Episode 26 | Telling the Whole Story
[00:00] Mike: This is Startups for the Rest of Us: Episode 26.
[00:12] Mike: Welcome to Startups for the Rest of Us, the podcast that helps developers be awesome at launching software products, whether you’ve built your first product or are 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 that we’ve made. What’s going on this week, Rob?
[00:25] Rob: It’s been a pretty slow week for me, actually. I don’t really have much to chat about. How about with you?
[00:30] Mike: Well, if you remember, I was in California last week. And between the airport and being on the plane itself it took me about 18 hours to get home. [laughs]
[00:40] Rob: Oh, good grief. That’s terrible! What happened?
[00:43] Mike: I got to the airport and I was flying Jet Blue back from San Jose. And it turns out that Jet Blue does not have very many flights out of San Jose. Apparently, they don’t open until almost seven o’clock at night. So I had to take my bag through security, because I got there at like noon or one o’clock or something like that.
[01:02] And then it was like eight o’clock or so when I checked to see if my flight was on time, and it wasn’t. It was delayed by three hours. I spent like 12 hours in the airport itself, and then it was like another six or seven hour flight back.
[01:14] Rob: That’s terrible. Why were you there so early?
[01:17] Mike: Things ended short and I went to the airport.
[01:20] Rob: OK. You didn’t want to go to the Tech Museum in San Jose?
[01:26] Mike: The thing is I walked by that a couple of times and it did not look all that techie. They had like a Harry Potter exhibit. I was like, “If that’s the height of your technical stuff, I’ll just pass. Thanks.” [laughs]
[01:38] Rob: Right. Well I haven’t been there since….Boy, I mean it’s been 10 or 12 years. And it was really cool. They had a bunch of old computers and just old stuff from the ‘60s, and ‘70s, and ‘80s, for that matter. I think they have an Apple 1 in there. I mean they just have a lot of cool stuff if you are into tech history. But yeah, seeing the Harry Potter thing might not be a big draw.
[01:57] Mike: I think they actually had a movie there as well. But it was all about, like, special effects and how it was made and stuff like that. You know, I’ve seen that kind of stuff before and it’s not real interesting to me. [laughs]
[02:07] Rob: Well, how about an update on your .NET Entity Framework stuff and your Kindle reading. How’s that going?
[02:11] Mike: Oh, yeah. It’s going pretty well. I’m still working through some of the Kindle books. I bought three of them, so I still haven’t gotten through all of them. But it’s coming along pretty well. And, you know, just working through some examples.
[02:22] I took one of my old products that I had posted online for several years and then took it down and ran that through the Entity Framework. And I was actually surprised. It spit out all these different entities that I was able to use, and I was able to write some code very, very quickly to access the database and do everything that I needed to do.
[02:39] The only thing I found, and this may be something I’m doing wrong, but it seems like at the very end, I’ll call it the cleanup phase, it seems like it was a little slow. And I think in most applications that probably wouldn’t matter so much, because obviously, when you are at the end of the application and are closing it out, it doesn’t really matter if it takes an extra second or so for everything to kind of shut down and cleanly wipe the slate, so to speak.
[03:04] But I did notice it, because all I was doing was just like a command line prompt that just spit out all the contents of a particular table. It would spit everything out and then it would kinda pause for a second, and then the program would end.
[03:15] So, I don’t know. Maybe I’m just doing something wrong. I’ll have to dig into it a little bit.
[03:19] Rob: Yeah, see if someone else has had that. Well I’ve actually been really enjoying the Kindle books that I bought. I just kind of bought my first batch and I’m almost done with the book called “Un-Marketing”.
[03:29] It’s a lot about, you know, engaging your audience. There’s some social media stuff in there. I’m not super hot on getting too far into just social media as a buzz word, but the guy really knows what he’s talking about. The stuff he says is not the same crap I’ve read on blogs and heard other people yapping about. So I’d recommend it. It’s a decent read.
[03:47] Mike: For listeners out there, Rob just kinda got cut off because our podcast dropped through Skype. So go ahead, Rob. What was the problem here?
[03:55] Rob: Well, so for the past six weeks maybe, since I got this new Netgear N router, anytime I’m on Skype…or not anytime, but half the time I’m on Skype I’ll get cut off in the middle of a conversation and then my Internet connection gets dropped. And so that’s how I know it’s on my end rather than your end.
[04:11] Whereas before, four months ago or something, when we’d get cut off, my Internet connection would stay up. It was on an old Wireless G Netgear router.
[04:19] So what I was asking you is, I’ve used Netgear for 10 years. Do you use something better that’s affordable?
[04:25] Mike: [laughs]
[04:25] Rob: Like a consumer model like Linksys or something that could help out with this?
[04:29] Mike: I have a bunch of different things here. I have the Verizon router that I basically need to have in order to run my network because of the fact that it’s a FiOS connection. So you have to have that no matter what, which kind of sucks.
[04:42] Rob: It’s just like their modem, right? They call it “the modem”.
[04:44] Mike: Yeah. You can’t just replace it. You can’t swap it out and put your own thing in because of the way it interacts with their system. Because basically, if I were to try and rip it out, which I’ve tried to do before, what happens is after about 24 hours my TV goes haywire. And the reason is the TV system is interconnected to that. I don’t know. Somehow they talk to one another. I can’t get rid of it.
[05:07] So unfortunately, I have to deal with that. But behind that I have a bunch of different things. I have like a 24 port switch that’s a Linksys, I believe. And then beyond that, I also have a couple of Netgear switches. I don’t think my 24 port switch is managed.
[05:25] I think it’s just one of their higher-end 24 port switches, though. And then I also have a CyberGuard VPN firewall sitting behind my Verizon FiOS router. And that kind of feeds into the rest of my network. So I use that so that I can VPN in when I’m remote, and I don’t have to worry about my active directory being up and running and all the other stuff that I had in place before.
[05:45] But things, for me, seem to work well. But that router, the Cyberlink that I was just talking about…
[05:51] Rob: CyberGuard.
[05:52] Mike: Yeah, the CyberGuard is a bit more expensive. I think it was $500 or $600, something like that.
[05:58] Rob: Right. Whereas the wireless routers, the Netgear stuff that I buy is like $50 for something brand new.
[06:04] Mike: Yeah, but Netgear still makes pretty good stuff, and so does Linksys. So I’m surprised that you’re having problems. The only thing I can think of is that because it’s…not necessarily because it’s wireless, but because it’s wireless N, depending on how you have it configured, wireless N, the way they get up to the speeds that they do is that they actually use two channels. And the two channels kind of go side by side.
[06:24] And I think that if one of them were to go haywire by any stretch of them imagination, then you’ll lose the whole thing, because then your service quality just degrades. And I’m not real familiar with all the dirty details of how that works, but I know that they basically tie two channels together to get to the 300 megabits a second speed.
[06:41] If you were to drop one of the, say, say one of them had some interference, I think that the frequency hopping would be a little bit more challenging if you have to do it on one channel but not both.
[06:52] Rob: Yeah, I think I’m going to buy another one, the identical model, because they only really have one wireless N Netgear. I think I’m going to buy another one, try it, just to make sure it’s not a hardware issue. And then if it still does this, I’ll probably try to buy a Linksys and see if that fixes the deal.
[07:07] Because I know that if I go around it and I plug in directly to my cable modem, then I don’t have the issues. So it’s definitely a router issue at this point.
[07:15] Mike: Unfortunately, I can’t blame your Vista 64 anymore.
[07:18] Rob: Yeah, I know. I know.
[07:19] Mike: [laughs]
[07:20] Rob: I’m Windows 7 now, which has been working really well.
[07:26] Mike: Yeah, so one of the other things I noticed this past week is that Y Combinator had funded a single founder company. And I found this interesting because I remember looking into Y Combinator, I don’t know, five, six years ago, something like that.
[07:38] At the time, I was kind of disappointed because Paul Graham had come out with a statement. I think that it was eight or top 10 mistakes that somebody could make trying to start their own company. I think it was the first one, but one of them in there was going it alone as a single founder.
[07:53] I just find it interesting that, lately, it seems to me like they have backpedaled a little bit. I don’t know the story behind it, but I just find it interesting that they are starting to look at single founder companies a little bit more.
[08:05] And maybe it’s because the initiative or the drive of the people who were applying, or maybe they are introduced to them somehow. What do you think about that?
[08:13] Rob: Well, I think that they’ve funded…it’s well over 100 companies now. And I think that even if you have a blog post or you kind of think, “Oh, single founders, they stand less of a chance of succeeding than, say, a two founder, three founder company.”
[08:28] Even if you have that, if you fund one, or two, or three out of hundreds that are single founders, I mean it still could be the exception to the rule. So I don’t think him funding one kind of goes against what he said.
[08:39] In addition, if you published something five years ago, I mean I have to be honest. I published a lot of stuff even two years ago that I look back on and I’m like, “Hmm, I don’t quite believe that anymore.” Either it has changed or I have changed; my understanding of it has changed. So I could see either of those being the case.
[08:55] Mike: I think I went back and looked around a little bit. They probably funded five or six different single founder companies that I know of.
[09:02] Rob: Out of 100, like five or six, so the other 95…So if they are at 150, say, and they’ve only done six single founders, I mean that’s a pretty small percentage.
[09:11] Mike: Right, right. I just found it interesting that…It just wasn’t something I’ve seen before. I just wonder if it’s an experiment on their part or, as you said, it’s just the exception more than the rule.
[09:21] Rob: What company is it?
[09:23] Mike: It was the link that I had sent you.
[09:25] Rob: Oh, it’s the analytics…
[09:26] Mike: Ginzametrics, I think?
[09:27] Rob: It’s Ginzametrics, OK. Yeah, I wonder if he had a lot of background, or if he had a special thing that caught their attention. I mean he must have, I guess. Going against the rule like that, he’d have to have something pretty unique going on.
[09:38] Mike: Yeah, it definitely seemed like the guy who is the founder of it really knew the space very well and had a lot of contacts, and had been in that industry for quite some time.
[09:47] Rob: Yeah, that makes sense then.
[09:52] Rob: The first one that I came across, it’s actually about 10 days ago now, but it’s an article in the Wall Street Journal, and it’s called “10 Mistakes that Startup Entrepreneurs Make”. And it always kills me when popular periodicals, big newspapers and pop-culture magazines, try to cover entrepreneurship, because they just try to be so broad and so general it’s almost humorous.
[10:15] It’s not just entrepreneurship, it’s anytime you are in a field pretty deep and you understand it, and the some magazine covers it, just any large-scale media covers it, they almost always get it embarrassingly wrong, if you actually know about the subject.
[10:27] Mike: They just butcher the topic. [laughs]
[10:28] Rob: Yeah. Yeah, it’s painful. I think in most cases it’s not intentional. They are trying to kind of spice it up to make it a little more exciting, maybe.
[10:36] Mike: To get the eyeballs? Like Wired Magazine?
[10:38] Rob: Indeed. So this article: “10 Mistakes that Startup Entrepreneurs Make”, we don’t have to discuss all 10 of them, but I find that I disagree with almost all of them. And they are like sweeping generalizations anyways, but if there was a blog post on this I would totally be commenting and reaming the guy.
[10:52] So the first one is, coincidentally, going it alone.
[10:55] Mike: [laughs]
[10:56] Rob: They’re saying that’s a startup entrepreneur mistake, which I think is funny. Do we even need to discuss that one? [laughs]
[11:01] Mike: No, probably not.
[11:02] Rob: The next one is: asking too many people for advice. It says it’s always good to get input from experts, but getting too many people’s opinions can delay your decision, so your company never gets out of the starting gate.
[11:14] Yeah, I don’t disagree with that one.
[11:15] Mike: I think that it’s just the way that they put that. I wouldn’t say that asking too many people for advice is a bad thing, but I would say delaying action until you’ve talked to X number of people, or waiting until you’ve talked to everybody you possibly can, I can see how that might lead to the idea that, “Oh, there’s a ‘magic number’ out there that if you ask too many people, you are going to either delay or not do stuff.”
[11:40] And I don’t think that’s necessarily true, because I think that you can start your business and continue talking to people. Maybe it’s just that they mean asking too many people for advice before you start.
[11:50] Rob: Right. Yeah, I think that’s what they are implying. Another one I found interesting that they have as a mistake: targeting too small a market. So, they say, “It’s tempting to try to corner a niche, but your company’s growth will quickly hit a wall if the market you are targeting is too tiny.
[12:04] Because yeah, number eight is raising too much capital. So they are going after it from a VC or Angel-backed mindset, which, of course, it doesn’t directly oppose what we talk about, or at least some of the experiences that we’ve had, but it is just a different mindset.
[12:20] I think the thing that kills me is that when you read things like this, they don’t clarify it upfront what they are talking about. They just say, “Mistakes entrepreneurs make.” And it’s like, this does not apply to everything. I don’t even think this applies to, like, 50% of the businesses in the country. I think this applies to like 5%, maybe 10% of people who are raising money to start companies. You need to have a disclaimer at the top of, like, who this applies to.
[12:42] Mike: Well even if you look at their comment on targeting too small a market, the example that they give is, think about all the high school basketball stars who dreamed of playing in the NBA, and they point out that there is only 32 teams and each team employs only a handful of players.
[12:56] That’s definitely too small a market by any stretch of the imagination, in terms of raw numbers. But if you were to think about those people in terms of how much buying power they have, it’s a lot. You’ve got 30 teams. Each of them has got a multimillion dollar payroll. If you are trying to target just those players, for example, to buy your product or something like that, I mean they collectively have, what, $500 million, a billion dollars worth of buying power? I mean that’s a lot.
[13:24] I don’t know how they jumped to that conclusion. I mean maybe they just looked at the raw numbers of the people as opposed to the actual numbers behind it.
[13:33] Rob: Yeah. And then seven and eight are: raising too little capital and raising too much capital. And it’s like, “Well, of course.” You are kind of hedging your bet here by listing those as mistakes entrepreneurs make. It’s like picking too small a market; picking too large a market. not locating in the Silicon Valley; locating in the Silicon Valley! It’s like, if you are going to put a bunch of opposites in there, is that really helpful?
[13:53] Mike: Yeah, I don’t think so.
[13:54] Rob: I don’t want to sit here and just rag on this article, but…
[13:57] Mike: Yes you do! That’s why you brought it up! [laughs]
[13:59] Rob: I guess that’s why I brought it up.
[14:04] Mike: Something else that caught my eye earlier this week was there was a discussion topic in the Micropreneur Academy forums regarding .NET technologies. And somebody said: “I don’t think .NET is viable for a cash-conscious micropreneur. At some stage, you are going to have to pay big for it.”
[14:18] I have my own thoughts on this. I wanted to get your take on it.
[14:21] Rob: Well, I can definitely see his point. Obviously, not being open source, it’s not free forever. Absolutely. But I disagree that you are going to have to pay big for it. You know, I guess I’m probably not a good person to ask about this, because frankly, I’ve always had one of the Microsoft programs. Before BizSpark, there was something else. It was called the Empower for ISV’s. So I had three years of MSDN subscription for like $100 a year.
[14:48] And then, after that, I became a Microsoft MVP, so I know get MSDN for free. So I guess if I didn’t have that stuff, then yeah, it would b kind of a fiasco. I think the big problem is not with the hosting. I’ve never built anything that needed to scale up that I needed to have a dedicated server. I always go with shared hosting or VPS or something.
[15:08] And in those cases, it’s not that expensive. I mean it’s a little more expensive than Linux hosting, but it’s really not that big of a deal. But if you are building something that is super computationally intensive and you are going to need 20,30, 100 servers down the line, yeah, it’s going to be pricey, obviously, because you have to pay for all those server licenses. And, you know, if you have SQL server licenses, those things are outrageously expensive.
[15:27] So I think it just depends on where you expect to grow to. Since I look at smaller ideas that I don’t expect to just scale infinitely, I don’t see it as being a big issue. The one thing, I guess, is the development tools. Visual Studio just cost you, but with something like BizSpark or MSDN subscriptions, it’s not wildly expensive, and the tools are really solid.
[15:49] But yeah, if he’s a Ruby programmer or a PHP programmer, although I don’t like the IDE’s nearly as much as Visual Studio, I can see the point of not even wanting to pay $800 or $1,000 for the next version of Visual Studio.
[16:02] So that’s my take. What’s yours?
[16:03] Mike: I can agree to an extent with what the person was saying. I think that the bigger issue is, as you pointed out, I mean if you are looking at a lot of the smaller markets, I’ll say, you can get away with a lot without having to pay Microsoft a dime. I mean there is the Express editions of Visual Studio. There are the Express editions of SQL server. I mean the SQL server 2008 R2, you can scale that database up to, I think, 10 gigs.
[16:29] Rob: I think I would use Visual Studio Express, or whatever. It’s called like Web Developer or something?
[16:34] Mike: Yeah, something like that. If you start looking at those things, I think that the bigger problem comes in when you decide that, for whatever reason, the functionality there isn’t enough, or you don’t want to deal with the hassle of any of the limitations, or you say, “I don’t like installing the stripped down versions. I want the full thing.”
[16:51] And well, yeah, of course you are going to start racking up the bills on that stuff. If you go out to buy a car and you say, “Well I have to have the Ferrari,” it will get you from point A to point B the same as a Honda would.
[17:02] And I think that the same thing could probably be said, for the most part, for the difference between the ultimate edition of Visual Studio versus the Express editions. I know I’m going to get flamed for saying that, because there is a lot of functionality that you don’t get with the Express edition that you get with the Ultimate edition. But you can get by.
[17:20] And if your business is actually making money, then you can certainly invest some of that money back into upgrading your toolset if you wanted to go with some of those higher end versions because there is functionality that you needed.
[17:33] Rob: Yeah. Honestly, if you knew Ruby on Rails really well and you knew .NET really well, which would you go with? And you could code equally in them. Looking at it truly from a cost perspective, it’s hard to compare.
[17:46] I think Visual Studio, in my opinion, does have the best IDE; I think .NET does. So it’s going to give you back some hours. It’s of course going to get you to launch sooner and such. But if you really do plan to scale, then down the line that could just cost you a lot more money in the long run.
[18:01] I pose that question to you. What do you think?
[18:03] Mike: I don’t know as it’s really that big a deal. I see those things more or less as fixed cost. And don’t get me wrong, you can obviously go to that higher end of the scale and start getting the Enterprise editions of SQL server or the Data Center edition.
[18:18] If you are truly scaling up your business to the point that you need to have 24 processors on a machine and you have to have terabytes of disk space, the fact is you are going to have a lot more other costs to deal with, and the cost of an MSDN subscription is really not that big.
[18:34] And in addition, if you are really growing your company that big anyway, then it would make sense to take your product and put it through some of the other Microsoft programs that they have available where you can get your product certified and you can become a Gold partner, or one of the registered partners, because they have different partner levels. And depending on your partner level, you can get free software.
[18:54] It just depends on the direction that you want to take the business. And I think if you are going to be scaling up, at the end of the day, it really comes down to how productive you are with the tools. And if you are more productive with Visual Studio and all the .NET tools, then go that way. If you are more productive with Ruby and a lot of the open source stuff, go that way. Because I think that your time is really the single biggest expense in the long run. It’s not the money, because you can always make more money.
[19:21] Mike: So Rob, here’s a question for you. You had sent me a link a couple of weeks ago, and it was about ultra light startups; a 19 year-old who was running a t-shirt printing business?
[19:30] Rob: Yep.
[19:30] Mike: Tell me about that.
[19:31] Rob: This is an SF Gate: San Francisco Chronicle website. You know, what caught my eye is the headline, which is: “Ultra Light Startup—Little Capital, Just Computer”, which obviously is just right up my alley.
[19:42] I was a little disappointed to read the article. It’s a 19 year-old kid going to Berkeley and he started a t-shirt printing business. It says it grossed more than 60 grand in August, putting him on track to post more than 700 grand in sales this year.
[19:55] The thing is, he doesn’t touch the t-shirts, which, of course, is cool, right? He outsources that part of it. But there’s really no talk in here. I’m concerned by this kind of journalism. Because you read those numbers and it seems like, “Wow! We should all do this, right? Why am I not starting this company? This is so easy to do! A 19 year-old kid!”
[20:13] But they don’t talk anything about net profit. Like, it would be so easy for this guy, he very well could be totally under pricing the market, and that’s why he’s getting all this revenue. And he’s either making zero profit…I would hope he’s not losing money. But his margins could literally be 5%. On that $700,000 revenue, he made 30 grand or something, or even less.
[20:33] So I guess I was kind of bothered by that as I read it, because at first, I was reading it and I was totally sucked in, like, “Wow! How come I haven’t done this?” But as you read it closer, there’s kind of like there’s this big piece of it that’s left out; this main piece of information.
[20:46] Mike: Well you did do that for a while, didn’t you? You had that beach towel business.
[20:50] Rob: I did. And actually, that’s kind of why I started thinking about it more, was that my revenue was pretty good; it was a few thousand bucks a month with beach towels. But yeah, the net profit on it was less than 10%. And that was a less competitive market than online t-shirt printing. Online t-shirt printing is brutal.
[21:06] And I guess the way this guy is getting his traffic is it says he uses tactics that increase his rankings in free searches for terms like “custom t-shirts”. He’s obviously doing SEO of some sort. They don’t go into that much. I’m curious to see what he’s doing.
[21:20] But it’s a brutally cutthroat industry, because people are out there for the cheap dollar amount. They are really very price-sensitive in this niche. I wanted to bring it up because I feel like I read a lot of articles like this, I mean at least once a month, where if you really look at the numbers, it’s not that they don’t make sense, but it’s like they are way over-blowing what he’s actually done.
[21:39] They could be over-blowing what he’s actually done; we have no idea. If they guy is making a 50% profit margin, then wow, I need to hook up with this guy, you know? Like, this is fantastic. But I don’t know. I just wish they included more information in stuff like this.
[21:52] I actually was listening to a podcast, it was about a year ago, and someone was interviewing a startup founder who had just launched, and they had 500 users. At the time, I was like, “Oh, that’s pretty cool!” 500 users and they charged like $20 a month or something. I was like, “Wow! He’s got 10 grand already.”
[22:06] And, you know, you are going through this interview and you are hearing all this stuff, and then towards the end, it came up, it was 500 “users”. They were not customers; it was a freemium model. And when the guy actually asked him how many paying users they had, he either said an exact number and it was like three, or he said a percentage and it was like a tenth of a percent.
[22:24] But it was something so low that I was thinking, “Man, if you hadn’t asked him that, people go off thinking what I was thinking.” The: “Oh, you have 10 grand a month worth of revenue. Aren’t you smart? Isn’t this a great thing? I should do this.”
[22:33] And that’s kind of this delusional mean that goes around of people reading these blogs and thinking it’s easy, whereas actually making something that is profitable and is not a zillion hours of work for a few dollars a month is really, really hard.
[22:45] Mike: Yeah, I think that’s the key part of it, though, is the underlying profit you are able to make from. In this article it points out he is on track to make $700,000 in sales. And even if you were to say, OK, he’s got a profit margin of 10%, as you said, he’s not actually touching anything. He’s basically reselling it for other people. And because it’s a physical good, the margins are pretty bad.
[23:07] And giving him the benefit of the doubt, at 10%, OK, he can come up to $70,000 for the year, which sounds great. And for a 19 year-old kid it probably is. But how long is that going to last? I mean how much work does he actually have to put in in order to get that out?
[23:22] And I suspect he’s probably at like, as you said, probably around 5% for profit, maybe even less. If you start counting in things like returns and all this other extra work that is essentially overhead—it doesn’t count towards your bottom line, I would imagine he is probably really not making much better than minimum wage, to be perfectly honest. And it’s just misleading, as you said.
[23:45] Rob: Yeah, it’s quite possible. I think the thing that kills me is I don’t want to say he’s making minimum wage, because I don’t really know. Because there’s not enough information in this article for it to actually be informative.
[23:57] Rob: So, next topic. You had a scenario I think you wanted to pose.
[24:00] Mike: Ah, yes. So, if as a micropreneur you are about to launch and you find some serious flaws in your product, should you push off the launch of should you go through with it?
[24:09] Rob: That’s a tough hypothetical.
[24:11] Mike: [laughs]
[24:12] Rob: And the reason it’s so hard is there are so many things that play into it. I think my inclination would be to hold off the launch, unless there was a really good reason to go forward with it, such as you’ve committed to a high profile blogger who is going to post on a certain date, and for some reason you can’t email him or her and say, “Hey, can you just push this off one week?”
[24:35] I would probably go to a lot of trouble to rearrange things to push it off if I found a critical bug that I couldn’t fix. But, there you go. It’s like, what is critical bug? Do you have people really relying on it?
[24:47] Typically, I wouldn’t recommend committing to a launch date upfront, frankly, unless you do have some press that is going to publish something. What’s your take?
[24:54] Mike: Well, I guess that’s kind of what I was getting at. There’s a lot of things that play into it. And I think that some of the things that you mentioned are all things that you have to take into account. If people are going to be posting about it and you have no control over those press releases or things like that, you don’t want to be locked in if you don’t have to be.
[25:12] But as you said, there are a lot of things that play into it. And if people are relying on it, if you’ve already posted out to people, those are things that you still actually can take back. So let’s say that you’ve emailed a mailing list of 500 people who are interested in your product, you’ve already told them that it’s coming out.
[25:28] If you were an end user, what would you rather have, some product that is coming out that you’ve been told that it’s going to be out on, say, Monday and you get an email on Sunday night saying, “Look, we are pushing it off by a week because there are bugs and we don’t want to release a crappy product,” or would you rather them just push it out on Monday and then you go buy it and find all these problems, and then you get pissed off because there are problems in it and the person launched the product anyway, and you were really hoping to get this product so that it would solve some particular problem that you were having?
[25:56] I think, personally, I would rather have number one. I’d rather them fix the problem and give it to me when it’s right.
[26:02] Rob: Yeah, I would too. I think that we shouldn’t kid ourselves into thinking that we’re building something that people want so badly right at the start that they actually care. You know, we’re not building the new iPhone.
[26:12] We definitely should solve pain points and all that, and I really believe that. But to push something out a week later, given that you can actually give someone more value from it, i.e. an app that doesn’t crash, I think that’s the way to go.
[26:24] In addition, I think this is even more of an argument for having that email launch before you do a full public launch. If you put together an email list of several hundred people and you launch your product to them, then it’s almost like this semi-private launch. You still sell the product. You can still find out if it’s crashing. And you can then push off your truly public launch, your hard launch, and take a little time to do this soft launch and fix the bugs before they get out in public.
[26:50] Mike: Cool.
[26:53] Mike: So this week’s listener question is from Carl Faulkner. And it’s a big long, so I am going to paraphrase some of it.
[26:59] He says: “Hey guys, I really like the work you are doing with the podcast. It’s very helpful. You’ve talked a bit about marketing and niche finding, and one of the underlying messages and techniques that I got from your discussions is that you seem to solve problems in which people are already looking for a solution. In other words, you study keywords and search metrics to evaluate the potential of a product.
[27:17] This approach makes a lot of sense. You can position your products to get in front of potential customers using SEO without changing their behavior.”
[27:23] Rob: I want to stop you right there. Sorry. As Carl said, and please correct me if I’m wrong, Carl, I think you are half right. We do talk about this. We do talk about finding a pain point and finding a need upfront that people are actually searching for.
[27:36] But we don’t necessarily limit marketing to SEO. That just happens to be the best way that we’ve found for measuring market demand. You could also go out and do market surveys, you could talk to customers. There are lots of ways to actually try to measure demand.
[27:50] But looking at search engine metrics is not saying that the only way to market is SEO, or even the first way to market is SEO. It’s just saying that this really is the best way nowadays to try to find and measure that capability. So I just wanted to have that clarification. Go on Mike.
[28:06] Mike: OK. He continues and says: “I recently soft-launched my first products, which you can find at www.micromaximus.com.” — And I’ll put that link in the show notes—“…which is a very niche market. But I don’t think people are actively looking for the solution that my product provides. But the product does solve a problem that exists in my target market.
[28:24] So my question is, how would you approach marketing of a product that people aren’t actively looking for but solves a problem they have? Things that I have been doing so far are contributing comments to on-topic blogs, and writing a blog for my own site, and some Twitter activity. Thank you for the feedback.”
[28:39] So I went out and I actually looked at this, and I can see why he says that people aren’t actively looking for that particular solution. To give the listeners a little bit of background on it, it’s basically a way to have your debit card go out and make active purchases for a minimal amount, because there are a lot of banks nowadays that want you to use your debit card, and they’ll give you rewards or cash back if you have a minimum number of debit purchases on a given month. Or they will give you higher APR’s on your balance.
[29:11] And all they require that you do is you actually use your debit card. And a lot of people forget or they don’t like to use their debit card. Personally, I hate using my debit card for all that stuff, because I don’t get the protections of a credit card.
[29:23] It seems to me like you kinda have to figure out what banks have these programs. And if you are going to target SEO, you almost have to build the SEO around attracting customers of those banks. I think that that’s going to be difficult, because I can’t think of how you would go about doing the SEO for that. I just don’t know what you would target.
[29:44] Rob: I don’t either. I don’t think this is an SEO play.
[29:47] Mike: So that basically means you have to do other avenues. And those other avenues almost seem to me like they are going to be offline. And I hate to go down this road for just about anything, because it really doesn’t scale well, but things like newspaper ads. And I suppose you could do some online advertisements. Maybe you could use Google AdWords to help you try and zero in on those people, but I think that that’s going to be painfully expensive because of the price point that you are offering, and the fact that you are probably going to be competing with people like Capital One and Bank of America. You are not going to be able to effectively compete with those companies in AdWords.
[30:27] As you agreed, I mean SEO is kind of a foregone conclusion. I don’t know as Google AdWords or paying for searches on Yahoo or Bing is going to help very much. Newspaper advertisements might work. Social networking might work. If you could get some blog posts to go viral, that might help. But I think that you are going to have a hard time marketing the product because no one is looking for it.
[30:48] In addition, because of the type of market it is, you are trying to target people who are trying to save money. You are trying to get them to save money by spending money with you, which is kind of counterintuitive.
[30:58] And it makes sense if you really sit down and think about it, but people don’t want to sit down and think about it. So I think that’s the major issue that you are going to be running into here. So I’m having a hard time coming up with anything actionable that you could actually use.
[31:10] You basically have to find out where your audience hangs out. And whether that’s at financial awareness clinics, or there’s adult education programs where people can go and learn about how to more financially conscious or more fiscally aware of what they are doing with their money and how they are saving money.
[31:28] You might be able to approach some of the professors of those types of courses. That might get you something. But again, those things just don’t scale. I think it’s going to be a hard sell for the most part. I could be wrong here, but what do you think Rob?
[31:40] Rob: I think you’ve pointed out some important points here Mike, and it’s that scalability of your marketing is a huge deal. That’s typically more of a concern than actually scaling your code.
[31:48] The thing is, finding sustainable and scalable traffic sources…and when I say traffic, I don’t just mean online stuff. I mean just bringing people to your website or to call you on the phone if you are going to sell over the phone, or however you are going to do it.
[32:01] Just finding a sustainable source of prospects is really, really hard. It’s way harder than people think. And it’s probably the hardest part of marketing software and apps and such. A lot of people think that this startup thing is easy and that they can just go Tweet about it, write a blog post, email some bloggers and boom, traffic for the year.
[32:21] The thing is, is even if you get lucky and you get a few people to blog about it and send you links, you’ll get this huge spike of traffic, and if it’s targeted, you may close some sales, you may not. And then, it will just kind of wither away.
[32:32] It’s not a sustainable model. I mean you’ll get a thousand to two thousand visitors and then it will drop way off down to, whatever, 100 uniques a month. And then you have to try to do this again. You have to try to find more blogs or more avenues.
[32:44] And this is why I preach pretty heavily that there are three sustainable traffic sources. There are certainly more than that, but for like micropreneur stuff, for things that you are not going to do fulltime and that you kinda want to be able to do online, an email mailing list is number one, a blog or a podcast is number two, and search engine optimization is number three. And then AdWords can be number four, although it’s so expensive these days I really don’t recommend it to most people.
[33:08] I think for the reasons you’ve said, this doesn’t fit any of those. Because when I say blogging, or even Tweeting, or having a mailing list or whatever, I mean of those targeted prospects. It’s people who are looking for your service, not just having a mailing list of 10,000 random people.
[33:24] And the problem that I see with Micro Maximus is that it’s a horizontal niche. It’s kind of everyone who has a rewards checking account; that’s a really hard market to find. So I think the horizontal versus niche thing makes this really hard to market in terms of the sustainable traffic approaches that we talk about. And then, people not searching for this particular solution doesn’t make it impossible, obviously, but it makes it a lot harder, especially for a one person company who is not going to be doing this viral/social media marketing everyone talks about.
[33:57] Again, it always seems easier than it really is. You know, you have to be damn good at it. We look at Peldi from Balsamiq, who pulled this off really well. And there are bloggers who pull this off well. They are super smart, super gifted, they know what they are doing.
[34:10] A lot of things fall into place for that to happen. So that’s it. I think I agree with your initial assessment of the challenges that Carl is going to face as he tries to market this service.
[34:22] Mike: So that wraps up this week’s episode. Rob, take it away.
[34:24] Rob: If you have a question or comment, call our voicemail number. It’s 888-801-9690. Or you can email to us at firstname.lastname@example.org.
[34:34] Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. And If you enjoyed this podcast, please consider writing a review in iTunes by searching for “Startups”. You can subscribe to us in iTunes or via RSS.
[34:45] A full transcript of this podcast is available at our website: startupsfortherestofus.com. We’ll see you next time.