as much as the length. I feel like the length is probably a lot more important than the actual structure of the podcast.
[15:29] The other thing I think of is, you know, in terms of vulnerability I think one of the things that we do is not only do we talk about some of the things that we’re working on but we also talk a lot about other people. We talk a lot about the community. We talk – and we try to involve the community. We do a lot of listener questions and I think that really helps to engage the listeners because if you don’t engage the listeners, if you’re not talking about them, it doesn’t necessarily help them because you have your own thoughts and views on the things that you’re working on and if all you do is talk about those things, eventually it gets boring. I mean you can’t talk about yourself 99 days out of a hundred. It’s just people aren’t going to listen.
[16:05] It’s not necessarily that interesting and you can’t possibly be doing enough that, you know, it’s going to be interesting all the time whereas I find our community very interesting. It’s fascinating seeing all the different things that people are working on and how they’ve tried things and what things have worked, what things haven’t. And there’s just not enough hours and day for me to try all those different things which really for me, listening to our podcast is nice just because it’s interesting to hear what other people are working on. We don’t talk about ourselves constantly and I think that that translates to having a good podcast as well because a lot of the podcasts you listen to that are very successful don’t talk about themselves all the time, they talk about other people.
[16:39] Rob: So, our next topic is an e-mail I received from Barry Welch [Phonetic] and he’s a long-time listener and he e-mailed a link to a Hacker News’ post. It’s about a guy having a rough time and the title of the post, it’s an Ask HN and the title is “And Now What?” And basically the poster does an anonymous post and he says, “I’m desperate. I’m almost 38. I start a programming at age 10. I spent 7 years in a video game industry.” And he worked up from a programmer to a CTO.
[17:06] And he says, “I tried during 5 years to create a startup. I still have a halftime job that pays the bills and it gives me enough time to create stuff and during these five years I’ve created all types of stuff, a game, tools, B2B projects. I’ve created some projects alone. Each time I had find that no traction. I got negative feedback. It’s demotivating and I stopped. So, I don’t know what to do. It’s horrible because I have all this time and skill but nothing to do. I have no motivation. All the failures kill me, what I waste.”
[17:32] I mean he kind of goes on for a while. He says, “If you have any advice, that would help.” There are some decent responses in the Hacker News comments but I know both you and I had some thoughts on it. So, let’s talk a little bit about it.
[17:43] Mike: So, I think the first thing that strikes me is that the post itself if you read through it and we’ll link back to it in the show notes. But in reading through it, I wouldn’t necessarily say that this is probably uncommon from, you know, the perspective of somebody who’s tried numerous times and never really succeeded. It almost [0:18:00] strikes me as just like a classic case of depression. I mean, you know, the person is depressed severely about having trying for five years to build a startup and almost nothing has worked.
[18:10] And I see a lot of emphasis here on, “I’ve done this. I’ve done that.” I don’t have any ideas and it’s very focused on I and I don’t see any focus on anyone else. So, to me it almost seems like the person is really focused on himself as opposed to focus on other people. But when you’re trying to build a product focusing on yourself is bad because you’re not solving anyone else’s problem and you can build a product for yourself. But what are you going to do? Are you going to pay yourself for it too? It just doesn’t make sense. It’s not going to work that way.
[18:38] So, you need to build something that other people are going to use and if you’re not talking to other people or about other people, how are you going to get there? So, in this case if I were offered by so be like start focusing on what somebody else needs, you know, don’t focus on yourself. Don’t focus on where you are, where you’ve been and what you’ve been doing and try to find people who are also in a position where they have that same need so that you can build a product that meets those needs.
[19:04] Rob: A lot of people have been in this boat. I was in this boat. I may never felt this bad at the time but a lot of people try for five years to create something and it doesn’t pan out the startup stuff especially if you’re trying to go for more of the big bang. I mean he built like game at one point. Like if you’re trying to go down that road or trying to raise funding, the odds are that you’re not going to succeed. So, this should not be a surprise. So, I think the first thing is to adjust expectations. Don’t be so disappointed with the failure and see it as one more step on the road to actually getting this done.
[19:34] The next thing I would do is probably take a couple of months off from any side work or any thinking about the startup idea. Maybe take I’d say somewhere between two and four months off and you might also want to try to get away for a period of time and go to, you know, more of a remote place and spend some time just thinking and not stressing about this.
[19:54] And if you find that you can’t do that, that you cannot stress about it, then you have something going on like that’s where it’s – you have like a clinical something that’s bothering you whether it’s depression or whether it’s an anxiety disorder or something. Consider seeking professional help because if you have thoughts that are just constantly on your mind and you – that you can’t get off of under them no matter, there are folks out there who can help you with the stuff.
[20:16] The last thing I think is after taking that break of several months and just getting away from it, my guess is that you’re going to have a bunch of ideas to start cropping up again. Keep a list of them and figure out if in fact you do actually want to do this. So, that would be the next question. If you have this halftime job that pays your bills, so why do you want to do a startup? Why not just work halftime for the rest of your life and enjoy what you’re doing? Like what is it that you really want out of a startup? I would take a step back and ask yourself that.
[20:43] And in the mean time, take that halftime that you have for a week and spend it doing something fun. But find something else that’s interesting that you can spend your time doing so that you’re not so caught up in this startup space. I think you need a little bit of distance and then probably need to come back to it full force at a time in the future once you got time to kind of reconcile up.
[21:03] Mike: Our next question comes from Jeremy and he says, “Hey, guys, I e-mailed you a question back in January about doing door-to-door marketing for local organic produce delivery campaign that you answered in episode 117. The company is now expanding to the majority of Orlando along with a complete redesign of the website that’ll be launch in a couple of weeks. The question we have for you guys is how to best spend our budget? We have $10,000 that is dedicated to marketing for the next three months and our goal is to hit 100 users. It should be a realistic goal but without conversion numbers from our new website, there’ll be a bit of trial and error at first.”
[21:31] “We’ve approached the local ad agency and they tell us they think they can get us there. Do you think it’s worth money spending to hire a professional agency to do all the heavy lifting or should we just take the $10,000 and put it towards search engine marketing and hire a blogger and social media person? Remember that this is a local business so search engine marketing for anyone outside of Orlando is useless. Should we invest a lot in local advertising, flyers, sponsored events, et cetera? Thanks. My wife and I are both still enjoying your show. It’s Jeremy.”
[21:56] Rob: Since marketing is such a key part of your business long-term and since these are the first days and you don’t really know how you’re going to acquire customers, I would lean against hiring agency to do it unless they show you exactly what they’re going to do and it’s believable.
[22:12] I cringe to think of handling $10,000 to an agency and just expecting them to do the heavy lifting and having it work out because if it doesn’t, you really haven’t learned anything. At least if you spend the 10 grand, you’re going to learn what works and what doesn’t, you’re going to take a lot away from that and my guess is you’ll get close to that 100 if you don’t, you know, make it all the way.
[22:33] So, I would lean towards doing it myself but that’s only because marketing is such a critical piece of your business. If you guys want to focus on all other aspects of your business, I guess you could consider outsourcing the marketing but think about it this way, if you spend this 10 grand, you’ll get these hundred users, what then? How do you acquire your next hundred because you probably don’t have another 10 grand to spend? But if you spend this 10 grand and you learn from it and you get the hundred users, then you can probably parlay that knowledge in to figuring out how to reduce the cost of the marketing or how to do some more guerrilla tactics that may get you the same results. So, that’s what I consider.
[23:09] I would definitely consider search engine marketing, pay per click on Facebook because it’s awesome because you can do, you know, GO stuff. So, you can go to local and Craigslist, of course because it’s free. I would not hire a blogger at this point. I don’t know what the use of that would be. I think long-term you do want to have a Facebook page, getting some likes. You want a Twitter account, of course but I don’t — I wouldn’t focus on that for my first hundred people. I would do some stuff that doesn’t scale before I did that.
[23:36] Mike: I would definitely not go the route of hiring an ad agency because even if they do a bunch of stuff and it turns out that it’s wrong, obviously, you wouldn’t have learned anything like you said but even if they do something that is right, how do you know that it’s repeatable? I mean if you don’t have all the insight in to exactly what’s going on – I mean there’s subtle nuances just in talking to somebody and if you’re not the one who’s doing that, then it’s going to be harder for them to convey that back to you.
[24:01] So, the other thing that weighs in on my mind is the fact that they’re going to be paying somebody on an hourly basis to go out and do bunch of stuff for you and they’re going to be burning money whether it works or not. Whereas if you do it yourself, you don’t necessarily have to pay yourself while you’re out there burning this money. I mean you can print flyers. I mean printing flyers is nothing. It doesn’t cost hardly anything but if they hire somebody to go do that, it’s going to cost you the $50 to print these thousands of flyers and then it’s going to cost you $5000 just to go out and distribute them.
[24:30] So, it’s a difference in how far your marketing dollars are going go to. So, I would definitely lean towards doing everything yourself because as Rob said, I mean marketing is going to be a key piece of your business moving forward and you have to be able to understand all the ins and outs of it.
[24:45] Rob: Yeah, there also is some pretty good local marketing using like Google Local and Google Maps so when people search for stuff although I don’t know if people are going to be searching for this. I think it’s more of an outbound thing. I think your thought of doing flyers because, you know, you had print out some flyers before and gone door-to-door and obviously, that’s not long-term scalable but at this point if you have 10 grand to spend, I would certainly give that a shot for a few days and see how well that works. And if no one signs up, then you wasted your time but like Mike said you really haven’t wasted any money.
[25:13] But if that starts working and you know you convert 1 out of every 50 houses, then now you have numbers to start working with and you can then hire someone to do it and know what you can pay them per hour and still make money or you can just make it, you know, I think for two days a week, you go out and do that. Those are certainly my initial thoughts. I imagine there’s a lot more in the local marketing space that neither Mike nor I have ever tackled.
[25:36] Mike: So, thanks for the question, Jeremy. Our next one comes from Pierre and he says, “Hi, I’ve been reading lately about the B2B versus B2C startups specifically most startup founder seemed to favor B2B businesses. Two items from Jason Cohen emphasized this point recently. First, was a recap of his MicroConf presentation where he says B2C is not worth it. Customers complain about cost all the time. Every speaker at MicroConf is in B2B that should tell you something.
[25:58] And he also wrote a blog post called “Bootstrapped CPC Rule of Thumb” which paints a very bleak picture for B2C paid ad revenue. Since B2C tends to bring in less money for customer, there’s less money to put in to acquiring customers. However I went back and listen to episode 10 of your podcast which was about B2C versus B2B startups. You both seemed considerably more optimistic about B2C startups than the current mood in the startup community. This episode was recorded almost three years ago. Have your views of B2C startups changed or are people just underestimating B2C startup potential? Thanks. I love the show, Pierre.”
[26:28] Rob: Two things, I think a lot has changed in the startup space or knowledge of how to launch startup has changed in that three years. In addition, I’ve learned a bunch personally in that three years. And yeah, I won’t do another B2C startup personally. I’m not saying no one should do them but the support cost or paying customers complain about price like Jason said, it’s just a hassle. It’s a hassle to keep people around and that’s not to say the B2C doesn’t work because obviously, Facebook and Twitter and Google, you know, these are B2C companies but you have to go a whole different route if you’re going to do that. I think bootstrapping of B2C company to profitability and to that, let’s say your number is 10 grand a month that you need to quit your job, it’s a lot harder to do with a B2C.
[27:11] Now, mobile is an exception here and mobile was not nearly as prominent as it, you know, as it is today three years ago when we talked about this. So, that would be the exception that if you can get in front of a lot of consumers all at once and that’s through something like a mobile app store, iOS app store, it’s also through like WordPress.org.
[27:30] If you can get a big channel of people and have a low one-time price point and not support, then yeah, you can certainly do this but to build a larger business and business that consistently grows and generates several hundred thousand in to the millions of dollars a year, you’re not going to do that as a single founder. I can count on one hand the number of single founders that I have ever heard of that have done B2C startups and been able to do this but there are dozens, literally dozens and dozens, if not, hundreds that I could think of that are, you know, one and two-person teams who have done this in the B2C market. It’s just — it’s a whole different game.
[28:04] Mike: The one comment that kind of sticks out in my mind from about B2C versus B2B businesses is from a Business of Software Conference I went to where somebody was trying to launch a business and one of the things that they found out afterwards is they were going after the B2C business and what they realized afterwards was something like 92 or 95% of all money that spent on software is spent in the B2B space which means that there’s very few people who are consumers who were spending money on software.
[28:36] So, if you’re trying to monetize those people, there’s much lower dollars that are being dedicated to that. So, why would you want to go after that? You can look at and say, “Well, there’s going to be less competition,” but I don’t necessarily think that’s true because I think that there’s a lot of people who are still going after that B2C market and because there’s less money, there’s actually more competition.
[28:54] I mean you can count on one hand the number of people who have gone after that market and been successful and it’s not to say that you can’t do it. Mobile is an exception. You can definitely do those types of things there but it’s difficult. It’s a lot easier to find a B2B business that is going to work and is going to scale because all you need to do is you need to find a problem that people are willing to pay for.
[28:54] There’s a very limited number of problems that people in the consumer space are willing to pay for. And again, it’s not to say that they won’t pay for things, it’s just that it’s very hard to find some very specific problems. If you want to build a game or something like that, that’s definitely a B2C business but at the same time, you’re competing with all of these other things for sources of entertainment.
[29:34] So, you know, what other types of things can you charge them for then the list of things that you can charge them for is actually very, very small. So, there’s a lot of competition there. It tends to be high dollar items, you know, like real estate software searching for new apartments and things like that and maybe you’re monetizing them directly by charging them or maybe you’re trying to do ad-based things.
[29:54] But even building a business off of advertisements I don’t necessarily think that that’s a great way to go either because it’s very difficult. I mean you have to be able to know what your numbers are. You have to be able to tap in to the different ad sources of revenue and you have to deal with privacy concerns and customers are very antsy about handling over personal information.
[30:12] So, those are all the things to consider whereas in the B2B space, 95% of those problems just go right away. You don’t have to worry about them and the dollar amounts are much higher. So, your profit margins are going to be higher.
[30:23] Rob: Right, yeah. It’s not that there aren’t problems in the B2B space, it’s just that you’re able to charge five to ten times more and so, it’s worth the dealing with the problems that are in the B2B space. In terms of building a business around the ad revenue, you just have to get so much volume. It’s not that it’s not possible, it’s that it’s really, really hard and by the time you get there, you’re talking millions of page views a month to really build a nice sustainable business and it’s a long shot. That’s a hit-based business. It’s not the repeatable business types that we’re talking about here.
[30:52] Mike: So, we have time for one more question. This one is from Todd and he says, “Hey, Rob and Mike. I love the show. I have a few questions. How can you test for various media formats on different devices such the Galaxy, iPhone, iPad, et cetera? I know Adobe Labs and BrowserStack but that doesn’t show media renders. Second question I have is when you’re making app for products, did you ever plan out the lifetime viability of the product such as 1 year, 2 years, et cetera? Anyway, keep up the good work.”
[31:16] So, Todd, I have a very quick answer for you and I’ll link to it in the show notes, there’s an article on SmashingMagazine.com that lists a ton of cross browser testing tools. So, there’s free tools out there and they do list the Adobe Browser Lab on there. They do not have BrowserStack but they do have I don’t know probably 12 to 15 different tools on here that do what seems like what you’re looking for which is being able to display what the media is going to look like and all these different formats and different browsers. There’s various pricing on there but we’ll link to that in the show notes and hopefully, that will be what you need.
[31:50] Rob: In terms of his second question, it was, “When you’re making app, do you ever plan up a lifetime viability of the products which is a year or two, et cetera?” I don’t know that I build products that I don’t feel are likely going to be evergreen. Obviously, if you build against an API or you build, you know, interfacing with some large powerhouse like Google, then you know the lifetime is not infinite because you know that API may change or you know, that Google could change the way that they pass search engine data, you know, as I’ve seen with HitTail already because HitTail relies on some of the query string data that Google sends.
[32:21] But I never think, oh, it’s going to get shut down in a year or two because frankly I just wouldn’t I mean it’s so much time and effort to get something going that if I know it has a pretty short lifespan, it’s not something I would be interested in doing. I think if you’re doing a funded startup or a super high fast growth hit-based startup, then yeah, what’s the cycle for that? It’s like a 1 to 2-year growth and then you sell.
[32:41] So, maybe it doesn’t need to be as much of a sustainable business. Or if you have something let’s say you’re just writing an e-book or 50-page e-book, yeah, I guess that that’s sold for 12 months and then went out of style. It was a hint guide for a video game or something. Sure, if it only takes you, you know, 12 to 15 hours to put together, that’s one thing. But to truly build a like an actual business, you know, build the SaaS app or you put in hundreds and hundreds of hours or the tens of thousands of dollars and you put in 12 to 24 months of your life to do it, it’s just not something that that I would only do for an opportunity window that’s only a year or two long.
[33:15] Mike: Well, I have my Altiris Training website which sort of falls in that boat. I mean if they come out with Altiris Client Management Suite 8 and they completely redesign the interface, then most of the stuff that I have developed tends to go out of the window. I mean basically I’d have to go in and I have to re-record, you know, pretty much every video in there because, you know, all the screens are going to be different.
[33:36] And then they may make some minor adjustments and changes and stuff between screens even between version 71 and 72, for example, but I don’t necessarily know as I would go back and re-record every single video based on that. And you know, the chances that some of those changing, it’s not really that big a deal but if they do a complete overhaul, I’d have to seriously consider whether or not I’d go back and even bother with all that.
[33:58] Rob: Right. I think that’s different though because it wouldn’t wipe out your business. You would – all the traffic and the marketing copy and all that stuff that you built would still be valid. And if it was bringing in enough money, you could just either hire someone or record it yourself and the business is still totally solvent. It doesn’t wipe you out.
[34:16] Mike: Right. I mean the other issue is that even – the people are still going to own version 7 for a long time. So, they – then I would just have to build, you know, videos for version 8 and then I could host them side by side and say, “Well, if you have version 7, go here. If you have version 8, go here.” Yeah, I don’t know — I don’t own any other businesses that are, you know, have a low lifetime viability. I don’t think that I would go down the road of building something where I thought the whole business was going to die out in a year or two unless, you know, it was some massive return for not a heck of a lot of investment.
[34:47] Rob: Yeah and I think we almost need a specific example to be able to really evaluate this but –
[34:51] Mike: Yeah.
[34:52] Rob: …you know, it’s like a friend of mine has a Pinterest plugin, right? It’s a WordPress plugin. He’s an Academy member. We talked about it and I said, “You know, Pinterest may take a nosedive. It could pull Myspace or Friendster here.” But he knew that the upfront investment was not – it wasn’t hundreds of hours to build this plugin. And he’s made enough money that already that it was well worth. You know, he’s like six or seven months in to the paid plugin and it’s like boom! If it was – if his plugin was wiped off the face of the earth, it was such a learning experience and he made a decent chunk of money that it was worth it.
[35:23] But at the same time he’s not planning. He didn’t look and say, “Wow, this thing is obsolete in a year and I’m going to go build it,” because I probably would have said, “You know what? Find something else that’s not obsolete in a year and spend your time doing that.”
[35:34] Mike: I think even with that, Pinterest plugin though the future is unclear for it. I mean so, you’re essentially trying to predict something that you have no way of knowing. I mean Pinterest could nosedive tomorrow and then their whole business could tank but we’re kind of guessing at that point, you know. We have no idea whether or not that’s going to happen. I think it’s a little different if you know for a fact that there is a – end of life for a product that you’re trying to build an add-on for. That product is going to go away.
[35:59] You’re going to build this add-on but on – let’s say, it’s an add-on or Windows XP. Well, Windows XP is end of life next, what was it, next spring some time? You know, when I go build something, it was very much Windows XP specific, probably not at this point. I probably wouldn’t have done it five years ago either because, you know, all these new versions of Windows have come out. I’d built some thing for those but not necessarily for Windows XP. In the context of the question, I wouldn’t go after something that has an obvious end of life. I would definitely lean towards stuff that is more evergreen.
[36:29] Rob: That wraps up our questions for today. If you have a question for us and you’d like to hear us discuss it on air, you can call our voicemail number at 888-801-9690 or e-mail us at email@example.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. 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.