Show Notes
Transcript
[00:00] Mike: This is Startups for the Rest of Us: Episode 120.
[00:02] Music
[00:10] Mike: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
[00:18] Rob: And I’m Rob.
[00:19] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Rob?
[00:23] Rob: I got a call Sunday night from one of my developers. We almost never speak on the phone. I picked up the phone and I said, “Uh oh.” And it’s Sunday night about 7 p.m. and he says, “Do we have a backup of the database?”
[00:34] Mike: Oh no.
[00:37] Rob: I was like, “Ah, yeah. What happened?” And as he’s talking I’d said, “You forgot the WHERE Clause.” He forgot a WHERE Clause on an update statement.
[00:46] Mike: Oh.
[00:47] Rob: I’ve done this twice in twelve years where you just you say update the table set this column equals that and you know, for those non-developers out there, then you’re supposed to say, “Where the I.D., customer I.D. equals 123.” So, you only update one row. But if you leave that WHERE Clause off, you update the entire table every row to the same value. And so, if you only have 50 rows, that’s fine. If you have 5 million rows, they all get updated. Now, it turns out it was a small table. It’s 4,000 rows and luckily enough, it was not a table that’s used in real time. So, it’s something that’s used in [Audio Glitch] on billing process. So, I was able to just – we stopped the billing process.
[01:26] I was going to run a few hours later and then I got in touch with our DBA and that’s one of the benefits of having a DBA is he has all – I’ve asked him just to have up-to-the-minute backup since so he could basically restore to a point in time. So, I said restore to like 7:15 p.m. Pacific Time, you know, because he ran the query at 7:20. He’s on UK time. So, it did take a couple of hours because I don’t want to wake him in the middle of the night for something that wasn’t basically wasn’t taking down the app. But once he got the message, it was like 20 minutes later, everything was restored and it was fine.
[01:57] Mike: Yeah, I’ve done that in the past at least once or twice myself and I’ve learned if I have an update statement that I’ve written, what I’ll usually do is I’ll comment out just like the update part of it and I’ll do a select first to make sure that I’m selecting all the rows that I actually want to update.
[02:11] Rob: Yeah, I’ve seen professional like DBA, you know, 24/7 DBA guys do that and that’s what I do now too. Like I said, I’ve done this twice and the first time I did it was through an Oracle database and has the rollback capability because you have to commit. And so, I saved myself for the rollback. The second time I did it, there was a way to reconstructing the data and I’d just had to spend about an hour doing some manual stuff. And realistically as we talk through, there’s only, you know, myself and these two…two other people like production database access so – as we talk it through, they’re were ways, you know, if we didn’t have a backup or the backups had failed or something, there was a way to manually reconstruct this data that would had been a pain where we had to pull it from a couple of different sources. But it was like always not lost and realistically the app, you know, wouldn’t have been sunk. So, but it was a funny – it’s such a funny quote, “You know, do we have a backup of the database?”
[02:59] Mike: Yeah, those are words that you just never want to hear? Did you put that out on Twitter because that would have been a great quote?
[03:05] Rob: What’s been going on last week?
[03:06] Mike: I’ve been doing some more work on AuditShark for the self-updating policy builder and that is finally working. It’s taken forever to get it working but it got to the point where we had to read through the source code. I didn’t read to the source code but my developer did in order to get the installer working because we were using a WiX toolset which is open source but it’s not documented real well. So, he had to restore it at one point to just reading through the source code to figure out what different pieces he did and how to make it work and do what we wanted to.
[03:33] So, at this point everything seems to be working. You can just install it and then everytime you run it, it double checks to verify that you have the latest version. If you don’t have the latest version, it just doesn’t self-update which is pretty awesome. It seems to work even if you have like UAC running. It just asks you if you…if you’re okay with updating that and just go through and update it and everything seems to be working pretty flawlessly.
[03:54] Rob: Nice. And this was a little bit of a hang up for your early access.
[03:58] Mike: Yeah. It kind of – it put the whole early access on hold for much longer than I would have liked. I mean it didn’t seem like this should have taken as long as it did but because of all the issues that we ran in to with it, I am not real happy about where the early access is right now. So, I feel like I’m behind schedule on a lot of it and I haven’t talk to nearly enough customers to understand what’s really important to them so far. So, I’m really considering just kind of extending the early access to get more of that feedback and bring more people on to it because that was really just holding me up and until that was done, I couldn’t really add more people to it.
[04:31] Rob: Right. Yeah, I definitely think you need to get more feedback from more people because it doesn’t sound like you have talked to enough at least when we’ve talked in the podcast. It sounds like you have a few people who have given you feedback but not…not enough that you’ve made like drastic changes if needed. I mean in the interest of accountability like the original early access was supposed to start at September 10th I think and you started it in and then there was something wrong and you – I think you spent about six weeks fixing it. And then I don’t remember what happened in October-November but I don’t know if the holidays got in the way or what but – so you’re now, you know, you’re several months in to essentially early access. You kind of started one and then stopped it and then restart it again in January. Do you have a tight timeframe for this one for like extending it or what…what are you thoughts at this point?
[05:14] Mike: I wouldn’t extend it by more than a couple of weeks I don’t think and not must something drastically serious comes up where people are trying to use it and just doesn’t – it out right, it doesn’t work. The other question is whether I release it without the full-blown Linux support which I probably would. I would probably just launch it and there are pieces that my developers built in which allow me to turn on and turn off different functions based on whether flags are set on their accounts so I can say, “Okay, we’ll turn Linux support on for this account and not that one,” for example which is kind of a neat function to have.
[05:46] So, I’ll probably just kind of plow forward without having full-blown Linux support in there and you know, with the — on the Window side just, you know, move forward with what I got. But I really like to get some more feedback from people as to what they think of how it operates or certain reports they want or things like that. So, I don’t think that would extend it by more than probably three weeks or so. But I do want to get some more people sign on to it and get some feedback from them.
[06:08] Rob: So, coming back to that Drip landing page split test I was running last week. If you recall, I had kind of a stripped down minimalist version and then I had a heavily designed drop shadow which is going to be the final marketing version and they are split tested against each other. And so far, the minimalist version is just trouncing, absolutely trouncing. I think it has 500% more conversions. The highly designed version which almost makes – that’s such a big difference that it makes me think there are might like either someone is messing with me because they know that I’m doing this or there’s like a cookie issue because I was running a split test right before this one and there’s somehow the cookies are overlapped or something.
[06:49] So, I think I’m going to like totally restart it and see if I get the same results. If – and if I do, then I need to seriously look at like what to do in terms of the marketing side because I don’t just want to turn on a design that’s not converting.
[07:00] Mike: I might either go ahead and put either Inspectlet or Crazy Egg on there just to see where people are actually going through and measuring it for a couple of days to see what people are doing when they get there.
[07:10] Rob: Yeah, that’s a really good point. Actually Inspectlet where it records the mouse movement, that would be a really good one.
[07:16] Mike: Cool. So, what else you got going?
[07:18] Rob: Last thing I’ve been working on is over the past week, I’ve migrated about five more sites to WP Engine and you know, DreamHost is – man, I’ve been on there since 2005 and for the first probably five or six years, they were solid. I mean they were really just a great value for the money. I always need one a high end host but they have just had at least with my server I’m on a really old server, right, because I’m eight years old and it’s – the stuff is getting slower and slower and slower and I’m needing to pay more money because I’m on a VPS and I have to crank up all the usage, the bandwidth and stuff. There’s no sites I even have left on DreamHost that are using many resources. They’re just not high volume sites. The one thing I can think of actually is our podcast episodes are on there, like the actual mp3s and I know that it’s like what is it? A terabyte or something a month?
[08:08] Mike: Yes, something like that.
[08:09] Rob: Like a terabyte a month of download but geez, it should be able to handle that, you know. You know, as a result of all these, the MicroConf site is now stable. It’s up on WP Engine. It had two outages within a week. Knock on wood, I shouldn’t have that again because WP Engine is a much, much more stable and faster environment. And then I also got several blogs and some other kind of more critical sites. I think now all of my really critical sites are off of DreamHost on WP Engine.
[08:34] Mike: Yeah, I started to move over. The – the podcast site, I haven’t quite done that yet.
[08:38] Rob: Yup and then once you do that, we’ll need to think about moving the actual audio, the mp3 files as well because they’re on my DreamHost account.
[08:46] Mike: Cool.
[08:46] Music
[08:49] Mike: Today, we’re going to be talking about how to bring people in to your business so that your business can move to the next level because obviously, it’s extremely difficult to do everything yourself. You need to bring people in who you can plug in to different areas your business and depending on what level your business is at and what you need done is going to kind of dictate the types of people that you bring in. So, that today we talk about the different types of people that you can bring in to your business, what sort of roles they would play, when is it appropriate to bring them in, when is it not appropriate, how to find these people and what they can do for you that either you can’t or shouldn’t or that other people couldn’t or shouldn’t do for you.
[09:24] Rob: Right and there are some people probably listening right now that are thinking I don’t want to bring anyone on. I want to stay the solo founder that I am right now, the solo-preneur and I don’t want to hire people because I don’t want the responsibility. And obviously, that’s a perfectly legitimate point of view and both you and I have done that or are doing that presently. Even if you’re doing that though, there are still a couple of these roles like I’m talking about advisers and virtual assistants that I would encourage you to think about doing because let’s stop believing that you really can do it really well all on your own. You can do. You can get halfway there. You can get most of the way there but if you want to achieve your full potential I’ll say or you want to grow faster or you just want some guidance and support, there are some of these roles even if you’re not going to hire an employee, you’re not going to hire someone fulltime or a part-time on a regular basis, there are still help that you can and should bring in to outsource certain tasks and there are still those roles of like advisers or mastermind fellows that I think are critical even if you truly do want to stay that solo-preneur.
[10:24] Mike: So, the first one we’re going to talk about today is the intern. I think that when you’re talking about an intern, you can do either a paid internship or an unpaid internship but at the end of the day, I mean you’re still talking about somebody who’s essentially an entry level employee. I think the real draw back to interns is that because they are low level, because you have to spend a lot of time training them, it may not necessarily be worth of your time because of all the extra time that you have to spend doing that training and training is very time-intensive.
[10:52] It’s very mentally-intensive to make sure that you’re on top of what they’re doing and making sure that they’re doing the right things because if they’re doing the wrong things, then not only are you spending that time with them trying to train them but then you have to go back and you have to still do the work in anyway in – whether that’s having them redo it or correct them, you’re going to basically sink a lot more of your time than you would if they just did it right the first time or if you paid somebody who was much more skilled or experienced to do that work.
[11:20] Rob: Yeah, I think defining interns as someone who’s entry level but has an interest in learning about the field and I guess probably a pretty good way to define it and I’ve always been hesitant to hire an intern. I’d say over the past three years, I’ve averaged two requests per summer college students or grad students who are in like digital marketing or you know, majoring at something dealing with online marketing who have e-mailed me and wanted to intern. And I’ve really struggled with a decision and everytime I got the e-mail because the person A) is taking initiative and so I know that they’re probably going to be someone who gets things done and B) it’s just – I just like to help people out like to give back and teach. I’ve decided not to do it after a lot of thinking and talking to people.
[12:06] The other thing is I almost feel like if someone is going to come and work for free or work for a really, really low stipend which is typical – I think all the ones who have offered have said they’d work for free. Its just kind of – it doesn’t seemed right to me like it seems like I’m getting something – I know they’re getting training but it’s like if I’m trying to do it to save money, but I’m just having to invest a bunch of time and that equation…that equation doesn’t work for me, you know because my time is – I value my time really highly. And so I’d almost rather find someone who is already experienced and pay them like fair wage for their time and probably have more time for my business and then give back to the entrepreneur community through these other avenues.
[12:46] So – but I do know people who have hired interns and have had great success doing it. I know founders who’ve done it. I know that Dan Andrews has his Tropical MBA Program where those people who have a little more – tend to have a little more experience than what we’re talking about but the cost is not very high and they do come in with the attitude of learning. So, I know that it can definitely work. It’s just not something that, you know, has work for me personally in the past. I’ve opted for one of these roles that we’re going to talk about.
[13:11] Mike: Right, I think that the situation where interns would actually work really well is if you’re trying to grow your business and you are looking in to intern program as if it’s a method of bringing people out of college and vetting them before you hire them because you’re going to get a lot better view of what somebody is like as an employee when they’re an intern than you will in like a 45-minute or a 3-hour interview. I mean you just get a much better idea of how somebody works, working next to them or having them report to you for two, three, four months than you do in just going through the regular interview process because there’s a world of difference between those two things. So, the next one we’re going to talk about is virtual assistant.
[13:54] Rob: I’m actually down to three virtual assistants right now. I don’t include developers, designers, product managers, any of those technical roles in virtual assistant bucket but I have three working for me down from I think at my peak, I had six. I’ve hired about 15 over the past probably four or five years and some have they just not worked out and then others have had to move on like one went to grad school and so couldn’t do VA stuff anymore. And then others I’ve, you know, decided to let go or just kind of wound down the projects that they were working on.
[14:25] But I’ve always found a lot of value in finding someone. I mean the nice part about a VA is you can typically find someone who has experience in the area that you need help with, right? So, you have someone who’s already trained. I mean they may not be highly technical person or a highly, you know, design-oriented person but you don’t hire them for that kind of stuff. You hire them for admin work and research and responding to e-mails and other tasks that are just hard to get done and you kind of just need a jack of many trades, like a non-technical jack of many trades. I am putting out a video course on how and why to hire VAs if you have a startup and if you’re interested in that, you can go to softwarebyrob.com and there’s an e-mail newsletter signup in the upper right and that’s where I’ll be mentioning that.
[15:07] Mike: I think the biggest advantage that I’ve found with the virtual assistants is using them to as more of a human filter to whittle down vast quantities of information in to something that’s consumable. So, I’ve used VAs to go out and search for like themes, for example, if I’m putting together a WordPress site and I need a theme for the WordPress site. I’ll point to several of them and say, “These are kind of what I’m looking for. Find me 10 or 12 other options that are close to this one,” because that’s something that you can’t have a computer do it and even if you could, it would take forever to build a program that would actually go out and be able to do that for you.
[15:43] So, having a human sit there and look through those and use their brain to kind of figure out what it is that you’re actually looking for and then present you with those options is a great way to use a virtual assistant to cut down on the amount of time that you’re spending on something. And that way, you’re going through a pre-filter list as opposed to searching through tens of thousands of themes that are out there.
[16:02] Rob: Yeah, that’s a really good example. Ways that I’ve used a VA in the past, couple of months have included, you know, we have people cancel HitTail, right and during the trial and then we have some customers cancel and I wanted to e-mail all of those over a certain period of time and say, “Why had you cancel,” you know, because they didn’t give us – they didn’t have give us a reason or didn’t give us a full enough reason in the cancelation form. And I wanted it to be personal and come from someone on the team and I also wanted someone to just be able to hit reply when they get the e-mail and send it back to us.
[16:31] So, yes, I could write a script to send a bunch of e-mails, you know, but by the time I do that, I had a Google doc spreadsheet that I sent to the VA and I just said, “E-mail them all and here’s the form. It’s short. All they have to do is hit reply.” And then he gathered up those responses, put them on Google docs and he actually arranged them. He didn’t just spit them in there as a big chunk of data. He actually said, “You know, three people said the similar thing.” And so, it’s like you said, he took a large volume of manual information and did something that wouldn’t have been easy to write a computer, to sift through all the responses and we’ve gotten a less responses and send them through a form instead of just saying, “Please reply and just let us know in one sentence, you know, why you’re responding.”
[17:09] And so, that was super helpful and actually, that’s where we did operation retention based on putting all of those responses. And that’s how I do. I view virtual assistants as a form of human automation. It’s a way to automate things that you may down the line want to do and code or that maybe just a little too hard to do with software but that having someone’s help can just help save you as a founder so much time. Hopefully, on a recurring basis as someone you should have at first or for these one-time projects like you and I just mentioned.
[17:38] Mike: The other thing is it’s faster to write down a process and hand it to a virtual assistant and have them go through it and than it is code up any sort of computer program to go through it automatically and although it may be less expensive in a long run to do that depending on what the actions are, you’re going to get somebody sit in there and looking at those things and you’re going to be able to hand them this process. They’re going to be able to execute it within five minutes after you hand it to them as opposed to computer program which might take you weeks or ever months to put together.
[18:05] Rob: Right and you know, a founder, a friend of mine who has a successful SaaS app, he was still answering e-mails like all the support e-mails. He was doing tier 1 e-mail support up until – it was probably three or four months ago, he said it wasn’t taking him enough time for week – per week that he didn’t think it was justified to hire a VA to help him out with tier 1 support. Now, once he did, he was just like, “I cannot believe I didn’t do this sooner,” you know, because it’s not about the sheer volume, it’s like, “Oh, it’s only three hours a week,” but it’s all the little interruptions that you get along the way and it’s having to wait of those sitting in a queue somewhere, they have to come back to five, six days a week, you know, several different trigger points during the day, you want to check in because you don’t want to be 24 hours before someone hears back. And if you can just get someone on board to help out with you even if they are only spending a few hours a week to start, it’s invaluable towards removing that mental burden.
[19:00] Mike: So, the next one is a contractor. And I think that both you and I put contractors in basically the same boat where contractors are a technical step up from a virtual assistant. So, whether they’re doing video editing, audio editing, software development, design work, copywriting, those kinds of things, that’s generally the role that a contractor fills for you. And I think the differentiation between a contractor and a consultant which is the next thing we’ll talk about is that a contractor is somebody who’s coming in on an hourly basis and you put together an idea of what it is that they’re going to be working on and if you need them for one hour a week or you know, 25 hours a week, they’re going to come in and they’re going to do that work for you. But the expectation is that it’s more on demand than anything else.
[19:47] The difference between a contractor and a consultant is that a consultant tends to come in as a highly specialized person in one specific thing. And I differentiate between contractors and consultants because consultants come in for a very short period of time, you have a very specific problem that you want to solve and they tend to be much more expensive. Now, you might hire a contractor to come in and do some graphic design work or design some e-mail templates. And I kind of put that person in to a contractor role even though it is a short term gig but the fact is that they’re much less expensive whereas if I wanted to hire a high-end SEO consultant or a high-end SEO contractor, the ideas that, you know, that person is there only for a short period of time and the value that they’re going to be delivering is extremely high to you and that is why you’re paying them, you know, these vast quantities of money as opposed to a contractor who is still providing value to you but it’s not necessarily the same level as a consultant comes in.
[20:44] Rob: I think the point that what you start to think about bringing contractors or consultants on are if you have a little bit of money and if you have, you know, either from your day job, if you’re bootstrapping or from the product revenue perspective, if you’re actually launched already. That’s a thing with contractors and consultants is they’re more expensive than virtual assistants and interns but they free up your time assuming you can afford someone that’s reasonably good and you hire well, this is where you really start leveraging someone else and freeing up vast quantities of your time.
[21:15] Virtual assistants are great first step for that but as soon as you can bring someone in the help with development or to help with, you know, even if you’re good at design to help expedite data and get something done quicker, that’s really when I think about bringing contractors on. And consultants, I’ve always brought them where it’s like I have a task and I don’t know how to do this or it’s going to take a really, really long time for me to do this like a huge chunk of my time.
[21:37] Most recently, when I acquired HitTail, I brought a DBA on basically as a consultant to help migrate the database, you know, that was 2 or 300 gigs, to migrate it from one datacenter to another. We had an overnighting of a hard drive and all types of crazy set up to keep stuff in sync and real time. Now, the cool part is that he then came on board on a regular basis to do all the database maintenance and the backups and the point in time restores when I need him to do so. And so, he actually made kind of the transition. I still consider him as a highly trained expert and experienced consultant but it’s nice that we now have that relationship that I can tap in and say, “Hey, you know, we have this one big thing. Can you…” I mean he’ll write queries for me sometimes, right? He’s just billing hourly but all the pretty complicated query on a pretty gnarly set of tables that I want to do join on I have him run it through to make sure, you know, is this legitimate.
[22:29] But the thing is as if HitTail wasn’t a profitable app, I probably wouldn’t have dropped the money to bring him on board in the first place. And so, I think that’s the point. Money shouldn’t, you know, it can’t be the thing that keeps you from bringing on someone experienced to help leverage your time but at some time you have to be realistic and you can’t just go out and spend 5 or $10,000 on a website design when you really should be using that for other marketing tasks.
[22:54] Mike: So, now that we’ve talked about a lot of, I’ll call them more temporary workers, why don’t we talk about the next one which is the employee. Bringing in an employee in to your business I think is a huge step. It’s a world of difference between a having contractor or consultant who comes in and doesn’t work for you and if you don’t have any work that you have to send them or you don’t want to send them any work because you’re trying to conserve money, then you can totally do that. But with an employee, you’re making a lot of commitments and there’s an obligations that you’re undertaking in order to pay that person’s salary and you have to be able to meet the revenue targets in order to support that employee.
[23:29] I think one of the big things that most people don’t think about when they’re hiring an employee is all the additional overhead cost that come in with hiring an employee because you have to pay employment taxes. You typically have to cover health benefits. There’s all these things especially when people start to get further advance in their career and they start thinking about things like, you know, planning for retirement like, well, do you have a 401(k) plan or a 529 college savings plan and things like that and those are things that, you know, kind of the overhead of having an employee.
[23:58] Rob: I think the role of employees in tech startups has been changing and I think it’s going to continue to change. Most of the startups that are early stage that are hiring employees, they either have funding or if they’re bootstrapped, they just have to be really, really strict about who they’re hiring and bring people on slowly and do their healthcare costs in the U.S. Most of like the tech startup workers I know don’t have healthcare unless they work for a large company like a Facebook or Google, someone who has a lot of funding. The mentality of I’m going to work for the startup in exchange for, you know, I’m going to exchange kind of those typical benefits of the 401(k) and of the medical, dental insurance and I’m going to instead get stock options and I’m going to get this exciting and fun job.
[24:43] And so, I think that puts pressure, you know, a downward age pressure for sure on the startups that I see hiring in terms of, you know, you can’t get – it’s going to be really hard to get someone who’s 40 years old and married, has two kids to come and work for you if you can’t offer all that stuff. But at the same time, you know, if the expenses is too overwhelming then that’s probably the reality for them as well.
[25:04] Mike: So, the next step from an employee is a co-founder or a partner in the business. And with a co-founder or partner, most of the time I think that when you get in to this situation, you’re doing it upfront, you’re probably working on the business on the side until it gets off the ground and starts getting revenue. And you’ve – hopefully, had those conversations about, you know, how to structure things, ownership, vesting, those kinds of things before you start making any real money or you start running in to any problems where those discussions that should have been had are going to become a problem because you didn’t have them. And you know, a co-founder or a partner is completely different than having an employee or contractor or visual assistant because they are complete vested in to the business or hopefully, vested in the business.
[25:46] Rob: Yeah. Didn’t Paul Graham said that one of the top two reasons that startups have issues from what he sees on Y combinator is founder issues, founder disagreements?
[25:54] Mike: No, it was on the top ten. I just don’t remember what number he used for that.
[25:58] Rob: Yeah. So, it’s – as always it’s like it’s – there’s never – a never or – I never have a co-founder, I always have a co-founder. It’s just finding the right person and finding the right fit both with the business idea and finding complementary skills. I have seen over and over founders get together who are both developers and that just doesn’t make a lot of sense to me, you know. It’s like you need to find someone who can do the marketing stuff, someone who can do the design stuff or someone who can do this, the development stuff, someone who can do, you know, the sales and the admin and manage a VA. I mean there’s all these skills that need to get done and so if you overlapped heavily on a single skill, you really are not multiplying your gene pool there and covering the basis that need to get done in order to actually launch something.
[26:42] Mike: Right but I think that there’s another side that you have to look at as well. I mean if you don’t have overlapping skills, it’s very difficult to take over responsibilities from somebody else. I mean it’s so – for example, if you get a marketing guy together with a developer, they may work very well together by separating their duties but what happens if the marketing guy needs help or the developer needs help? I mean at that point, then you have to start looking out side of those two people because the other person just didn’t have the capability. I think there’s got to be enough of an overlap but not too much as you said.
[27:14] Rob: I think I would err on the side of having less overlap.
[27:17] Mike: So, okay. So, we’ve talked about interns and virtual assistants, contractors and consultants, employees and co-founders. And I think the last one that we came up with was an advisor. And I think there’s a couple of different ways that you can have an advisor. You can have an advisor who is strictly high level person, somebody who you go to and just talk to as more of a mentor. And then I think that there is other advisor who you look at, somebody who owns their business, who is also an entrepreneur, kind of more of a peer than an advisor who has, you know, run their own company in the past.
[27:49] Rob: I’ve seen this structured in many different ways. I mean with funded companies often someone to bring on an advisor early and then they’ll actually give the advisor half a percent or 1% of the company and they’ll have the contract, I don’t know if they put in writing but they’ll say, “You know, I expect you to – I expect that we’ll have a 1-hour phone call each month and that you’ll answer my e-mails every week.” I’ve also seen some informal relationships where you, you know, just say, “Hey, will you answer my e-mails,” or “Can we do a call when needed?” And you’re just kind of doing it to help the person out. You probably have a relationship with them of some kind or you just know they’re going places so you want to be a part of that.
[28:27] And then like you said, I’ve seen mastermind groups where like you said it’s more of a peers giving each other advice and then encourage them and help. And I would encourage you that if you are going to get in to mastermind, to try to find people who are ahead of you in that process rather than someone who is either behind you or at the exact same level because it’s just – it winds up being hard to actually get actionable advice if you’re all just stumbling around kind of doing the same things, you know. Whereas if someone six months or a year ahead of you and they – it tends to be pretty fresh in their mind and they’re going tend to have some really good suggestions for when you hit road blocks.
[29:06] Mike: I was reading something recently that heavily advocated for if you’re going to be giving any part of ownership of your company, any equity at all to an advisor then you should definitely have a written contracts and a vesting schedule that goes with it because some advisors just simply don’t work out.
[29:22] Rob: Yeah, that totally makes sense. I mean I would say any time you’re giving anyone equity for any purpose unless it’s a tiny, tiny amount of equity for a very specific task they’re doing that they should…they should vest overtime because otherwise, you can sign this agreement and now they own this thing and if they disappear, they still own that part. And that’s a major problem. So, I have a question, Mike. So, should everyone have an advisor? Do I need to go seek someone out? And if so, how do I do that?
[29:48] Mike: I think if you’re having specific issues that you are fully aware are issues that are going on right now that you need assistance with, then I would definitely go talk to somebody. Do you need to have that person come on as a full-blown advisor? No, not necessarily. What I would say is that if you happen to stumble across somebody who you think would make a good advisor, then definitely leverage them and try to use them as an advisor. But I don’t know as I would go out and consciously seek an advisor. And the reason for that is that I think that when you start looking at advisors and you’re trying to evaluate different people for advisors, I think that it takes your eye off of the product that you’re developing or the marketing that you’re doing.
[30:28] And it’s not to say that having an advisor couldn’t help you with some of those things but at the same time, if you shift your focus from building your products and talking to customers and doing all the things that are associated with building your business, then you’re no longer doing that and you are – you’ve kind of shifted in to – I almost think of it like a situation for companies that are looking for funding either they’re building the product or they’re looking for funding. And if you’re not – if you’re looking for funding, it’s kind of an all-consuming task and you’re doing that instead of building your product and making a business.
[30:57] Rob: I also think you need some kind of traction with your product before you can basically do a cold intro and find an advisor because you can’t just e-mail someone who’s well-known and say, “Hey, be my advisor,” because they get e-mails like that all the time and there are too many products out there that they…they can’t possibly advice everyone. And so, if you have a network and you actually do know some people who could be advisors, that’s one thing, right? And then it’s an easy one-shot email, “Hey, I’ve finally decided to launch my app like we’ve talked about before. Would you, you know, answer a few e-mails if I send them over the next few months,” and started off informally and then accelerate it if needed.
[31:33] Now, if you just have no contact and it’s all cold, then you are going to need something more than that. You’re going to need an e-mail that’s like, “Hey, I launched. I have traction and I have a couple of sticking points. Right now I’m looking for an advisor, could I send you some e-mails?” And that time, at that point then you actually like you said, you have something that you’re trying to deal with.
[31:55] On the flip side, I’ve found a lot of value in there being people who on an ongoing basis are kind of almost sharing in my journey because they know – they’re really sharing in the journey of the product I’ll say because you don’t have to give them rims of background. You don’t just say, “Hey, I have a SaaS app and here’s what’s happening,” because they’re probably going to tell you some suggestions that you’ve already tried. But if they’ve gone through the journey of the app with you, then they already know what you’ve tried, what you have and it’s just way easier to get that feedback.
[32:23] And that’s where I don’t have advisors as much as I have the mastermind groups that I’ve talked about where people every two weeks, I meet with them either in Skype or in-person depending on the group and they get to hear an update on my app. Even if I don’t have a major issue that week, they get to hear where it’s going, some things I’m thinking about. I’ll always ask for some feedback but even if there’s not a major point of guidance, at least they’re now updated and so, in two or three months when I do have that major point, they know the history cold because they’re heard it, you know, in real time as it’s happened. And that’s been my avenue for finding kind of filling that advisor role with my businesses.
[32:59] Music
[33:02] Rob: If you have a question for us, call us at our voicemail number at 888-801-9690 or e-mail us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt. It’s used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 119 | How to Solicit Feedback from Your Customers
Show Notes
- Linux auditing with AuditShark
- GetDrip
- Follow AuditShark on Twitter
- RapidWeaver
- WWRWD
- intercom.io
- Wufoo
- KISSmetrics
- KISSinsights
Transcript
[00:00] Rob: In today’s episode of Startups for the Rest of Us, Mike and I are going to be talking about how to solicit feedback from your customers. This is Startups for the Rest of Us: Episode 119.
[00:09] Music
[00:18] Rob: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:27] Mike: And I’m Mike.
[00:27] Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
[00:32] Mike: So, last night I got Linux support working for AuditShark.
[00:35] Rob: Very nice. So, now you have a component that installs on Linux servers that – you can audit Linux boxes instead of just Windows servers?
[00:43] Mike: I can do Linux boxes but it has to be remote. So, I don’t have a native Linux agent yet. Down the road, I’ll be looking to see what I can do with Mono to take the agent that I have and be able to direct him —
[00:53] Rob: I see —
[00:54] Mike: …put it out on to those machines. But for the time being, this is kind of an intermediate stuff. You know, I expect that some people are going to look at it and say, “Well, no. I’m not really comfortable with that.”
[01:00] Rob: Now, is this something that was built by customer request?
[01:04] Mike: I look through the people who were…who would basically wanted to be in as part of the early access who I’d essentially ruled out because they’re specifically asking for Linux support and concentrated on just the people who are looking at Windows support and realized that there’s a fair number of them that want either Linux or Windows and Linux. So, I looked at it and just said, “Well, just based on the numbers alone…” and it wasn’t like I didn’t know that I needed to go in this direction eventually anyway but I kind of wanted to take a look to see how much effort it would take. And it really didn’t take very long to do. I had to refactor some code but it wasn’t too bad. So, I got some basic Linux support working. It works at the command line right now. I still have to make some of the hooks with the UI to make the rest of the work for the customers and it really wasn’t nearly the amount of effort that I thought it would be.
[01:48] Rob: Nice, yeah. If you have a good architecture, I guess that speaks to that, right, if it’s easy to add code or functionality to it.
[01:55] Mike: Yeah, I mean I planned on doing it eventually anyway. So, there were a lot of places where I just kind of let hooks in and said, “Oh, well, if it’s a Linux machine do this. If it’s Windows machine, do that.” And all the stuff for the Linux machines, we’re just kind of commented out or it didn’t do anything. So, all the hooks were there. There were just wasn’t the actual mechanism to connect in into a machine through SSH.
[02:13] Rob: So, you now have support Windows and Linux and you have essentially an e-mail list of people who need your product, need AuditShark for either Windows or Linux. But what are you looking at in the next couple of weeks in terms of wrapping up your early access and everything is public and you’re officially launched and marketing, so what is that look like?
[02:31] Mike: So, there’s one hang up right now and that’s the installer for the Policy Builder and it’s basically to auto-update it right now because everytime I spin a new build, you have to update that locally which is a royal kind of a nightmare because you have uninstall it and then you have to download the new version and reinstall it. The developer I have working on it has been running in to a lot of problems because he’s using the WiX code base from CodePlex which is an open source package but unfortunately, there’s no documentation for it. So, in order to figure out how its work, he’s had to go in and actually read the source code for it which is apparently just a nightmare.
[03:03] So, that’s been an ongoing struggle for the past couple of weeks. I would hope that he’ll be done in the next couple of days but I can’t say for sure that that’s going to happen. So, it’s kind of wait and see how that turns out. But if that turns out well, then the rest of the stuff should fall in this place pretty quickly. You know, I should be able to hand it out to people who are running either Windows or a Linux over the next couple of weeks.
[03:22] Rob: What have you learn from the early access? I think you’re about a month in. Have you received a lot of feature requests or UI improvements or things that you’ve now wrapped in to the product to make it so that it’s better than it was a month ago?
[03:34] Mike: I’ve got a list of things that I’m looking at making changes too and most of it is around, I’ll say user experience because people looked at it and they said, “Oh. Well, I don’t understand this,” or “What you’ve done here implies X or Y and I don’t quite understand it.” So, I really just need to rework some of that in the UI but otherwise, product functionality is there. It’s just how it’s presented is a little bit off, it’s a little bit misleading in some cases. And obviously because I don’t have as much documentation as I need that makes it a little bit more complicated because people have to look at it. They draw their own conclusions or interpretations about what something means or they look at and they have absolutely no idea what a particular term means and have to guess. I have to either reel them back in through e-mails or you know, talking to them on the phone and saying, “No, that’s not what I mean. It means this other thing over here.”
[04:21] Rob: Very good. Well, I started something I’m excited about. I have a new split test going on at the homepage for Drip, so at GetDrip.com. What I’ve done for the past couple of months is I’ve had a single design of a landing page and then I’ve had three different versions of it with different text, different headlines. Just testing up the value proposition to see which one resonates the most. And right away, one of those just failed miserably which is great because it shows me that I shouldn’t use that particular verbiage to describe Drip and the other two have been battling back and forth. There was a longer form one and a short form one. They’ve been battling back and forth and they’re actually very, very close in performance. Well, it’s a bit of a bummer I guess [Laughter]. We’d prefer that…that one of them be a clear winner.
[05:01] But what I did today is I actually rolled the ultimate design for the marketing site is all done in slice and we converted the homepage of that marketing site into the landing page. So now, I’m testing two completely different designs against one another. It’s the original landing page that Derek did, he’s the product manager for HitTail and he’s working on Drip as well. And he threw it, you know, that one together in a day and then the marketing site that had a designer design is a much more in-depth, you know, exhaustive kind of marketing design. So, it has a lot more design elements to it and I’m really curious.
[05:36] This is kind of a – it’s maybe a David versus Goliath thing, right, where it’s a nice minimalist landing page versus a heavily designed, heavy drop shadow, lots of textures in the landing page and so, I’m curious. I know which one I like visually but I’m curious to see which one converts because they have in general, they have the same content. It’s all just a visual change and are both just asking for an e-mail address.
[06:00] Mike: Interesting. Do you have any inclination about which one is going to do better at this point or no?
[06:04] Rob: It’s really – this is one of those that’s really hard to say because it’s like I know that the professionally designed marketing app looks more professional. We just spent more time. We spent more money because we know we’re going to have this site for a few years, right? But at the same time, it’s often the simple minimalist designs that do better because they get out of the way of your copy and of your message. And so, I’m actually I really am curious to see which one I don’t really have a leaning at this point. It’ll definitely take a few weeks to figure that out because the site doesn’t get a ton of traffic. I haven’t really started much marketing to it. I think I will resume some paid acquisition sending some traffic there so that can maybe help with the split testing as well.
[06:43] Mike: Very cool. So, the other thing that I’ve been working on is a new Twitter strategy for AuditShark and basically outsourced the actual implementation of it but I kind of wrote down exactly what I wanted to be done and when I wanted it to be done. And so, I’ll be measuring the progress of that over the next two months or so and the basic ideas to follow a bunch of people who seem relevant in the security space and then go out and continuously find links that are relevant to the security world about what machines are being hacked and why they’re being hacked and going in to different communities like, for example, the Rails community and finding information that’s relevant to the security in the Rails community and then tweeting that out. And following people who are members of the Rails community and just kind of identifying different clicks of people who would be interested in that type of information.
[07:32] Going back and looking through at the number of people who follow the AuditShark account back and see who’s actually kind of interested in it because obviously, it’s just following somebody else is going to get them to kind of know about that particular account. And if they follow AuditShark back, then it shows that they’re interested in that kind of information. I’ll be measuring the progress of how many followers the account gains over the next probably six to eight weeks.
[07:55] Rob: I see. And are you doing that to see which niches this resonates with? Or are you actually looking at this as a lead gen, as a way to get clicks back to your website?
[08:04] Mike: I haven’t followed that thought – pattern through yet. So, I’m still kind of working out in my head exactly what the end goals of it are. The reality is it didn’t take me a lot of time to put together that marketing strategy itself but mostly it’s around providing awareness that the product is out there and then giving it kind of a social presence in Google and Bing and whatever other search engines that are out there that are spidering through Twitter’s content. And assuming that there articles that the AuditShark accounting is retweeting or tweeting out there that people are then retweeting, then that should hopefully lead to some people finding out about AuditShark who would not have found out about it otherwise.
[08:42] Rob: Got it. So, I have two thoughts on it. One thing is if you could potentially put your picture instead of your logo on it, it makes people more open to following you. I don’t tend to follow most company accounts that have logos as the picture because it’s just as not as personal. I think you’ll probably get less interest just because it feels more like a corporate thing rather than, you know, they’re following AuditShark versus Mike Taber. It’s just less appealing.
[09:05] The other thing I would think about is to put a short timeframe on this experiment. Obviously, we’re all for experiments but in the experience of marketing HitTail as well as my other apps, Twitter has really not been that helpful. The only time it’s helpful is it’s really helpful for personal brands stuff and like with the Academy and MicroConf and the podcast. I mean all that it makes sense because it’s all are conversation but just marketing B2B apps has been less successful. If you’re actually doing content marketing like KISSmetrics and Buffer app and Bidsketch and that kind of stuff, then that’s…that’s really when Twitter comes in to play because you get followers and then they actually click through to your website and then you either get an e-mail to follow up with or they just become fans and subscribers of your website.
[09:47] So, but just doing Twitter as a strategy and just to aggregating content, I don’t know if I have seen anyone do that successfully in the beat of the space without having enough really in-depth content marketing also going on.
[09:59] Mike: Right, yeah. I mean content marketing is something that I’m going to be looking at down the road a little bit. It’s just that it’s not this week. It’ll be probably, you know, two or three weeks out. I’ve been trying to evaluate what my content marketing strategy is going to be and I’m still trying to figure that out. Part of it is try to find out which of these, you know, niches are responsive to the things that the AuditShark account is tweeting out. The other thing is in terms of following people, there’s kind of I’m putting essentially an artificial cap on the number of people that is going to be following on a weekly basis. So, it’s not like it’s going to go out and follow like 30,000 people and then wait to see who follows it back. That’s not really what the intent of it is. The intent is really kind of established that two-way communication between people and find people who are interested in the product and the type of problem that it solves.
[10:46] So, part of it is doing that and then the other part of it is as you kind of diluted to was going after kind of a content marketing strategy. I’ve put a timeframe of 6 to 8 weeks to say okay, let’s re-evaluate this to see where this is at after that 6 to 8 weeks and then take a look at it then and say, “Is this something that’s going to continue or is it something that should just kind of fall off to face of the earth?”
[11:08] Rob: So, long-time friend of the show Michael Frankland, he launched a theme site for RapidWeaver mac web design software and he actually dropped me a line and said that he was basically kind of the way we preached about finding a tight niche and going after it. And so that’s, you know, RapidWeaver mac web design software is pretty small and so far, you know, it’s going pretty well for him. So, I’d just want to give him a shout out and his URL is yuzoolthemes.com, yuzoolthemes.com if, you know, RapidWeaver space probably worth taking a look. Last update for me is, remember the t-shirt that WWRWD that we talked about a few weeks ago?
[11:44] Mike: Yeah.
[11:45] Rob: That was not printed. It did not meet its goal.
[11:47] Mike: Oh.
[11:48] Music
[11:51] Rob: So, today we’re going to be talking about how to solicit feedback from your customers. Now, we had answered a question from a listener a few episodes ago on this topic and he had specifically asked on the HitTail website why I didn’t have some type of form or something prompting people to send feedback in and to ask for a new feature and such. And we talked briefly about the best ways to solicit feedback but I felt like there’s more to it than we are able to get in to in that Q&A episode. I’d just wanted to go in to a little more and you know, talk about some of the options and some of the things to weigh when you’re looking at soliciting feedback.
[12:25] The outline today looks like we’re going to talk about when you should solicit feedback, when you shouldn’t solicit feedback, some different services and approaches for doing that and then the options for actually distributing the forms or the surveys or whatever to your customers in a way that gets them to actually fill them out.
[12:41] So, to kick us off, we’re going to be talking about when you should solicit feedback from your customers. And I have two points in the outline. The first one is when you’re in your early days of your product, when people are still canceling and drove because you don’t have enough features, you should absolutely be soliciting feedback from everyone who cancels even if that means sending a personal e-mail and or getting on Skype or over the phone with them. This is the time where you need to iterate very quickly and start figuring out why people are canceling because at this point, you are just plugging a hole in your funnel essentially. You’re plugging a whole in your churn rate and you’re trying to get to the point where you have a stable enough customer base that you can actually start growing your customer base and growing your revenue.
[13:26] Mike: I think the important piece of that that you just said is that it is about plugging the holes in your funnel and the really important piece of how you want to plug those holes is that if you are able to prevent 15 or 20% of the people who come in to your application from leaving through that, that’s 15 or 20% who were going to stick around and contribute more to the bottom line of your product which means that your lifetime value for those people is going to go up rather that down.
[13:51] Rob: Right and even beyond thinking about it in terms of numbers and churn and lifetime value, you want happy customers, right because happy customers stick with you and happy customers talk to other people about your product. They spread the word. And so, I find it that that there’s this race to just build features. I guess as developers we always want to rely on just building more and more and that is almost never the right solution. If your product isn’t catching the attention of customers, it’s typically more of a marketing issue. But if you have customers using it and they are canceling, that typically is a lack of features.
[14:27] So, there’s a big difference between those two things and that’s why when people say, “You know, I have a SaaS app and it’s not doing well,” that’s not enough information to know how you should troubleshoot this and the next question I always have is, “How many customers have come through and actually either sign up for a trial or paid you some money and then not continued with it?” Because if the answer is five, then the response is you need to…you need to get more people using it, right? And once you get those people using it as they cancel, then you should follow the directions in this podcast to solicit feedback from them as they do.
[14:57] Mike: Well, I think the important piece to keep in mind there is that is exactly what you just said is for your SaaS app and I think the things are significantly different when you have a downloadable app that people have paid for because they paid for it once and then maybe they talk to your support team, maybe they don’t but you have a lot less data to work from if it’s not a SaaS app.
[15:18] Rob: That’s true and the interesting thing with one-time product downloads is you basically have two groups of people, you have customers and you have prospects. And often the customers who have paid you with that one-time fee want different things that your new prospects do and that’s always a push and pull as well. And so when you solicit feedback from customers, if you have one-time downloadable software, you also want to solicit feedback from prospects and you should have a prospect list like an e-mail list, hopefully, been gathering e-mails from people who come to your site. If you’re not, then you should go to GetDrip.com right now and sign up to be notified because that is absolutely a way to not only figure out from your customers what you can do to get them to continue upgrading, but it’s a way to talk to the prospects and figure a way to get more of them to buy.
[16:07] But there’s a big difference between prospects and customers when it comes to downloadable software with SaaS apps, the difference is not so big because if you have a customer and they can cancel anytime and stop paying you, then realistically, they’re – about as valuable to you as a new prospect, right? There’s more of an equitable relationship there where customers and prospects are almost the same because either one if they paid you next month, they’re going to pay you the same amount of money. While I do still think you should differentiate between them. I don’t think there’s as much – it’s not as critical to talk to prospects when you have a SaaS app and you already have people paying you.
[16:38] Mike: Yeah, I think that’s one of the downside in the enterprise software space is that they can leverage their marketing and product managers to tell you which you want to hear in order to get you to buy it. And then once you’ve bought it, they don’t care. [Laughter]
[16:50] Rob: Exactly because they’ve already delivered it and they’ve already made their money. That’s actually advantage for customers of why SaaS and an ongoing subscription model can be better.
[16:57] Music
[17:00] Rob: The second point in time when you should solicit feedback from your customers is when you’re essentially moving in to a new market. So, if you already have a successful app and selling well to a certain group of people and you’re basically moving your way in to a new niche or perhaps you’ve even going horizontal and you’re backing out of a niche and trying to takeover an entire horizontal market, that’s when you need to re-solicit prospects and customers. It’s a big unknown, right? If you have a known product but you don’t know the little tweaks that you’re going to need to make in order to satisfy that new group of people and what you will notice if you have a recurring billing app is as soon as you start moving it to new markets, you’ll notice your churn will go app and typically your conversion rate will go down a little bit because it’s just your marketing to this unknown factor and you don’t have all your pieces optimized yet.
[17:48] And so, that’s a really good time to go and solicit feedback from those people in your trial sequence who you know are from this…this brand new market and trying to figure out how do they refer to your product, how do they talk about the benefits because often they will actually phrase things differently. It’s the same benefit that your existing customers get but they’ll use different words for it or they want to communicate it in a different way. And so, that’s why you don’t actually going out and soliciting this feedback can be helpful.
[18:13] Mike: And that’s very helpful for segmenting your market and in terms of your marketing strategy because you’re going to want to build a different landing pages that are designed for different keywords that either you do paid advertisements or tweets or you know, very short bits of information out there where they drive people back to your landing pages and those specific features you’re going to want to call out and different marketing collateral. And based on that that you called out, you’re going to want them to drive them to one landing page or another based on which of those segments that you’re trying to market to.
[18:44] Rob: So, now we have a couple of points in time when you shouldn’t solicit feedback from your customers.
[18:49] Mike: So, the first time that you should not be soliciting information from users is when you’ve stopped learning anything new. And if you gone out there, you’ve asked a bunch of questions from people, you’ve learned a lot of information and then you start hearing the same things over and over again, it’s about that point that you should stop trying to do that yourself. I mean it’s not to say like if somebody cancels, you should never ask them, “Hey, why is it that you canceled?” But at the same time you might want to back off from doing it yourself at that point because you’re the one who’s going to make the judgment call as to whether or not you learn anything new. And if you stop learning new things, that’s the time to pull the plug on it and that’s the time that you outsource it, that’s fine but you shouldn’t be going back to those people and continually asking them when you already know what the answers are probably going to be.
[19:33] Rob: Yeah, I’m a believer in short burst of soliciting customer feedback. Compiling all that feedback, making a roadmap, putting a feature list together, prioritizing everything and then attacking it and iterating on your product, adding features to it. I am much less of a fan of having this ongoing feature requests coming in via e-mail and just constantly having to deal with them, reprioritizing things. There’s a certain amount of agility that has to be there and especially on a very early days, you’re just going like crazy and you are reprioritizing. But once you get at least a little bit stable and you have that customer-based, kind of running around and just constantly having new feature request and all that stuff coming through, it actually scatters you.
[20:15] I feel like it’s counter productive. And so the approach that I recommend is if every maybe four months or six months, put it on your calendar and you do an outreach to solicit this feedback using them as we’re going to talk about rather than having this ongoing, “Hey, I want to request a new feature type of thing.”
[20:31] Mike: And which you just said kind leads in to the second time when you shouldn’t be soliciting feedback is if you’re already converting visitors to customers and they’re sticking around. So, if you’ve gone through that process of soliciting the feedback, you execute that roadmap and then you start seeing your churn rate go down, then those people who are visitors are converting in to customers. They’re sticking around. They’re contributing to your lifetime value and at that point, it’s probably not worth going back and saying, “Okay. Well, you know, how much further do I want to optimize this?” Because there’s a sealing on any of these optimizations that you can do, so there’s always going to be low-hanging fruit elsewhere.
[21:05] So, you can squeeze as much as you want out of, you know, trying to plug the funnel but at some point, there’s going to be such an insignificant return on the amount of time that you’re putting in to it that you’re much better off going to look at other parts of your product, just trying to figure out where those things can be improve, where other marketing efforts can be improved so that you’re not wasting your time spinning your wheels for like a tenth of a percent gain when you could just spend 20 minutes or 30 minutes some place else and get like 1% or 2% gains.
[21:32] Rob: Yeah, that’s what I was trying to say. You know, I’m not trying to imply that I’m a fan of like every six months and get this big feature list and then just build it and not listen to your customers.
[21:40] Mike: It’s almost like space invaders where you got the guys that are coming down and they’re really low at the ground and those were the low-hanging fruit. You want to kill those guys first because the guys are up at the top, they don’t matter so much.
[21:51] Rob: Exactly. I do think that developers and founders and people who are building their apps, they overcompensate. They tend to lean too heavily towards the “I need another feature” that if my app is not selling, if my app isn’t where it needs to be, if I don’t have the revenue I want, then I’m lacking features. And most of the time, that’s an excuse, that’s the resistance talking because you want to go back in to your basement and build more features rather than get out there and figure out what is really going on with your positioning, your marketing, the way you’re selling it, your niche, your channels. There’s all these other things that people I think in general avoid and you can – getting this constant feedback, you’re constantly going to be getting new feature request but going in to…in to your tunnel and sitting down and building them is counter productive. So, I think you should lean way from that, not to say you should never do it but I think by nature, we lean towards it too heavily and so, I think you should lean away from that and lean in to doing more marketing.
[22:50] Okay, so we covered when you should do it, when you shouldn’t. Let’s talk a little bit about options for distributing, essentially distributing the surveys and distributing the feedback solicitation mechanism, right, a form of some kind. Now, the two options that I’ve used that have worked the best are e-mail and a splash page, when someone logs in to your app. This assumes that you’re targeting people either prospects or customers, you know, who you’re having some contact info for. Now, far and away, a well-drafted e-mail typically coming straight from the CEO as plain text, not using the fancy template that you might have paid the designer a bunch of money to design but just a plain text e-mail asking sincerely for feedback but not just that saying, “How would you like to improve the app? How would you like to improve your user work experience?” And actually putting it on not on the customer but making them realize that they are going to be improving it for themselves, that has always converted extremely well for me. And if you have a nice list, a 4-figure list, you’re going to get way more feature requests and you can handle just by doing that.
[23:54] And then the second option I mentioned is to have like a splash screen when someone logs in to your app and you can use a tool like intercom.io. They’re pre-built SaaS app to allow you to message your customers. At HitTail, we just have like an if statement when someone logs in and we do a little mod, mod 2, mod 3 and you know, if there’s a remainder of one for all you programmers out there, then we display a certain welcome screen or splash screen or whatever and I can just set that up pretty easily. It does require modifying some code though. So, if you’re a non-developer an intercom.io might be a better option for you. Both of those work. Now, the issue with the log in is it takes a long time. Unless someone is logging in to your app everyday, it could take you weeks to get enough feature requests. That by definition, you’re going go get your most active user first responding to that rather than everyone who’s on your e-mail list.
[24:42] Mike: Yeah, I was going to point out that the downside of that is that the active users, you’re going to hit them multiple times and that is as a user, that’s incredibly frustrating to get bombarded with the splash screen every single time you log in. And —
[24:56] Rob: So, just for a note, we don’t — either cookie someone or since they are logged in, you know who you are —
[25:01] Mike: Oh, I know —
[25:02] Rob: And —
[25:02] Mike: But I’ve seen the ones where you log in and every single time, it’s – I’m just – it’s just a warning to people who are going to implement these themselves to make sure that you don’t bombarded people every single time they log in.
[25:13] Rob: So, those were the two options, to e-mail your list or put a splash screen on log in.
[25:18] Mike: One more option is to directly reach out to people based on some criteria that you put together. So, if you’re going to say, “Okay. Well, these people who have not logged in for more than a week or two weeks, I’m going to reach out to them and I’m going to start asking them some questions to try and figure out why they’re not logging in and learn what it is that’s preventing them or causing them to not log in.” And that’s helpful for you to determine what level of engagement is typical for your users. But in addition, you can find out if there are ways to help bring them back in to use your software more often, to make them more dependent upon so that they will use it more often, so that they don’t cancel down the road because a lot of times there are ways to predict who is going to cancel and who isn’t based on the usage of your software. And that may very well be that if somebody hasn’t logged in for 7 days or 14 days, that could be an indicator that they’re going to cancel soon.
[26:10] On the other hand, it may not. They may only need to log in once a month or twice a month or something like that. It really depends on what your application is but those are the types of things that you’re going to want to be able to find out from these people and calling them and talking to them directly to the phone versus through e-mail or through having them send you a feedback through a splash page. There’s almost no substitute for talking to somebody on the phone and asking those questions directly.
[26:34] Rob: Absolutely. Now, in many of my apps, we don’t even ask for phone number when people register so we don’t have them. But I think that long term, if you have customers who do stick around, collecting their phone number over the course of your relationship with them will help with a lot of things. It’ll if they have billing issues, it’ll help if you want feedback from them.
[26:53] Now, let’s take a look at four different options kind of services that you can use for collecting the feedback in an intelligent way because the wrong way to do this is to set – tell someone to, “Reply to this e-mail with your feedback,” or “Just send us a e-mail at feedback@ your domain name .com,” because what you get is this big mass of e-mails if someone then has to go through and try to pars out what people are saying.
[27:18] A better approach is to have some kind of lose – at least loosely formatted form that feeds in to some type of spread sheet or database or an app or something. And so that’s what we’re going to look at now are four different approaches to doing that. The first one and it’s probably the one that I use most often because it so amazingly simple to set up. It’s fast. It’s free. It’s pretty cool. You go in to Google docs. You create a new spreadsheet and then in the menu, you can just create a new form from that spreadsheet. And so, you create several columns in the spreadsheet and when you create the form, you can just put a text box and say anything someone types in to that, put in to that column of the spreadsheet. And literally like 5 minutes, you can get a reasonable looking Google spreadsheet form up on the web, on the public web. You just share it everybody and then, you know, has long URL and you just include that URL right in your e-mail or in you splash screen, you know, ask people to go and check it out and give you some feedback.
[28:14] Now, you have to be careful here. You don’t want to constrain the feedback too much. If you have specific feature options that you’re thinking about and you want people to rank them or you want people to select one of the five or something like that, then you can definitely ask them some strongly type of questions but I also encourage you to have a text box or a text area where people can do an open ended feedback and open ended suggestions because that’s only going to provide kind of new ideas that might this person creativity. It’s more of a brainstorming session.
[28:40] Mike: So, one that I’ve used before is Wufoo and I really like Wufoo for putting together the surveys because you can tightly define what it is that you’re asking the users and then on the output side, you can export those spreadsheets. You can then take those spreadsheets. You can load them in to the Google spreadsheets or you can just take a look at them and you can use them inside Excel and you can filter them in any way that you want. Wufoo is actually what I use to solicit a bunch of people initially as my early access users for AuditShark. So, I took all those people and you know, had them fill out Wufoo surveys. I posted a link on my blog and just have people fill it out. It’s very quick, very easy to do. The surveys themselves are pretty easy to format. Obviously, Wufoo is a paid piece of software as opposed to Google spreadsheets.
[29:22] Rob: Right but Wufoo allows you so much more flexibility and you know, it is free up to looks like three forms and a hundred responses per month.
[29:30] Mike: Right.
[29:31] Rob: So, give a fairly – user base that could use, you know, you could use it for but it’s also 15 bucks a month if you want to go beyond.
[29:36] Mike: Yeah, it’s not that expensive.
[29:38] Rob: Yeah and did you know what Wufoo is named at? So, it’s a combination of Wu-Tang clan and the Foo Fighters.
[29:44] Mike: [Laughter]
[29:45] Rob: This next one is a service called Qualaroo and it used to be called the KISSinsights. And you know KISSmetrics, right? They also own the KISSinsights. They sold it to Sean Ellis.
[29:55] Mike: Oh, really?
[29:56] Rob: And Sean has since – he already had an app going that was dealing with like rating of free apps. It was called CatchFree.com or something. He was doing customer development. He learned about what these apps actually wanted and so, he went and acquired KISSinsights and renamed it to Qualaroo. And what it does it essentially allows you to put a really simple pop up survey. You can put it on the public website. You can put it inside your app but it’ll just sit there with a little plus thing and it’ll bounce up after a certain amount of time and you can ask really simple questions.
[30:26] The nice part about this, how it goes beyond what like Google spreadsheet or Wufoo does is you can put a different survey on each page and you can give all different types of configuration variables, right? So, you can make it pop up only once per customer, once per customer per week or whatever and you can get specific feedback about that page, how they’re using it, what they’d like to see improve, any feature request, that kind of stuff. So, this might actually be something that you could do more of an ongoing basis. I think you might get too much feedback if you do that like more feedback than you can use. It’s something to think about using. It’s definitely not cheap. It used to be free and I think it’s like 80 bucks a month now. So, it’s a non-trivial amount of money for this kind of thing but if you’re looking for surveys where you can ask specific questions about specific pages, I do…I do think it’s a good service.
[31:10] Mike: I’ve definitely seen this particular type of form before. So, it looks very familiar and I can definitely see signing up for this for like a month or two months just to get the data that you need and then cancel the service because you’ve already got that information. I mean I think you’re right. I think going and taking this to an extreme is just not going to help you very much. But once you’ve got that information that you need in order to improve your product or improve your website, then the software has served its purpose.
[31:35] Rob: And rounding this out, the last couple of services I want to talk about are UserVoice and Get Satisfaction. There wouldn’t be a podcast episode about soliciting feedback if we’re not going to include these. So, I’m not a huge fan of UserVoice and Get Satisfaction. I think they do a very good job of getting feedback and if you have a massive user-based. I mean 10,000 customers/users or more who are going to give you feedback, it is – these are both good options for you because they allow up voting and I think down voting. There’s a lot of options for it. It’s for amassing a lot of data in to a useable format.
[32:09] However, unless you have that large audience, it can seem like a ghost town like if you get your UserVoice thing up and you put a little tab on left side of your website whichever one was doing a few years ago, if you only have a few hundred or even in the low thousands of users, a lot of them are going to participate and you’re going to have some feature requests that are on there but not a lot of votes. I really question the value of something like this trying to have it up there as an ongoing thing because as we said earlier, when you stop learning anything new, you should stop asking for feedback. And pretty quickly, you’re going to watch the features move to the top that you should implement and you’re going to watch the other one just kind of flail. And once you have that information, in my opinion, the UI distraction, the noise of having that that little tab on the left-hand side goes away as well as people who log in to your site a lot of times are going to start tuning that out visually.
[32:56] And so, these aren’t necessarily something I recommend. They have been popped for options for a long time. Actually, if you’re listening to this and you have use this ongoing and you just love UserVoice or Get Satisfaction, I’d be interested to hear your take on it because at this point, I have great success with, you know, e-mails and splash screens and the other options we’ve talked about.
[33:14] Mike: Yeah, I totally agree with – basically you want to have this critical mass of people who are actually using those services because if they’re not, it does look like a ghost town. If they don’t see anything like this, they’re going to assume that lots of other people use it. But if they see that you’ve put up UserVoice and you’ve only got, I don’t know, 10 or 12 different comments on there, they’re going to rightfully assume that, “Oh, well, maybe he’s only got 20 or 25 users. What are other people using instead of this particular product?” And then at that point, you could have this mass exodus. I’m not saying that, you know, using UserVoice is going to cause that but you have to be careful about what the perception is of the users who are using your product and the information that are going to glean from these types of services.
[33:58] Music
[34:01] Rob: Now, we’re going to look at one listener question and this one is about going moving from contracting to consulting products. It’s from Vlad and he says, “Hello. Thank you for all the experience you guys share. It makes me really evaluate what I do for a living. I have a strategic question and I’m hoping you can help me find the answer.” Basically, Vlad is working as a contractor and he works through recruiting agencies and ultimately, he wants to get to selling products. The issues he says that he works a lot of overtime. For instance, this month, he booked 201 hours.
[34:34] So, that means moonlighting becomes really problematic. He can’t build a product because he can’t allocate enough time to it. He says taking time off is not really a possibility as the client’s attitude is usually that everyone should work as much as they possibly can. So, he’s considering moving to consulting. He hasn’t done it yet but he says he’s looking at finding his own consulting clients, charging a weekly rate that’s roughly two times over his current rate is and during an inevitable gaps, he would have enough money that, you know, would cover that and he would work on the product.
[35:02] But he says, “What I don’t know is if this is actually better than contracting. The idea sounds good on paper but I’m curious is I’m not accounting for some things that will not allow me to allocate enough time for my product. Finding client is an obvious unknown for me. Presently recruiting agencies do all the footwork and I just have to give them a cut. So, my question is would finding and closing the deals actually take so much time and effort that building a product would become impossible?” So, there are few other questions after this but why don’t we tackle that one first.
[35:32] Mike: My view of this kind of thing is that finding new customers can be extremely time consuming and if you find one customer who ends up being an extremely long-term customer, then you’ve got it made. I mean that’s a golden opportunity at that point but you know, if you start finding because of your rate, you end up finding all of these much shorter term contracts that don’t last nearly as long partly because your rate is so high, then you’re going to run to this issue where you’re going to have a lot of down time. And during that downtime, your primary focus is not going to be working on your product, it’s actually going to be finding your next contracts because you don’t know how long that’s going to take and that’s one of those problems that is never going to go away. It cannot be solved by spending a little bit of time on it. It’s an all consuming effort to try and find those new customers because you don’t know when it’s going to be. It could be one month, it could be a week, it could be a day, it could be six months. You have no idea and because of that uncertainty, you’re going to have to sit there and you’re going to have to devote the time to finding those new customers rather than spending that downtime working on your products.
[36:39] So, my advice would probably be to stick with the people who are feeding you that work and kind of go by the rules that we’ve kind of talked about in the past episodes of this podcast where you basically have to have it at least a couple of things you either have time, money or expertise. And obviously, you have the expertise. You don’t have the time but you probably have the money. So, you could probably outsource the development of other product as long as you know what that product is going to be and that way, somebody else is building it for you versus you spending your time doing it. And then you can do code reviews in your spare time which admittedly is probably not a lot of time but it really doesn’t take a lot of time to do a code review of somebody’s code on a daily basis as long as you stay on top of it. If you wait a week or two weeks or three weeks to do code reviews, it’s going to be a lot of time and effort to do it. But as long as you allocated a little bit of time each day or each week to go ahead and do those code reviews, you should be fine.
[37:30] Rob: Yeah, one thing I left out – Vlad’s e-mail is pretty long so I summarized it but one piece that he mentioned is that most of his contracts are six months to two years long and so that’s why he’s looking at moving in to what he’s calling consulting which is the shorter geeks. I was in quite a similar situation maybe 6, 7 years ago. The thing to think about is if you have so much work, you’re working 200 hours a month, then you can be pretty picky about the work you accept and that’s a situation I found myself in was I had more contracts than I could possibly do and that allows you to start dictating some of your terms. As Mike said, the first thing is you either have time on your expertise. You obviously have expertise and I bet you have a lot of money because you’re working so many hours and you’re billing contract or rates.
[38:15] So, the outsourcing is a great idea. I think acquiring an app that someone else had built to give you a head start is another good idea. I don’t think if you’re billing, you know, a triple digit rate that you should spend several hundred hours building some SaaS app that you can hire someone to build for much less cost. This is a common situation for people to be in. The second piece is that you can kind of start dictating what you want to do, right? If you’re working 200 hours a month, think about talking to the clients that are hiring you. I know that I did this. These aren’t necessarily easy conversations to have but letting them know that you can stick around but you can’t keep working – what is that? I guess that’s 50-hour a week. It’s not the end of the world. But if you have a family and that can be a problem.
[38:56] And ultimately, moving down to part-time which is something that I did. I’ve moved down to four days a week and then three days a week and this was all as like a contractors/consultant. That allows you time to…to build your product. But I would think about it before doing that because if you are billing all this time at this high rate, then why give that up? Why not look at getting an app out there, getting it launched, getting it marketed and outsourcing as much as you can. At least getting it to a point where it’s making enough money that it can fill in those gaps. So, even if it’s bringing in a thousand bucks a month, well, you can back off, you know, maybe to 40 hours a week. And then once it’s making a few thousand bucks, you can back off a little more.
[39:34] So, it’s much more of a gradual approach. I agree with what Mike said, moving from contracting to a more short term freelance work, double the price, I really question that approach. I think you’re going to spend so much time finding the work and handling all the business aspects of it that you’re going to be better off in basically in the situation you are and figuring out how to make that situation work for you. Hope that answers your question, Vlad.
[39:56] Music
[39:59] Mike: So, if you have a question or comment, you can call it in to our voicemail number at 1-888-801-9690 or you can e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 118 | Anti-piracy methods, HitTail, AuditShark and other madness
Show Notes
- Protecting against software pirates
- Actions to take when a software pirate steals your software
- WPEngine
- Micropreneur Academy
- WishList Member
- YSlow
- DotNetInvoice
- Mike’s Twitter handle: @SingleFounder
- Rob’s Twitter handle: @RobWalling
- AuditShark’s Twitter handle: @AuditShark
- HitTail
- GoDaddy
- TheSSLStore.com
- Comodo
- GeoTrust
- Trello
- thestartupkids.com
Transcript
[00:00] Mike: This is Startups for the Rest of Us: Episode 118.
[00:02] Music
[00:11] Mike: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
[00:19] Rob: And I’m Rob.
[00:20] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Rob?
[00:24] Rob: I’m doing good, Mike, aside from the fact that I don’t like anti-piracy code in DRM. Yesterday morning I wake up and I have an e-mail from our virtual assistant Andy who’s trying to log in to the Academy, micropreneur.com. He’s doing a little admin work and the WishList plug-in that manages our membership just keeps telling him, “You need to validate your product code. You need to click this button and validate the product code.” We’ve had this thing installed for four years, right? And although we’ve moved servers a few times, I mean we’ve never had to go through the step again. And it turns out that if you try to log in, it wouldn’t let us do anything in the WishList admin and then if you log in as a user to the Academy, it was deathly slow. It was like 20-second page load times.
[01:04] And so I’ve e-mailed WP Engine. I’m trying to run YSlow. I eventually e-mail WishList and as it turns out, they have piece of anti-piracy stuff in their plug-in that calls back to their server and if it can’t validate it by hitting their server, then it slows your site down. And their server was down. They told me the next morning that it had been hacked but that’s new to hearing there [Phonetic]. It was, you know, I tried to hit their server. I couldn’t hit it and so, I figure that that was the issue. And sure enough, when they come back up, everything worked again but it was just, ugh, it was like slap to the forehead, you know, like who does that? I mean honestly, I’ve heard of maybe one or two other vendors doing this and to me it’s such a single point of failure. It’s such a way to piss off thousands of your customers.
[01:50] Mike: I understand the mentality but it’s – I don’t want to say it’s the amateur mentality but it’s the mentality of people who feel like they’re probably not necessarily offering enough value or they’re too scared of pirates to understand that the people who are building real businesses are actually going to buy licenses for it.
[02:08] Rob: Right and actually you’re one of the first people who I had heard say that. This is like maybe 2005, 2006, you had a couple of blogs post on it and we’ll link those up in the show notes but you basically said because I always of the mindset, you know, like in the Shareware world, the MicroISP world, people would always have the license code and you know, in order to use it, you needed the specific license thing and you basically came out and said I don’t think that’s the right way to go and I think that hurts your customers, your paying customers more than it stops the people who are trying to pirate your software.
[02:35] And that was where we’re at the decision for our DotNetInvoice and we were looking at doing some type of registration code anti-piracy thing and we decided not to after reading your post and doing a little more research. But everytime I run in to this now and when I’m the customer and it causes me a great deal of pain and or a lot of angry e-mails from users, I totally think back to that argument of if you’re really a small vendor, the anti-piracy stuff is typically not worth it.
[03:02] Mike: That’s totally correct. I mean even the other way to look at it is how much time are you – and effort are you going to spend as the vendor supporting those people who are legitimate customers who really did buy your product and all you’re doing is you’re…you’re pissing them off and you’re making their lives miserable. And on top of that because they’re talking to you for a support help because your anti-piracy mechanisms aren’t working or there are something, you know, going on that’s making things slow or your server got hacked, it doesn’t really matter what the issue is. Every minute that you’re spending time working with those customers is a minute that they’re pissed off at you and a minute that you’re not getting worked done. So, you’re basically killing time on multiple people because you want to implement stuff that will theoretically help you but at the end of the day, it really doesn’t.
[03:48] Rob: Right and I think your argument in the blog post if you want to defeat pirates, keep releasing new versions of your software because nothing discourages someone from pirating your software more than seeing that they have an old version of it and that they can’t get the new version.
[04:01] Mike: That kind of came about because I had some software that I was publishing back in probably 2002, 2003 and I was selling it and I had put copy protection software on it and it gotten cracked and then we released a new version and then that got cracked and then we released a new version and then that one didn’t get cracked. And I don’t think that it was because somebody couldn’t crack it because it was the exact same encryption code, it was just the new version. I think that whoever was doing it, they just got bored and they said, “Ugh, I’m not going to bother.”
[04:28] Rob: So, I started the day off with a rant, you’re going to start it off with some positive news. Did you get an e-mail from someone?
[04:33] Mike: Yes, I did. So, last Thursday, I was having an absolutely horrendous day. There were tons of stuff that was just going right. And I got an e-mail from Bob Ropp [Phonetic] who said, “Just want to let you guys know that I really love the show. I found it searching through tech podcast about six months ago and I’ve been a loyal listener ever since. Thanks, guys and give up at the good work.” And as I always said, you know, it’s just kind of made my day.
[04:52] Rob: Very nice. I realized we haven’t mentioned our Twitter handles in quite some time. So, if you are a listener to the show and you’re not following Mike and I on Twitter, check us out. Mike is Single Founder and I am Rob Walling.
[05:05] Music
[05:08] Rob: Have an update on AuditShark? So, what’s the news?
[05:11] Mike: Based on your previous comment about Twitter, I started working on the AuditShark Twitter account and following a bunch of different people and just trying to get a small following there and I’ve got it up to around 40 or 50 people in three days or something like that, four days. I haven’t put it any extra time in to it since then but I’m starting to work on the process that I can hand to somebody and say, “Hey, I want you to start tweeting out links and stories and news articles to help grow that following a little bit.” And then in terms of the website itself, I roughly doubled traffics since November and December levels. So, I’ve been doing some content marketing and SEO that is kind of starting to pay off at this point. I got to go back and take a look at some of the inbound links and some of the different keywords that I was looking at as potential targets to go after for SEO but it’s a matter of kind of prioritizing those and putting up some new articles.
[05:59] Rob: And what’s the AuditShark Twitter account?
[06:01] Mike: Oh, it’s just AuditShark, @AuditShark.
[06:04] Rob: So, people who are interested in hearing about security world, is that what you’re going to be posting links about?
[06:09] Mike: Yeah. So, I haven’t kind of fully fleshed out my strategy for it yet but what I’m thinking about doing is kind of going to a bunch of new sources and trying to figure out what links would be relevant to the people who would be following the account and what sort of security things are happening in the world. So, for example, recently, there’s been a lot of problems in the Rails community because there’s been some pretty significant, I don’t want to say backdoors but security vulnerabilities that have kind of come out where you can take control of a server and basically run arbitrary code on that server even if the application is designed in a secure way because it has a problem to do with the framework itself, not necessarily the way that people are using it.
[06:49] And of course, it’s a problem because if your Rail server gets compromised, it means that they can get access to anything that’s on that server including the database and, you know, your customer data and then they can use that to go in to other servers. And just by doing a little bit of matching between different Rails applications, you could start whittling down to figure out, okay, well who between these two applications is using the same password on pretty much all their accounts. And then you could use that to launch massive attacks against some pretty major sites on the internet, you know, anything from Amazon or you know, Microsoft, Oracle, et cetera.
[07:21] I mean if these people are truly using the same e-mail addresses and passwords on all those websites, it would be very easy to go in to them and do different things and especially when it comes in to the things like banking. I mean because people use — if you’re reusing those usernames and passwords or the e-mail addresses, it can be a huge problem. So, I’ve been looking at that a little bit and trying to decide. I’ll say in how far in to that rabbit hole I want to go and I’ve actually reached out to a couple of people in the Rails community and see if they would want to use AuditShark to audit their servers to help monitor for changes of any critical system files. So, for example if the new user show up or a new software gets installed or if some of the code libraries are out of date, et cetera and I’ve gotten some responses from that [0:08:00] so I’m looking at those right now.
[08:02] Rob: Nice. So, if folks are interested in that kind of stuff, I see that’s what you’ll be talking about on your Twitter account.
[08:07] Mike: Yup.
[08:08] Rob: So, on Sunday morning [Laughter] I got an e-mail from both you and my HitTail product manager saying, “Your SSL cert is expired.” And what it have – this is totally me dropping the ball. When I acquired HitTail, it was maybe 18, 19 months ago, the previous owner had a 2-year SSL cert and she had bought it on February whatever two years ago and I don’t know if you can transfer ownership. I should had just bought a new one to be honest but it was on the server I’m working and I was able to export and re-import it when I moved servers and just never thought about it and so bam, right in the middle of – it was probably early Sunday afternoon Pacific Time, the thing just stops working. So, at least the website was up, the marketing site worked but you just wouldn’t, you know, when you click to register that’s SSL because they ask for credit card number and I wasn’t getting any trial.
[08:56] So, the kicker is I went in – I knew it was a GoDaddy SSL cert and of course, I go to GoDaddy to try to just renew the cert and I realize – that’s when I realized, I don’t actually own the cert so there’s no way that I can just renew it. So, I generated a new request on the server and I go to GoDaddy to try to fulfill the request and they say, “You can’t take out a cert for – a Wildcard cert for this domain name because one already exists in our system and it hasn’t been purge, doesn’t get purged for weeks after that.”
[09:23] So, I had to then call GoDaddy and I have to tip my hat to GoDaddy. I’m shocked at how good their customer service was over the phone on a Sunday afternoon and they – the guy I got on with their SSL Department and they purged the old one. I sent in the request and they turned it around in like 10 minutes. For a Wildcard cert, I was really impressed and oh, total time taking was about an hour from the time I heard, you know, from you and my product manager but it was a little stressful for sure. I didn’t know because I kept imagining back in the day, you’d wait 24 hours to get an SSL cert back and I was really hoping it didn’t laying in to Monday.
[09:57] Mike: It depends of what type of SSL cert is you’re getting. So there’s [0:10:00] this thing called an EV cert which is Extended Validation which gives you the – it’s not just the little lock icon in your browser bar but it also gives you the name of the company itself. So, if you like go to PayPal or Bank of America, they tend to have those Extended Validation certificates and it’s supposed to signify to the end user that, “Oh, we have done an extended background check on this company and that will take you several days or even a couple of weeks to get through.” But with yours, I mean it’s not an Extended Validation. So, you don’t have to worry about it and they can generally turn those around pretty quick. I get most of mine through either the SSL Store Comodo or GeoTrust and their turnaround time on most of them is, you know, minutes. It does not take fairly long at all.
[10:43] Rob: Yeah. So, that was good news. It was just a minor…little minor hiccup for Sunday afternoon. Luckily, it got resolved quickly. But Derek is my product manager for HitTail and I just start calling him by his first name. He e-mailed and then texted me and that’s what I needed was the text because I hadn’t check the e-mail that day.
[10:58] Mike: Cool. I just finished up writing an e-course. It’s an introduction to how to use Altiris for my Altiris training site and I’m working on building a landing page for it but I’m also touching base with some of the Altiris sales engineers to see if they’d be willing to tell people about it because they’re in the field all the time and they are talking to customers. So, these customers are obviously asking…going to ask them questions about where can we get resources and they will tell them but at the same time, if they knew about my site and they will probably tell them about my site and get more publicity for the site just because the sales engineers tend to have a lot of clout when they’re talking directly to the customers. They take their thoughts and opinions on whether or not a site is a good resource. They treat it as if they have some authority.
[11:38] So, I think that if just by touching base with some of my old contacts through that network, I can definitely get some more people to the website because the traffic is pretty much kind of leveled off back to where I had originally thought it would be. I don’t see it going significantly back up without some extreme measures [Laughter] just because the site doesn’t give very much traffic for the keywords that I’m targeting and there’s not much else I can target [0:12:00] for those keywords.
[12:01] Rob: Right, small organic SEO market which makes sense. What’s the e-course for? Is it to get SEO traffic? Is it going to rank for keywords or is it to give away and exchange for an e-mail?
[12:11] Mike: Yes, it’s to give away and exchange for an e-mail address and that because I’m getting a lot of people to the site or I’m getting, you know, enough people to the site but my conversation rate isn’t as high as I would like it to be. So, what I’m trying to do is first I want to get e-mail addresses from those people. Send them some valuable relevant content that they’re going to read hopefully on a daily basis and then try to draw them back to the sites who in an effort to get them to buy or to maybe sign up for other e-courses or something along those lines.
[12:36] Rob: Got it. Yeah, in terms of getting e-mail addresses, our landing page at GetDrip.com, I started sending some my paid traffic to that purely as a test of a couple of things, I’m split testing some different headlines and body text of the landing page. And that’s worked out well. There’s already one variation of the test that had just completely flopped and so that tells me that that particular, you know, that verbiage that I was using is suboptimal for this market. And what I like about the paid acquisition is it’s not that I’m trying to actually make money out of it, it’s just that it’s just so easy to send a bunch of traffic to it really quick and kind of see how it behaves.
[13:11] At this point, I’m getting around 20% of the traffic that I’m sending from these two niches to provide their e-mail address. So, I’m fairly happy with that. It’s not like outstanding but it’s definitely, you know, these are cold e-mails, people who’ve never heard of me or heard of the app or anything. So, the fact that they’re willing to type an e-mail in to our landing page is a good sign at this point.
[13:33] Mike: Yeah, that’s cool.
[13:34] Rob: I want to go back and update folks on my Trello versus paper competition, right? I’ve always use paper for to-do list and I moved to Trello a couple of months ago and although I’m still using – I have a Moleskine notebook, the black notebooks that I use for all my long-term items in my big thinking and you know, anything that’s like goals and such. But I got to be honest, man, I have not going back to paper for the to-do list since I wet to Trello and I have the iPhone app [0:14:00] and I have it on the iPad and I have it on my desktop and I loved that it’s all synced and then I can just pull it up anywhere and add stuff, move it around. It’s just – it really is someone finally cracked that nut. You know, Fog Creek finally cracked it and I really – I have not found a reason not to use Trello still. It’s pretty crazy.
[14:17] Mike: Yeah, it is. You know, it’s funny because…it’s funny that you bring up Trello because I was trying to think of how to move some of the UI for AuditShark in to the Cloud just because I was talking to the developer that I have working on AuditShark and we were trying to hash out where would be the best place to host all the stuff because right now everything is kind of split between the Cloud and then you have to have this policy builder and it gets kind of complicated for the user and it’s like well the easiest thing to do would just be have everything in the Cloud.
[14:44] So, we were discussing how to kind of rework the UI and make it easier to use and one of the things that I thought of was the way that Trello allows you to kind of drag and drop things between the different columns and I was thinking that will actually might make a very good UI for putting the policy builder in to the Cloud because I was trying to figure out how to do that, you know, using like grids and tables and adding things back and forth between different columns and within the policies and control points. And it gets…it gets a little bit complicated and hard to explain unless you’re kind of familiar with some of the different terms and how the policy builder works but basically the idea of being able to drag and drop objects on the screen, that right there would solve like 95% of those issues.
[15:26] Rob: Very nice and I wonder if…if Fog Creek use the framework or somebody you could piggyback on and say you don’t have to build it from scratch. You know, I imagine that you use jQuery or something that makes that easier.
[15:35] Mike: Actually, they…they posted a couple of links on their blog that tell you specifically what the Trello stack is. So, it started out – let’s see here, they say that they’ve got CoffeeScript, Backbone.js, HTML5. They have this thing called Mustache which is a templating language and then they also have Socket.IO and WebSocket, Ajax Polling. They’ve got MongoDB, Redis and a couple of other different [0:16:00] things in here. And I probably wouldn’t necessarily need all of these things but the fact is that they tell you basically what the use for that. So, if I wanted to build something that was similar that was specifically designed for AuditShark, then I could probably do it. It would be significantly better than putting much any other security product that is out there on the market right now. So, you know, it’s definitely something for me to think about. I just don’t know how much effort it would take to build something like that.
[16:26] Rob: Yeah and if you haven’t build something like that before, the learning curve will certainly be steep on the initial implementation. It’s nice that they – that’s why I like about software companies. There’s a lot of them will just say, “Here’s how we did this.” You know that Fog Creek published that so that other people can go build cool stuff is really neat and that’s not done in a lot of industries. You don’t see manufacturer showing you their process as a rule. I mean that’s pretty cool.
[16:48] Mike: You know, with software – I mean anybody can make it. It doesn’t matter whether you tell everyone about your idea or tell nobody. I mean the fact is as soon as you launch it, everybody is going to take a look at it and say, “Oh, well, I could build that and you know, this is probably how you did it.” And you can kind of reverse engineer most things. It’s just you kind of to have to put any effort and do the work in order to rebuild something like that. It’s not exactly a big secret.
[17:09] Rob: Oh, I have a couple last updates and then maybe we’ll dive in to a few listener questions. Regarding HitTail, January was the best month ever. It actually had – not only that but I had more trials than any month in the past and previously, June of last year had the most trials because it was the year or the month that the AppSumo deal ran and it sent a bunch of traffic. So, it’s a good kickoff to 2013 and what’s nice is since it’s a 21-day trial, February should actually look good too. We got an unexpected write-up in Search Engine Watch. The head editor had seen a HitTail ad and had been familiar with HitTail from years ago and so, he wrote us up and then invited me on their Search Engine Watch Podcast and obviously, that traffic would convert really well.
[17:50] And I guess the thing I realized, man is it’s like the more you’re out there, the more you have ads running, the more you’re just being written about, the more we’re getting contacted by joint venture partners, people who say, “Hey, we want to e-mail our list, you e-mail your list, you know.” Search Engine Watch finding us – I mean it – it just increased that, you know, that lock surface area like Justin and Jason talk about. I mean just being out there creates more exposure and more area free to expand your business. So, it’s definitely working out or at least it did work out in the month through January for us. So, trying maintain that growth and hit our growth goal of 2013 and on track for that so far.
[18:25] Last two update, one is I watch a movie on Netflix streaming. It’s called Indie Game: The Movie. I highly recommend it. It’s about some software developers who are building indie games and it’s – Indie Game is like it’s just one or two developers. So, they’re not associated with a studio. It is really cool. It captures the emotion, the struggles, the anxiety, how long it takes, how the internet can be really cruel if you put out a game and people don’t like it. I mean it’s very closely parallels what we do as developers also theirs world is a little more subjective, right, where people can just say your game is cool or not. At least with software, if we try to sell on value, we have a bit of, you know, a different measuring stick but if you’re all in to the software development stuff, I really recommend Indie Game. It’s nice because it’s free on Netflix if you have a subscription.
[19:11] Mike: The other problem with selling game is either people like it or they don’t and if people don’t like it, there’s not a lot you can do to save it. It’s not like a business application where it doesn’t meet somebody’s needs and you can tweak it until it does. But with the game, it’s really hard to tweak a game so that people like it if it was just a complete dot or bust from day one.
[19:33] Rob: Right. It’s much more hit-based. It’s like writing popular music or making a movie rather than building software for businesses.
[19:40] Mike: Yup.
[19:41] Rob: All right, last thing is our editor had a comment about last episode. Someone wrote in they were talking about the organic delivery idea in New York and she said that she – there is a grocery delivery service in New York City that delivers organic as well as other fresh food and it’s called FreshDirect. She said it’s a huge operation and it’s hard to imagine one person being able to coordinate that. She said FreshDirect is been around for a number of years and she sure they started out small but now they have a giant warehouse, thousands of trucks and drivers and deliver thousands of items within 24 hours of ordering them. There’s no subscription fee. There is a delivery fee at a minimal amount you can spend.
[20:18] You know, we touched on that a little bit just because there’s competition doesn’t mean that you shouldn’t do something if you can figure out a better way to do it. But if you are going to go head-to-head with a big incumbent player, you do need to figure out how are you going to be better or different than they are and obviously, the logistical aspects of handling all the perishable food is quite a big thing to bite off, if you’re wiling to do that and that’s the kind of thing that interest you, by all means.
[20:40] Mike: The problem with fruits and vegetables and things like that is you run in to a lot of what’s called shrink in the retail industry and shrink generally refers to any goods that are lost but when you’re talking about produce, what you’re generally talking about there is stuff that just could not be sold because it wasn’t any good. So, whether the…the apples have bruises on them or something just went bad, you know, the milk expired, things like that, there’s a lot more shrink in the produce industry than there is in the…the general retail but general retail does have shrink as well. I mean if clothes or something like that get ripped or if a TV set – nobody wants the TV set where the box is kind of destroyed a little bit or mashed in on the side. I mean that’s why in…in the past grocery stores used to take can goods and if the cans had dents in them, they would sell it to you at a discount. And now, they don’t do that anymore because people would take the cans and they just drop a whole case of them and say, “Oh, well, I get 50 cents off of each of this.” So – but shrink is definitely a big concern in an industry like that.
[21:39] Music
[21:42] Rob: Let’s answer a few listener questions.
[21:44] Mike: So, the first one comes from Glen Lawson [Phonetic] and he says, “Hi, Rob and Mike. Once again, thanks for continuing to produce the podcast. It’s been my favorite for several years now. Rob, I have a question for you. You’ve mentioned that you brought on a friend to be product manager for HitTail with the hope that he’ll one day take up more responsibility with allowing you to focus on new products. Once you’ve launched or acquired a product and built it up to a stage where others can manage it with little direction from yourself, how do you maintain growth and encourage your staff to be passionate about the business and have a desire to grow it? Would love to hear your thoughts. Regards, Glen.”
[22:12] Rob: There’s a couple of ways to do this for sure. First thing is you need to hire the right people, right? You need to hire someone who is generally going to be passionate and excited about whatever they work on because if they don’t have that, if you just hire someone who’s kind of ho-hum about any job they do, then you’re not going to be able to instill that in them. The second thing to think about is you want to hire someone who’s specifically excited about startups or about growing startups or about being a startup founder. It’s not something that I think can really be taught but if someone is naturally excited about this concept of being a software entrepreneur, then it’s awesome for them to learn on the job and that’s…that’s what I found with Derek is just that he has such a thirst for knowledge and had such a desire to learn all the [Audio Glitch] of the business that I mean I remember, you know, being this back in the day, right? It’s like you’re a kid in a candy store because you’re doing what you really enjoy everyday and you’re getting paid for it and you’re just learning all these awesome stuff.
[23:05] And so, those are the first few things that I think will carry you a long way and then at some point, I think if you’re looking at long term, you do have to think about putting your motivations alongside the person that you hire. In other words, if you make out really well in the businesses well, then you guys should both do well. And so that product manager should ultimately either get a share of profits or equity. And that’s again, may not be the first year or two that they work but if you’re thinking long term, that has to be something in the back of your mind because someone is not going to work forever just to put a bunch of money in your pocket and they are always going to work harder if there is some more motivation to do that either again make more money in terms of equity or a profit sharing?
[23:46] Mike: Well, I mean I think a lot of what you said rings through for most people but the other…the other side of the coin is I used to think this exact same way as well. You know, what’s in it for the people that you’re hiring? And the fact is not everyone wants to run their own business. I mean some people just want [0:24:00] to be able to go to a job and do that job and it doesn’t mean that they’re not passionate about it. It just means that they don’t want to have to think about it when they’re not working. So, those are the type of people who are perfectly content to work for you. They’re not going to actively be looking for the next ride to catch, you know, the next business to jump on to. I mean they want a job. They want a steady income and they want to be able to enjoy their career and as long as you’re providing them with an environment where they are actually enjoying what they do, then you don’t necessarily have to worry about that too much. And again, it depends on what type of person you hire and what they’re interested in. But you can definitely run in to those people who are more entrepreneurial in nature and want to go on and do their own thing. But there’s definitely contingent of people who don’t want that.
[24:48] Rob: Yeah, that’s a good point. And I think I have a…I have a hard time giving advice in this area because my end is one, right? I have only done this once and I found a certain type of person who works in a certain situation and at this point, I don’t know if I could replicate it yet. With a lot of the stuff that I give people advice about, I have done it many, many times in a repeated fashion, all the marketing, the starting, a company they’re growing, you know, the product revenue and all of that stuff, it’s something that I feel confident that I have done it enough times that I do have, you know, an end of 10 or an end 20. My sample size is just larger and so with this one, I have thoughts on it about how I would proceed, but to be honest with, you know, really I only experience to one person. I have lesson I like [Phonetic] to stand on in terms of giving others advice in my opinion.
[25:31]Mike: The next one is from Brian and he says, “I’m currently struggling with the decision whether or when to hire employee number one. My dilemma is I don’t quite have the revenue yet to support this but I’m also very bogged down in task that I’d like to hand off. So, it’s the chicken or the egg thing. An employee will help free me up to focus on growing revenue but without the revenue, I can’t afford an employee. Should I grind it out as I’ve been doing mostly solo with study but slow growth and hire someone later on when I can afford it or should I hire someone sooner and think of it as an investment just for a faster growth? Thanks, Brian.”
[25:59] I think that the thing that you have to do here is take a look at the tasks that you have that you are spending a lot of time on and try to figure out which one is you’re spending the most time on and which of those tasks could be outsource to somebody at a part-time rate. I don’t know as I would go down the path of hiring somebody fulltime yet but you can definitely find people who are looking for part-time work and especially if you’re doing things like support tasks where those types of things can be scripted and you can give somebody some general guidelines and say, “This is my general blanket policy. If somebody asks for a refund, give it to them. If somebody wants you to help them out, go ahead and help them out.” And you’re paying them on an hourly basis. You can kind of have them touch base with you if they have any questions about that stuff but what you’re really looking to do is free up some of your time without having to pay for them to do it fulltime for you.
[26:47] And that allows you to kind of slowly get in to it and the one thing I would caution against for most people in general is if you’ve never been a manager before, it’s very hard to jump in and just take on somebody as a fulltime responsibility and have to manage their workload at all times. If you’re having problems trying to makes end meet and pay their salary, the best suggestion that I would have is don’t do that. What you need to do is take them on a part-time basis and gradually move in to that role and if it doesn’t work out, then that’s fine. I mean you’ve only taken them on as a part-time employee as a opposed to a fulltime employee because once you start taking someone on as a fulltime employee, that’s a huge responsibility because especially if they’ve left another job to work for you and if it doesn’t work out and a lot of these situations do not work out the first time because you – people are notoriously terrible at hiring people.
[27:38] So, you’re better off hiring somebody on a part-time basis kind of testing the water and see how things go and then move on from there if things work out. But if they don’t then, you know, cut the cord. Move on to the next person and at that point, you’re not really torpedoing somebody’s career or taking them away from a job that they realistically could have stuck around in for a while.
[27:59] Rob: That’s exactly what what I was going to say. That’s why we talk so much and we have done this over and over. We did it with support and in the Academy, with support with HitTail. I could go on and on literally, five, ten times I’ve done this, hiring someone who starts off maybe only at 2 hours a week and they’re purely on as needed basis and that’s where nice project management tool like oDesk that actually tracks their time. There’s things that can really track someone’s time accurately and then like you said, you’re only on the hook for the time they work. They can linearly scale up as the time expands and in fact at this point, I now have multiple people working over 20 hours a week and I have one person working 40 hours a week but none of them started at that point. They all started working a couple of hours a week and allowed me to have the free cash flow to then go invested in other things in marketing approaches or in development cost. There’s no reason to tie up a bunch of money in a fulltime employee. I really don’t see any reason to do that.
[28:57] Music
[29:00] Rob: Our next e-mail is actually not a question. It was…it has a subject cool stuff found. It’s from Carl and he says, “A film is in the making that I thought might interest you and your listeners.” And so if you visit startupkids.com, you can see a trailer for a movie, that’s a documentary about young web entrepreneurs in the U.S. and Europe. Did give them my e-mail address because I’d love to hear when it comes out but it has interviews with the founders of Vimeo, SoundCloud, Kippt, inDinero, Dropbox, Foodspotting and several others. So, he said it should be out in March of 2013. I’m in to this type of thing, right? You know, I love movies that observe, you know, all the stuff that we go through and to see other people talk through it is just fascinating. So, thestartupkids.com.
[29:40] Mike: And I think our last question for today comes from Ricardo and he says, “Hi, Rob and Mike. Thanks for the show. We’re a small SaaS company from Brazil with nearly 250 customers. Obviously, we love to get new customers and hate it and I really mean hate it to lose them. I hate it to the point that I’m disappointed with the whole business and mad with anyone who crosses my path for a few hours after each cancelation. I know I should be doing more marketing to get more customers more quickly. What I want to hear from you is what is your strategy for when you lose subscribers from the moment someone request a cancelation to subscription to the moment you actually let them go, how do you deal with it? What sort of metrics do you think? At what point does it start to concern you and more personally, how did it affect your mood in the way you treat your products? Thanks very much, Ricardo.”
[30:19] Rob: First thing to think about is to look at your product and figure out are you past the point of product market fit meaning have you built something that people want to use, that solves a problem that they have and that you are marketing to the right market that really needs it. So, if you are at 250 customers and they are happy and they love what you’re doing and you are able to find new customers and bring them in to your app, then the answer to that would be yes. You know, if your churn rates relatively low, you know, typically when your growth starts going up, your churn goes down, then you know that you “hit” product market fit, okay? If you’re before that, then every cancelation is an opportunity to talk to that customer, find out why they canceled, find out if they just are never going to use your app or if you’re missing a single feature, if you’re marketing to the wrong people. You know, there’s a bunch of stuff that you can find out for them and that’s a whole another conversation but that’s the kind of pre-product market fit discussion.
[31:10] Once you’re scaling and you’re marketing and bringing new people in, churn is a fact of life, period. You’re going to have people that cancel every month and with 250 customers, I hope that number is not a lot of people but in fact in early days of a SaaS app while you’re trying to hone your funnel and hone retention and get all your features in to keep people happy, you can easily have churn of 10 or 20% a month. Now, you can’t have that for very long. You’re obviously losing a lot of customers. 20% churn with 250 customers is 50 customers a month and you’ll essentially be at zero in five months. So, realize that but no matter how well you hone that and how good you get that number, how low you get it, you are always going to have a few people that cancel.
[31:51] So, I think there’s kind of the mental aspect of it. You said you get, you know, angry when people cancel, I would take yourself out of that loop so that you are no longer receiving that e-mail and having to cancel them. If it really does impact you and impacts your productivity in the way that you’re working with other people, I would say give that to an assistant or a tier 1 support or something and let them handle that because you don’t need to know about every single cancelation if they’re comments given in the cancelation which you should always ask why are you canceling and require, you know, at least X characters. If their comments given in that, then yes, maybe you should see all of those every week and be able to read through them but in terms of you getting angry everytime they cancel, then you should probably remove yourself from that process.
[32:32] Second thing I think is you have to look at them in aggregate and that actually takes away a little bit of the emotion from it and what I mean by in aggregate is look at the percentage. So, tracking churn percent which is the number of customers who canceled in a month divided by the number of customers you have at the beginning of that month is, you know, an absolute key SaaS metric. So, you need churn. You want to calculate the lifetime value and of course, the monthly average revenue per customer. But in terms of churn, you also want to break it up in to multiple durations because with SaaS or with any kind of subscription, you’re going to have higher churn in the first period that there are customers. So, for some businesses, it’s the first 30 days has really high churn and that can be 20 or 30% and then after that, it’ll settle way down and by down, I mean it can be 2% or 5% like really low areas. In other businesses, your first 60 days have high churn and in other’s first 90 days.
[33:28] So, you’d just have to calculate yours and you see, you watch and look when that churn drops off and then I would look at your first X days, So, for you it’ll be 30, 60, 90, probably. So, I’d say, you know, look at your first 60 days churn and then look at your post 60-day churn. And those are really the numbers you want to track on an ongoing basis and you want to either have a graph of those that you can look at so you can easily see the change in churn or you want to have a table, you know, worst case, you have a table of your current month plus all your previous months so that you can eyeball it and see is my churn going up or down. When your churn is too high [0:34:00], then you have to implement a bunch of stuff to try to bring it down and again, that’s probably an entire podcast or maybe a MicroConf talk that needs to happen, talk about specific ways to bring churn down. There are a lot of different ways to do it. Those are my initial thoughts on it. Mike, do you have anything to add?
[34:16] Mike: I like a lot of the things that you said regarding what metrics to take and you know, when it should start to concern you. Those are good things. I think the number one point that you said was to kind of remove yourself from that feedback loop if it’s really affecting the way that you work and the things that you’re getting done. That I would say is probably the single most important thing to do.
[34:36] The one other thing that I would point out is that this is definitely a situation where it seems like you’re taking these cancelations personally and the one thing that I would point out is that while you’re getting these e-mails and somebody is actively telling you, “Hey, I’m really not interested in your product anymore,” it’s not a lot different than somebody coming to your website and looking at your products and saying, “I’m not interested.” And that 98% of those people who come to your website are not interested and they leave. But for some reason, those people are not irritating you, it’s these people who have actually gone through that extra stuff, have looked at your product, have probably made a couple of payments and at that point, that’s where, you know, you’re getting these feelings of anger from these people who are saying, “Well, you know what? I’ve tried it out. I really don’t like it. It’s not for me. It’s not going to fit for what my needs are.”
[35:24] And my point is that there is not a lot of difference between those two and there’s this much larger group of people who are telling you no and the only reason you’re taking it personally is because you don’t get that feedback loop. So, again, just kind of going back to what Rob said, definitely take yourself out of that, have somebody else e-mail them back, ask them why they’re canceling. Get the information that you need and then just give it to you and aggregate.
[35:45] Music
[35:48] Rob: That wraps us up for today. If you have a question for us, call our voicemail number at 888-801-9690 or e-mail us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt [0:36:00], used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 117 | Door to Door Customer Development, Courting Feedback from Customers, and More Listener Questions
Show Notes
Transcript
[00:00] Rob: In this week’s episode of Startups for the Rest of Us, Mike and I are going to be talking about hiring an offshore developer, how to court product feedback from customers and using content aggregation and curation as a business model. This is Startups for the Rest of Us: Episode 117.
[00:15] [Music]
[00:23] Rob: Welcome to Startups for the Rest of Us, the podcast that helps designers, developers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:33] Mike: And I’m Mike.
[00:34] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike two weeks into your AuditShark early access?
[00:41] Mike: So, things are going pretty well there. I guess over the past week or so we’ve had some minor set backs because both of the primary developer that I’m using and myself decided to upgrade our computers and he went the route of migrating his machine from Windows 7 to Windows 8 whereas I’d just wanted to upgrade the hardware and debated going to Windows 8 but I didn’t want to spend all the time associated with finding drivers and dealing with all the headaches of reinstalling everything. So, I just took a backup of my machine and then migrated it to the new hardware and just restore everything and I was done. [Laughter] Meanwhile, he spent I think three or four days trying to download all the software and get everything kind of back to where things where.
[01:19] Rob: Yeah, everytime I get a new machine an upgrade, I typically budget myself about 16 hours start from just a barebone instance, install Windows and install everything. But last time I got an SSD drive probably two iterations ago and that time dropped to between 6 to 7 hours because the installs are so much faster. I think Windows now installs in what, 10 minutes or something on an SSD. So, it really cuts a lot of that time out. But with yours, you just did a backup. So, you still have the – because you know how Windows develops that craft over years. I mean if you run Windows for five years, it just gets slower and slower as the – what is it called, the registry? It’s more bogged down than all that stuff? So, at some point you’re going to upgrade [Phonetic], right?
[01:58] Mike: Maybe, I mean I was able to just dropped it in to a back up and then do a complete restore on to the new hard drive and I had an SSD drive that I was going from. So, like my old set up was one SSD drive as my primary partition and that was my C drive and then I have another drive that – or two drives that are mirrored so that I can do my, you know, basically have everything else on RAID and that’s like one and a half terabyte drive. And then I have a third one that I have all my backups get dumped to. So, what I did was on my new machine, I just took my backup drive, popped it in, restored with the backup of my primary drive on to my new SSD drive and then pulled the two drives over out of them and as a mirror and then restore the secondary partition on to that so that my second drive came up in mirror is hardware mirroring instead of software mirroring and everything was pretty much fine. I mean everything is back to the kind of the way it was. The only difference is that now I have six cores instead of two and I’ve got 64 gigs of RAM instead of I think 10 it was. Things are going well.
[03:00] Rob: So yeah, I know that’ll make sense but oh – did you get what I’m saying like overtime if you let a Windows install, there’s run and running on 5, 6, 7, 8 years even 2, 3, 4 years, it just gets slower and slower that’s I —
[03:09] Mike: I know what you’re saying but I don’t really run in to that problem as much because I don’t install like tons and tons of stuff that I just know that I’m never going to use or that I’m going to use minimally. I tried to keep my system relatively clean. But I mean the thing is with an SSD drive, all those performance problems tend to go right out of the window.
[03:25] Rob: Yeah, I’ve still seeing them with the Dell. I have a Dell laptop and I built SSD and yeah, it’s definitely better than it used to be but when I upgrade to a new system, I make it a habit. I feel like I want to start fresh with the brand new OS install. You know, that gets rid of all that junk that’s been lying around. I only install maybe a dozen programs at this point because I’ve — so much as web-based. But it’s still – I don’t know. Maybe that’s an old school way of thinking. I’m interested if other folks still feel that way or if they also just kind of move their stuff as a backup, you know, or if they start from scratch.
[03:55] Mike: I think one of the issues you can run in to is there’s a lot of stuff that runs in the background on startups. So, like if you start using Evernote and Dropbox and all these other tools and services, eventually, they’re going to be starting up when your machine starts up. And what I found was that there are certain things that with an SSD drive, you’ll run in to problems where a service tries to start but there are other dependencies that haven’t quite loaded yet or haven’t finish loading so you have to change some of those services to start up as a delay of start instead of automatic start when the operating system heads. The other thing that you can do is I think you’re on a MSConfig and what that will do is that will allow you to see everything that’s starting up when your machine boots up and you can just go in and disable anything you want.
[04:39] Rob: I do all that. That’s my standard install procedure. On day one when I install a brand new OS, I do both of those things and I actually have two or three other steps that I go through to optimize it but still, over the years the stuff just gets slow. Windows is not Linux and or you know, or Mac OS and that’s why I like starting over from fresh.
[04:55] Mike: I get it. I just haven’t run in to those problems. I mean my old machine was a lot slower than this one just in general and then switching over I got a state of three SSD drive. So, it’s 6 gigabit instead of 3 gigabit and then the processor as I said is significantly faster. I’ve got three times as many cores in it plus it’s just a better architecture in general. So, I don’t see any of those performance problems that I was seeing before.
[05:20] Rob: If anyone out there runs in to or doesn’t run in to that problems Mike and I are talking about, I’d be interested to hear from you in the comments for this episode 117. So, for the second time in a little under three weeks, I found myself on the Central Coast of California. So, I hit Pismo Beach the last couple of days with the family and then the kids and the wife went home and I’m in San Luis Obispo for a couple of days. And what I love is it’s off-peak time, right, because it’s now…it’s a low season and then the week in that hotel rates are really good. So, you can get serve right on the beach for less than half. And I’ve found that this change of scene for me, really ignites creativity like I find myself wanting to dive in to new projects and thinking a different way about the projects that I’m already working on.
[06:00] So, Steve Blank says get out of the…out of the building and go talk to customers, I think you need to get out of your town or just get out of your space every once in a while and give yourself time to — even if you’re just working from cafés and you’re not even doing kind of the vision questing that I talked about where you take a retreat, I just feel rejuvenated and like totally psyched up right now to work on my projects.
[06:19] Mike: You know, one thing we forgot to mention on last week’s podcast episode was that MicroConf sold out in just between 51 and 52 hours.
[06:27] Rob: That was really cool. So, first we did an internal launch to the Academy and we sold more tickets than we thought we would. And then when we actually did the launch to our early bird e-mail list which really wasn’t even a public launch. It was just sending out e-mails to the list. We sold out like you said in just over 48 hours. It was…it was pretty crazy. That gives us a lot of time and flexibility to focus on the event now, you know, to like spend the time recruiting speakers and adding elements to the event that otherwise, in past years we haven’t had the time to do because we’ve been consumed with marketing it. And in fact, we’ve actually added a couple of more speakers since you’ve talked…you and I have talked about it lately. One is Erica Douglass from Whoosh Traffic. She had a web hosting business that she sold for a million bucks when she was, I don’t know, 26 or 27 and now, she’s on to a new startup. Dave Collins from Software Promotions who’s been doing SEO and AdWords for like 10 years and he’s going to be talking about SEO and then mostly confirmed.
[07:17] And I haven’t even talk to you about this but Josh Kaufman who’s…he’s a bestselling author of the book called The Personal MBA which I’m actually – I just finished listening to the audible.com. He has agreed to come but we just haven’t worked out all the details but he – I saw him on the attendee list. He actually tweeted out and said, “Hey, I’m going to be there.” And I’m just thinking, “Wait, I’m just reading your book.” There’s a bunch of stuff in that I took notes on that I’d love to hear expanded on. So, you and I agreed to invite him. So, I’m pretty excited about to have a line up shaping up. Those – because they’re an addition to Jason Cohen of WP Engine and Hiten Shah of Kissmetrics and of course, you and I.
[07:49] Mike: Yeah, that’d be really cool to hear from those guys. Obviously, some are the ones who were there last year but definitely looking forward to hearing from both Erica and Josh. That would be interesting.
[07:57] Rob: So, last thing before we dive in to several listener questions we’ve lined up is I was listening to last week’s episode which we had talked about the stage one through five and had to move people from stage three to stage four. And in my mind, I wanted to clarify kind of the discussion there but I think both of us made it sound like you could only find success if you’re in stage four, if you’re a stage four person and I don’t believe that’s true. I think that you can move faster if you’re stage four because you work better with people. I also think you can grow bigger because you work better with people.
[08:27] But I know a lot of people who are stage three and who truly are doing that microISV micropreneur, you know, not hiring contractors, not working with other people. It just takes you a lot longer to get there and eventually, you hit a ceiling. And in fact, if you talk to me maybe two years ago, that was – I was still in that mindset being my own person and just wanting to…to work alone and do everything on my own and that’s not a bad thing. It just matters where you want to go. Once I’ve made the decision that I wanted to go bigger, then…then the ideas that I was working on and I wanted to go faster than I was currently moving, that’s when I really made that switch through the “We’re great” mindset rather than the “I’m great” and trying to build up a small team to help move things along.
[09:09] Mike: Yeah, that’s absolutely right. If that was an impression that we gave, then I apologize for that. It wasn’t necessarily the intent because you can definitely be successful in stage three. You can definitely be successful in stage four. It’s just that with stage three, you’re limited by your own capabilities and success primarily because you are not willing to give out tasks to other people because you don’t feel like you can rely on them to get the results that you want. So, you really in essence self-limiting at that point. It’s not that you can’t be successful because you won’t be successful, it’s just that there is an upper limit to the size of the projects that you can undertake because you…because of that inability to hand out work to other people or to involve other people in your processes.
[09:48] Music
[09:50] Rob: So, today we’re going to be running through several listener questions and we’ll tackle as many as we can within our time constraints. Our first question today is about door-to-door customer development and it’s from Jeremy Frederick. And he says, “I’m currently involved in an investor-funded startup. It’s at learneverywhere.com but we are really struggling to sell the product and I’ve started other projects to hopefully have something else catch on. I launched the website called marketplacedeliveries.com. It might not be the typical site you talk to people about because the really work isn’t the website or software but the execution of the business which is online grocery delivery that focuses on local organic produce. This is definitely a cold market for me but I run an ad campaign in only the Orlando area that converted $100 to 67 page views.” So, 67 clicks I’m assuming.
[10:37] “…and 10 people adding their e-mail to the mailing list. I then printed 130 flyers which was $40 plus two hours of time and went door-to-door in my own neighborhood to pass them out and converted 26 of them to visit the website, 24 of them entered their zip code and 15 entered their e-mail. What I wanted to ask you is if you’ve ever done door-to-door advertising and if these conversion rates are reasonable. Do you think there is a market here and your personal advice on a business like this one? Thanks, I’m looking forward to listening to more episodes.”
[11:05] Mike: To me this is extremely interesting because of the fact that I don’t think that most people when they are trying to build a product of any kind go door-to-door and ask people if they’re interested in, you know, buying. And I mean I understand this is more of a B2C type of opportunity but still, I think that it’s very unusual. I know Patrick McKenzie did it when he was trying to build his appointment reminder software. You know, his is also more of a B2B product than a B2C product. So, I find that just in general very interesting.
[11:35] One of the things that I’m looking at here is that, you know, it says that there are 67 page views. I don’t know what the conversion rate on that is. Is it – was he paying a dollar per click or something like that? I might look at the percentages there to see if it’s a reasonable conversion rate but beyond that – I mean some of the other numbers that you threw out passing out flyers and getting 26 of them to come to the website, 24 of those people entered in their zip code, that to me seems like there is extremely high interest there because if they’re going to come to the website and then you’ve got 90% of them entering their zip code and then 15 of those of people entering their e-mail, you’re talking 90% conversion rate and then a 50% conversion rate. I mean those to me seem really, really high.
[12:16] The question is what type of margins can you get out of it and what is it that you’re actually going to be selling to them? To me, this is definitely worth exploring more. It’s kind of hard to give the specific advice without some more specifics to the numbers. But I would definitely pursue this a little bit more and really, what you’re trying to do is to verify whether there is not a market to be had or whether there is not a viable product. And that’s what you’re really trying to prove is to…is to disprove your theory about is there a market and you’re working theory should be, “I believe that there is a market.” You’ve gone around. You’ve done a lot of these things and to me, it just looks like you’re trying to disprove that but all the numbers are coming back and saying there are people who are very interested.
[12:53] So, I think you’re definitely on the right track and I would advice proceeding forward and start looking at the numbers and what sort of profit margins you can get and what it is that you’re actually going to be offering them and work from there.
[13:04] Rob: Jeremy did mentioned a bit of the conversion or you may had missed that one when I was reading it but he said it was a $100 for 67 page views and 10 people added their e-mail to the list. And so that comes out to about a buck fifty of click and then he paid a $100 for 10 e-mails. So, that’s $10 per e-mail. Now, the conversion rate is about 15% of visits from those cold ads to e-mails. They’re not – 15% is not bad. What is not great is paying $10 to get an e-mail at this early stage because from that list, when he actually launched this, my guess is he might convert somewhere between 10 and 30% of people to customers. So, you’ve essentially paid up to a $100 to acquire a single customer or you may have only paid, you know, $33.
[13:46] Well, that’s not terrible. I mean you can totally build businesses on that type of cost to acquire a customer. I think the next step I would take is figure out what – how much profit you think you’re going to make over the lifetime of a customer and take a guess — obviously, this is a recurring thing, I’m assuming you’re setting them not for a subscription. And these types of subscriptions of physical goods are really popular right now in terms of, you know, you think about manpacks.com. There’s a bunch of what — paleopaks.com. This space is hot but physical goods are – especially perishable goods like you have like you’re dealing with organic stuff, obviously, it’s going to come with a lot of logistically headache and it’s going to be tough to scale really large.
[14:26] So, I would take a serious look at just in the Orlando area, getting this up and going. Hiring people to do these door-to-door deliveries, cost of gas, cost of insurance, all of that stuff, how much you really think you’re going to be able to make per delivery and then say if a customer sticks with this on average for four months or six months kind of just pick…pick a number out of the air. And if you find someone who is doing something like this and get a better lifetime estimate even better. But for now, just take your best guess of what you think it might be and then look, “Wow, do I think I’m going to make enough money from each customer to actually make this worth all the effort of basically ramping up a warehouse and logistical delivery type stuff,” because that’s…that’s a non-trivial thing to do for sure. But I certainly admire your ambition, you know, way to go going door-to-door and setting up ads. I mean, you know, you really taken that the customer development stuff to heart and I think…I think you’re doing a good job with it.
[15:13] Mike: Yeah, I did miss it and kind of eluded to what the conversion rate is in there. I do understand where you’re coming from. I don’t necessarily disagree with anything that Rob just said. The…the other thing that I thought of that I would just want to mention is that the conversion rate that you’re getting from the people that you went door-to-door to and talk to them, my inclination is to believe that by explaining to them exactly what the product was that you’re offering, you probably give them a much better idea of it and then they would get from coming to your website. So, your conversion rate there is going to be a lot higher because you have the time to sit there and talk to them and explain everything to them as oppose to relying on them coming to your website and you know, looking at it for 3 seconds and making a gut judgment call as to whether to give you their e-mail address.
[15:56] Rob: Right and then the thing you have to think about is obviously, as the owner of the business, you’re not going to [0:16:00] do that, right? You’re not going to walk door-to-door but could you hire people on Craigslist either for a cut of, you know, you can give them – unique URL that they hand out and then they get a certain percentage or they basically affiliate or that you pay them, you know, 8 bucks an hour or 8, 10 bucks an hour just to walk around and pass out flyers. And from there, you could also figure out cost to acquire customer based on your success and you know, you’re now training kind of a – it’s a door-to-door sales force and again, that’s nothing I would – I have any desire to do personally but if that kind of thing excites you, it’s certainly a creative approach to acquiring customers and most people, you know, wouldn’t have the guts to step up and try to do it.
[16:37] Mike: Well, I think the other thing to mention is that we kind of titled this question as being door-to-door customer development and that’s really what I would take this as not necessarily looking at this solely as an effort to acquire customers but using that door-to-door experience to kind of figure out mentally what it is that people are actually looking for and you can kind of guide that conversation when you’re talking to people and I believe that obviously that, you know, Jeremy did do this because he got a significant number of those people who actually came to the website to put in their zip code and then entering their e-mail address.
[17:11] Rob: Right and my hope is, Jeremy, is that when you went to those customer’s doors that you also ask them, you know, not only, “Would you be interested in this,” but “How can I make this offering better,” or try to determine from them like Mike said actually doing customer development and not just doing pre-sales because there’s a difference, right? Pre-sales is when you say, “I have this product. It’s this price,” bam! You know, “Will you buy?” And that’s a good question to have sometimes but also customer development is that next step of saying, “How can I improve that? If you won’t buy, then why not?” And figuring out if you can slowly change your…your offering to make it something that appeals to…to more people and is perhaps more scalable for you. So, thanks for the question, Jeremy.
[17:47] Our next question is on hiring an offshore developer. It’s from Anthony Robson [Phonetic] and he says, “Like most, I want to start off the e-mail saying how much I love your show. I’m non-technical but web savvy and you guys still provide quality advice for founders like myself. Although non-technical, I know plus have learned a lot about marketing my product. I have also found several unique ways that I will try to market this idea. Now, let’s get to the meat of the burger. I want to hire an offshore firm to develop version 1 of my website. I’ve listened to your podcast regarding outsourcing to sites like oDesk. However, do you guys know any resources that can teach me how to hire an offshore development firm?”
[18:23] Mike: So Anthony, the first thing I would say is you should probably go back and listen to episode 64 which is titled Hiring a Managing Remote Developers. And this episode we talked a lot about hiring, you know, remote developers, what you should be looking for. I think that one of the issues you might run in to is the fact that because you’re non-technical, you don’t necessarily have a firm grasp on how to tell the difference between whether a remote developer is going to be good or not or just – or developer in general because, you know, they can blow smoke and you won’t know one way or the other whether they know what they’re talking about.
[18:54] What I would probably advice in that situation is come up with a simple task, ask three or four different people to do the same thing and then just look at the results. Kind of gage how well they get back to you and what the quality is of the stuff that they’ve delivered. So, if you ask them to build a very basic web app that allows somebody to register and log in. It shouldn’t take terribly long for people to do that and the more responsive they are to your request, I would go with the person who is more responsive and is willing to work with you and you know, provide those deliverables quickly as opposed to somebody who, you know, you think maybe really good but they take a little bit longer. They’re trying to fit you in between other projects and you farm this work out to, you know, 3, 5, 7 different people at the same time, you know, to kind of depending on what your goals are and whether or not the first couple of people work out. And you get those mini projects back from them and you just figure out who is most comfortable to work with and that’s probably what I would advice as a good starting point for hiring somebody who’s technical when you are not technical.
[19:57] Rob: Yeah, I also recommend checking out Codecademy, Codecademy.net I think it is. And basically, it’s a free online tutorial of kind – that gives you an idea of how to code and they have a few hundred thousand people have gone through it. But just to get an idea of what it takes to code will really give you a bit of insight in to how to hire a coder. And I think if you’re hiring it for a specific technology like PHP or Rails or .NET or even mobile, but if you learn that technology at least a bit, you’re going to have way more insight, you know, in to how to hire someone.
[20:29] Our next question is about how to court product feedback from customers and it’s from Paul. And he says, “I’m just setting up a new SaaS app. My question is how do you court product feedback from your customers especially around enhancement request? I was thinking of using an enhancement tracking tool to allow people to have visibility. I noticed on the HitTail website, you just have a contact this box and providing feedback on enhancement, et cetera is not necessarily promoted. Your thoughts are appreciated.”
[20:54] Mike: So, I think there’s two different things that I can think of here. One is using something like Olark and other one is using something like UserVoice and you can integrate this in to your products to help gets you direct feedback from your customers. The other thing you can do is you can build something yourself where, you know, you have this built-in customer feedback loop or you just have like a contact or something like that that they can e-mail you and maybe a little dashboard where the user can ask you questions and your replies will be there.
[21:23] But really, it seems to me like it might be a much more efficient use of your time to use one of these third parties that just has an integration component where you just plug it in to your software and it allows them to directly interact with you and they handle all that legwork because you don’t want to be building things that are not going to directly contribute to getting your product out the door right now. Your primary focus should really be getting the product finished and then working with the customers to, you know, make sure that everything is okay, what’s you…you’re building is, what they want, et cetera. But you also want to have some of these conversations up front so that you’re not building something that nobody is actually going to pay for.
[21:59] Rob: Yeah, I’ll start by saying regarding HitTail and the reason were not asking for customer feedback right now is because we’ve…we’ve hit a sweet spot where we have found a need that we filled with our product and we’re not doing major feature development right now. We already have a list of my long of different customer requests and we have those in a big Google doc and at some point, I’m probably going to pull them out. We’ve decide that, you know, for the further development and do maybe a Reddit style social news thing where – I think UserVoice allows you to do this. You just put a bunch of issues in there and I would probably just e-mail all of our existing customers, send them there and say, “Which of these are you, you know, interested in.” Vote up, vote down type of thing. That’s why I would handle that.
[22:39] We just been pulling them in via e-mail and what I found is that there are people who really want something build, they will in fact e-mail you and let you know even if you are not encouraging it. But if you want a higher volume of those – of that feedback which we, at this point, I don’t want a higher volume, but if you do, then having a splash screen when someone first logs in that they see this screen that says, “You know, we want your feedback.” That’s a great way to do it. Sending an e-mail during your trial sequence or shortly after the trial sequence ends to every customer and asking for feedback will also do that and then having like Mike said having a little UserVoice tab on the side of your website or the side of the app that basically is kind of pinging them all the time to give you feedback.
[23:17] That can work okay but it won’t, you know, people become blind to that, right? There’s the banner blindness where you just kind of tune it out but that at least help you manage the feedback certainly. So, if you’re really looking at to develop your product quickly and you want a lot of feedback, then those are three approaches I would look at implementing. So, thanks for your question, Paul.
[23:34] Our next question is on content aggregation and curation as a business model and it’s from Derek Kuntz and he says, “I look forward to each new podcast like a child waiting for Christmas. Thanks for your time and effort. You’re both are really a gift. I would love to hear your thoughts on content aggregation or content curation as a business model. Let me explain. I’m in a very early stages of launching realcardio.com, a workout app for busy people that allows you to get a workout in less than 20 minutes. Users build their own workout playlist based upon what types of workouts they want to do i.e. cardio, strength training yoga or even a workout mix. Right now, all of the video content is coming from YouTube and it’s only a small sample set. Eventually, much more content will come from YouTube and other sources like Vimeo, Dailymotion, et cetera. It’s much easier to pull content from existing sources like this rather than try to market original content and then host the data myself. Besides, almost every video eventually find this way to YouTube and anyone can embed a YouTube video. What are my potential pitfalls from monetizing a site like this? Derek.”
[24:33] Mike: Wow, I think that your major pitfall would be some sort of problems with legal problems. I mean I don’t know what the legal agreements are around a lot of those video sharing sites but I would be curious to know whether or not embedding them in to your application would be accepted or approved in their eyes. Now, you may be able to give around that, you know, with the technicality by saying, “Well, I’m not embedding your content in to my application, all I’m doing is linking to it.” But that doesn’t necessarily mean that they’re not going to turn around and sue you anyway.
[25:05] So, I would be really cautious about that kind of thing just because you don’t know what those legal issues are. You may want to approach them and ask them questions about it but, again, you may just find yourself in the same boat. They may say one thing, you know, the developers may say one thing and then the lawyers may say something different.
[25:22] One of the things that I can think of is that this seems like a very crowded market and I feel like the problem that people have is not necessarily finding music or videos or something like that to entertain them for the 20 minutes, it’s more of the fact that it’s a problem getting them to the gym. The whole market just feels very saturated to me.
[25:39] Rob: Yeah, in addition to kind of the Terms of Service stuff that Mike talked about, I questioned how much value you’re actually providing at this point. Basically, you’re in a non-business niche so it’s – I know it’s a fitness niche which is fairly popular but it’s still dealing with consumers basically and consumers are really price sensitive. So, it almost feels like a YouTube channel could do this. If someone has a good YouTube channels of yoga workout videos and someone who could just go and get all their yoga from their and if someone, you know, wants to get a different type, they can go to cardio workout says an example and get it from there. So, I won’t feel like I would – if I was working out that I would want to go and manually build a playlist like you’ve shown, right?
[26:15] I think that maybe a better value proposition is to think like Pandora where someone can enter an interest or enter a single video and get a bunch of videos just like that that are really good aggregated workout list that you build automatically. Even then, I don’t know of any consumer that’s actually going to pay a recurring subscription for that. I really think you’re going to need to be ad-driven which is a challenge because there are already ads in the video. From what I know the terms of service you can’t strip ads out or…or add…ads over them. Yeah, I – this is more of a challenge. It’s more of that raise some funding and get really big type idea. I don’t see that there’s going to be enough – that you’re going to be able to generate enough traffic and provide enough value to people who aren’t just going to go to YouTube and maybe put together their own playlist or just, you know, pick a few of their favorite channels and use those if they want to.
[27:04] I just thought of one other interesting angle. If you made a mobile app and it was basically a mobile workout app of aggregated videos, that could – or that may already exists but that’s another interesting thing but, you know, again, you’re going to make 99 cents or 499 or something off that single sale and I guess you could have, you know, in that purchases like we’ve talked about to expand it later on. Yeah, mobile maybe the way to go with this, mobile and iPad and you know, to kind of tablet driven.
[27:27] Music
[27:30] Rob: Our next question is about paying affiliate income on recurring payments and this comes from Will Claxton [Phonetic]. He says, “Hi, guys. I listen to every single episode and I thought it was about time I send in my own question. I was wondering if I could ask your opinion on something I’m struggling to get my head around. I’ve had about a million ideas for SaaS apps and always figure out a reason or two not to go with them but that’s okay, I know I’ll eventually find one that has all the right ingredients. The question I have is more to do with how to pay referral/affiliates on a monthly recurring revenue model. In all honesty, I don’t want to be paying someone forever for a percentage of the monthly income from a customer they referred to me once. Is that something I’m just going to have to bite the bullet with and do or is there a better option of paying them a higher percentage for just six months to a year then cut them off? I wouldn’t want to pay them a one off lump sum at the start because say the app is 10 bucks a month and I pay them $50 and obviously I’m going to get scammed big time. Hope the question makes sense. I absolutely love the show. Keep up the good work. Regards, Will Claxton [Phonetic].”
[28:26] Mike: I have a couple of thoughts on this. I know that Will seems to think that he’s going to get scammed big time but the fact is that if you have an application that you’re selling for $10 a month and you’re paying somebody $50 a month, then realistically, your lifetime value for those customers has to be at least $50. You’re not going to offer somebody $50 if you’re not going to make $50. So, that’s the first thing. The second thing is that you’re not going to pay an affiliate the second that they send you a customer. What you’re going to do is you’re probably going to wait 30 or 60 days for those customers to stick around and not only just to make sure that they are going to be a customer but to start getting revenue for them and to make sure that they’re going to be around for the long haul because you’re right, I mean they are going to be customers who sign up and they’re going to drop out that first 30 days or within two weeks or something like that. So, you almost might want to put something in there that says, “You get paid an affiliate if the customer stays around past the first month.” So, at the very minimum, you get at least one month revenue from them. So, that way what you don’t have to deal with is you don’t have to deal with all the problems associated with the people who are kind of dropping out of your funnel at the very beginning because they aren’t a good target market for, you know, the type of product that you’re offering.
[29:34] The second thing that it does is it essentially forces the people who are on the other end because they’re not going to be get paid for 30 or 60 days, it forces them to send you good traffic. And that’s really what you’re looking for at the end of the day. You want people who are qualified leads to come in to your sales funnel and as long as you’re managing that sales funnel well enough, you can pay people upfront. Now, the one problem that you could run in to is that what happens if somebody does start sending you large numbers [0:30:00] of qualified leads? What’s going to happen is that because it’s a SaaS-based business, you’re going to run to this cash flow deficit where you have going to have to start paying your affiliates mounts and mounts of money before you accrue enough money to be able to maintain your status as cash flow positive.
[30:18] So, if let’s say that you have a thousand people sign up, well, that’s a $50,000 that you would have to pay out, you know, about 60 days later but you’re not going to make that $50,000 until six months in. So, you’re going to have this gap between month two and month six where you have to basically have $50,000 cash on hand. Now, there’s ways to manage that. You can limit the number of people that an affiliate can refer to you at a given month. There are probably ways around that if you work with the affiliates and say, “Look, you know, you brought out enough people that I’m going to have to push this back. I can afford to give you the $50 upfront. I’m going to have to make a payment plan with them or something along those lines.”
[30:56] But those become cash flow issues and with any SaaS-based operation, when you find a traffic source that is working well, you’re going to have to have the capital. You’re going to have to feed that source of traffic and you know, with the affiliates, this is definitely a big problem when you are, you know, paying that much money upfront for them. It’s not to say that it doesn’t work. I think that WP Engine does this but they also have funding on the back end. So, they have the cash flow on hand in order to be able to fund this type of operation and do it effectively.
[31:24] Rob: Yeah, I agree with what Mike said…that sounds, you know, sounds a bit complicated. Unless you have someone fulltime managing that program, you’re going to have a lot of little details to think about and to keep people from gaming the system. I think overall, you need to think about what your version is to paying someone an ongoing monthly commission. Commissions for SaaS apps can be for a lay low like 15%, 20, 25%. I mean that’s typical, right? It’s not like the 50% e-book commissions you typically see. So, if you are charging 10 or $20 a month, 15% is only a buck fifty or $3 and that is in my opinion a completely reasonably enough to pay someone if they are referring you a paying customer because you should have a very high margins on your customers.
[32:06] In addition, you’re not going to be paying this person forever because customers don’t stick around forever. Your average lifetime is not going to be very long unless you have a very solid business like a hosting platform but average lifetimes are one year or less. And so, I would seriously consider either going with a 15 or 20% commission and just paying it for the fulltime their customers stays with you or giving the affiliate 100% of the first one or two months payments if you feel more comfortable with that.
[32:38] Now, someone could obviously come in and try to game that system but what do they get out of that, right? If you’re not paying them any more than a customer has paid you. So, it’s not like them sending you a hundred say customers does them any good that makes them any kind of profit. So, those would be the two, kind of the two simple suggestions that I look at doing. With HitTail, we offer a 20% affiliate commission and that is for the lifetime if that customer stays there and for us, that is totally worth. It’s just worth paying that much money because the profit margins are high and that’s enough incentive that we do actually have affiliates now working and sending us customers. We’ve actually had quite a few new customers created in January alone from our affiliate program.
[33:18] Music
[33:21] Mike: If you have a question for us, you can call it in to our voicemail number at 1-888-801-9690 or you can e-mail it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.