Episode 183 | 5 Startup Rules to Live By with Dan Norris

Show Notes

Transcript

[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I have Dan Norris on the show and we talk about five startup rules to live by. This is Startups for the Rest of Us: Episode 183.

[00:09] Music

[00:18] 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.

[00:26] Mike: And I’m Mike.

[00:27] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week Mike?

[00:32] Mike: I’m experimenting a little bit with some various bio hacks to help improve my overall health. Some things are just basic things like just going to the gym on a very regular basis but some of them are I’ll say a little bit out there and so far though it seems to be working. There are certain things that I’ve noticed for example. I’m working less hours and it feels like I should pull back on spending time working out but at the same time I recognize that if I do that then what’s going to happen is I’m going to spend those additional hours working on my products and stuff but at the same time, my productivity is going to drop. So it’s this weird state where I know in the back of my mind that I really shouldn’t do that but it’s like I want to.

[01:16] Rob: I’m a little confused. You’re working less hours by choice and that makes you feel like you should workout less?

[01:21] Mike: No. I’m working less hours and I’m spending that time instead working out.

[01:26] Rob: I see.

[01:27] Mike: So in the back of my mind I’m like I wish I had more time to work on this stuff. Where can I get that time from? and the natural place to get it from would be to stop working out.

[01:37] Rob: Exercise.

[01:38] Mike: Exactly. Exercise. But I know that if I do that, it’s going to negatively impact my productivity when I am working.

[01:42] Rob: When you are working, right.

[01:42] Mike: And the other thing, my wife’s a fitness instructor so she actually put together one of the workout routines for me and I tried it out and afterwards I gave her a call and I was like I think you’re trying to kill me because that was really rough. And she’s like it couldn’t have possibly been that bad and then she tried it and she’s like sorry.

[02:00] Rob: Nice. She was trying to kill you.

[02:04] Mike: I think so.

[02:06] Rob: Hey, I have a couple things this week. The first is a congratulations to a three time MicroConf attendee, his name’s Robert Grzesek and he writes software that controls mills which are little wood – well sometimes they’re very large but sometimes smaller, things that cut wood to make cabinets and to do really intricate cuts and he said that they take in the software, he’s been doing it full time for years. They’ve taken it as far as they could so they decided to actually launch their own mill to build some hardware. So we launched a kick starter and they wanted $30,000 and it was funded the first day. They’re now a $61,000 and they have 29 days to go still as the recording of this podcast. We’ll link it up in the show notes or you can also search on the Nomad CNC mill. So check it out for sure and congratulations to Robert for getting that up on kick starter.

[02:56] The other announcement from the community is Brennan Dunn is going to be on Edinburgh in Scotland in June. He’s going to be talking at the Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. disruption and publishing conference on June 20th. Brennan’s also looking at putting together a workshop about online marketing and starting a business so if you’re interested, if you know Brennan and you’re in the Edinburgh area, I would recommend that you drop him an email at brennan@planscope.io and let him know that you’re interested so that when he tours there he can be in touch.

[03:22] Mike: Very cool.

[03:23] Rob: So today Mike and I have the pleasure of welcoming Dan Norris on the show.

[03:27] Dan: Hi guys, thanks for having me. I’m super excited. I’m a huge fan of the show so I’m looking forward to the conversation.

[03:32] Rob: So Dan, if you haven’t heard of Dan, he has his own podcast. He has a blog. He has a startup or 2 or 3 at any given time. Dan I know I’m not doing what you’re up to justice. You want to get folks a little 30 second intro to what you’ve been up to the last year or two?

[03:47] Dan: I at the moment really got one business and that makes me very happy because in the last year we’ve had about 4 or 5. Most of them have failed. At the moment our business is WP Curve. I’m on the web press small jobs for $69 a month and we operate 24/7. About 10 months ago I had just kind of a big failure with my last startup and those were a couple of weeks away from needing to get a job. And I launched WP Curve in that time we signed up 250 customers and we’re up to about $16,000 a month and sort of experienced in the last 18 months a massive failure and the opposite of that as well.

[04:18] Rob: You tried to validate along the way. You built a list and then in the end it didn’t work out that well and so you wrote a post kind of postmorteming that and we walked through some of those steps and talked about lean startup and startup validation and stuff like that.

[04:29] Dan: Yeah and I contacted you guys recently because I’ve sort of written a book that talks about that journey that I went through about that failing business and what I got right with the current business and it talks about the validation aspect and the book’s called The Seven Day Startup so it’s about launching quickly and I think what we’re going to talk about today is some of those lessons.

[04:49] Rob: Yeah. That’s right. It was episode 142 called the startup validation work and then we did a follow-up episode 145 which was this lean startup work for bootstrappers. As Dan said, he contacted us, one chapter in particular stuck out to me. It’s either 13 or 14 business rules to live by, startup rules to live by. Which is it Dan? Is it business or startup?

[05:09] Dan: Well I talk about that a little bit in there. I think it depends what you like but I like the word startup because I think it sort of feels as if you’re working on something a little bit more exciting than just creating a job for yourself. So I like that word better than business.

[05:22] Rob: Cool. So today we’re going to be talking through a handful of these rules to live by. Obviously we won’t be able to get through all of them so I guess let’s dive into the first one. You have a rule, it says test every assumption. The biggest question I have about it is how is it possible to test every assumption?

[05:38] Dan: I mean this is being one of my biggest lessons and I think it’s the whole reason why I kind of had a year working on the business but didn’t work and seven days working on a business that did work because the business that I worked on for seven days I didn’t make any assumptions because I didn’t have time. So I simply just launched and didn’t know what the right pricing was. I didn’t know where the people wanted this. I didn’t validate it. There was no time for validation or pricing or anything. I just launched it and then I worried about all that stuff afterwards. As a result, the kind of hidden benefit was that all the decisions I made ended up being made based on real information from real customers rather than assumptions.

[06:14] So I suppose there’s a lot of ways to do it but I think especially for bootstrappers, the best way to do it is to launch as quickly as possible. That way, every decision you’re making is based on how people are responding whether they’re getting their wallets out, what they’re telling you about the product, how to improve it rather than sitting around kind of debating is this a big problem? Is it valid? Do I need to run some paid ads to test email opt-ins or whatever all that stuff and cutting a lot out of it and instead just making decisions based on real information from real people.

 

[06:42] Rob: You know what would you say to a founder who might be listening to this or an aspiring founder for that matter? Who he was in your shoes a year ago where you were working on a software product and you had to spend some time building something. You couldn’t just launch in seven days because you were building a Saas app. Whereas your new product is more of productize consulting. You have a staff who are doing things but you really didn’t need to spend time to build software upfront.

 

[07:06] Dan: Well, we’ve also launched a web press plug-in within one week during that period, it failed but I still followed the same process and I’ve got examples in my book of people who’ve launched businesses very quickly. A week is hard for a software business. It’s probably one of the harder ones to do but I think that’s a consideration for a bootstrapper. One other chapters in my book I go through like what is a good idea for a bootstrapper and the amount of time it takes to build the product is a consideration I think whether or not it’s a good idea. If you’re in a situation like you are where you’ve got a bunch of success and you’re kind of free to explore, you don’t need your next startup necessarily to be a big success. If it fails, you’ll be fine. That’s a different situation that I was in and probably a lot of your audience are in. In that situation, I think you’re better considering an idea that enables you to launch quickly and don’t think about a startup that’s going to take you 12 months to build for at least for your first one.

 

[07:53] Rob: Yeah on the show here we often say 4-6 months of part time work that’s kind of been the rinse that we’ve thrown out. You’re bringing the ball way back to the seven day thing. I suppose if its software maybe you’d give them a break and let them spend a month or something.

 

[08:07] Dan: No I think with the example that I run through with my own product it’s actually really cool because when I started my business informally it was effectively a analytics dashboard. It took me about 10 months before I really knew that it wasn’t going to work and it took me 6-8 months of full time work and many tens of thousands of dollars to get my first paying customer. And to run about the same time, Baremetrics, have you talked about Baremetrics on the show? Their stripe analytics?

 

[08:32] Rob: We haven’t but the owner Josh Pigford or the founder, he did an attendee talk at MicroConf.

 

[08:36] Dan: Yeah and that’s one of the examples I got for my book. He was able to start a business that was very similar to what I started but he was able to build it very, very quickly and he’s done extremely well in a very, very short timeframe. And there’s other examples as well. There’s a company called launch rock truck that launched on startup weekend and with a couple of days they’re on tech crunch and the within a couple of months they were funded. It’s difficult with software but it’s not impossible.

 

[08:59] Yeah, if you’re running a service, it’s definitely easier to launch quickly but I still think you’ll be better off at figuring out a way to test your assumptions properly. There’s another good example in the book where I talk about a guy who started a deal site for wine and his assumption was people didn’t necessarily need discounted wine. What his assumption was people would get a bunch of different wines and they didn’t know what they were going to get. So they pay $15 for a bottle of wine, they might get $100 bottle of wine or they might get a $15 bottle of wine. So it wasn’t necessarily cheaper but those surprise elements, so what he needed to test was will this side actually work? And he tested that by having a party and everyone who walked up at the party paid $15 for a bottle of wine and some people got a $15 bottle of wine, some people got a $100 bottle of wine.

 

[09:40] And he just looked at what people did and what they talked about, whether they engaged with each other, what they’re excited about the process and that was enough for him to get some validation around that the concept was right before you actually spend any time on software.

 

[09:51] Mike: It sounds to me like the whole premise behind testing every assumption is not necessarily about testing the assumptions. It’s about more about moving quickly and doing things as fast as possible so that you get to that point where you do have the data.

 

[10:05] Dan: Yeah. I think before you launch, I think it’s more about not having assumptions. If you can launch quickly and not really having assumptions before you launch, but after you launch, we just keep coming back to this in our business. it’s like every time we make a decision, we just think about okay are we making this because we are sharing something that we don’t actually know and if that’s true then what I’m going to actually ask your customers is it important that we offer 24/7 service? Is it important that we offer unlimited fixes? We assume it is but why don’t we just ask people make sure this is actually something that they care about before we kind of make decisions around those things. I think there’s a way you can interpret it before you launch, after you launch in every decision we make we try to do it without assumptions.

 

[10:40] Rob: I’m curious. You mentioned Josh with Baremetrics and how he did it in a week and that it took you 10 months. What was the difference there? Were the products really that similar or did you build a much larger product?

 

[10:52] Dan: I definitely built a much larger product but I did that because I was working on assumptions. The difference is before we launched, I built something that I thought I needed. He built something that he thought he needed but neither is new. So I spent a long time – like mine had a lot of integrations with about 15 different other products. So it was the analytics dashboard that brought in data from a whole bunch of places so it’s much more complex to build I imagine than Baremetrics was when he started. But at the same time, I only built that because I thought that’s what people wanted.

 

[11:19] So I made a massive mistake there in assuming that people actually wanted to pay for that. What he did was he thought people wanted to pay for it but he didn’t waste time trying to figure that out. He just launched it and then kind of just gained that natural momentum which is something we’ve noticed with this business but never happened with my last business. It just didn’t hit that point where it just started to kind of build on its own.

 

[11:38] Rob: Right. I like the idea of launching quick. I love hearing the story of Brennan Dunn launch a WordPress plug-in in a wakened and Josh obviously launched Baremetrics in a week. I just don’t know how far you can take that that. In terms of the analytics package you were developing, I know you were developing, I know it was large and let’s take a look at drip. I mean we basically spent four months half time and then another two months full time before we got it to market because it was just a bigger package. It sends email. It does real-time analytics. I validated it before hand as much as I possibly could by going outland having the conversations. I’m sure you’ve heard the story sending emails, getting people to commit to paying and all that’s tuff which I think you did some of that as well but it didn’t work out quite as well. I like the idea of what you’re saying like trying to get something out in seven days. I just don’t think it’s possible in every situation.

 

[12:24] Dan: Sure. There’s a few things on side to that. One is that what I needed to do with informally was to find out if people had this problem and I could’ve done that without software. I could’ve created a form where people clicked the button, connected to analytics, chose a bunch of their favorite services, click save and then give them a message and say your report will be ready in 24 hours. I mean with WP Curve, I had a live chat on my phone that sat next to my head every night I bed in case it went off for the first two months because I was offering 24/7 and it was just me.

 

[12:53] I could’ve done something exactly like that with – formally I could’ve said your report will be ready in one hour service and just processing the report and I could’ve just easily done it manually and presented the report to them and then asked them to pay. I couldn’t have done that in seven days as opposed to 10 months to build the actual whole application.

 

[13:09] Rob: That I like. That makes total sense. I’ve talked about doing that if I were to launch HitTail from scratch I wouldn’t go build software. I would do exactly as yours saying. I would have someone on the back end manually grading and ranking things based on the data someone submitted or Drip, we didn’t need – we really didn’t need to spend that much. It’s like you said, I was at a place where I could have a developer working on it but we could’ve won off – I already had the thing built on HitTail. I could’ve installed the widget manually on the next person’s site and we’ll link it up to a Mail Chimp account that I had secretly sending auto responders. I mean I totally could’ve cobbled that in a week so that I like. It’s the idea of an MVP is not a prototype that people get confused thinking MVP is a prototype. The MVP is just the minimum way to check that next assumption to validate…

 

[13:52] Dan: That’s exactly right and one of the quotes in the book was something like people focus on the minimum and not the vital which is I think the problem is they treat it like a product like you say and they focus on doing as little possible but is this actually viable for someone to actually pay for it and does it solve their problem? And that’s what you need to focus on and to do that quickly sometimes it’s not software you need to build. Sometimes there’s another way to build it. But the other thing I’d say about drip is I think it’s worth considering whether or not drip is a good idea for particularly a first time entrepreneur who’s bootstrapping.

 

[14:23] So in the book as I mentioned before, a list of criteria for good ideas and one of them is the ability to build it and test it quickly and Drip might be a good idea for 3rd and 4th time entrepreneur but it may not be a good idea for a first time entrepreneur because it might be just too hard and too competitive to build something like that. I’m sure a lot of people have come before you and in fact I know people who build similar products to this and they failed so I think that’s worth thinking about as well.

 

[14:48] Rob: Yeah I think that’s a good point. I have recommended people against going into this market because it is so competitive. So you’re right. I don’t think a first time bootstrapper should dive into this. Cool. I think that piggy backs really well on a second rule which is solve problems as they arise. Can you talk a little bit about what that looks like?

 

[15:04] Dan: I’m very big on this. Again, I mean the first 10 months of my last business, I mean I spent so long trying to get the perfect payment gateway. I could’ve set a pay – with this business I set a PayPal in 30 minutes. With the last one it took me six months to setup a US bank account and to setup brain tree and to get a really nice integrated seamless payment from within the app but why? It wasn’t a problem. So why was I even working on that?

 

[15:27] So now, as an example, we’re a support business and we didn’t have a support help desk until we got to 250 customers a couple weeks ago. We literally just got a support desk and we’ve been using Trello and it’s been working perfectly fine until it began a problem in which case we knew that we would have to upgrade and solve that problem. There’s a lot of examples like that in our business where if you focus on problems you actually have, you end up doing what your customers want you to do rather than kind of acting on assumptions and just working on a whole bunch of stuff that really doesn’t matter.

 

[15:56] Mike: That’s more about solving the problems that you have versus solving problems that you’re going to have.

 

[16:01] Dan: Exactly. And predicting the problems again I have is part of the problem is that people end up being very, very bad predictors of what’s going to happen in their business because there’s just way too many unknowns. Some people think of it like it’s some kind of experiment entrepreneurship but there’s just too many unknowns. When you launch it – because you don’t even know six months down the track if you’re going to be doing the same thing that you’ll be doing. So why on earth would you plan for like anything, a hosting, I’ve heard you talk about Rob with your setting up service or what not. It’s generally these problems. They’re easy to solve quickly then they shouldn’t be solved in a way where you’re trying to predict what’s going to happen because 99% of the time you’re going to be wrong and it will mean that you’re working on the wrong things.

 

[16:35] Rob: Yeah that’s right. It’s pretty mature optimization. And about how it’s so easy to prematurely optimize credit card payment gateways hosting. I mean I’ve seen people with $500 hosting plans, $500 a month dedicated hosting plans, signed a one year contract and then not get any traffic for six months and it’s just a waste of resources at that early phase.

 

[16:54] Dan: Yeah. The optimization thing is a big – I have a friend too who’s debating what help desk to install and he’s got – and I asked him how many customers do you have and he said I’ve got about 10 customers. And he spent a couple of weeks evaluating what help desk to install and I’m like what’s wrong with email? I mean we’ve got 200 customers and we have a help desk. Like that’s not a problem you should be solving. The problem you should e solving is you need more customers. You can’t have a business with only 10 low fee monthly customers.

 

[17:20] So I think if you try to solve problems that you don’t have, you end up not working on things that are really important. You kind of get distracted and optimization’s a big one like everything you read online is about optimizing through conversions or setting up your analytics or improving the SEO and everything’s about fine tuning something that’s already working. But when you start out, you haven’t got to the point where it’s working yet so you need to be focused on getting it working before you do any of the optimization stuff which I know you guys talk about a lot.

 

[17:46] Rob: Yeah. I think especially if software developers are starting businesses, we tend to gold plate our software because we’ve often worked in enterprises where you know, as soon as you deploy, a million people are going to be using it tomorrow. So you know that it has to be robust. So then when you step aside and you go to build your startup, your prototype basically or your MVP I should say, we are naturally inclined to gold plate it because we think we’re going to have a million users and we don’t want to have to change stuff down the line. And think it’s been a big lesson certainly for me 10 years ago as I stated learning these but if there’s something that you can easily or even with several days of work change later, then make the decision really fast. Right? Do the minimum amount of work and then fix it later.

 

[18:26] There are certain things that you can’t do that with data models are often really hard to change so I do tend to put a little bit flexibility to those and there’s certain other things. But for the most part, you can get around a lot of things later.

 

[18:38] Dan: Yeah.

 

[18:37] Rob: Cool. So let’s dive into our next point, your next rule which was look for sources of momentum. You want to tell us what you mean by that?

 

[18:46] Dan: Yeah. This is another interesting one. We’re talking about the Baremetrics story before and just the fact that – because I wanted to cover like the marketing that he did in my marketing chapter because I’ve got a chapter that talks about 20 different ways to market a business and I wanted to kind of learn how he marketed that and he basically emailed me and said all I did was told people about it after they signed up, people tweeted it and then it just grew. He tried a bunch of different ways of marketing it but what worked was people talking about it.

 

[19:12] And like with my last startup I focused so much on different ways of marketing and I think I had 25 different ways I was testing and I had a big post on your blog about all these different ways I’ve build an email list and different traffic strategies, everything else. But I just couldn’t get that point where I was getting any momentum. The only thing I’ve got momentum with was my content and that ended up being a big asset. But the actual business didn’t get any momentum. And with WP Curve, the opposite is being true like we haven’t done any marketing other than just doing what we do, our content, our podcast and what not. We haven’t done any paid acquisition. All we’ve done is encourage people to tell people about it and try to do a good job.

 

[19:47] Yeah, and the momentum itself is brought forward. So I think when people start businesses, they kind of hope they’re going to get to that point of momentum and that’s why I like the idea of launching very quickly so that you can tweak things or maybe you can just completely kill an idea just for whatever reason is just not getting that momentum and it’s hard to predict but when it happens, you’ll notice it and it happened with Baremetrics and this happened with us. I think that’s really what people want when they start. So looking after those, it might not be like in your actual business as well like I said without content I noticed that traffic momentum was really good like I was starting to get rankings and traffic and mentions and back links and everything for our content.

 

[20:24] So we really doubled down on that and that’s when I ended up kind of building our list and enabling us to keep up WP Curve. For other businesses, there might be something else but for me I noticed content and I noticed this particular idea was starting to build momentum and then it just sort of gets a life of its own.

 

[20:38] Rob: Got it. So to be clear, you’re not saying that you should focus on word of mouth with this. You saying you should try several approaches and really pay attention to whichever one starts building momentum.

 

[20:48] Dan: Exactly. And I think that part of that as well is just relying on your own data or not making assumptions based on other data as well. So with the marketing, there might be 20 different ways you could potentially market something. 19 of them might not work for whatever reason. I mean it might work for someone else. They might not just work for you. Sometimes it’s just not a good fit with the founder and that’s something I’ve found like I’m just not good at certain types of marketing but I am good with other types of marketing and testing a bunch of stuff basically enables you to widdle down what’s working and find something where you can get that natural momentum and you just get an uplift that its sort of bigger than whatever you’re putting into word.

 

[21:25] And that’s when you really need I think to kick your business off. I think it’s very difficult to do the typical sort of four hour work week, send a bunch of ad words traffic to a page and then work out that you can make more money than you’re spending. I think that’s much, much more difficult than people realize and I think businesses do need that natural momentum so try a bunch of options, workout what works for you and for the business and stick with what works.

 

[21:44] Mike: Another thing I want to point out to our listeners is what you’re talking about here in terms of looking for sources of momentum is really about marketing and business momentum. It doesn’t really have anything to do with your own personal momentum, your own personal motivations which kind of leaves us directly into the next one which is managing your own motivation. We’ve kind of talked a little bit about that and what you mean by managing your own motivation versus the momentum of the business.

 

[22:08] Dan: Yeah, I think momentum covers every aspect of business. Motivation is so important that you can’t oversight how important it is. I don’t know exactly how to go about keeping that passion for the whole time you’ve got a business but you really need to love what you’re doing. You need to visualize what you’ll be doing everyday in your business. That’s one thing I kind of point I’m trying to make in the book is what will we actually be doing during the day? Every day in your business. And do you love doing that? What would you do what job doing that? I’ve started businesses where I’m doing cheap E-commerce type stuff like iPhone cases and stuff like that. And it meant that I had to sit around packing envelopes all day and it was horrible and I hated it and it failed.

 

[22:47] I mean that’s very, very easily avoided because I knew that I just didn’t want to sit around packing envelopes. So I think it’s definitely worth thinking about how your idea is going to manifest in terms of your daily work. If you were thinking about a cofounder, I think that’s been a huge motivation factor for me and momentum has role as well. I mean even just the success of our content is a really big motivating factor for us, the vanity metrics all going up is a motivating factor. Relationships and networks, all that kind of stuff. And helping other people, all that kind of stuff really helps you wake up in the morning and love what you do and that’s something that’s kind of a rule that you need to live by otherwise you’re just going to burn yourself out and fail or just want to get back and get a job because it can be tough.

 

[23:52] Rob: Yeah, I think a big driver for me in terms of motivation lately especially has been community. It’s both my mastermind groups as well as the Micropreneur in the academy and at MicroConf and then here at my local tech scene. I live in Fresno, California and 3-4 years ago there really wasn’t much of a tech scene but one has formed here down town. And I have a little office with 26-27 other software companies and that is it’s amazing to go down with the energy and just being able to be around other people. So I’m a big proponent of being around others who are doing interesting things and are not – the more you hangout with other folks who are doing salary gigs and you’re trying to do something interesting it’s like they just talk about different things and they think about different things and they complain about different things. Not the same mindset that we do. I think community really plays a big part of that especially for me.

 

[24:15] Dan: Yeah and one thing that a lot of people do is work from home by themselves and they kind of think that working from home is going to be this amazing thing but it’s actually not that much fun to sit around by yourself at your computer working. That’s definitely consideration for motivation. I’d like to talk to you about what you’re doing locally because I’d like to do something here. Just get that same.

 

[24:33] But I think what you guys do with the content as well and with the event, you’re helping a lot of people and that’s sort of – because you’re putting into the community you’re also getting back from the community and I think that’s probably a really big thing for people to consider. And we try to like be generous with our time and give a lot of our content out to other places and do lots of interviews and just take calls of people who have questions and that kind of stuff is a really big motivator as well.

 

[24:57] Rob: The last rule we’ll look at today, Dan you have many more in your book as I mentioned, is manage churn. You want to tell us what that’s about?

 

[25:04] Dan: Yeah. I like this and this assumes you’ve got kind of a recurring business where you know when someone stops using your service. People will leave and I like the idea of really focusing on that because it gets you focusing on exactly what your customers think about your service. It might be a better way of putting it is lose retention rather than focusing on the negative. But we had Sean Ellis on our podcast and we were kind of looking for a bunch of growth hacks from me to work out how we could grow the business and his basic message was you need to look at retention and referral. So you need to look at do people want to stay on as a customer? If not, why not? And do they tell other people about it and refer other people and that’s what’s growing our business despite all the content we do and everything else we do.

 

[25:46] It’s literally just about making sure that what we’re doing is good quality and the customers care about it and sometimes it’s difficult to know that but if customers start leaving which they will then that’s a really good point to work at exactly why. And what we did there is just send them a really simple email. We’ve tried a bunch of things. This one works better than the others and we just send them an email with the subject did we do something wrong? And it’s just one line that says I noticed you canceled. Did we do something wrong? That forces most people to reply. We ask them why. They left, they won’t tell us. But if we asked them did we do something wrong, they’ll tell us exactly why they left.

 

[16:15] And that encourages the appeal of your service to customers because you’re effectively stopping people from leaving which means you’re making them happier and improving your product and that’s probably – I mean focus on product was another thing I had in my list. It’s effectively the same thing. It’s focusing on making sure people love your product so much they stay and they refer to other people.

 

[26:32] Rob: Yeah. I really like how Sean Ellis [0:26:33] [Inaudible] there with. Are they telling other people and are they sticking around? Right? Because I think there is a lot more discussion online about optimization as you said, driving traffic, those are the approaches. There’s less and less said the further down the funnel you get. And as you get to the point of I actually have customers, how do I keep them and then how do I get the customers to tell other people. Those are super advanced things and we don’t tend to get into them. And I don’t mean advanced by they’re complicated. I just mean that I don’t think there’s nearly as much information about those topics than the ones at the front end and I think the reason is most people are in the beginning stages and they’re not the point where worrying about churn maters because like you said they only have 10 customers or they have 0 customers and they’re still building and just driving traffic at that point is perhaps the bigger concern.

 

[27:19] But I definitely like the one line email that you’re sending with Drip we do the same thing when people cancel. The email is a little different. It’s two lines. And it’s from me, from the CEO and it basically says please respond even if you only have time to write one line, I’d really appreciate it and it’s an enormous reply rate. And I get a lot of good feedback about pricing or just that they’re in a different situation. they’re a blogger and it’s too expensive and they can use a free plan or some other tool or even if it’s not something that I’m directly going to build a new feature, at least I have an idea of who our product is really working for and who and why it’s not working. And the audience of who and why it’s not working for them.

 

[27:53] Dan: That’s right. You learn a lot from there. There’s a lot of problems that you can solve that come as a result of asking people that like we have a lot of people – not a lot of people. It’s not uncommon for people to sign up with us and then cancel after a day because they assume something in that service like I assumed it was some multiple websites or the [0:28:09] [Inaudible] agency and we can support all their clients for $69 or whatever. So those problems can be easily fixed. We wouldn’t have necessarily known that but because they arise occasionally then that can be easily fixed by changing the copy on the website.

 

[28:21] And as you said, a big factor in churn is who are the people to start with? Who are the people you’re attracting in the business to start with and are they the right people? And once you start realizing the types of people that leave, you can start honing in on the types of people that don’t leave and therefore getting those to your side on the first place and focusing on working on how you can get those people as customers which is going to increase your retention overall.

 

[28:42] Mike: I think the other thing about churn that most people don’t necessarily think about out-front is if you got 100 customers and you lose five of them in a month it’s like okay well that kind of sucks but I can probably scrounge up five more customers but what happens when you get to 500 customers or 1,000 customers because then, those things, the churn starts to scale up as well as the percentage may stay the same but the actual number of customers increases.

 

[29:07] So if you have a 5% monthly churn, by the end of the year you’ve actually got a 54% yearly churn which is just abysmal for your business. I mean it will kill it and you have to be able to address those issues and make your product or your service better. And if you’re not doing those things, if you’re not actively focusing on reducing and managing that churn it will eventually kill your business because you’ll get to a point where you’re losing more customers than you’re gaining.

 

[29:30] Dan: That’s right. And I think the solution may not be simple either and I think some businesses have more churn and others like a service. With ours, it’s always going to have a bit more churn and like hosting for example where people just aren’t going to leave unless the provider does something bad. They’re just going to stick around. Whereas with ours, we need to keep our value. So the solution to churn might be totally different but it’s something that we’re really, really conscious of. It’s kind of a complex thing. I don’t know if you talked it on your show about metrics and stuff with churn but if you haven’t I’ll send you some notes and links that might be useful for your audience.

 

[29:58] Rob: Yeah. We probably need to dive into it in a future episode because it is very complicated. Even just building a churn dashboard is hard because you have to have all these cohorts and there’s a lot of different ways to interpret things. Do you include annual plans? Do you include comp people? I mean there’s this whole if people can’t cancel, if they churn because of credit card failure versus voluntary churn, tons of stuff. And then as you said, it’s never one thing that you need to do to fix all your churn. There’s typically like 8 different things to serve 8 different audiences who are cancelling.

 

[30:28] And as a note, folks if you listen to think one, there’s an Saas app or planning to launch one, there’s an app that’s called keepify.com and it helps at least does some predictive work for you to figure out who’s going to be canceling soon based on behavior.

 

[30:43] Dan: Yeah I think like you can get carried away with all the metrics and that may not be so useful to someone who’s just starting. But what is useful is focusing on your product and working out why people are leaving. And that’s why churn is useful because you’ll get direct information from customers that tells you honestly why they left and that’s something that you should be focusing on because it’s product and if you improved the product then you increase retention and you increase referrals.

 

[31:05] Rob: Very good Dan. Thanks for joining us today. Do you want to give folks an idea of where they can find a book? Because obviously we’ve just spoken about 5 of the 14 rules you have and then you have another dozen or so chapters and I think the book is free. Is that right?

 

[31:18] Dan: Yeah. It’s not out yet but it shouldn’t be too far off. If you go to wpcurve.com/sevendaystartup at the moment it’s just a landing page for an email opt-in, that’s the list that I use to email. I send one weekly email and I’ll send the book through to that list. When the book’s actually out, we’ll just put it up so people can grab it. Might be able to send you a direct link but it’s still a few weeks away.

 

[31:37] Rob: Very cool. Well thanks again for coming on the show man. It was good to have you.

 

[31:40] Dan: Yeah hopefully it’s useful if people got any questions I’m just dan@wpcurve.com feel free to send me an email.

 

[31:45] Rob: And you also blog at…

 

[31:47] Dan: Yeah everything’s wpcurve.com so I didn’t really delve into that but that’s some – we’ve kind of put all of our stuff on to that site now so wpcurve.com/blog and there’s about 300 posts up there. Just eBooks and email courses and a whole bunch of stuff. A lot of that stuff is not really WordPress related. It’s kind of startup and business type related so that’s going to be useful for your audiences podcast with Sean Ellis and Noah Keg are portably the two recent one that we’ve done are the best for your audience.

 

[32:14] Rob: Yeah. You put out a ton of content. You’re very open with what’s going on and over the last year or two as you’ve started businesses so it’s definitely a lot. If folks haven’t been over to WP Curve I would recommend checking out all your content.

 

[32:27] Dan: Thanks. I’d love to have you guys on the show soon as well.

 

[32:29] Rob: Yeah absolutely.

 

[32:30] Dan: Sounds good thanks for having me.

 

[32:32] Mike: Thanks Dan.

 

[32:33] Music

 

[32:26] Mike: If you have a question for us, you can call it to our voicemail number at 1-888-801-9690 or email it to us at questions@startupsfortherestofus.com. 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.

 

 

 

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15 Responses to “Episode 183 | 5 Startup Rules to Live By with Dan Norris”

  1. Donald Wheeler May 6, 2014 at 9:06 am

    Just FYI, the link for Dan’s book should be wpcurve.com/7daystartup – thank you for all of your awesome content!

  2. I really enjoyed the discussion and tradeoffs involved in the first point about validating assumptions. I know I’ve made mistakes building things that I just didn’t need to test my assumptions.

    I like how Dan had customers vote with their feet and wallets on his assumptions.

    Thanks for the mention!

    • Thanks Robert, that’s a super interesting business you have there. I love a business that can directly make more money for it’s customers. It’s a no brainer if you can get it right. Let me know when you come out with a version for service businesses!

  3. Edin-burra not edin-burg. (assuming you ever want to actually not get lynched if you ever decide to go there ;) )

    • Geez, this is the second time someone has corrected my pronunciation of a city. Maybe in the future I will only spell city names…

      • Hi Rob,

        haha, and they are both Scottish cities:

        Glasgow was first and now Edinburgh!

        Cheers from Scotland ;-)

      • Heh.. Well not so much Edinburgh, but if you’re in town and mispronounce Glasgow, you might just come away with an injury ;)

  4. Rob,

    You can see an example of how to pronounce Edinburgh here:

    https://www.youtube.com/watch?v=TN9E3WsaHWw

  5. Thanks for the awesome episode.
    Enjoyed a lot..

  6. AWESOME episode guys! Absolutely loved it. Dan’s point about doing a spreadsheet instead of an application is spot on also was his response to “is this even feasible” i loved his approach that there are so many different ideas and approaches to business that ensuring you are selecting the right one for your goals (notably here first time bootstrapper) is 100% spot on.

  7. Really great episode. I was on a mastermind with Dan while he worked on informly, which never really took off the way he might have liked.

    Then in the course of a week, he launched WP-Curve and was off to the races. Inspiring story of how sometimes you just need to get back on the horse and try again.