Episode 60 | Delving into the Future of AuditShark

Show Notes


[0:00:00] Rob: This is startups for the rest of us episode 60.

[0:00:04] [music]

[0:00:13] Rob: Welcome to startups for the rest of, podcast that was developed for designers and entrepreneurs to be awesome at launching software products. Whether you’ve built your first product or you’re just thinking about it. I’m Rob.

[0:00:22] Mike: And I’m Mike.

[0:00:23] Rob: And we’re here to share our experiences to help you avoid the same mistakes that we made. So what’s going on this week Mike?

[0:00:28] Mike: I am in full recovery mode.

[0:00:31] Rob: Yeah you’ve had like minor surgery right?

[0:00:34] Mike: I went in and I had some spinal injections done. You know it’s funny that I’ve talked to other people and they’re like, oh I didn’t feel a thing and I’m just sitting there thinking to myself “ yeah but you’re not immune to Lidocaine.

[0:00:43] Rob: Yeah so oh really, it doesn’t work for you, it doesn’t make you numb?

[0:00:47] Mike: No.

[0:00:48] Rob: That’s not cool at all.

[0:00:49] Mike:  And people don’t believe me when I, especially doctors don’t believe me when I tell them that that stuff just doesn’t work on me. But the last time I was at the dentist I had six Lidocaine shots plus two bone drills and that was when I finally stopped feeling pain.

[0:01:02] Rob: Wow. Well I’m sorry to hear that man you’re already on the road again right, okay sure.

[0:01:07] Mike: Just for this week and next week though.

[0:01:09] Rob: Okay but you’re able, at least you’re able to travel and such.

[0:01:13] Mike: Yeah.

[0:01:13] Rob: I was just thinking getting shots in your back would kind of hinder that for a while but it’s good you’re…

[0:01:16] Mike: It actually didn’t. Things were actually a lot worse before I had the injections so it’s a steroid cortisone injection because some of the lower discs in my back were having fragments that were breaking off and what happens is it gets inflamed and then they’re supposed to kind of dissolve on their own. But they haven’t been and it’s because the whole area is inflamed and not infected or anything but it’s just you know irritated. So they don’t naturally dissolve on their own and because of that it basically creates more inflammation which creates more swelling and everything just you know, the cycle just kind of repeats. So it gets worse and worse.

[0:01:53] The day I had the injections it was last Wednesday and things were actually pretty bad and then I took things easy for the rest of the day. And then the next day things were a little bit better and the day after that it was better. And I had a three hour car drive a couple of days ago that was pretty rough afterwards. But other than that I’ve been feeling pretty good.

[0:02:10] Rob: Yeah the astute listener will notice that we missed an episode last week, we didn’t release any and it’s because Mike had this procedure and took a medical leave,  a medical week from the podcast. So hey I want to give folks an update about MicroConf, you and I were just talking about it before the podcast. Basically at this point we are we’re honing in. We had already talked about Tropicana and Hard Rock and we still are looking to making up our mind. But some dates I wanted to throw out for people to mark on their calendars for potential dates are April 16th,17th, April 30th May 1st.

[0:02:42] And those, don’t buy plane tickets yet obviously, it could feasibly still change and be a whole different month but that’s what we’re looking at. We’re upstaging it this year, last year we were at the Riviera which is an older hotel and we’re looking to just go you know quite a bit more upscale per popular demand. And we already have some awesome speakers lined up, keep your ears out we’ll be talking about that in the coming weeks.

[0:03:10] You know today we’re going to get pretty heavy into Audit  Shark. I got a long email from a listener and a guy we both know of. I wanted to give folks an update on Hit Tail. So you might hear it in my voice I am pissed off right now because I freaking, I spent the last 12 hours basically until about 1:00 in the morning  last night and then I got up and I just worked all day today. And all I’m trying to do, it’s a six page web application, that’s what Hit Tail is right. There is a marketing side, that’s 200 and something pages but inside in the back end it’s about six or seven UI pages and they’re very simple. They pull out of a database and they display in a grid.

[0:03:45] And I cannot get, I have a new design  for those and all I’m trying to do is integrate one, the first one into the old code and I can’t do it. Everything is broken.  There are so many includes, there’s like eight or nine JavaScript and ASP files to make a single page work. The structure of the code is so bad that it’s just a cluge and I have looked at rewriting it and it would take me several weeks. And so I don’t know there’s no simple answer but this is totally, this is like the lowest, probably the lowest point since I bought the app, you know I bought it three and half months ago.

[0:04:21] I just have to get through and struggle through it, this is the last thing that’s keeping me from basically re launching the site because I need to get the new look in before I market it because it’s so dated right now.  I just feel like it’s going to be  a pretty leaky funnel. Remember the big mailing I did last time? I mailed like 4000 people, they were old customers that had cancelled and such.

[0:04:40] Mike: Yeah, yeah.

[0:04:41] Rob: That turned out really well. I got somewhere around 50 or 60 new signups.

[0:04:46] Mike: Oh my God.

[0:04:47] Rob: Yeah. And anywhere between there’s some $10 plans and some I think I got a couple of $30 plans as well. So yeah it’s a SaaS app so it’s acquiring revenue so it’s pretty nice. It really really helped and then I have a recurring monthly now that essentially emails anyone who has cancelled but is still sending us requests and that we have new keywords for. And you know they get emails that says,  hey we have new keyword suggestions for you if you want to check them out you can come sign up.

[0:05:11] So it’s kind of a nice little monthly reminder for folks who’ve cancelled. Yeah so things are going really well on that. I mean I’m really pleased with the new signups and I’m pleased with the way that the marketing has gone. People are pleased with the way the app is coming around, people who have used it. You know there’s a couple of hundred customers now, over a couple of a  hundred actually.

[0:05:29] And that’s really good. It feels good in terms of you know, I feel like the app is validated and it’s working again. But in terms of getting this new look and I’m just like furious. I’m hoping by the next podcast I’m just done or you know like 80% of the way there  because I had wanted to get this done sooner so that I can start marketing the thing. But looks like will, the big marketing push will definitely have to wait until after the first of the year now.

[0:05:54] Mike: Now are all these includes or they are all JavaScript includes?

[0:05:58] Rob: There is a bunch of Java Script and there is several ASP. It’s classic ASP so it’s Olean technology but…

[0:06:04] Mike: Got it, got it. I mean you could for the JavaScript itself if you’re having those sorts of failures you can download Firefox and use Firebug.

[0:06:12] Rob: Yeah.

[0:06:12] Mike: That would certainly help with that because you could step through all the JavaScript and find out where it’s failing and then make sure that those things are in there.

[0:06:18] Rob: Yep. Without Firebug I would have been sunk, I would have been sunk. I have been using that to look at the, you know http requests. You know the other thing that screwed me is Chrome will not allow you to set a cookie with the domain local host but it doesn’t tell you that. So I’m trying to log in for like two hours and I’m like, there is something crappy in the code it’s not picking up my cookie. And just over and over I’m like…and you can’t step through at ASP so I’m like the response not right, where is it failing, where is it failing?

[0:06:49] And finally I was just like on whim after seriously two hours of screwing with it I went and got into Firefox and it work and  broke in a different way. And then I’m like, what is going on? So I went online and sure enough if you’re, since I’m running on local host Chrome won’t allow you to send a local host cookie. And not it [0:07:07][inaudible] yeah and it totally screws you so. Little things like that, there has been like ten things that have just been weird tricky Ajaxy, you know things that are so hard to see because you’re not able to step through and see them in a debugger and it’s all kind of guesswork that’s what going on.

[0:07:23] Mike: Mmhmm. Yeah that does kind of suck. I mean I ran into, not quite similar issues for AuditShark  because I had to develop locally. But I’m using SSL certificates so that makes things a little bit challenging because everything, everything is done over SSL. So I have to make  sure that in my Java environments I’m also using you know SSL as well. So I have an SSL certificate for my laptop, one for my desktop and then I also have one for my server a bit of challenge.

[0:07:54] Rob: Right. No, that makes sense. Yeah I’ve resigned I mean this is, this is the downside taking over a code base, and I know that I knew that going into it. You know that taking over someone else’s code is always hard and like I said this is the low point. I’m not saying, “ Oh I shouldn’t have done this”. I have no regrets like I’m very pleased with it. But I’m just at that low point where literally like two hours I was just spouting curse words at the computer you know, so pissed off.

[0:08:21] And questioning every hour that ticks by I’m thinking how I could rewrite this. It would take me several weeks but maybe you, should I do that should I do that. And so there is that doubt in the back of my mind of, do I just rewrite this whole damn thing? And so I started sketching out what might look like. I actually started writing a spec and recorded a screen cast for a developer who works me to rewrite it in ASP and NVC. And the more I go into it the more I realized although it’s only six or seven pages it is, it’s quite complicated.

[0:08:51] And it’s seems simple when you look at it but as you enumerate everything they’re going to have to do and how they have to do it because you can’t just use basic queries right? You can’t just say “select star from this” because one of the tables has 1.2 billion rows in it. So you have to have a very specific query structure. So there is just, at that point it’s like “ huh this gets more complicated”. And I’m going to lose, have bugs and I’m going to lose some features and you just now that goes when you go to rewrite something. It’s always more complicated than you think it’s going to be.

[0:09:19] Mike: No, I definitely know. I mean just look at how long I’ve been working on AuditShark, my original intention was to, what was it, have it out of the door and possibly….

[0:09:29] Rob: After ten weeks?

[0:09:30] Mike: I think I wrote a blog post about it a while back it was back in July or something like that. That was when I was looking to originally push things out and start going live with it and here it is five months later.

[0:09:41] [music]

[0:09:44] Rob: I think we want to get pretty deep into AuditShark and specifically some comments that I’ve heard both from this email I got from a friend of the podcast, Lester Burk as well as some stuff you know Ted mentioned, Ted Pitts mentioned base as  a software and other people have mentioned you know offhand to both you and I think.  And it seems like it might just a good discussion to kind of dig into some specifics, some points about AuditShark and some points about maybe some confusion about what AuditShark is. How you have, or haven’t been marketing it, have or have or haven’t been developing it, you know just different opinions that people have and kind of just hear your side of the story.

[0:10:19] Mike: Sure.

[0:10:20] Rob: Lester was at MicroConf last year, he is a Micropreneur Academy, I’m pretty sure he is a lifetime member. He sent a very long well written well thought out email to me. He’s like, I have concern about AuditShark and Mike and I’m concerned that you know he’s going to release and nothing is going to happen.

[0:10:37] And I read it and I was like this is good and I forwarded it to you and so Lester I apologize, I just, it totally didn’t occur to me. Because I thought it was just so well written but he’s really given constructive things. He just is, but he tells it like he sees it.

[0:10:49] Mike: I sent a couple of emails back and forth to Lester and I even told him the questions he asked are really good questions. I told him flat out, I said I don’t think you should temper those questions in fact they should probably be a little harsher because and not just for the questions he asked me but in general when you’re asking questions it makes whoever is answering them be spot on with their answers.

[0:11:09] And they have to have clearly thought through what their answers are to those things and being prepared for those types of things makes them truly  think about what it is that they’re doing and whether or not they have seriously considered the ramifications of whatever path they’re on.

[0:11:24] Rob: Right.

[0:11:25] Mike:  And I told him like I didn’t take offense to anything he said one bit and he asked me very good questions. So we’ll definitely get into those also.

[0:11:33] Rob: Cool. I don’t think I’m a great accountability partner. I don’t push things right? I ask your opinion you say, “Oh this is what I’m working on” and then I let it go. And it seems like other people they just tend to push more and for some reason that’s not like my personality. So even this email stuff I’m going to read is just like more forceful than what I would tend to say on the podcast.

[0:11:51] And so this is motivation for you to think about how maybe you reshape, how you talk about AuditShark and this is motivation for me to think about how I kind of push you in future podcasts. So first quote was from the last where he says “Frankly I hear myself in the things Mike says and thinking that reciting technical manouche is the same as business progress. Does Mike actually enjoy the marketing? In your book,” that’s my book Start Small Say Small “you come right out and say that it will be 15% coding and 85% marketing. But you let Mike of the hook with 85% coding and 15% marketing progress”.

[0:12:25] And then he puts in a quote kind of a you know kind of a chuckle, kind of like “But it’s so good it would sell itself”. So he’s just, he has a concern that you’re not working enough of marketing that really when we do our updates I do tend to talk more about doing marketing tasks and you tend to talk more about technical challenge that you faced.

[0:12:42] Mike: He’s absolutely right, I talk more about the technical side of the things that I have been working on primarily because they’re the things that I am most focused on at that time. And it’s not to say that I’m not doing any marketing because I certainly I am. I mean I’m doing like building, I’m building a mailing list.

[0:12:57] So one of the things that I haven’t really talked about so far is that I have been putting together a newsletter where it’s very leading to whoever subscribes to the newsletter. And the idea is to essentially teach the subscriber to the newsletter about compliance and the things that they should be looking for and the things they should be doing. And it’s not technology specific in any way shape or form, it doesn’t even relate to AuditShark at all. What it relates to is specifically how they should go about their job and what they should look in the tools that they use to get that.

[0:13:28] Now I’ve done compliance software before actually built compliance software and I know what sort of things people are looking  for because I’ve done enough compliance consulting. And the things that enterprise companies look for are basically the same things that smaller companies look for. The problem is the enterprise companies tend to have external regulation that dictate what they need to do. The smaller guys it’s more of an honor system, they’re supposed to looking at certain things but in general they’re supposed to look at their environment and start identifying where there are regressions to their security policies.

[0:14:02] And it makes it difficult for them because there’s not necessarily established benchmarks for them to look at and it just makes it difficult for them to know what they should be looking at. Their first question is always “ what is everybody else looking at?” And AuditShark will help them with that. But I don’t necessarily say, “ hey AuditShark is going to solve your problems”. I say this is what you should be looking for. And then kind of let them make those mental leaps in talking about AuditShark.

[0:14:30] Rob: That newsletter or the series of articles you have is obviously, you can put it in auto responder where people give their email you drip it out to them over the course of a few months.

[0:14:40] Mike: Yep.

[0:14:40] Rob: Could you release that now? Do you need a product in order to do that?

[0:14:43] Mike: No I don’t. And what I’m waiting for that is to kind of finish out my thought process in the newsletter so I’m out to about four or five newsletter articles right now and I’m trying to think of how I’m going to mould it such that it comes to a logical conclusion. And say, “ this is kind of where this newsletter ends, if you have any questions let us know blah blah blah, etcetera”. But I’m kind of in a cliff  right now. So until I address that cliff I’m not quite sure whether or not I should move forward with pushing that out.

[0:15:17] Rob: Why are you making it end?

[0:15:18] Mike: The newsletter is more like  an introduction to compliance and an introduction to it kind of has to end somewhere.

[0:15:24] Rob: I guess honestly if I had a list and I’ve got a few hundred subscribers if it’s going to be  a decent funnel I wouldn’t stop it. I wouldn’t say that’s the end of this thing. Because you know someone may not buy within two months right?

[0:15:37] Mike: Mmhmm

[0:15:37] Rob: I mean it make them six, you may have a six months cycle on this thing, you don’t know yeah.

[0:15:42] Mike: I think, you make a good point though. Why should it end at that point? And the idea is I guess it’s kind of like anything where you’ve kind of pitched enough of your products or the idea behind your products and what it can do for people. And granted in this particular newsletter I’ve been focused more on the problem of compliance in general. What I’m looking at for kind of the next set of newsletter articles is to trying to weave AuditShark into that such that it becomes more of a sales pitch.

[0:16:12] I mean initially its education, education from the standpoint of I’m an expert in this particular area these are the things that you should be looking for. And then morphing that into more of this is how AuditShark can address these issues that you may have thought of and oh by the way, here is a coupon code for a free trial for 60 days or whatever for being a member of this list. And then leveraging that over time to hopefully try and convert those people.

[0:16:37] And then obviously you have to measure how many people are, eight newsletters in who have purchased, how many people are 12 newsletters in who have purchased. And trying to figure out where is the inflection point of where people convert the most.

[0:16:51] Rob: Right. It sounds to me at least the feedback I’ve gotten is that people want to hear more about this kind of stuff you’ve been doing with AuditShark. You mentioned that you have been doing marketing with it. That you’ve done some link building, you’re working on some SEO and that you’ve written these lists, episodes of a newsletter. What else, like do you have, I mean I’ll throw out an example. Like with HitTail, over the past five months, six months since I started looking at it, I put up a Google doc and I started a marketing plan. And all it is a bunch of bullets, like I’m not into big formal plants.

[0:17:19] It’s a huge bulleted list and I started with Noah Kagan’s  Mint.com marketing plan that he published online a year or two ago. And I morphed that towards HitTail and it includes low touch, high touch, all these different kinds of marketing approaches. Some of which, I mean obviously I did a bunch of his because I’m not going to do similar things it’s just not, you know it doesn’t translate.

[0:17:42] But then as I’ve been reading or listening to podcasts of blogs or books, anything over the past six months I’ve expanded that plan. And at this point I have 11 pages solid single space bulleted list. And that freaking thing is ridiculously good, like I’m not trying to pat myself on the back but I get so excited when I look at it because I have this ream of to me like interesting potentially valuable, hopefully highly valuable marketing approaches that are catered to HitTail.

[0:18:11] And it isn’t vague stuff. It includes specific tactics and it includes specific websites that I’m going to do this on or this with. Realizing that half of them, 75% of them eventually are going to fail but I’m going to basically find you know the approaches that work really well. What do you have in place for AuditShark right now? Do you have bulleted list, is it all in your head, are you just looking at like marketing through SEO in this newsletter? Is it going to be cold calling, is it going to be like, what is your plan?

[0:18:39] Mike: I haven’t formally written most of it. I keep most of it in my head. I will be the first to admit it’s probably a terrible terrible place to leave everything like that because I’m sure that there’s things that I’m missing. I do keep some things in Evernote probably not nearly as much as I should. I’ve got some things kind of distributed between my iPad, my phone and I should really use Evernote on all of them and I just don’t.

[0:19:02] So I could definitely do a better job in that regard. One of the things that Lester brought up was that he doesn’t hear me talking anything about customer development. Have I even shown this to people? I have done a demo, I did a demo for three people at one point all on the same call basically walking them through the interface, walked them through how it would work, what it does, what sort of reporting they’re going to be able to get out of it.

[0:19:24] They liked it, they were impressed enough by it that they wanted to continue the discussion as I got further down the road with it. But I was at least able to get some of that initial feedback. A couple of weeks ago I had a day off where I actually went to all four of the banks that are in my hometown. And just basically walked in and started talking to them and saying, “ you know I just want to talk to  your IT department”. I got in and talked to them and said, “ This is what my idea is” and tried to kind of hash out the things that  I had been working through my head in terms of what my plan is.

[0:19:55] But the target market, I’ve kind of talked about is really small business, small banks. And when I talked about compliance software being generally enterprise software, AuditShark is really not aimed at the enterprise. And by enterprise generally I think of a thousand employees and up. That’s not necessarily the number of employees or computers that constitutes an enterprise, really enterprise is just a label. I mean if you go out to small companies like Axosoft for example they have an enterprise version of their products, it is aimed at ten developer companies, ten developers or ten employees is really not an enterprise but that’s the label that they have placed on it.

[0:20:30] So that’s the expectation that people have for their software. With my software my target market is really companies between 50 employees and about 250 employees.

[0:20:42] Rob: So is  that 50 nodes?

[0:20:44]Mike: Yes.

[0:20:44] Rob: And 250 nodes so obviously for those who are new AuditShark is auditing software, it installs on a server and then it’s charged per node. I think there is a little client piece that installs on each client Mike or not?

[0:20:55] Mike: No, no, you install it on one…

[0:20:57] Rob: Okay so it’s all on the server okay.

[0:20:58] Mike: Yeah you install it on one machine and it agentlessly queries information from all the other machines.

[0:21:04] Rob: So then if you have 50 nodes, they pay, the pricing is still five bucks per node per month, 50 nodes ten buck, okay.

[0:21:10] Mike: Yep.

[0:21:11] Rob: So it would be 50 nodes would be 500 bucks a month that they would pay you and obviously 250 would be 2500 a month. So these are definitely see, this is actually an interesting thing because I have been confused in the past and I’ve mentioned like, Mike I don’t think anyone is going to find your site through SEO and buy from you. I think everything, every sale is going to be high touch, definitely at first and probably for ever because it’s such an expensive price point.

[0:21:34] You may not be selling to enterprises but it’s an enterprise price point in my opinion, 2500 bucks  a month for  250 person company is, you know it’s decent chunk of change, 30 grand a year. Would you agree with that or do you think that you’re going make sales off your website? Someone is going to click an “add to cart” button and buy this you know this $1000 a month software?

[0:21:51] Mike: I don’t think I’m going to make sales off my website. What I do expect to happen though is I’m going to get leads from the website…

[0:21:58] Rob: Absolutely.

[0:21:58] Mike: And I’ll be able to follow up on those leads. So that’s really what I’m looking at from the website perspective. My anticipation is not that somebody is going to browse through my website and I’m going to get a 1000 visitors and ten of those are going to say “oh well I’m just going to buy your software” and they’re going to plunk down $2500 a month, that’s just ridiculous it’s not going to happen.

[0:22:20] But what I would expect is that maybe somebody signs up for a newsletter. And they give me their email address which basically is permission to email them at which point I can personally email them and say “ hey just wanted to let you know if you’re interested in it, I can schedule a demo of the software and walk you through how it works or talk about maybe the compliance problems that you’re having and do more of some personalized one on one stuff”. Because at a price point for 500 or $2500 a month it is worth my time to go after them individually.

[0:22:50] Rob: Absolutely.

[0:22:50] Mike: A price point of $10 a month is not, it’s absolutely not worth your time.

[0:22:56] Rob: Right. I think the question you were getting at is enterprise versus not enterprise, I mean it’s just a label. I think you know Lester brought up he said when he’s spoke with you at MicroConf you had said you had a friend who ran like a bank with 500 nodes who may be interested in AuditShark. And then lately you have been saying you know that this is an enterprise software. So you’re saying like you don’t consider 500 nodes to be enterprise software even though that’s like five grand a month.

[0:23:20] Mike: I think for compliance software it’s not and the rationale behind that is that when you get into a much larger environment and it’s to step back and take a look at the industry of banks a little bit, there are about 8000 to 8500 banks in the United States. The average branch size is about ten. So ten branches you figure maybe ten employees per branch, about 100 employees on average.

[0:23:43] Unfortunately if you chop out like the top, I don’t know was it ten banks or so they constitute 70% of the market, that means that the other 8490 banks constitute the rest of them. So your average branch size drops from 10 to substantially lower amount maybe three or four. You go to any given town here in Massachusetts and you will see at least one local bank if not two. Here in my home town we have three, there are three local banks. And one of the ones that I went into a couple of weeks ago I went in and I talked to them, I just said “ I just want to ask some questions”, they sat down with me.

[0:24:22] And I said, “ what are you doing to manage your environment and how are you dealing with the compliance issues?” And they said, “ well we hire an outside consulting company to do that for us”. Which incidentally is something that I had heard before so that kind of goes to another point that I’ll make in a second. But to drive kind of deeper into this particular perspective where I’ll say, in discussing with them it seemed like I was having a hard time explaining to them what AuditShark was and what it did.

[0:24:47] So I tried to simplify things a little bit and say “ okay well you guys log into your machines you have a policy and you know you log into the computer by typing in your username and password and it authenticates with Active Directory”. And they said “ We don’t use Active Directory”. And I said, “ excuse me how do you manage permissions and everything? Do you use Novell?” And they said “ No what’s Active Directory?”

[0:25:10] And at that point I realized that this was not my intended customer. Because they had no idea what Active Directory even was and one of the things that my software relies on is the existence of Active Directory. They were using it, they just didn’t know it and the reason they didn’t know it  is because they had outsourced it to this other company. The other thing I found out from them was that they were an 18 employee company which means they didn’t even have an IT department.  So they’re relying on an outside consulting firm which to me leads me to something else I learnt from talking to other prospective customers that the smaller  banks tend to rely on these outside IT consulting firms.

[0:25:46] And there’s a limited number of them and these banks tend to work with the same ones year after year. So one of my go to market strategies is actually going to be approaching firms and saying “ hey here is what I can do for your banking customers” and letting them kind of do the legwork a little bit or the introductions to help make into those accounts.

[0:26:09] Rob: Right so you’re talking then about into selling into IT consultancy IT auditors right?

[0:26:13] Mike: Almost kind of like an, I haven’t worked out all the details in my head about how that would work yet. But you can almost think of it as a high level like an affiliate program where they…

[0:26:22] Rob: Sure it’s like Symantec do that, Norton and those guys.

[0:26:26] Mike: They do but they don’t really offer software as a service. I mean they have resellers and in a way this is a reseller arrangement as well but because it’s a SaaS application it complicates things. You know whose customer is that at the end of the day?

[0:26:40] Rob: Microsoft does that actually. They do SaaS and its form or fashion so you may want to look at their model of how they do it because they have partners who go and sell and they split revenue some, I don’t think it’s 50 50 but in some form or fashion.

[0:26:55] Mike: Yeah I have seen for like for Exchange Server you can definitely by Exchange email boxes and stuff and there are different companies that will host it and then Microsoft has their Office 365 I think it is that you know there’s resellers out there for that I believe as well.

[0:27:09] Rob: Right. I like the approaches that you’re talking about. I like that you’ve talked to folks, it sounds like you’re learning stuff from banks. My biggest concerns as you go to sell Audit Shark is that it sounds like you have a lot of different avenues that you are trying to pursue and without doing it fulltime I am concerned that you are not going to be able to do any of them to the extent that they need to be. Because you know you and I both know how intensive, time intensive high touch sales are.

[0:27:32] And so you are going to get some leads through your website. I’ve not doubt that you’re rank first in terms, you will get some leads and you will be following up with those guys. But if you are not doing that 9:00 to 5:00, 9:00 to 9:00, five days a week and you are doing that evenings and weekends then how are you going to even begin to do out, you know basically external prospecting with these IT auditors and develop the product? And once you get it installed at an Alpha site or a Beta site you are going to be working with those guys.

[0:28:00] I mean it just seems like you are really going to be strapped for time and there is a lot of complexity, sounds like there is complexity or just a lot of different options for the sales channels. I don’t know, how do you plan to sort that out?

[0:28:12] Mike: Yes, the answer to most of those is yes, there is a lot of complexity and one of the things I am doing now in talking to people is trying to figure out what is going to be the most valuable in terms of my time. What’s going to be the most fruitful in terms of learning those first customers, those early people who are going to give me the feedback that I need.

[0:28:30]And it is not to say that I can’t somehow morph Audit Shark a little bit so that it is less aimed at banks or maybe uses the same backend and it’s something at a price point that people could afford. So I am not removing options like that from the table. I am definitely keeping them in mind. But I haven’t come to firm conclusions on how to deal with some of those things because you are absolutely right about the fact that those high touch sales are going to be very time intensive. I may have to do a lot of hand holding there is no doubt that I am…

[0:29:00] Rob: The installation, you are going to have to help with the installation especially early on you are going to have to…

[0:29:05] Mike: Installation, installation is almost a joke.

[0:29:05] Rob: You think it is, we think it is [0:29:09][inaudible] invoice. It is like FTP this and run a sequel script that’s all it is and we spend so much time supporting that because people do not know how to do it or they do it wrong. Or they have a server that is all jacked up and doesn’t have components that every other server should have and they don’t. I know you have an MSI and you have a really nice installer and all that…

[0:29:28] Mike: What I have at this point is once you have created an account in the website it directs you to go to a page where you download a zip file you unzip it, you run the executable with the command line of the install and that’s it.

[0:29:43] Rob: So they have to open the command line there you go.

[0:29:45] Mike: Right.

[0:29:45] Rob: That’s a support ticket right there, no I am serious dude it’s…

[0:29:48] Mike: I know

[0:29:48] Rob: I know that sounds so simple and I could do it. But so many people are going to screw that up, I guarantee it so…

[0:29:54] Mike: I understand and…

[0:29:55] Rob:  Or it is going to crash or whatever you know there is going to be something there.

[0:29:58] Mike: Yeah.

[0:30:00] Rob: So but that’s neither here nor there. So yeah you’re going to have installation support you’re going to have sales, you are going to have lot of stuff going on.

[0:30:05] Mike: But it’s not like installation, if I needed to do the installation for somebody I could do it via a WebEx or go to a meeting or something like that and literally be done in about two minutes. It is not really that difficult and I have already got something to work on my list of things to do to put together a PDF that outlines exactly how to do it. And then I am going to take that PDF and I am also going to create an HTML format of it that goes on the download page that says, this is exactly how you install it complete with screen shots.

[0:30:31] So I am looking at ways to mitigate those types of problems. I mean one of the things that I spend some time on that didn’t need to be there kind of from my minimum products but it dynamically creates the zip file for the user when they go to download it.  And it does that so that it can insert their customer specific data into it.

[0:30:52] Rob: Right, yeah.

[0:30:52] Mike: So that the user doesn’t have to do it because otherwise I would have had them open up an XML file and then modify some stuff that would have just been, it would have been a nightmare.

[0:31:00] Rob: Right, bottom line let’s just say they get the command line and they get it installed and they are going to run it and they are going to, stuff is going to come back, they are going to have questions for you right. Especially the first 10, 20, 30 customers you selling this to they are going to be all over you for support. And you need to be all over them supporting them just to keep this stuff going.

[0:31:18] So super time intensive and I guess the question that, that may be the question that has been in the back of my mind the whole time is, I mean Lester points it out several times. He says, “Mike says this isn’t enterprise software. But he talks about like long sales cycles, high touch sales, higher price points. You know having an auditor involved maybe selling through an auditor as a partner into these banks is definitely more enterprise than not”. Stuff like that, its like has a one person’s software shop ever successfully actually sold mission critical software to a bank. If the bank switches to Mike’s stuff and you are hit by a bus, you know what is his story to his customer.

[0:31:52] There are certain things that go along with enterprise software sales. Things that we have just covered that Audit Shark will have long sales cycles, higher price points, needing like a partner, you know having an IT auditor that is a partner but then you sell through, you have to recruit them, give them a cut and then you know get into the bank potentially cold calling, high touch sales in general.

[0:32:16] I mean so these all really are much more enterprise than say HitTail, right? Being a lower end you know price point SaaS App or done at invoice those are obviously not enterprise. And this is more it is sounding to me like it’s more enterprise than not. You may not be aiming at Fortune 500 or Fortune 1000 but there are enterprise considerations that come with building this product. How do you plan to run an enterprise sales organization as a one person shop?

[0:32:43] Mike: I don’t believe it will stay one person forever. I have kind of resigned to the fact that if I wanted to actually grow this out it has to be more than me I can’t possibly do everything and I understand that. I mean if you look at the code base for the product, the code base alone is I think 65,000 lines of code right now. And this for what I refer to as my minimum viable product for this there is no way around it.

[0:33:08] And it sounds like a huge amount of code for what it does. But in many ways what I have done and how I have done it is necessary for what my long-term vision is which is not something that I have really shared with people because that vision kind of needs to come to fruition before I start talking too much about it. There are things that I want to be able to do that if I start talking about them I feel like it would not only derail me but would invite competition for things that I don’t necessarily want people to go after yet.

[0:33:38] And I understand that there’s lots of people who will say well you know, talking about your ideas it’s how you get them to become reality it’s, nobody is going to steal your ideas. I understand that but there are other things to consider. I think you are right in your assessment that there is a lot of things to consider and there are a lot of things that I am just not going to be able to do or handle as a one person shop and I don’t expect to be able to. But over time I also expect that this product is going to grow to the point that I am going to hire people to help me out with it.

[0:34:10] Rob: Right but I mean there is always that point where you like you have more support and sales efforts, prospecting efforts and all that stuff you have way more time than you do money. You may need 40, 50 hours a week you are working you know doing consulting and then you are doing this and other 30 plus hours a week. But you are not bringing in enough money to hire someone. I mean have you thought about that I mean like at what point you think you can bring in an employee or a contractor to help out?

[0:34:37] Mike: Not specifically it really, the money has to be there. I mean I can already cut my hours, and I have already talked to the company that I do a lot of subcontracting through and told them flat out I would like to cut my hours. And that is so that I can start working on Audit Shark on not necessarily a fulltime basis but on a more regular basis. And they are interested in potentially being a reseller for it because they have looked at it, they have seen what it can do and they know what my capabilities are.

[0:35:03] They have an established customer base I have no doubt that I could leverage them to start selling it to some of their customers. And that would cut out probably two thirds of the issues that you raised. You know for example how am I going to find time to do demos? I don’t need to find time to do demos, I could teach them how to do demos, I could teach them how to talk about the product.

[0:35:23] They already have the customer base I don’t need to find them. So there are a lot of those issues that basically get resolved by working with resellers and partners. The real question on my mind is how to structure of the compensation because it is a SaaS App how do you do that? And that’s not an answer I have right now.

[0:35:42] Rob: Honestly we could talk about this for like another hour. I have more questions and there is even more stuff Lester talked about in the email and I am sure you can certainly talk about it for hours. It seems like we might you know want to continue addressing this in future episodes and I think that…

[0:36:00] Mike: We could ask people to send in questions for me.

[0:36:02] Rob: Send in questions, yeah I think maybe sharing what you have in mind could potentially help other folks beyond just the kind of the development of it.

[0:36:13] Mike: Yeah I definitely agree, I mean I can certainly be more than happy to share the things that I can.

[0:36:19] Rob: I think people listen to podcasts because they want to hear our stories.

[0:36:21] Mike: Right.

[0:36:22] Rob: You know what I am saying, they want to hear what you are doing, what you are thinking and basically like how are you marketing this, how are you thinking about it because I think that’s why people tune into the show.

[0:36:29] Mike: Yeah

[0:36:30] Rob: It is to hear our trials and tribulations and they really hear the failures. It is not that everything has to work it’s just people want to hear us try stuff, you know.

[0:36:38] Mike: Yes. It really seems like the way that I need to go for this is leveraging resellers to get into those accounts where because it is high touch sales those people who already have their relationships that’s going to be important. That is going to be key to me pushing a product out and getting people signed on with it. I am not going to get those people driven on my website in the volumes that I need and be able to establish the trust that I need.

[0:37:04] Rob: Yeah I would agree. I think it’s going to be too time intensive and it’s going to take too long to ramp up. I think that resellers are obviously good, it’s intensive to do that right? You have, it sounds like you have some existing relationships so you won’t have to cold call to find resellers. But just finding resellers and managing them as an example with [0:37:22][inaudible] voice we have resellers and it is way more of a time sink than we have ever gotten money out of it. Obviously resellers work for some business but my experience as far has been that it is not that good.

[0:37:32] It seems like your like Audit Shark and the banking model is different and they may be more used to that and they maybe more of a viable option. But I wouldn’t underestimate the time that it would take to get them on board and trend and constantly reminding them to push your product right because otherwise  they forget and they are not going to sell your product for you unless you kind of tell them to do that.

[0:37:52] Mike: Right, yeah and I have talked to three different consulting/service companies about Audit Shark and all three of them were interested in either becoming a reseller for it or talking to their customer about it and having them buy it directly. There are a bunch of different options there. It is just really a matter of me finding out what model fits because I have given a lot of thought to how different resellers models work, and I am not terribly happy with any of them that I have found really so far. I mean if you take  a look at for example Microsoft.

[0:38:25] Microsoft reseller model is that if they sell direct to you, you have to buy at a significantly higher price point. I mean you buy the full MS RP and the reason for that is because they don’t want to undercut their resellers. If you look at other companies like Symantec, what Symantec does is they have, you know a two tier distribution model where they sell to distributors and then everybody else all their partners buy from distributors. And that is not really any big secret.

[0:38:54] But when you start talking to those customers or to those partners, you can go to any of those partners and you can ask for a price quote for something and then you can ask for a price quote from somebody else. And depending on you know what level of a partner somebody is with Symantec or you know what their discounts are with their distributor you can start playing price words between them. And you know their sales reps are going to go back and forth. And then you will end up with in fighting between your partners who are trying to resell your products because they are trying to make margins.

[0:39:27] And I don’t really like that model just because of the fact that let’s say you are a reseller for me and let’s say I am going to sell my software to you for $6 per node and then you turn around and resell it to you know whoever you want. If I make the same deal with somebody else and they are able to sell it for $6 basically the two of you if you are competing for the same customer you are going to be going back and forth with the price. And you are going to lower the price back and forth between each other to land this one customer and all it does is devalue the product.

[0:39:56] And I don’t like that whole concept because it basically just puts a minimum price on everything. And at the end of the day honestly it’s I am going to get whatever it is from the end customer and then you are going to get some cut of it. I don’t necessarily like that model. What I have been considering is something in more of a form of a rebate where I have a little bit more control over it where depending on the customer aligns with me directly. And then I turn around and provide a rebate back which almost fits in more with a SaaS model anyway.

[0:40:28] Rob: Right sounds like there is a lot of question marks around that model, I mean sounds like…

[0:40:31] Mike: There are…

[0:40:32] Rob: I mean you have talked to resellers have you demoed for resellers?

[0:40:37] Mike: Yeah.

[0:40:36] Rob: I mean it sounds like that is kind of your next gig if you are going to go that route. Like next time we record the podcast, do you have anything scheduled between now and then where you are going to demo or show it to a customer or anything like that?

[0:40:49] Mike: Not on my calendar last I think it was Thursday or Friday I had a conversation with one who was, they wanted to take another look at it. And just because they had some more questions about it and at the time when I first demoed it to them it didn’t have, it really wasn’t full featured at this point. As of last week sometime I would say that I am basically done with Audit Shark in terms of being able to install it for a customer and have them use it.

[0:41:14] There is one outstanding bug that I have to fix that I kind of introduced in the process of implementing the scheduler that where it doesn’t save the data properly. So I need to fix that but that shouldn’t take more than you know maybe an hour or two of work to fix. But beyond that the product is done I can install it in somebody’s environment and it will run on a scheduled basis it will run the audits it will, you can go to the website, you can click a button, you know just by choosing a couple of dropdowns, you specify the policy, the group of machines, you click audit and it will execute that audit as quick as possible against those machines and it will pipe all the data back up into the internet.

[0:41:50] So everything is basically working at this point, it is just a matter of tweaking some things in the UI to make things more comfortable adding some of the documentation, I have already had a lot of the documentation added into it. But having those as you pointed out having those conversations with those prospective resellers is probably going to be pretty important. And I haven’t, I don’t have anything specifically in the product right now that allows somebody to sign on a customer as kind of a subcomponent over their account so to speak.

[0:42:19] Rob: Right and that’s probably not something you want to build at this point, you want to sell at my opinion you want to sell before you even start writing any of that kind of stuff, you know what I am saying?

[0:42:28] Mike: Yeah.

[0:42:29] Rob: Get some money in the pocket.

[0:42:30] [music]

[0:42:32] Mike: The one thing that I would say for anyone who is listening is if you have questions or you want to hear more about what my plans are or thoughts are or something doesn’t make sense or if you think I’m way out and left you on something, feel free to let us know. You can call in a question or comment to our voicemail number at 1888019690 or you can email in an MP3 or text format to questions@satrtupsfortherestofus.com. Our theme music is an excerpt from ‘We are out of control’ by Moot used under Creative Commons. A full transcript to this podcast is available at our website startupfortherestofus.com.

[0:43:04]If you enjoyed the podcast please consider writing a review on iTunes by searching for startups you can subscribe to this podcast in iTunes or via RSS at startupsfortherestofus.com. Thanks for listening we will see you next time.

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9 Responses to “Episode 60 | Delving into the Future of AuditShark”

  1. This episode was excellent!

    Mike, I do not in any way intend for this to be critical of what you’re doing. To paraphrase a couple smart guys, I offer these comments to help you avoid the same mistakes I’ve made :)

    1) Who is the person who has a problem that AuditShark solves? Small bank branch offices don’t buy software. It’s some person at that office, and they need to have a pressing problem that you can fix.

    If AuditShark is a best practice that isn’t specifically fixing a person’s pain, it’s analogous to a doctor telling you to exercise and eat more vegetables. You agree, then go home to sit in front of the TV with a bag of Cheetos.

    In fact we’ve found that you have to solve one of the top 3 problems they’re thinking about right now in order to get someone to buy. If you’re addressing problem #10, they will tell you that’s a great idea, then not buy. (If you’re lucky, one day they get hacked, it becomes problem #1 and you make the sale.)

    The indicator that you’re looking for is a person begging to give you money for your unfinished product, because it’s better than what they’re doing now. If you can’t find that person, you’re going to have a hard time selling it. I don’t mean that you won’t make any sales, but it’s going to be a very expensive sales process.

    2) The comment you made about resellers making sales for you is a giant red flag!

    I strongly believe the conventional wisdom that says:
    - resellers fulfill existing demand, they don’t create it
    - you need to make the first 100 sales yourself before you try to hire a salesperson or outsource it

    I think the only way that makes sense for you is if the IT outsourcing companies are your primary market. Which means your product solves the IT company’s problem. (Like the way website frameworks are sold to web design companies rather than directly to small businesses.)

    3) Regarding MicroConf, if you’re collecting votes, Harry and I wouldn’t be able to make it Apr 16-21. I know there’s no perfect date, but I thought I would mention it.

  2. Somehow, I think people love it when Rob puts it to me in a podcast. Makes for a good show, and great entertainment as well.

    The person having the problem is the IT manager at the bank. He’s got too much stuff going on to be able to effectively make sure that all of the computers are effectively secured at all times. He can’t be constantly checking random PC’s to make sure they’re still in compliance. About the only time the IT manager ever goes to a machine is when there’s a problem, or when an auditor comes in and demands to see audit results from a set of computers.

    Good point about the person begging to give me money for an unfinished product. I’ll definitely keep my eyes out for that, as it means I’d be on the right track. Incidentally, Cheetos rock… :)

    Regarding the resellers, I probably mislabelled them. I was put on the spot and while I understand who they are and what I want from them, I probably focused on compensation for them a bit much during the podcast and glossed over what I meant by “reseller”.

    Perhaps I should refer to them as Service Providers. They fall into one of three general categories.
    1) External auditors (primarily CPA’s)
    2) Managed Service Providers
    3) Consulting companies

    The primary way I want to use these service providers is to help identify prospective customers faster. I can certainly walk into random banks during my free time, but it’s going to take time to do it. My thinking with these service providers is that they already have an established relationship that I can leverage. I was referring to them as resellers because I felt like I should give them money for their trouble, but then I remembered my sales tactic here.

    Basically, they introduce me. I run the auditing system and bill the customers directly. For #1, it’s a win-win because they get results faster, and I get a customer. For #2 and #3, if I am identifying problems in the environment, someone needs to do the legwork to correct those problems because as of today, I don’t have the ability to do it. I will in the future, but I don’t today. Which means they get more billable hours with their customers by using my software to help identify problems.

    Does that make more sense?

  3. This also is meant to be a friendly comment; abeit a direct one.

    I don’t know Mike or know if you’ve created, launched, marketed other projects, but you sound alot like a ton of people I know that are always saying that they would do something if only they had X, or after they finish Y, etc. You have excuses or justification for not launching.

    You are not following the lean startup methodology in this project. Do you need perfect software? Do you need a email bulletin ready before launching? If you are just weeks away, why not make an actual sale? Make a sale! One! If they actually buy it, you can run home, put in 15 hours per day to finish whatever is missing, but at least you have something.

    You mention you met with 3 or 4 people and they seemed interested. Is 3 or 4 a significant sample for a survey? Did they give you their credit card number, or are they just curious about your app? Are they emailing you, asking about your launch date?

    Something I tell friends is that anyone can start a project or endevour. Anyone can start a web app, a software project, a diet, a college degree… but only a few actually finish it. In my experience the last 20% takes 80% of the effort.

  4. Sandy:
    I don’t think businesses will ever start emailing you trying to get their hands on your product.

    I would wonder though about the quality of those email signups though. Mike does have a large following (podcast/academy etc) so people will signup just to see what he’s doing.

    Your product does seem incredibly expensive ie to monitor 500 computers at $10 each will cost a business $60,000/year.

    Do you sign the contract and then tell them that AuditShark is only installed on a single box.

    I think you need to find a more realistic price point.

  5. Adam:
    I beg to differ. I’m working on a project, and I have one guy I talked to who every two or three weeks emails me to ask if its ready to launch. Its something he really needs. He’s losing money without it and other solutions available are too expensive. If I told him to sign up and pay today he would. Could just be one crazy guy, but it does prove an unmet need exists.

    I agree on the email signup comment. I’m not sure SFTROU podcast readers are Audit Shark’s target market. I think I signed up to the mailing list a while ago, I don’t remember.

    GO MIKE! Make Audit Shark awesome.

  6. I agree about the pricing. Perhaps a tiered pricing structure would work better. After a certain number, the price dramatically drops. When it comes down to it, you’ll soon start to see what companies will really be interest in paying.

  7. To Rob: You mentioned in this podcast that you had used the mint.com marketing template and developed an 11-page marketing to-do list for Hittail. I’d *love* to know more about this. Any chance I could take a peek? :)

    • I’m keeping it under wraps for now, since it’s one of my competitive advantages. But I plan to discuss specific points from it on the podcast as I implement them – I expect some to succeed and many to fail. And perhaps down the line I will release parts of it once I’m confident it won’t have a negative impact on my business. But stay tuned in the coming weeks for more specifics :-)

  8. Oh, almost forgot – strange place listening to your podcast.

    I’m a forensic scientist and frequently find myself in court testifying on criminal cases. When I arrive at court, I often don’t know when I’ll be called to the stand. It might be right away, or sometimes as long as 5 hours.

    To calm the nerves, I often bring a book, or something else – as long as it’s not related to the case…which recently have been your podcasts.

    I became so absorbed into one of your episodes, that I didn’t hear my name called. Soon after I felt a tap on my shoulder and it was the Chief Investigator. So basically one second I’m listening to Rob talk about how he left his job, the next I’m on the stand discussing DNA evidence in a Robbery.

    Anyway, I love these podcast. Burning through them at about 2-3 a day!

    Keep up the good work.