Show Notes
- Question from Bootstrapped.fm Episode 23
- Pipedrive
- Comment on episode 154 from Paul Murray about selling to restaurants
- Brian Casel, founder of Restaurant Engine
- OptInMonster and Drip
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I will be discussing advice for selling a startup, how to handle your metrics in those very early days of a SaaS app and when we think an idea is interesting enough to pursue. This is Startups for the Rest of Us: Episode 160.
[00:15] Music
[00:23] 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.
[00:32] Mike: And I’m Mike.
[00:33] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week Mike?
[00:38] Mike: I finally fixed a bug that’s been plaguing my policy developer for a couple of weeks now. It’s basically in the synchronization code between his stuff and the cloud. When we poured everything over from visual studio 2010 to 2012, there were a couple of things in the ND framework model that got lost and the time stamp was one of them. So stuff was getting sent up to the servers and then it just wasn’t coming back down.
[01:02] Rob: Yeah, that’s a bummer. Those kind of bugs are brutal.
[01:05] Mike: Yeah, it was really weird because he would do stuff and then he would save it and he would leave and then you come back the next day and then it would be gone and he couldn’t figure out why.
[01:13] Rob: We’ve had a number of little tweaks like that to make as well. Probably the last 10 days have been pretty tough of working on Drip. They’re these tiny little crisis that keep coming up that we have to handle in real time. And Monday morning at 2 in the morning we got an alert that there was something wrong with our email sending and one domain had been blocked and there was just all the stuff so we wound up getting on it pretty early in the morning on Monday and dealt with it and got it handled and got all the emails on and everything.
[01:43] But this real time stuff of actually needing to make sure that emails are sent and having things working real time is a big deal. It has been a semi-catastrophic week. It’s felt like that. No one noticed and we didn’t have down time and we didn’t have outages or anything like that but there’s just been a lot of stress. That’s what comes whit the recurring revenue and the hosted service and the need for high up time.
[02:04] Mike: Yeah, that’s one of the down sides to the whole SaaS model is just the fact that when something goes wrong, you have to get there and try and fix it before customers notice. Just this past week, we redesigned the entire back end storage system primarily so that we could write better reports and we’ve gotten some complaints that the reports were a little bit slow. So right now the reports are just lighting fast but when we’re first putting them in, there were some issues where not everything was being processed correctly so some of the reports just never got generated. And of course I had to go look at the schedule of when people have different things scheduled and say okay well, who’s going to be affected by this? Was there any data that was lost or was there any data that didn’t make it in or wasn’t saved properly then we’re going to have to account for. So that does kind of suck. But in your case it’s a little different because you’ve got data constantly coming into the system. Right?
[02:54] Rob: Right. And we have so many people. We have enough people using it now that there’s pretty much always someone inside the app either a paying customer or a trial user. We’re not in the tens of users anymore. Once you hit triple digits there’s people all around the world basically able to use it and so it’s a lot of work. I come back to the whole thing of like don’t build a SaaS app as your first app. We “know what we’re doing” I’ve built these before and we know what the up time requirements are it’s still a lot of effort in these early days because we’re working with such a small team. We’re just prioritizing features high and trying to get as much stability in everything in this we can.
[03:33] And truthfully I think the silver lining on this is that when we had database performance issues, it totally sucked for about four days and then we got it upgraded to something that should last, a server that would last us for a year and then we wrote a bunch of queries. It’s good that it feels like it’s kind of fixed for good or at least for the time being and the same thing with the one last week like we’re going to diversify. This thing that got blocked, we only had one domain where we’re sending trough and now we’re going to have dozen or more domains and so if anything else gets blocked, we’ll always have that backup which was a plan we were going to do anyway but now it really gave us the impetus to jump on and do it quickly.
[04:08] Mike: Cool.
[04:09] Music
[04:13] Rob: Today we’re going to be running through a slew of listener questions and comments trying to play catch-up for the past couple of months. Our first question comes from – he actually has an anonymous question. He says I’m one of three equal partners in a Saas app that is less than a year old but its gained significant traction. It has more than 75 recurring paying customers and its growing and the average plan is about $30 a month so it’s in the $2,000 to $2,500 a month range. As promising and valuable as the product and all of its assets are, our partnership is not so promising. Personality clashes, lack of focus and location issues, there’s like a 14 hour time difference with one of the partners, these have all been a big deal and they’re beginning to discuss their options.
[04:55] He says one partner might buy two of us out. Two partners might buy me out or we might seek a third party buyer for the whole thing. So he has three questions and let’s take this one at a time. He says if selling the business as a whole to a third party buyer, how do we go about putting a value or asking price on the business. How do we factor in revenue level, software assets, marketing side assets domain authority etcetera? Second question is if my two partners will be buying out my 33% stake, how should I go about putting a value on that aside from whatever we determine the value of the business to be. Would my personal contribution factor into this? And then the third question is there such a thing as a business evaluation consultant or some kind of independent appraiser to help us figure out a fair selling price?
[05:39] Mike: So my take on this is you could go out and find a business evaluation consultant but it would probably cost you a significant amount of money because they’re going to have to do a lot of digging to get you an accurate value for that. And the more time and effort they put into it, the closer the evaluation is probably going to be to accurate but at the same time it’s also going to cost you more money. At the end of the day, the evaluation is only really what somebody’s going to actually pay for it. In terms of selling a business off, those are some really tough questions. I think that there’s definitely – I guess sense of ownership over a lot of the assets and you’re definitely going to probably place a significant amount of value on it that isn’t necessarily going to carry over to what the business is actually worth.
[06:24] I think that’s really common because if you go out onto Flippa for example and you look for websites or apps that are for sale, there’s lots of people out there who are asking prices that are way, way too high for what the app is actually bringing in for revenue and they put such a high value on it because they’re trying to recoup some of the costs of their time and investment and it typically doesn’t work out. People aren’t necessarily willing to pay that. Now your situation may be a little different if your partners are buying you out. I think if you’re trying to sell the entire business to a third party, that third party is not going to care how much time and effort you’ve put into it. They’re going to care about what is the value of this business? What are they going to be able to do with it after they take it over?
[07:03] If it’s your partners by you out, you basically have probably more leverage in that scenario to say look, I’ve put in all this time and effort and I want to be compensated for it because it was a partnership. And if they’re buying you out because the partnership is not working out between the three of you, that’s a different story than you going to them and saying I want out. So I think that you could probably get more money from it from your partners than you would if you went out in the open market but I don’t know what those numbers would actually look like.
[07:32] Rob: If I were in your shoes I probably would look for someone to appraise this and I know some third party folks who are basically online business brokers, they’re reputable. These guys actually know what they’re doing and they know how to deal with Saas apps and e-commerce websites and kind of the stuff that we’d be dealing in. So that would probably be my at worst, that would be my first shot is to talk to this guy and I bet that’d be $500 or $1,000 to get a pretty in depth appraisal from him.
[08:01] Mike: That’s it? Really?
[08:02] Rob: Yeah. Because all you’re going to have to do is provide him with revenue and profit and expenses and that kind of stuff and he’s just going to be able to look at it and run the numbers because he sells multiple businesses a week. I mean really turns them over. So he knows the multiples and how to set prices on businesses that sell. Right? So he does all this for his clients and takes a cut of the sale. He’s just very knowledgeable. So it’s not a process that’s going to take him 20 or 30 hours to value it. And especially it’s not going to be a huge evaluation because it $2,000 or $2,500 a month. Let’s say it did $100,000 a month, that’s a whole different story. You need to be very accurate. There’s a lot going on, tons of transactions coming through, a lot more expenses. But at this simple level at a pretty low revenue rate, I bet that he’d be able to pop off fairly accurate quote almost with just a shared Google doc and 15 minutes of looking at it. And then if you want him to go more in depth, certainly that would cost a little bit of money.
[08:58] So that might be where I start. Now Mike’s point about the Flippa evaluation versus your internal evaluation, that is definitely true because if you go to the open market with this thing, you’re going to less than if you’re selling it someone who knows and trusts you and knows the code and know the business has potential and all of your partners know that. Right? So there’s potentially a premium that they would pay because they just have such intimacy with the app and they know that you guys are taking great care of it. I think the answer to kind of all your questions is to try to find a third party to appraise this and then in my opinion I would first try to sell it to one of the other partners before going to the open market. I just think that’s probably the best outcome. It’s always a tough position to be in. It’s a bummer the partnership didn’t work out and frankly we wish you the best of luck in figuring out.
[09:42] Music
[09:45] Our second question is actually from a podcast. It’s from bootstrap.fm which is Ian Landsman and Andrey Butov’s podcast and Andrey had asked this question several episodes ago. It’s episode 23 of bootstrap.fm and I think we’ll probably just play that right here.
[10:02] Andrey: I’ve been looking at various marketing techniques and trying to grab some of the low hanging fruit, that’s low hanging fruit for me because I haven’t done any of this stuff on the past SEO, all that stuff, AB testing and what not. And it does look like although this advice Saas stuff kind of already lives at the level where the app is liquid enough like there’s a flowing stream of users whether they’re being retained or not, it doesn’t matter. But there’s churn right? Sort of like all the strategies like AB testing and price AB testing and click tracking and SEO and all this stuff that you get to play with is only really liable at that level.
[0:10:47] And then when you’re at the beginning where you have like one sign up and three days and then maybe a couple of it, there’s another sign up later on, maybe a couple days, none of this stuff works yet. You can’t play any of these games. You kind of either have to wait for it or you have to find some other alternative games to play at that level of your app. So if there’s any gurus out there, Rob Walling, Amy Hoy, Patrick McKenzie, whoever is thinking about this stuff and giving advice, optimization for SaaS apps and all that stuff, I’d like to see more content on the early days. And early days doesn’t mean like I opened it up to 1,000 beta testers and 500 of them signed up so now it’s early but you already have churn. I’m talking about like 3 participants and like 10 visitors as a day.
[11:31] Mike: So I think that this is probably a common problem. I don’t necessarily know that I have a lot of great solutions for it. One that I‘m looking into is using – there’s a couple different ways you can do it. You can do it using Trello to kind of move people through what you sales pipeline is because if you get somebody who signs up, the first thing you want to do is you want to make sure that you reach out to them and talk to them. And for your first 50-100 customers, you’re going to probably do a lot of hand holding. So you need to make sure that you reach out to them individually, get them on boarded in whatever way its meaningful because this is not going to scale – it doesn’t necessarily have to either because you can talk to them individually when you’ve only got one person signing up ever 3 or 4 days, that’s not a big deal.
[12:12] So one way is to put the person into Trello and essentially set it up so that you’ve got people moving through a funnel where you’re saying okay, well they initially signed up and then the next swim lane is they’re using the product, are they actively using it, yes or no. Those are the types of things that you want to figure out from them and then you touch base on them and get their feedback, figure out how they feel about it. Is it solving their problem? You do want to have those early conversations to figure out what exactly their problem is and whether or not your application is going to be able to help them with it. If you can get them on the phone, that will definitely help you out.
[12:43] Another option that you can do which does the same type of thing is to sign up for something like Pipedrive where you’re just basically moving people through a swim lane of options and you would manually loop them through until you get them to the point that they’re paying for the product. I think that the strategy is extremely helpful when you’re still in that early beta when you’ve got probably less than 50 customers because you probably don’t have the volume that as you said there was a lot of those sales marketing strategies that simply don’t work until you get to scale.
[13:14] Rob: Yeah, but it’s a lot that’s in line with what you just said. My big thought is at this point you have to have to do things that don’t scale. You have to do a lot of things that don’t scale. It’s going to be basically one on one attention and its going to be almost high touch sales at this point. So like you said, the phone, email, personal emails to the folks, finding out why they’re using it, why they’re not. You recall I had this slow launch that was 90+ days for Drip. And that was basically communicating with and then on boarding like our first 15 paying customers, maybe 20. Now the amount of time that I spent with those customers absolutely wouldn’t scale and it would not be worth it based on the lifetime value of those customers but that’s not what I’m getting out of it. I’m not helping them in order to make that few hundred dollars that I’m going to gather for them.
[14:03] I was helping them use the app and get on boarded so I can find out what issues they were running into so that I could then build an engine that scaled because in this early days I’m manually turning the crank. I’m manually turning that hamster wheel. There’s nothing that’s going to be able to serve a lot of people at that point. So I like to think of it like if I you had a product on Amazon and so people started giving you star ratings, you wouldn’t want to look at them in aggregate yet because when there’s only three reviewers, and if you get a 1, 3 and 5 star, that averages to a 3 star. But that’s not important data. What you want to do is you want to ask the 5 star why they got so much value out of your product and what else you could do to offer the and who they are and how they found you and all that stuff.
[14:43] Then you want to ask the 1 star why they didn’t get the value out of it and then you want to ask the 3 star. All individually, you can’t look an aggregate yet because there just isn’t enough data. So it’s the same thing with your Saas app. You can’t just look at churn rate because your churn rate might be 40% in the first month which it doesn’t even compute. Right? That means like your customer lifetime is 2 ½ months long and it just doesn’t make any sense. So I think at this point, I’d do a ton of hand holding and then the very first thing that I do once you’ve actually publicly launched is that you need to drive more traffic. You can’t optimize unit you have more people in that funnel.
[15:20] And hopefully if you’re a marketer and you have traffic strategies, you can get there in 30 to 60 days to where there’s actually four digits of traffic and certain percentage of people signing up and you can start getting some metrics. If you are still learning marketing it could take you 4 to 6 months just to get to the point where you have enough traffic that you could even think about the optimization strategies like split testing and price split testing and all the stuff that Andrey mentioned in his question. During this time, you really have to pay attention and focus on boarding and focus on what works one on one and how you can then build that into the UI of your app that basically walks them through setup and then a sequence of emails that goes out to them over the trial process and that’s when you’re trying to scale your individual effort that you put in early on.
[16:07] But if you don’t get that learning done where you are doing the high touch part, then you just don’t know enough of exactly what you need to put in the app to get them to their first successful experience with your app.
[16:17] Mike: Something else that I kind of forgot to mention was that when you’re doing this, when you’re working with those people individually, one of the things you have to be able to see is whether or not they’re using your app. And there’s tools out there that you can – there are subscriptions services out there that you can use to help you find this out. But a lot of times you just want to know are they logging in? When is the last time they logged in? And those are very, very simple things that you can just slap a log message into a database to say each person logged in whatever time and then just run a sequel query to say okay well has so and so logged in the past three days or the past seven days?
[16:51] Then before you go talk to them you say hey I noticed that you haven’t logged in three days or since you created your account. Is there a reason why? Is there something I can help you out with? And essentially what you’re doing is you are customizing that person’s experience and then you can take the emails and stuff that you’re sending them, extract them out and then send them out later in an automated fashion once you do get to that scale. But initially you just need to get those interactions going and learn from them to help figure what needs to go into future emails.
[17:21] Rob: Right. And this applies to a SaaS app where you’re actually charging a reasonable amount of money. If you’re selling a mobile app that’s 99 cents apiece, then this doesn’t apply. And if you’re selling a onetime piece of downloadable software even for several hundred dollars doesn’t necessarily apply. This is a common question and there’s obviously no one answer to it. We’ve sat here and given a lot of suggestions but I’m glad Andrey brought it up because I bet it’s more common than we think and I don’t think that those really early days are necessarily addressed that well when we’re talking about a lot of the optimization approaches we do.
[17:50] Alright, so our next question is actually a comment and its from episode 154, its from the comments section on the blog and Paul Murray was referring back to a question that we answered during that episode about someone who is going to try to market to the restaurant industry. And Paul says I spent four months earlier this year on successfully selling mobile web and marketing services to restaurants. Granted you don’t plan on selling this, but might get the nail on the head when he said restaurants are technologically oversee and I was selling products and services that are easy to demonstrate the need for yet so many restaurant owners had their head in the sand when it comes to technology. If you’re going to be planning to sell products to help a restaurant with their back end systems, I can only imagine how hard it might be. Seriously, after my experience earlier this year, I vowed I would never ever try to sell anything to the restaurants again.
[18:40] So that was Paul’s take. Brian Casel has had a different experience with this, a more positive one. You can check out his website at casjam.com and he has a podcast called bootstrap web where he talks a little bit about his product for restaurant engines.
[18:54] Mike: On episode 151 Rick wrote in and said he’d received an email from wpbeginner.com this week that had mentioned a service for building an email list in WordPress. He said that the product was from optinmonster.com and wanted to know if Rob could explain how Drip is different than Optinmonster.
[19:12] Rob: Sure. Optinmonster is actually really cool if you go check out optinmonster.com they basically have an email capture form that is similar to Drip. A couple main differences is 1) Optinmonster is WordPress plug-in so you have to be running WordPress site to use it. The other thing is Optinmonster is a piece of code that you download. It’s a zip file. You install it in WordPress and then you can configure some stuff. But you host everything yourself whereas Drip is software as a service. So it’s a little snippet of JavaScript. You can install it on any website and we capture those emails.
[19:43] Optinmonster is just the capture form whereas Drip captures the emails. We help you setup an email mini-course. We will build your course for you if you have content that we can use in the course and we have a whole email editing interface and we have the email scheduling and you can split test emails in our system. I mean on and on, we’re basically the back end. We provide conversions when people from your list convert to paying customers and we’re starting to put some behavioral and work flow stuff in kind of the emails to say if someone does this then I’ll move into this list or whatever. So we are like an actual whole email provider whereas Optinmonster is just that front in form.
[20:30] Our next question came in via email from David Debour. He’s asking about when we think an idea is interesting enough to pursue. And he says first of all, thank you for all the content you create on your blog and podcast. I’ve been following you for about three years and it’s valuable to know there are others also on this path and to hear a voice opposite the Silicon Valley startup circus. I noticed that you’re working on a few new projects and I’m wondering at what moment do you think an idea is interesting enough to pursue? As solo entrepreneurs we have limited time so I can imagine you did not jump into a project unless you believe it can reach certain goals. For example, a specific revenue target. When is a project worth it in your perspective?
[21:09] Mike: I think that you have the answer to that right in there. Is it going to be able to hit certain revenue goals? And that I think applies more to the products that you’re developing if there’s just a project that you want to work on, you don’t necessarily care about monetizing it then it’s a completely different story. When you set out to meet a very specific revenue target and typically it’s a minimum revenue target and you do the research on it to figure out is it realistic to be able to hit this particular revenue target? And if you feel like it is, you start going down that path and crank it out.
[21:39] I think the challenge is sometimes in finding out or figuring out how to justify what those numbers you feel like they should be. So if you think that an idea is going to be worth $20,000 a month, well how do you know that that’s going to be it? Well you can take what you expect to be able to charge for it. You got to talk to people. You need to make sure that they’re willing to pay what you once charged them and just do the math on it and try and figure out how many people you think would actually be using the service.
[22:06] From there, it’s just kind of a matter of extrapolating to say will you meet that revenue target and how quickly are you going to be able to meet the revenue target because that’s the other side of it is given enough time, you can probably scale any given business but you need to be able to reach out to those people and get them on boarded in a reasonable amount of time. If it’s going to take you 10 years to get to 1,000 customers, it might not be worth it. But you also have to remember that as time goes on, you’re going to be able to learn enough that will allow you to scale your marketing efforts and maybe you only sign on 10 people the first year within that 9th or 10th year you might be signing on 200, 300, 400 people a year.
[22:43] Those are things to take into consideration but some of it’s about drive, some of it’s about how much money you want to make and some of its about how much of that you’ve done in the past. So if your previous efforts were getting you let’s say $1,000 a month then your next revenue target is going to be more than that. Typically most people don’t go after a project that is going to make less than their previous ones.
[23:08] Rob: I think there are probably a few different aspects of play into this. I think revenue is one of them and I think revenue is a way that we measure things. Right? Measuring if it’s a larger idea that we’re going after. But I actually think that a project becomes interesting to me if I know that I’m going to learn a lot from it because learning is something that excites me and kind of expanding my knowledge base and going into realms that I haven’t gotten into before something that I need consonantly. So if you are like that as well, I think that should play a factor into whether an idea is interesting and it shouldn’t just be about revenue.
[23:45] I think the other component is feasibility like is this idea feasible for you to build? And I think a bunch of questions you can ask yourself is if you go back to episodes 133 and 134 we did a founder test and we did a product test. Those questions actually plan to how interesting an idea is for me because if I’m not the right person to build this or the idea just doesn’t really pass the product test very well, it becomes a lot less interesting to me because the risk goes way up and the change that I will invest a year of my time and a lot of money and that it won’t work out goes up. So that becomes less interesting.
[24:22] Our next question is about starter apps and it comes via MicroConf attendee Rich Buggy and he basically says I’ve noticed a changed in the bootstrap startup community over the last few years when Rob started promoting the Micropreneur approach, it was about finding small niches and building an income for multiple smaller products. These days, it seems the greater focus on building a single product that can generate $20,000 to $50,000 a month with just you and a VA or two. Typically the developer does the surrounded topic or technology they’re passionate about, something that’s causing them a problem or something they’ve previously worked with and he listed a bunch of examples Brandon Dunn, Nathan Barry, Patrick McKenzie, Brecht Palombo, Rob Walling.
[24:59] Around this time last year I started building a big app. At that time it ticked all the boxes for a good product but it wasn’t in an area that I had passion for. I’ve since stopped developing for a number of reasons I won’t go into. I’d love to hear your opinion on building what I’m calling a starter app versus going after a large product that you are more passionate about or experience with. The starter app obviously carries a much lower risk if it fails but its offset by a much lower reward if it succeeds. By contrast, a larger app carries a much greater reward but you’re typically a more crowded market and it can take six or more months working on the side to get ready.
[25:30] So that we’re mostly on the same page, I’m defining a starter app is something that is the first product you’ve released on your own, can be built and released within 2-4 weeks after hours of development. It’s limited revenue opportunity maybe $2,000 a month. It’s being built so you complete the process of building releasing and running a product and you’ll either flip it in 12 months and move on to something larger or you’ll keep it to supplement income rather than replace it. And for a larger application, I’m thinking of products which scale similar to Drip, live cycle email platforms shopping carts landing page platforms.
[26:01] Mike: Well I think what he described says a starter app is really in many ways the Micropreneur approach. What you started doing, you built a couple of small apps and gradually grew larger apps out of those. So maybe you had one that did $500 a month, another one that did $750 and as you stack these things up, they supplemented your entire income and that kind of became known as the Micropreneur approach. But I think we kind of talked about a little bit previously on this episode where if you start building larger and larger apps over time it’s like your natural inclination is to build something bigger than the previous thing that you’ve built.
[26:40] And part of the reason for that is because you just get more comfortable doing those types of things. You get more accustomed to the different things that you’ve learned about how to put together a mailing list or how to interact with customers or just in general how to sell software online. So it seems to me like this starter app is really just an extension that entire process.
[27:00] Rob: Yeah I’d agree with that and there are several points which made some where he talked about a seeming change in the bootstrap startup community but I don’t know that there has been a change. When I came out and talked about the portfolio approach and the Micropreneur approach of just having multiple small apps and going up the stair step of starting with 500 a month and like you said building up, no one else was talking about that. So I don’t know that there’s as much of a change as that has always been my approach the way I came up and not a lot of other people have done that as far as I know.
[27:30] These days, there is a focus or there are a lot of people talking about building that single product but I think there always have been. The only reason I’m doing it and I’ve talked about is because that’s because what I’m doing now but I would still say that if you’re getting started now, that the portfolio approach, the small stair step approach is the way to go. Some people are talking about info products today a lot more than they used to be. I don’t think – I mean that’s not really how I came up. I came up doing software and web apps and that kind of stuff. I did write my book and launched the academy at some point but I was already there by the time I got there.
[28:05] I have no issue with info products but if that’s not your thing, then don’t think that you have to do that. Don’t be talked into doing that if you do in fact kind of build your empire using SaaS or just smaller websites and smaller ideas. But I think the analogy that keeps coming to mind is there’s college ball. There’s the minor leagues. There’s the major leagues. Don’t feel like you need to jump into the majors because other people are talking about playing in the major leagues. Work your way up there. There’s so much that needs to be learned in terms of marketing experience and in terms of perhaps self confidence, that was an issue of mine and an issue of other folks I know, just having the confidence that you can actually do this and that this is going to work for you and that you can pull it off.
[28:47] All these things are answered slowly over time if you take the time to attack smaller ideas and build them up over time. That’s not to say you don’t have to be excited or passionate about that idea. You don’t have to pick a niche for electricians or for line men or for people getting married if you’re not interested in those niches. You can just pack smaller ideas in niches that maybe you’re interested in.
[29:09] Mike: I think your analogy of college ball and going pro and that type of a sports analogy is very true and it helps people understand that let’s say I wanted to go and be a professional basketball player for example. There’s no way I would just walk up to an NBA team and say hey I’d like to try out. I would really need to practice a lot and get comfortable with all the different aspects of the game and running a business is really not any different and a starter app is a very, very good way to get comfortable with the basics of the game of running a business.
[29:42] Rob: Right. And if we look at the examples that Rich mentioned, you look at Brandon Dunn, he had basically come up through consulting. I would imagine he’s a freelancer at one point and you learn business and marketing skills. Then he hired folks, started a consulting from and he was running like a 10 person consulting firm when he started looking at doing products. So he essentially came up through college ball and the minor through the consulting angle but he had learned a lot from I imagined other mentors and he also had a lot of business and marketing skills that he had packed up from consulting.
[30:12] Nathan Barry launched multiple apps. I think he had an iPad app that was fairly successful. He had multiple other apps that he launched before diving into kind of these larger app ideas and he still not – he doesn’t have a really big app that does a ton of money. He’s still working towards that so he’s kind of working his way up too. Patrick McKenzie, bingo card creator. Right? That started tiny. I think he made a few thousand dollars the first year. Talk about a tiny niche that he grew. Then leveled up to Saas with appointment reminder. Brecht Palombo he has this one app that is distressedpro.com where he’s selling information but it’s kind of like a membership website. From what I understand, that had small beginnings and he learned a lot along the way.
[30:53] Now he was also heavily experienced in marketing and sales because he had run essentially a real estate brokerage and so he already had a lot of knowledge that us as developers would not have by nature. And he came up through college ball and the minor through being a real estate broker and knowing how to close deals and knowing how to talk to people on the phone and close sales. Everybody you mentioned, just because we’re doing the larger ideas now it doesn’t mean that five years ago we weren’t working in small ideas and just trying to figure ourselves out. That’s where I think people typically need to start unless you really are an outlier.
[31:27] There are certainly people who start with the SaaS app and they’re really good or they get lucky or combination of those things and suddenly they have an app doing $40,000 a month after couple of years and that’s great for them. It’s just not the typical situation that I see. Alright, and our final question for the day is from Fredrik Sandabert and he attended MicroConf Europe. He had a question about launching a SaaS app nationally in a non-English country versus globally with different language options.
[31:56] He says I know that Patrick McKenzie has mentioned this a couple of times, I think one of the times was whether someone should do a bingo card creator for Australia as they apparently have radically different rules on how the game works that his bingo card creator doesn’t meet. And at the same time, I know that other people have created clones of SaaS apps you think that would’ve worked out that are not working out. Lastly, my own SaaS app net biljett he says it’s a site aggregating Swedish events like concerts and stuff. There are several of those that have already been launched and all of them have been miserable failures. The thing with mine is that the user can create alerts for interesting things. So they can say they like jazz in Stockholm and then they can get alerts.
[32:34] This is somewhat interesting and it’s related to this topic because it’s not really possible to see as anything other than kind of a locally national thing in Sweden. At MicroConf, somebody told me that Apple tried doing that in iTunes and that it crashed and burned because the data is awful and it’s a mess getting things to work together in the world of events and ticketing.
[32:57] Mike: The basic question is that what sort of criteria do you use to figure out whether or not you can take something that is for English versus going global with it in non-English countries like what sort of criteria can you use when is it a good idea, when is it not and how could you make it work?
[33:16] Rob: Okay, so there’s two points I’d like to make. The first thing is if you have launched an app in the United States or in an English speaking country and you’ve had success with it, a lot of people localize too early. They try to put in other languages way too early. That’s only semi-related to this question but I would encourage you to really fish in your own pond for a lot longer than you think necessary and that your issues with growing your app have nothing to do with it being localized into other languages because that’s a huge waste of time for six months or a year saying well I need to grow the market so I’m going to add a German translation of it. But if you can’t support the app in German, you can’t sell the app in German then it’s really not that helpful.
[33:59] The second thing is I think you have to look at market size and I think you have to realize that if it’s a B-B app versus a B-C because the Swedish events app that he mentions is really more B-C and so could that feasibly work in Sweden? Well sure. Because there’s enough consumers there to make it work. It’s not the typical play that we talk about where we’re going to get actual income. You know he’s probably going to have to either get venues to pay for advertising or there’s going to be a weaker revenue model say than just subscription billing but there’s enough of a market there to do it.
[34:33] However, if you try to go into Sweden and sell to dog groomers or electrical contractors, my guess is that there may not be enough of those to make it a viable market. So I think market size is another big factor you have to play into especially in smaller countries where you language is only spoken in that country and it’s not spoken in other markets around the world.
[34:55] Mike: I think your comment about people trying to go global, create local versions of their apps in other languages was dead on. I mean it’s very difficult to believe that most people who would be listening to this podcast would have completely saturated their own market to the point that they have no choice but to go to a foreign language in order to make something succeed or to grow their product.
[35:17] I totally agree with you about the fact that you have to look at the market size itself and whether or not the market there is going to support that. And then the revenue model is something else. I don’t think it’s any different than launching something in English as it is in launching it in German or Swedish or anything like that. Is the market there big enough for that type of app? You can probably make some generalizations about a particular type of app from a successful one and another market.
[35:45] So let’s say that there’s an English version of something and you want to take that into your local market. Find out what kind of statistics you can find out about them before trying to do that. I mean are they being successful at it? Are they reaching people? How many customers do they have? And some of those things are going to be really difficult to figure out. You could also call them up and ask. I mean a lot of companies if you – I actually had a conversation earlier today where I said how many people do you have using this application? They gave me a ball park number so just give them a call or shoot them an email and say hey, I want to know before signing up for this that I trust that you guys are able to handle this. What other similar customers do you have? How big are the customers that are using it etc? And you can get a ballpark idea of how well they’re doing just from these types of answers.
[36:30] And then you extrapolate that and say okay well in the US market let’s say that you’ve asked that of an English speaking company there’s 300 million people in the US, let’s say that there’s 50 million people in your country just divided by 6, you can get ball park numbers. I think the demographics are definitely going to going to be a little bit different from country to country but you could probably guess a general idea of what sorts of revenue numbers you can probably be looking at based on those things.
[36:56] Rob: Right. And I also think looking at the marketing channel as well because if someone in the US is using a specific SEO tactic and Google is 90% of the market whereas in your market, Google is only 50% then you have to think about that a little bit or someone’s using a lot of Facebook ads and Facebook just isn’t in your country then that is – the market size doesn’t help if you can’t reach them through a channel that the other folks are also using. So there’s obviously a lot of complexity to this question but I hope that will lend some insight. Thanks for asking that Fredrik.
[37:26] Music
[37:29] Mike: If you have question for us, you can call it in to our voice mail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 159 | Business of Software 2013
Show Notes
- Business of Software Conference
- Steve Pavlina: Get More Done in Less Time
- Steve Pavlina: Productivity
- Steve Pavlina’s Ultimate guide to productivity
Transcript
[00:00] Mike: This is Startups for the Rest of Us: Episode 159.
[00:03] Music
[00:10] 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. What’s the word this week Rob?
[00:23] Rob: The word is I’m one week past the public launch of Drip and it feels like a lot has happened during that time. Basically last Wednesday we launched the last 1,300-1,400 people on the email list and then it went live with the world. It feels like a good milestone. However, the day that I sent out the emails or about the day before, we started having some performance issues. I think we talked briefly about them on the last podcast and so I couldn’t relish in the victory of the launch because I was basically having to go in and like disable reports for people who had higher volume accounts which are our best customers frankly. It’s the people with the most traffic we’re seeing the most emails. So that is bittersweet.
[01:02] But within two days we went to a new server, got a new AWS instance with an outrageous amount of RAM, moved the database over the middle of the night on Friday night. And at that moment, everything came back up and it was super fast. That was when it was literally 1 AM Saturday morning, that’s when I finally had like the victory rush of we’re done, we’re launched and stable. And then I popped off this quote today to Derek and he thought this was fantastic when my app is unstable, I’m unstable and I’d like to put that in a t-shirt at some point.
[01:37] Mike: Very nice. Well it’s nice to be able to have those performance problems and then you already have the customer signed up and be able to turn around and invest in a matter of infrastructure for that but it kind of sucks that you have to go through all the stress and effort of moving everything over just because you end up with those performance issues.
[01:54] Rob: Yeah. I agree. I mean it’s this balance right? Because the server we moves to is going to amortize out over the course of a year, it’s going to be between $400 and $500 a month for the database server. That’s what we need to sustain growth, what I expect the growth to be over the next year and I wouldn’t have wanted that six months ago. That would’ve saved us all the headache but we would’ve just been dropping tons of cash along the way. This is now the second server we’ve upgraded to. I think this is the beauty of these kind of pay as you go models. You can scale up pretty easily. You just have to have that 20 minutes of shut down time where as long as your database is small enough because it’s only 2 or 3 gigs still, you only need 20 minutes to do it. And if you can get to it quick and you have an agile team, this is the startup way. Right?
[02:39] If I was at a big enterprise, I would’ve just dropped the coin six months ago and gotten a 68 gig instance for the database but it’s just not something I want you to – you want to spend when you have zero customers using it but it’s totally worth it when you have a couple hundred people actively pounding on this thing.
[02:54] Mike: Well, I’m testing out a new task prioritization strategy. So I’ve had so many things coming in like – I think I’m like most people where I tend to use my email box as – I tend to use Gmail as kind of a task list. I try to keep it under 20 or 30 things but lately it started to grow and become a little bit more unwieldy and getting into that inbox zero has just not been feasible lately. So what I started doing was I picked up a couple of eBooks. They were written by Steve Pavlina. We’ll link to his blog on the show notes.
[03:28] One of the books that I picked up was some advice on productivity and one of the things that I took out of that book was he actually sets up a system so that he has A tasks, B tasks and C tasks. And anything that’s an A task is stuff that will generate some sort of return or still be usable in five years. And anything that’s a B task will have like a life expectancy of two years. And then anything that’s a C task the benefits are going to be no more than 90 days in the future. So anything that’s like paying bills or doing invoicing or sending out receipts and things like that. Those are all C tasks. They need to be done but they’re not necessarily important and they are not going to benefit you 90 days down the road really. I mean obviously you’ve got to pay your bills and stuff versus things like working on your core products or building marketing material and things like that, those could be B or even A level tasks.
[04:19] And he actually suggest that you spend at least 50% of your time on A level tasks and no more than I think around 20% of your time on your C tasks and then everything else kind of gets shuffled in with the B tasks. So at a bare minimum, you’re spending at least four hours a day on you’re A level task. At most you’re spending you’re a 1 ½ on your C level task and then any left over time gets allocated to your B task. And it seems that I kind of supported out my task list according to that strategy and I’m kind of working through it right now and it seems like it might actually work out because I could take a look at anything that’s a C level task. My very first thought is can I send this to somebody else to do?
[04:59] Rob: Yeah, that’s a nice way to do it. I’m actually intrigued by this because what I have is a queue in Trello that pretty much are my tasks and I just have a single queue and I keep it in order and I try to go down that queue as best as I can. And then of course stuff gets assigned to me in FogBugz for support and stuff gets emailed to me in Gmail. So I really do have three queens that I’m trying to merge and manage and I try to get everything into Trello prioritized and that handle it but I don’t like killing 20% of my time just trying to manage the queue. So sometimes of course you just go into email and delete a bunch of stuff and reply quickly without adding it into Trello.
[05:39] So I like the idea of having an A and a B and maybe a C because then those tasks that I’m always prioritizing at the bottom that never get done, a lot of my probably B and C tasks are on there, you actually give yourself permission to go work on them. Right? These are less important tasks but they do need to get done at some point. What I’m wondering is what tool are you using to manage this? Are you putting everything in a spreadsheet or is there a better way because you still have an email inbox with 20 things in it. How do you know what’s an A, B and C?
[06:10] Mike: Well I haven’t really gone through my list of emails yet but I’ve basically been keeping track of a list of what I classify as my A, B and C tasks and some of the emails in my mailbox map back to these. So for example I have pay bills on here. I have send work to one of my contractors, that’s a B level task because it’s more important that I keep him busy because the things that he’s working on are going to contribute to the business in the future and they will have that impact down the road.
[06:38] And then there’s things like soliciting more users for Audit Shark, validating and testing some of the Audit Shark code and working on that core engine I’ve classified as A level tasks. A lot of the emails are in my mailbox mapped back to those high level things. It’s not like I’m going through my email box right now and just saying this is an A level email, this is a B level email or something like that. I’m keeping track of things separately on an index card because I tend to use a lot of index cards just to keep track of things that I have to do that I need to do today for example. And what I did was I just mapped out a bunch of things that I have on my list of things to do and I just put A, B or C next to each of them.
[07:13] Rob: Got it. So for you, it seems like a shorter term thing because that’s not going to work for tasks or like some weeks or months to have them on index cards right? Because then you’re going to write it all the time?
[07:23] Mike: I mean in a lot of times what I’ll do is I’ll throw a bunch of tasks on an index card and my goal is to get through that entire index card and then I just throw it away and that’s the whole point of having an index card because you want to get through. It tends to be a short enough list because you can only fit so much stuff on an index card that it helps you knock those things out. And if you absolutely need to, you can take things from one index card and copy them onto another and put them on the top of the list or something that but I try to avoid doing that if I can.
[07:50] Rob: I did that for a while. I didn’t like it. I felt like a lot of wasted time. It was hard to reprioritize. Like I said, when Trello started and I started using it, I’ve been sold and I’ve been using it since. I have maintained inbox zero. I got to inbox zero right before going to Europe and then I was gone for a month I came back to hundreds and hundreds of emails and I’m down. I think I’m at inbox 5 as of the start of this recording. I’m pretty close to there and I do either – I am able to get most of the things into Trello. What’s nice is that Trello now has an email address unique for your board. So in Gmail I can just hit forward and I list it as the contact name is Trello and so I type in Trello and hit send and it goes into at the top of my Trello board.
[08:32] So then when I go into Trello to look at stuff, I’m able to reprioritize things and then basically I have to go back into Gmail and find it. I mean that’s where the kludge part comes in. I’m using these two systems to manage that single thing but for me so far it’s working. I do think there’s a better way. The better way I think would be to make a cross between Gmail and Trello. Right? Make a plug-in where you can reorder things in your Gmail inbox and add notes and add things just like Trello but do it to Gmail emails right there. You can add metadata and reorder so that they’re not just sort of by date. That’s what I think the best option would be.
[09:09] Mike: Switch over to using something like FogBugz or some other sort of “bug tracking” tool or customer support tool where like you send and receive all your emails out of there and that allows you to add in all those notes. But that’s a total hack as well.
[09:22] Rob: It is. But I can see that working. I wanted to call out a website called beamcalculations.co.uk. This is a long time listener and a guy who read my book and implemented a lot of the stuff that we talked about. His name is Kevin Taylor and he’s at beamcalcs on Twitter. He said Rob Walling, the site I have beamcalculations.co.uk after reading your book, it’s been live since September 25th and it’s had 16 sales. Great. Thanks to you. So just wanted to kind of call him out as a nice success story, someone who was able to launch and he’s certainly not going to retire off this effort but it’s that stair step approach. It’s getting something out there, getting people to use it, getting your feet wet and getting some experience marketing and actually getting a few dollars in your back account. And once you get that feeling, it’s addictive. Like launching is addictive. And so getting this site out, that will lead to his next idea and his next one and they tend to get bigger over time so congratulations to Kevin on launching.
[10:20] Music
[10:23] Mike: Since you were out during the middle of Business Of Software, I figured we’d go over some of the takeaways form Business Of Software this year.
[10:30] Rob: So you’ve broken it up into you have the hallway track and then you have a few speakers that you took away quite a few things from it sounds like. So why don’t you lead us through that?
[10:39] Mike: The first one was the hallway track and this is just randomly talking to people in the hall and various conversations whether you’re sitting down at lunch or you sit down in the amphitheater and talk to somebody next to you, I was talking I believe it was Brett Palumbo who was telling me that one o the things that he’s found is that when he’s trying and to contact people, the best way that he’s found is to use LinkedIn.
[11:04] Within LinkedIn, you can send direct messages to people. I apologize if I misquoted the numbers and stuff but I believe it was something in an excess of 70% or 80% in terms of the open rate and response rate was something along the lines of 50% for people who are receiving those emails which I think is a far cry from what you would typically get if you’re just cold emailing people or sending out marketing newsletter and things like that.
[11:27] Rob: Well the interesting thing here is you have the social graph so you’re probably tied to this person either directly or at a second level or a third level connection so it’s not a super cold email. There might be a little bit of warmth there and I’d be interested to hear more detail about this maybe I’ll drop Brett an email. But I’m curious to hear how you do this and don’t come off as spammy or solicity or just out of the blue salesy type thing. I know that there’s a balance here and I’m sure you can get there. I’m just curious what the lessons learned are there.
[11:55] Mike: Yeah. I mean we talked a little bit about that and it was more about when you’re first reaching out to somebody you don’t necessarily say hey I’ve got this product to sell you or that I think you might be interested in. It seemed like the best way to reach out to people was to ask them questions like hey I noticed that you’re listed over here or you’re involved in this organization. I’d love to have a conversation about and talk to you a little bit about it or something along those lines.
[12:16] Rob: Very cool.
[12:17] Mike: So the next one was from Rita Gunther and it was very interesting because Rita’s talk seemed very reminiscent of Clayton Christiansen’s. One of the things that Clayton talks a lot about is disruptive technologies and how companies that are large tend to be attacked from underneath by the smaller companies because they’re not really paying attention to them or it’s a very disruptive technology and they don’t feel like it’s going to be relevant in their space. He kind of relates that back to the story of IBM how they were initially selling these giant mainframe computers and then switched over to mini computers while all their competitors went out of business because they spun up this new division in this completely different part of the country.
[12:58] And a lot of the things that she talked about was how to identify some of the markets that are right for new competitors and she said basically find companies that have hostages, not customers because those are the people who are locked in and the only reason they haven’t gone to find another provider is because they can’t.
[13:15] Rob: Yeah, I’ve talked to a few people who are interested in Drip, some guys I know and they’ve talked about some larger enterprise marketing software that they’re using. They’re saying that they’re basically not able to sign up without a one year contract that they are essentially hostages for a year. That even if they just want to try it out, I mean you get a two week trial or a three week trial. But after that, you either pay for a year or you can’t use the software.
[13:38] I know sales force is like that and I think the larger enterprise like hub spots that is all annual and I understand that it’s better for their business for their retention and everything but it really does make your customers at some point start to turn against you. You see these companies early on where they have big fans and I think sales force signups have both been in that situation. Intuit was like that when they already had their tax offer. That was really good and everybody loved it. And then at a certain point it feels like they’re just trying to milk money out of you and they have you locked into their ecosystem.
[14:08] So I like the way of thinking about that. If you spot a company or an industry, everybody’s a hostage. I think credit card processing, payment gateways and all that stuff definitely was like that and Stripe came in and said everybody’s a hostage, how can we improve that? I like this approach.
[14:24] Mike: The credit card companies is the one that she specifically called out because nobody really likes dealing with those companies but they kind of have to because they really just don’t have any other choice. And as you said, until Stripe came along and then all these other payment providers came out and started offering other types of solutions so you don’t necessarily need to have a payment gateway anymore.
[14:43] Something else that she talked about was in identifying some of these markets is if the bosses at these companies have a tendency to say one of three things, either 1) I don’t want any surprises. 2) Don’t bring me bad news or 3) Don’t bring me a problem unless you have a solution. Because a lot of times, those are the types of companies especially for number 3 if the boss says I don’t want to hear about problems unless you have a solution for it. Well, if you have a company that can come in underneath them and basically get the from down low like from below their price point or something along those lines, if you don’t have a solution for that, then what will happen is there’s that sort of culture in that company, nobody’s going to bring it to the boss’s attention that it’s going to be a problem for them because they don’t have a solution. So if the boss has kind of made that mandate, nobody’s going to approach him until its way too late and you basically already done the damage to them.
[15:34] Rob: So how would you know that about a company? You’ve had to get some type of anecdotal evidence or you’d have to have some type of business relationship with them at your day job and realize how screwed up they were and then kind of go on the side and build a product to compete with them.
[15:46] Mike: Well I think you can do it a couple different ways. I mean 1) you could certainly probably glean some of that information out of just the way that they do business and I think some of that would trickle down into their customer service but definitely talking to former employees would probably be just kind of a no brainer to me. I mean if you can find some ex-employees of the company and kind of ask them questions about that especially if your already looking at going after a particular market and you happen to run into one of them and you start asking them questions like that and say hey, how did you analyze your competitors and what source of things did they do internally and how it was operated.
[16:24] I almost feel like the larger companies that you suffer some back lash like you were saying before about sales force and some of these other companies where they’re really locking in their customers I sort of suspected it in some ways their internals of the organization are probably run very similarly where it’s just very heavy handed from the top. And you’re expected to follow orders not necessarily be nimble. It’s like they want you to do what you’re told to do and not necessarily think out of the box because they’re trying to drive revenue in a way that they know how versus look for alternatives and other solutions.
[16:57] Rob: I think there’s that part where you can over optimize your funnel or you can over optimize your retention and you try to push the churn down for typically its reason of going public or trying to please share holders or investors often find that founders don’t want to do this kind of stuff. But you hit a point where in my opinion you can just push it too far and that’s when you start pissing off customers and there starts being this movement away from you and that’s where competitors can sneak into a market, identifying companies who have hit that point are good markets for us to enter.
[17:31] Mike: The next person I took a bunch of notes from was Dan Siroker from Optimizely. And he essentially had five different lessons that he wanted people to take away from his talk. And the first one was defining quantifiable success because if you’re not familiar with Optimizely, it’s essentially an AB testing tool for your website and the first lesson was defining quantifiable success. If you’re running any sort of test, you want to understand what are the success measures? How are you going to know whether or not a particular test was successful? And some of that with AB testing just comes in terms of knowing whether a test is statistically significant or not.
[18:05] The second lesson was that less is more. And if you reduce the number of choices the people have, then you can get a lot more return on the choices that you’ve made to implement. So there are several examples that he put out there where for example the checkout process, what people would do is they would rip out all the site navigation. Some people take this for granted that oh, that seems like a no brainer but then there’s other people who look at that and say oh, I wouldn’t have known that would’ve given me a 17% increase in my conversion rate for example. He made sure to call out some things like that.
[18:37] The third lesson he brought was that words matter and he showed several different examples where he was putting different types of text on buttons and asking the audience to kind of weight their opinion on what they thought would do better. There were a lot of people in the audience I mean I would probably say it was 60% or 70% who were wrong on most of these. That was something else that was very interesting as well because words really do matter and he was able to statistically show that there were certain types of words that would show up on buttons that would have a huge increase in the number of click throughs.
[19:10] And in addition to that depending on the audience for example if somebody was a new visitor for the website one set of text might convert better versus somebody who is coming in from a mailing list or had purchased before a different set of text would have a much better conversion rate.
[19:25] Rob: You know, this stuff can get complicated and I think that if you are sitting her listening to this and you’re kind of licking your chop because you have a successful business and you’re looking to squeeze another few percentage points out of it then this kind of – its advanced testing and analytics is what it is. This type of stuff is awesome. If you’re just getting started and you have 1,000 or 2,000 uniques to your website or you’re still building your product, then don’t worry about this yet. I mean AB testing is far off for you at this point and certainly these high, high end ultra optimizations as I would say.
[19:59] Because yeah, if you have traffic let’s say you have a million uniques a month, then it is absolutely worth optimizing every button for like you said, the traffic source like actually changing the text on buttons for traffic source. Amazon.com does this. Google does this. I mean those high volume scaled sites certainly it’s worth it for them. But I advice a listener to not go down the rabbit hole of worrying about stuff prematurely. Basically it’s kind of like premature optimization in that sense.
[20:28] With that said, if you do have a successful business, you have something that’s maybe allowed you to quit your job and you haven’t gone through a round of optimization of tweaking words, of testing different approaches, of reducing choices kind of following the things that Dan talked about in this talk, it can do pretty amazing things for you very quickly. Double digit jumps in conversion rates. Double digit jumps in sales. Even just having someone that you trust come and do a 10 minute screen cast review of your on boarding process and walking through that can give you 20 different ideas to implement and could dramatically increase the number of people that actually use your app.
[21:05] We’ve gone through this already 2 or 3 times with Drip. And one of the big reasons is because we’re emailing that mailing list with several thousand people who I knew were going to come and hit these pages, the pages just some weren’t converting and a lot of people weren’t on boarding early on. There were a lot of questions and so we’ve already gone through their reduced choices as you’re trying to get setup. And I have a lot of different options for getting setup and now it’s basically widdled down to like 2 ½ options. There’s a lot of value to be add here.
[21:33] Mike: The last two pieces of advice that Dan had had is seeking the global maximum because a lot of people have a tendency when they’re doing AB testing to tweak little things as opposed to doing wholesale changes to a page or to a site for example just because it’s so much more difficult to figure out what piece of that redesign for example impacted the conversion rates or was it just one thing? Obviously a lot of things changed. It’s very difficult to pin it down to exactly what it was. But you may very well be missing out on a lot of sales for example if you don’t do this and you end up with a local maximum for your click through rates because you’ve got all these things who are kind of leading you down a path to an overall 8% increase and conversions but if you do the complete site redesign then you may very well find that something completely different could give you 20% lift instead of just an 8%. But it is a huge risk if you start doing those things.
[22:26] Rob: Yeah. You also need a lot of traffic to do that. I’ve only had one site that I’ve ever been able to actually test two very different versions of a page and not just test them against on another but tweak both of them and do essentially multi varied testing over time and actually raise both of their conversion rates and then seeing which one went out. And that’s how you’d find the global maximum. But it is 1) super time intensive and 2) you need a lot of traffic or else it just takes too long. So there’s another thing I’d say save for later unless you do have a lot of traffic coming your way.
[22:59] Mike: The last lesson that we had to share was just start doing AB testing say which as Rob just said you really do need to have a lot of traffic in order to make this worth it. I mean part of Optimizely was really built out of things that were learned from the campaign trail from Obama’s 2008 campaign towards the white house. So there’s a lot of examples from the book that Dan points out. He gave a copy of his AB testing book to everybody in the audience which has a lot of the examples from that campaign and from various other things that they’ve seen and other companies that they’ve worked with. But you’re right. You do need a lot of traffic in order to be able to do some of these things.
[23:39] Someone else I took a lot of information from was Scott from Atlassian. There were several different things that he put out there one of which was internally when they’re developing features, I thought it was really interesting that what they do is they create customer personas with very specific attributes and goals and job titles for those customer personas to help the team understand how the software is going to be used out in the wild. So you’re not just building feature X. You’re building feature X that is going to be used by I don’t know, Sally in accounting who’s job title is CPA for the company or something or maybe she’s a CFO and she’s going to be the one who’s going to be used in this particular feature so she needs to be able to understand it and needs to relate directly to her job. Whereas Dan who’s over in the marketing department is completely not going to care about that feature but it’s going to help Sally which will indirectly help him.
[24:30] Another thing that they do to help keep the team not just interested but on the same page is to explain why those features are useful rather than how great those features are at a technical level because it’s really important to end user that those features work and help them do their jobs. They don’t necessarily care about how technically challenging it was to implement or how much goes under the covers. They want to know what helps them do.
[24:57] Rob: Benefits, not features right?
[24:58] Mike: Yeah. Benefits, not features. Something I found really interesting that Scott said was that he felt like at least 50% of the people there at the conference should go back to the office and fire someone. He said that everyone knows there’s someone they shouldn’t keep but they do because they don’t want to confront the problem. It was interesting that somebody would put that out there in a way that that they did.
[25:18] Rob: Yeah. There’s a book called Fire Someone Today. And I haven’t read it but I’ve had it recommended to me and it’s the same premise is that you should fired someone because you’re not facing up to something. I would think of it as like letting someone go who’s underperforming. But it’s like if you’ve grown to 10 people and you’ve never let anyone go, have you really hired that well or I can see his point that maybe you’re just ignoring the facts that are in front of you seems probably less allocable to me.
[25:42] Mike: There were several reasons that he pointed out why you might want to let someone go and one of them was they were a bad culture fit, bad performance was another one but he also commented that sometimes the company just grows past people. I think this really heavily applies more to Atlassian than a lot of other companies just because at this point Atlassian is I think 700 or 800 employees. And 10 years ago they were just a couple of guys working on a product.
[26:06] And it’s a very different company when you’ve got 10 people versus 100 people or very close to 1,000 people. And somebody who is there in the first year, the second year, they may have been very, very comfortable leading a team that was only 5 or 6 people but then you get into that problem where some people, if you’re just not cut out to be in a company that has grown to the point that it is, then maybe it’s time for you to either move on or to move to a different role inside of the company and that’s something else that he commented.
[26:36] He’s like just because they’re not a good fit for their current role anymore doesn’t mean you can’t look elsewhere inside the company. There may be other things that they can do and they will certainly be appreciative of that fact but nobody really wants to come to their boss and say hey look, I’m really not a good fit for this company anymore. They’re going to go out and look for another job before they start doing it.
[26:53] Rob: There’s a book called What Got You Here Won’t Get You There. And it applies more to growing a company as a founder and the skills that got you here and the marketing approaches and all that. If you’ve 10X then it won’t take you to the next 10x. You have to change your tactics. But I think that applies equally to growing an organization.
[27:12] Mike: Yeah. I said that it’s a very different culture when people are getting hired without the founder’s involvement because the culture in the early days very much revolves around the founders. And then once the founders are no longer doing all of the hiring, that’s at the point where you have to have core values for the company and things like that where you have to have written down what your culture is for the company in order to be able to scale that out to other people.
[27:36] Something Scott had talked about was he said in terms of pricing you get eaten from below, not from above which kind of related to Rita’s talk about how to find markets that are right to be plundered. What he did was he looked around some of the other companies that were selling similar types of software and he realized that their software was actually priced significantly higher than their competitors. So what he did was he essentially looked around and said okay, well how can we combat this? How can we fight this sort of a pricing strategy that could ultimately be your down fall?
[28:09] And what they ended up doing was they created these very small team packages for people and they sold easily six figures worth of software within a couple weeks and all that money I’ve donated to charity so it wasn’t necessarily about the money for them. But it was just interesting how in demand that software was based on the small team sizes. There’s an extra free for like 5 or 10 people. I think its $5 or $10 or something like that.
[28:35] Rob: I think they do Jura this way or they do a bundle of Jura which is their issued tracker with something else. And like you said, it’s like thousands of dollars of tools but they’re basically trying to eat up the market. They’re almost going freeman basically. I guess it’s on premise so it’s like $10 and you just bought a license to it for up to 5 or 10 people. They’re just trying to destroy the lower end market because that’s not what their bread and butter is. And I’ll say it gives them a competitive advantage because it allows them to get people on board with their tool and then as that company grows and then hopefully they’ll be more likely to use Atlassian stuff rather than start with some Saas competitor who just up sprouted and has a couple million funding who’s also trying to take that same market share from them.
[29:19] Mike: Two other points that Scott had made were both about how to price your offerings because they do have a hosted solution and they do have an on premise solution that they give. The point that he made was that when you sell something that is more valuable over time, use a subscription model. And if you sell something, it becomes less valuable over time, get your money upfront.
[29:39] Rob: Do you have examples of something that becomes more valuable versus less valuable? Did he bring up any?
[29:42] Mike: He didn’t specifically but think about this for example, a bug tracking system. If you have a bug tracking system, over time that gets more valuable to the customer because over time, as you add hundreds of bugs or thousands of bugs and cases in there, you don’t necessarily want to lose all that history. So moving to another product at that point, that product that you’re currently on becomes more valuable to you because it has all of that history.
[30:08] Now if you look at something like an eBook, you’re essentially delivering all the value upfront as the person learns from that and consumes it. There’s not really anything else. So getting your money upfront is obviously the natural course for that. I don’t know if we necessarily think about those types of things when we are putting together the offerings, the easiest way to explain that.
[30:30] Rob: Perfect. Those are good examples. So in terms of BOS, you’ve gone every year for the past 3 or 4 years. Do you feel like it’s changed for you or are you still getting the same value out of it that you always have?
[30:41] Mike: It was really high for a little while and then it dropped down a little bit and I think it started to pick back up again.
[30:45] Rob: Got it. So this year was perhaps better than last year.
[30:48] Mike: I would definitely say that this year is better than last year. And I think that part of that was just because the arrangement of the talks and stuff were – they had this back at the seaport hotel so there’s the amphitheater.
[31:00] Rob: It’s also smaller now right?
[31:01] Mike: Yeah, they cut a bunch of people from it. They didn’t sell nearly as many tickets this year as they did last year. I think last year they sold round 450 people. I think this year was around 350. So it’s definitely smaller but it didn’t necessarily feel any smaller this year than it did last year.
[31:17] Rob: That’s interesting. Yeah, because you and I have had some conversations about selling a few more MicroConf tickets like maybe 20 more than last year. Then just growing a little bit and allowing us some flexibility to keep increasing the value of the conference and my gut is that it’s not going to change the feel of it. But the first year I went to BOS it was 200 or 225 people and so for it to be 450, that’s a very different conference.
[31:44] Mike: Yeah, definitely. It just felt different last year to this year. I felt like this year’s conference probably delivered more value than last year’s conference.
[31:52] Rob: That’s good. I haven’t been for the last two years. This year was because I was in Europe. Last year I just opted not to go because the year before, I hadn’t gotten very much out of the conference. I mean it was disappointing. I’ve always been like BOS has always been my number one conference. Three years ago was a little less than two years ago. It wasn’t as good as they wanted it to be so I haven’t gone. Sounds like it has potentially reverted course in terms of the fact that it’s smaller now. I do think that the hallway conversations are probably going to be the bulk of the value and I just need to come to grips with that that I’m basically using it as a reunion to see a bunch of MicroConf Vegas people halfway through the year and that’s okay but I’ll probably focus on that rather on than on the sessions.
[32:34] The sessions and the speakers that they’ve had are for such large companies like hub spot’s going public, Atlassian is has 700 employees. It’s very different than what it was 3 or 4 years ago for someone like me who never plans to go there, go to that level of having a company that large, I’ll go for the hallway track and meet up with people who I know from MicroConf.
[32:55] Mike: That was another interesting thing that I found is there were probably about 30 people there that I knew from MicroConf or like the Micropreneur Academy. So there were a lot of hallway discussions about various things that people were working on or things that we learned or different techniques. And it wasn’t so much focused on the talks and what we were getting out of them as it was like the other things we were doing. So it was very much as you said kind of a mini reunion halfway through the year.
[33:21] Rob: Yeah and that’s a nice way to do it. What’s cool is you get in those conversations and you say what are you up to? How’s Audit Shark doing or what’s working for you with your product? And then someone says I did this crazy campaign on whatever and you’re like I totally need to try that or someone said hey, I had a marketing idea for you and its integrated with so and so, it worked for me. Those are the tips that will make a difference in your business.
[33:42] Mike: I think the last one that I want to bring up is from Greg Bagas and I apologize because I know he listens to this show so if butchered your last name, I’m sorry. He had a very good talk that and something happened I’ve never seen a Business Of Software before but he gave his talk and it was on entrepreneurs and depression. It was related to his struggles with ADHD and being bipolar, he got a standing ovation at the end of it. I’ve never seen anyone at Business Of Software get a standing ovation before. it was a very heartfelt talk and it brought to light I think a lot of issues that most people just don’t talk about in the entrepreneur community because building a business is hard and there’s a lot of struggles that people go through. And for the most part you tend to be alone.
[34:23] If you have employees it’s not like you’re going to talk to your employees about certain things and who else are you going to talk to about them? It was very interesting to hear about his story and have somebody get out there and talk about that particular topic.
[34:37] Rob: Yeah. Bravo to Greg. The video has already been released to the public if you go to businessofsoftware.com it should be somewhere around there. I think sharing a story like that is a really big deal and I think it’s helpful for a lot of people. This issue is coming up more and more. I don’t think it’s going away. These are successful and failed founders I’m talking about very real things that come up in the struggles of just starting a company. I think it’s helpful and I also – there have literally been suicides of venture funded founders who the pressure just gets to them or the stress just activates something in them and this is not something that I guess is uncommon and is kind of coming to light.
[35:15] Talk to Sherry about it quite a bit, my wife, she’s a PhD in psychology and she has talked to a few founders who are experiencing this kind of stuff and she’s actually interested in the topic and we at one point talked about her doing some research and doing a talk on it. So I think there’s more to be said on this topic and I really appreciate Greg for kind of bringing it into light and sharing it in such personal way because I’m sure as I said it resonates with a lot of us.
[35:38] Music
[35:42] If you have question for us, call our voice mail number at 1-888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 158 | The Reunion Show
Show Notes
- Drip (Rob’s app)
- AuditShark (Mike’s app)
- Drip “About” Page
- Bootstrapped with Kids Podcast
- HitTail (Rob’s other app)
- Customer Analytcs/Retention Apps
- Numa Group (Rob’s company)
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I talk about HitTail, Audit Shark and the goings on of the last five weeks. This is Startups for the Rest of Us: Episode 158.
[00:11] Music
[00:19] 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.
[00:29] Mike: And I’m Mike.
[00:30] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. Mike, what’s the word this week? I haven’t talked to you for almost a month.
[00:38] Mike: I replaced you on the podcast for a little while.
[00:39] Rob: I could tell. I was a little concerned. Dave did such a good job I was thinking uh oh, I might be out of a job. I might need to start and go solo or start my own podcast because yeah, I liked the episodes you guys cranked out.
[00:50] Mike: I hope the listeners did too. I hope they enjoyed a little break from you.
[00:54] Rob: Yeah. So obviously the reason I was gone was for MicroConf Europe. You and I were out of town for a week and then I stuck around for another three weeks with my family. I wanted to work about a half hour a day was my plan. Seven days a week, get up, check email, do some stuff just to make sure I kept up with it. I wound up working about an hour every three days and with the internet connectivity the way it was which was mediocre which was a very rejuvenating month and I got a lot of thinking done, I did come back.
[01:27] We launched Drip to about 1500 people while I was in Italy in October and now it’s kind of cool to see that go on. I would get the emails and then just I wanted to work through the launch list before I got back and that was kind of the only way to do it. I don’t want to be launching in November and December because we know everything calms down during that time. So how about you? Any new updates?
[01:50] Mike: Well, last night as a matter of fact I finally got the Linux support fully functional in the new UI. I’ve been kind of…
[01:58] Rob: You’re talking about Audit Shark.
[01:59] Mike: Since we cut over to the new UI there was a lot of things that just little stuff here and there is like oh I don’t know if this works or I don’t know if that works and so I was just kind of going through everything, making sure that everything still works and for the most part I mean my paying customer is still happy and has made more than one payment than this point so it’s good.
[02:18] Rob: I love that my paying customer.
[02:20] Mike: But I have had conversations with the other people who have signed on and I think I mentioned it on the last episode that we’ve got a concrete list of things that we’re working towards and trying to get those things resolved and out the door. So I’m working on certain things. My developer is working on other things and we’re kind of meeting in the middle because fortunately the things we’re working on are separate from one another and one of the things I was working on was making sure that the Linux support was working end to end. And I finally got that working again. It does work because I do have Linux policies because I’ve got the third guy who’s working for me, he’s building all the Linux stuff. I’m basically making sure that it works in the in the UI and the other developer I have is working on reporting.
[03:02] Rob: Linux is a pretty key piece right? For in terms of the early access customers or the beta list, the mailing list you had. When you’ve asked people, there may even be more interest in Linux support than you have in Windows support is that right?
[03:15] Mike: Yeah. It’s leaps and bounds ahead of Windows actually. There’s a bunch of people who have both Windows and Linux and they’re basically waiting around and saying well, let me know when you’ve got Linux support in there and then I’m willing to kind of take a look and move forward with it but if it’s just Windows I don’t necessarily care right now. And then there’s a lot of people who just have Linux.
[03:35] Rob: Yes, it sucks because you don’t want to be writing a bunch of code right now. What you want to be doing is getting people in early access and marketing and ramping up and basically you want to get to 1.0 as soon as possible so that you can slow down. You’re obviously always going to be building features but it’s like building Linux support is a big endeavor. And so are you at the point where it done and tested or is it kind of like right now we have 2 or 3 weeks to work out the kings basically.
[04:02] Mike: It’s a hard question to answer because there are other several different sides of it so there’s as I said I’ve got one person who’s working on just reporting and one of the things that’s come up is that people want to be able to see – if I run a report now, I want to be able to compare my current results versus my previous results very, very easily and they want to see where things have regressed. So there’s something going in called a regression report and that’s got to be built like currently things are just being stored using a back end blob storage. So there’s not a good way to compare things from one set of audit results to the next, so that’s one piece that’s being built in with the reports and then another one is being able to compare things over date ranges as well.
[04:47] So they basically want to see a priority on the 400 to 600 plus things that are in there now that we’re examining on their servers and they say I need you to prioritize these for me because that would be more valuable to me because right now, we’d basically just say here’s the information. Here’s what’s okay. Here’s what’s not okay but we don’t prioritize it for it. There’s this piece that needs to go in on the reports to be able to show them that prioritization and then in the back end policies, my other developer has to go in and basically assign the priorities to everything.
[05:17] So there’s the two different things that are kind of moving at the same time and then the third piece that I’m working on is basically making sure that the Linux stuff runs end to end which it hasn’t been until last night. So now that’s running, once some of the priority stuff goes in which will have to be done on Linux as well, then the reporting side goes into it and its just kind of like all three things are coming together all at the same time. And once those three things are in place, then it would provide I think the value that it really needs to because I’m going to have the same question marks from people who are using it on Windows as they are in Linux because they’re going to want those things to be prioritized. They’re going to want to be able to see regression reports.
[05:53] And I actually had an in depth conversation with one person who said this information that you’re providing me is awesome but his problem was around the fact that he didn’t want to have to go in every single day and try to remember what was different from one day to the next, what he really wanted he’s just like I just want a daily email that says have things gone off the rails? But it’s called the everything’s okay alarm and it will continue to sound while everything is okay. So basically just a daily email that says hey, nothing’s changed today. Between yesterday and today, nothing has changed. You just haven’t gotten any worse. Not better, but things have just not gotten any worse.
[06:26] Rob: Yeah.
[06:27] Mike: Somebody told me specifically they were like that’s awesome. That’s exactly what I need. And if I had that, it’s like after seeing that for about two weeks or so, I’d probably turn it off knowing that you would let me know if things got worse and he’s like as soon as I decided to turn that off, that’s when I would be willing to pay.
[06:44] Rob: Nice. And this person you were talking is an early access customer is that right?
[06:46] Mike: Yes.
[06:47] Rob: Not a customer but a user, but he’s basically saying that’s what I need in order to pay you. Very good. One feature at a time. It’s like you implement one thing for one customer and then they’ll pay and that will get you this other group of customers and maybe it’s a handful and then you just branch out slowly and it’s just kind of knocking these things off the list that allows you to get a bigger and bigger market. It’s like right now you’ve solved the problem for one person and just slowly over the course of weeks and months you’ll be able to expand that market. So what’s your timeline like? Let’s say like next week do you think you will have enough done that you’ll have another paying customer? I mean what does it look like for you over the next month or two?
[07:30] Mike: The reporting stuff should be going in this week. Now, whether the data is there or on the policies to be able to do the prioritizations and things, I don’t know that yet. I have to touch with the guy who’s working on that and just kind of verify that he’s working in that direction. There’s some things that need to go in his policy builder to help him enable that or to help enable that for him to make it easier so I have another person who’s working on that side of things who he’s supposed to be doing that tomorrow or it might be done within the next day or two after that.
[07:59] So realistically if I had to guess, I’d probably say it’s going to be another 2 or 3 weeks before all of that stuff is completely ready but it will be done in bits and pieces between now and then. So I think that the reporting stuff will be done either tomorrow or the day after. The policy builder stuff hopefully will be done maybe tomorrow or the day after and once then he’s done with that then the policies can be updated. But even after that, the people who I hand this off to, they’re still going to need time to get comfortable with it, take a look at the reports and then make their decisions off of that. And that might take in the first email, it might take 2 or 3 weeks of them getting the emails and reports to be able to say okay yeah, I’m comfortable with this
[08:36] Rob: Right. And that’s that free trial period right? You’ll just be running it manually. But once they actually start using it, they don’t pay you the first day. You give them time to try it out. Like I was saying when I was doing the manual onboard and with Drip, I was giving people as long as they needed to feel confident that Drip was basically making them money, that it was saving them time and making them money. And so some people had six week trials. It was just completely arbitrary but I only had 15 people trialing in and I was manually emailing everybody individually. I was watching all of their accounts. I was watching the number of subscribers, the number of conversions that were coming in.
[09:13] And then at a certain point it was obvious. Someone had like $400 or $500 in conversions come in in 3 ½ weeks. And so I emailed them and said do you feel like this is worth it? And they said yeah. So that’s the nice part about doing manual on-boarding although its time intensive, it allows you to get a feel for how long it takes people. You’re going to be able to look at it based on the complexity of their setup, based on their knowledge, based on how much time they have, you’ll have an idea of like huh, people can actually get value out of this in two weeks and so your trial should be two weeks or maybe it will be 30 days. But whatever it is because right you probably don’t know how long your trial should be. You could take a guess but you don’t really know because you don’t have enough experience.
[09:51] Mike: It’s not even that I don’t have the experience. The problem is that I’ll on board somebody and I’ll ask them a question would you pay for this and let’s say if it had this feature and this feature, then I would pay for it and it’s like okay well then I have to go off and build that feature and make sure that works and it might take 2, 3, 4 weeks to do that. And then once I’ve done that, you’re adding 2, 3, 4 weeks in there. It’s hard to judge at that point. I just don’t – I don’t have the data. I don’t have enough throughput through the pipeline of new customers that are being on boarded to be able to make those determinations in 3 or 4 months I think that will be a completely different story but I have no idea right now. I just can’t answer it.
[10:29] Rob: Right. You’re in the midst of what I’ve started calling the slow launch and this is basically the fact that I had customer zero on boarded onto Drip in April and we are going public tomorrow and it’s not early November. So what happens in that 6 or 7 months span, well, we were doing manual on boarding. We were building features per request just like you said where it would say are you willing to pay for this? It’d say no, I need XYZ feature, we would go build that. And slowly getting one paying customer at a time and then launching to 300, it was exhilarating and it got I don’t know, 50 or 100 trials in the door and then we saw how many converted and you just build from there.
[11:12] I think we have a luxury because we don’t have a venture funded board at our back saying you have to move faster. You have to hire faster. You have to grow faster. Now it could also be detrimental if we’re not super motivated to get things done but frankly if you have a launch list or you have customers who are interested in it, the best thing you can do is implement the features they need before you try to get them into a trial because otherwise you dump them into this trial, you get them on boarded and then poof, they’re like there’s not a value here. And then you have to go build a bunch of stuff and come back to them.
[11:43] I actually think you maximize conversion rates by doing this, this slow launch over time and letting in groups of people, working with them manually figuring out what they want, what they need, implementing it then you let in another 10% or 15% of your list seeing what happens with them. For me it’s been a huge learning experience to learn more about the customers at Drip, the people who it works for and who it doesn’t, the people who really understand it from day one and the people who need more education.
[12:09] Mike: The other thing is and I’m sure Drip is a little bit different than what I’ve got to deal with. One of the guys who had come to me and started talking to me about early access has 70 servers. Of course that falls in kind of like the enterprise space for my product because there’s at least $2,500 a month probably for just that one customer so I went back to my developer and I’m like can we even do this right now and he’s like no.
[12:36] Rob: Yeah, too much volume.
[12:38] Mike: Because things need to be re-architected in the background so as part of this reporting process that he’s working on, that stuff is going to be taken care of as well which is kind of nice to see but a lot of questions and stuff you had to answer about scaling up.
[12:50] Rob: Sure. Yeah, we actually are seeing scaling issues as well. We’re real time analytics. We have every time someone visits your website we got a ping back and we insert a record in the database because we have to be able to track referees of all the new visitors. We’ve tracked every time the popup widget opens to collect an email and we offer all that data up in the app and so we have already upgraded kind of the database hosting twice and we’re in the process of doing it the third time to fix some reports that are starting to get slow for people.
[13:23] The real time stuff which is a massive data collection like you’re doing and like actually HitTail and Drip both do it, it’s kind of a pain but I also think it’s a nice barrier to entry because a lot of folks is not just some simple crud Saas app that someone can build and then host on a shared server. It really takes some expertise to keep this thing running.
[13:45] Mike: Yeah I know what you’re talking about there. I’ve already gotten some complaints about some of the reports in there as well. These reports are slow and I’m like yeah, I know but I’m getting a couple of megs worth of data from just on audit and it’s like okay, well you throw 5-10 machines in there and it becomes a lot of data very, very quickly.
[14:05] Rob: Right. So I guess to wrap up kind of a Drip update, like I said, we launched – it was somewhere between 1200 and 1500 more people during October and then we are launching to the final basically the last 3rd of the list today. And then by the time this podcast airs, Drip will be live. You’ll be able to go to getdrip.com and basically see the tour and signup for a plan just like anyone else for a free trial. So that feels good. It feels good to finally hit that point although it is a bit anti climactic because we already have paying customers, revenue. Last month was a recurring revenue was up to $1,000 over the previous month and it’s on pace to do that again this month and so we’re already launched in my mind. The public launch is more of a formality at this point. The amount of recurring revenue that we’ve had while we are in early access, it will be several months until we basically duplicate that until we get that much revenue doubled.
[15:10] So about two weeks ago we launched to a group of about 600 on the list and it was before that, we had basically nothing. All we had was a signup page, a signup and a login page and then you can get it and the app was fully done but there was no marketing website. And about two weeks ago we got just a shell marketing website up and it was like an about page privacy policy, terms and service FAQ, just a couple things. And some of it was lorem ipsum and some of it wasn’t finished. I mean it was kind of up there and I didn’t link to any of it. I really just linked to a pricing page where they could sign up. But the pricing page did have footer links to some of those pages.
[15:44] I specifically called that out in the emails and said look this stuff isn’t done but you can poke around if you want. Right away, we started getting emails that are about page was lorem ipsum and some guy tweeted me saying is this serious? I’m going to cancel my trial because your about page isn’t done. And we probably got 4 or 5 emails within a week of people who were flipping out about the about page. It was crazy. It was all lorem ipsum texts. It was our images, the actual images but it’s at getDrip.com/about if you want to check it out. I was totally surprised and the fact that it wasn’t just one person really was indicative to me that people wanted to find out who was behind it or something. There was some desire to see this about page and for it not to just be plain text.
[16:28] Mike: Yeah. That’s kind of crazy. I don’t even know what to make of that.
[16:31] Rob: It makes sense now that it happened but I never would have expected it. I mean if the privacy policy in terms of service for lorem ipsum, they weren’t but if they were, I bet no one would’ve cared.
[16:40] Mike: Well, speaking of adding new content to the website, I implemented that content strategy that Brett Palombo from the bootstrap with kids podcast had talked about on air and Patrick McKenzie had also talked to me about over – I think it was last week I put more than 400 pages of content live on the website that’s all generated from the policies that were executed on people’s machines.
[17:03] Rob: Very nice. Have you seen any results from it yet?
[17:05] Mike: Yeah, Google hasn’t indexed it yet so still kind of waiting for that to happen and then once it does, it will be interesting to see what sort of traffic it generates. I don’t necessarily have very high expectations for it. They’re very, very specific things that if people were searching for those, then great. And maybe they would sign up. I just don’t know. I don’t have a good sense of whether or not those people would come to the site and say oh, well I’m not going to have to do these things on my servers anymore because they may just be doing them as one off things and they just don’t need to do them again. I want to see how it goes. I want to see what sort of traffic comes in but I have to wait for Google to index it because they just haven’t done it yet.
[17:43] Rob: Sure. You can certainly keep an eye on it. I mean you’re going to want a call to action at the bottom of everyone. I would also if you don’t already have the Drip widget installed, I think that will be a nice way to connect with people is to collect their email address because the idea of someone stumbling on it and signing right up for a trial is probably not going to happen that often. But if they’re at least interested in that topic and you can stay in touch with them over time and use your nice auto responder sequence you’ve already created in Drip, that’s certainly a good way to nurture those leads and stay in touch with them. I think that will be a better converting source than trying to get them to sign up for a trial on the spot.
[18:18] Mike: Yeah. Drip is already installed there and it’s already available so when you go to those different policies and the different items that are on there, they do show up right away, the Drip courses down there so they could sign up for it. But yeah, I totally agree with that. I don’t see any reason why that wouldn’t at least help.
[18:34] Rob: Sure, very cool. I did some more investigation and kind of had been watching HitTail over the past month since we last discussed it. Our last update we talked about how Google was going to 100% not provided and I think they’re in the 80% or 90% at this point. what I noticed is that Google at least in the US is about 67% of US search traffic and what’s funny is that HitTail is still doing quite well on the other 33% like it’s using AOL and Bing and Yahoo and kind of the other market.
[19:08] And so there have been some customers who their key word suggestions through HitTail have decreased substantially and that’s a bummer obviously. If they had 95% Google traffic, there’s not much to be done there. But at the same time it hasn’t been as much of an Armageddon as I had imagined. There still is room for there to be keyword suggestions. I mean if you think about it, no one is going to have this data and every single keyword you have now is worth so much more than it was a month ago when it was abundant.
[19:40] Dave Collins talked about that in MicroConf Europe just about how valuable, how hard keyword data is going to be to come by. And so it’s that funny thing of like a tool like HitTail or long tail pro or market samurai, it may take a hit with the not provided stuff. It can still be as or more valuable than any other resource you have because you don’t even have that data in your Google analytics anymore. That’s not the end of the world. I thought HitTail wasn’t going to make it and at this point, it doesn’t seem like that like it seems it’s going to stick around.
[20:13] Mike: So here’s a question for you. You said that when you were on boarding people you were kind of watching to see what they were doing. Did you have dashboards built into your application to monitor I guess user activity and overall user health or did you put that onto another application that you subscribed to?
[20:33] Rob: Are you saying like how often they logged in or something?
[20:37] Mike: Yeah, things like that. So did they perform a certain act? Did they perform a certain action or when was the last time they logged in? Have they sent on a campaign, that kind of stuff?
[20:47] Rob: Right. So we talked about using a service like intercom.io or customer.io or one of those retention services that allows you to have insight into what folks are doing, the further we looked into it, the more I realized that we wanted to just look at our database. It was literally some select queries to figure out what people are doing. Basically we have a last log in date. We also have a number of logins like a quantity of log in for every person and so I can see if they’re active and I can see when they last logged in.
[21:18] And then just by doing a select count from campaigns, you can see if they’ve activated a campaign. We did write some code to go like hit their URL and figure out if they’ve installed a java script. We look in the database to see if they’ve created a goal. There’s there steps someone needs to completely to basically get the full on boarded part of Drip that we can get that all from our own database. We don’t need any type of real instrumentation to do that. And I think if we did need instrumentation I would probably have just built it myself. Again, the further we got, the more I realized well I’m going to have to sink my data and all my customer stuff with an external system. And every time we add, edit, delete something, we need to call out and do that. That just seemed like more trouble than it was worth when we can kind of just run an ad hoc query and get that info out.
[22:03] I do have a dash board. I do have an admin area where it shows me a bunch of checkmarks, who’s done what? Who hasn’t done what? And those people of course get different emails. We have this whole custom email course during their trial that sends them different things at different times based on what they have and haven’t done and it tries to help them get on boarded. And it doesn’t just push it off on to them either. It doesn’t say go do this. It actually says please rely to this and we’ll be in touch. Please reply to this. We’ll do it for you. We’ll walk you through it, that kind of stuff. I’m assuming you’re asking because you’re at the point with Audit Shark that you’re looking at options?
[22:37] Mike: Yeah. I mean I’ve looked at the ones that you have mentioned came across, Woopra and Totango. It’s funny because they all saw a slightly different problem and none of them really solves the problem that I was actually looking to solve. So I can kind mash things together but some ways I’m kind of leaning towards building my own dashboard like you were talking about. It’s just like I don’t want to have to add that to the engineering plea. You know what I mean?
[23:05] Rob: Yeah. No, I hear that. It is when its building new features or building basically that’s instrumentation, it makes it tough. I think it took us less than four hours to do it because it was – I can hack that together with literally some sequel queries that just display on a white background on the dash board. So it’s not like a ton of – unless you have a ton of stuff you need to instrument, it’s not that hard to get this done. Sending the emails is, that’s not trivial. Well actually to be honest, sending the emails isn’t. It’s a big case right? If they’re on this day and they’ve done this, then send this email. The hard part and the part that took longer than the development was writing all the emails.
[23:47] Mike: Yeah. And I’ve already started working on the emails themselves. It’s just the kind of matter of deciding how those things are going to get sent out and how they’re going to get triggered.
[23:55] Rob: Yeah and that was where – here’s what I did. I put together a spread sheet and I looked all the cases and all the days of what people could do on what point and where we wanted it to be and I mapped out how many emails needed to be sent and I gave them all names and then I went off and I wrote all of them and it probably, that process of mapping it out and writing them probably took me 12 hours. It was tremendously time intensive.
[24:22] And then once I had that mapped out, I showed it to the developer, to Derek and he was basically yeah, I can get these to send out based on these cases that you said in like two hours because its literally select this, check if they’ve done that. If I haven’t, send them this variation of it. It didn’t take him very long. So the mechanism of sending the email again is not, I don’t think it’s that intense and I think trying to do it internally, I don’t know, it seemed to work for us.
[24:49] Mike: And I’ve looked at that as well. I don’t think that sending the emails would be that difficult. I’ve got about a third of them written. I think there’s a list of about 15 or 20 that I wrote down different situations whereas like I want an email to be sent out if this happens or for example when they first get their first set of audit results, I want to send them an email and say hey, just letting you know you got first audit results and explain them a little bit and walk them through what the next step of the process is and if they have any questions, to get in touch with me.
[25:16] There’s obviously the other side of it which is the dashboard information is like has this been sent to them? Has this situation occurred for such and such customer and then being able to take those events and just kind of throw them into a database or something like that and be able to report on them. But as you said, I mean I can throw those into my own database and then just report on them. It’s just a matter of the engineering time and effort needed to build those reports. And I‘m kind of leaning towards taking my other developer and putting him on that stuff. I haven’t made a solid decision yet.
[25:48] Rob: Yeah. That makes sense. I think what I found with kind of the backend admin stuff, the reporting like you’re talking about is that figuring out what I want and then kind of specking it out is as much time as to just write it. Since our app is in rails and I don’t code proficiently in rails, it does make sense for me to give it a lot of thought and speck it out and everything. But if it was in a language I knew I would probably at least with Drip, I would probably sit down and hack it out myself. That’s what I did with HitTail when I needed any type of reporting I would just write the sequel and execute it myself.
[26:24] The Numa group which is my little company that has Drip and HitTail and all the other stuff, I was up to five people. Did I tell you that? Not employees because it said W2 versus 1099 was it, really matter but in essence it was five almost full time people including myself and I feel like I should be kicked out of the Micropreneur club for that.
[26:45] Mike: I think the Micropreneur route is more about bootstrapping it yourself than it is about the actual size.
[26:51] Rob: Yeah. I think its bootstrapping. I think it’s also freedom. Like I had again five people including myself so its four folks but I still didn’t need to be anywhere at any given time unless someone ran into an issue, I didn’t need to be online 9-5 on Skype or something like that. I didn’t need to go into an office and see folks. So the freedom aspect that I enjoy was still in place. And to be fair, I mean one guy is Derek – him and I have now worked together for well, about a year and a half I guess. I enjoy hanging out with him. We hang out outside of work. We’re friends.
[27:26] One of them is my support guy. It’s Andy. He does support for the academy and for HitTail and now for Drip. So he’s kind of autonomous unless he has a question he’s just rolling. He’s in another country all together so he’s just rolling and stuff. And then I had the growth hacker intern who I talked about hiring a few months ago and he’s only here for 90 days. He’s a three month internship so he’s leaving at the end of November. And then the other guy was a rails developer we hired through Odesk and he was with us for about maybe 6 or 8 weeks and he got a ton of stuff done. He
[27:59] Actually got caught up and really got Drip to 1.0 like between he and Derek he kind of gave us just enough of a boost to get – now I have a service side API, a JavaScript API, a bunch of reports I needed, just some little things that I felt like weren’t getting done quick enough. And I was planning to keep him around but he was good. He just wasn’t fantastic like he didn’t quite fit perfectly with the team. And so once he had completed his stuff, he was just a little too much work to speck things out and Derek had to spend a little more time going through his code than I would’ve liked. So we did decide to let him go.
[28:35] So now we’re down. It’s down to just me and derrick and Andy again along with contractors, contractors who just kind of work on an ad hoc basis. It feels good. It feels good to slim down for the holidays I’ll say needing to be online lesson handle the fires that come up less. It’s good.
[28:53] Mike: See, part of my version to kicking you out of the Micropreneur club with five people is because I’m currently five as well.
[29:00] Rob: Nice. It all comes out. It is funny. Its funny how you – you get there slowly and it doesn’t feel weird and you know everybody and you hire them slowly and to say you’re five people sounds big. I mean two years ago I would’ve said holy Toledo I don’t want to be working with five people. But I know now a lot of Micropreneur that are MicroConf attendees or bootstrappers from the academy or just folks we know who were solopreneurs for a while and just over time, as you hire people and they’re really good, it doesn’t make any sense not to bring them on full time especially if they’re good and they can be autonomous and you can just kind of roll with it and you get way more done and they’re really valuable to you like the thought of not hiring someone simply for a principal reason because you want to be that true solopreneur, it stopped making sense to me maybe a year or two ago.
[29:55] Mike: Yeah. I totally agree. I mean I realized a while back that the whole single founder moniker is more of I guess a rallying cry against angel and VC funding than anything else. It wasn’t necessarily that you can do everything yourself. It’s just that you can certainly start a business yourself and do a lot of things but in order to make something that extends beyond you, it’s very difficult to do it alone but that doesn’t mean you can’t be the person in charge of everything and kind of manage it all pieces and that’s kind what I’ve backed up off at the moment. it’s just like I’m managing all these individual pieces and kind of putting them together towards this greater goal and everybody’s managing their own work and I’m just managing the interactions between them at this point. But it’s no longer just me.
[30:38] Rob: Right. I always took you single founder moniker that you didn’t want cofounders, not that you wouldn’t hire people. But that it’s you didn’t – you wanted to kind of do the initial founder part yourself.
[30:49] Mike: Yeah. It is. I‘ve had people get confused though so…
[30:54] Rob: That makes sense. You know, this is actually a good time to bring up a question. I’ve received I know – you may have as well. It’s interesting that you and I are attacking larger product ideas. And so someone listening to this might think back to our very first episode where we talk about attacking these super tiny niches, making $1,000, $2,000, $3,000 per app and just cutting your teeth at it and getting some successes under your belt and then kind of scaling up or even just compiling 3 or 4 of those smaller earning apps and being able to quit your job.
[31:30] And I’m kind of moving away from that you would say. Now that I have a couple employees, now that I don’t really have any small apps, I’ve started divesting myself with my really small apps because at this point, they are more trouble than they’re worth because one hour spent building Drip is worth 10 times what was spent building some old B to C app that I had lying around. And so it’s important to clarify that old approach still works. I still see people doing it. I still see people having a lot of success in those niche markets, making a couple grand a month and building their skill set and doing the stair step approach that we talked about.
[32:07] You don’t need to go big. Don’t go – I mean if you’re a first time founder, don’t go build an app like Drip. Drip is in an incredibly competitive market. There’s so many email startups right now. They’re venture funded. There’s all types of stuff going into them. There’s money coming in. The reason I’m attacking it is very specifically because I have the money. I have the experience. I have what, 10-15 successful apps under my belt. I’ve been solo now, full time not consulting for four years. Four years before I brought anyone on full time. So all of that works and you can be totally happy and have a lot of freedom under that model.
[32:44] The fact that you and I have now decided to tackle larger projects that are more – they just take a lot longer to get off the ground. They’re more difficult but they have a larger market space, it’s not something I would advice for a first timer but it is the next logical step for myself and wanting to be challenged and learn and grow. Me doing another app that makes $5,000 a month or $10,000 a month, it just isn’t that interesting anymore because I’ve done it enough that you have to constantly carve yourself out of those new challenges. Have you thought about this at all? Have you been asked that?
[33:20] Mike: A little bit here and there. I’ve heard where you and I are clearly not going after those types of things and it’s not that we’re no longer going after those smaller markets because it doesn’t work. It’s just that our level of experience with those things and the types of thing that we’re interested in doing have kind grown beyond that. It’s not to say there’s anything wrong with them or there’s anything wrong with them or anything wrong with that approach because I agree. I totally think this still works. Especially when you get into things like you’re building and I’m building where it takes lot of effort and expertise to be able to do those things and if you don’t have the experience building a team and putting out good products and building a business, it’s a lot harder to build it from the ground up when you have no experience.
[34:06] I ran into a guy probably less than a month ago who wanted to build a two sided market place for an application. He’d never built an app before. His partners have never done it and he really didn’t necessarily know what he was doing and he was going against venture funded companies and he wanted to bootstrap and I was just like no, this is a bad idea 10 times over. Several other people talked to him and basically told him the same thing. Fortunately he took it the right way and it wasn’t like oh, you guys are just bashing me. It’s like maybe I’ve miscalculated this, maybe I really should take a step back and think about this because they’re going to fumble me and I’m going to waste 2, 3, 4 years of my life doing something that is ultimately not going to be successful because they’ve got the money and they’ve got the backing and I just can’t compete in that particular market because I don’t have the experience.
[34:54] Music
[34:57] If you have question for us, you can call it in to our voice mail number at 1-888-801-9690 or email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 157 | How to get started with info products and WordPress plugins
Show Notes
- Pinterest Plugin
- Getting started building WordPress plugins
- Appointment Reminder
- Authority by Nathan Barry
- Convert Kit
Transcript
[00:00] Mike: This is Startups for the Rest of Us: Episode 157.
[00:04] Music
[00:10] 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] Dave: And I’m Dave.
[00:20] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How are you doing this week, Dave?
[00:24] Dave: I’m doing very well again Mike. Thanks for having me back.
[00:26] Mike: I had mentioned to the listeners several weeks ago that one of the things I was doing for Audit Shark was going out and submitting it to a bunch of different application directories where they do announcements for web based startups and new applications that are out there like beta list and things like that. And a few people had emailed into the show asking whether I would share that list, I already went through and shared it with them.
[00:50] But one of our listeners named Robert Gram who’s been at MicroConf, he went through and he actually created a much bigger list than I had. We’ll link to it in the show notes but if anyone’s interested in taking a look at that, it’s over at whitetailsoftware.com and I said we’ll link it in the show notes. He’s got a list of I think between 40 and 50 different websites that you can go to. But I did want to make sure that I shared that with people.
[01:11] Music
[01:14] Today we’re going to be talking about plug-ins and info products versus SaaS products and primarily about how to get started with a plug-in or an info product and kind of contrasting it to a SaaS application a little bit. When you’re looking at these sorts of things, plug-ins and info products versus SaaS products versus SaaS is really just a tradeoff that you’re making. There’s a lot of different tradeoffs that you’re looking at when you decide to go for an info product or a plug-in and it’s just important to be aware what some of those differences are.
[01:41] The first one is the speed to market. With each of these types of products, the plug-ins and info products, they tend to be fast to market versus a SaaS application which it can take you a long time to get to market. Dave, you’ve got a couple of WordPress plug-ins right?
[01:55] Dave: That’s correct. Yeah. I have AWPCP and business directory plug-in and I also have an info product too about how to buy websites and I would definitely say that compared to the time required to develop a full product even in MVP mode, getting something like an info product out is actually much, much faster especially when it’s an area of expertise that you already have.
[02:18] Mike: So really what you’re saying here is that in terms of the different types of products, there’s a sliding scale where with an info product it can be very, very fast to get to market. and then with a plug-in it will take you a little bit longer. But the with a full blown SaaS application it can take you substantially longer possibly even exponentially longer.
[02:36] Dave: That’s right. Depends on how complex that SaaS product is, if you have something that was as involved as Drip, I mean how long has Rob been developing that? That’s gone on for a long time compared to the fact that he was able to collect a bunch of articles and put them together for start small, stay small and in a comparatively smaller amount of time creates something that he could sell immediately and provide a great deal of value and get customers for.
[03:04] Mike: So another thing to keep in mind is revenue sustainability and with info products and plug-ins you get little to no revenue sustainability and that’s really about monthly recurring income versus a SaaS application where you can get that monthly recurring income occasionally depending on whether you’ve got these annual plans or not, you may have to deal with it on an annual basis. But the idea is you’ve got this recurring income much higher price points to deal with versus the info products and plug-ins. Now what about marketing complexity? I know with your different plug-ins you’ve got a lot of different modules that you sell with those. What are your thoughts on the marketing complexity?
[03:43] Dave: It’s something that would go basically from info product to plug-in to SaaS in terms of from simplest to most complex here. So when you talk about an info product, an info product is very much narrowly focused on a highly defined problem. So that might be something like a guide to web application design or it might be how can I charge more as freelancer? I mean there’s a very specific problem and that one info product is going to provide a very specific answer to it.
[04:13] When you move up the scale to plug-ins, initially that plug-in is probably going to be very focused on something that is more simple. But with my plug-ins for example, the applicability of that particular plug-in depends very much on what kind of site that it’s installed in. So for business directories, somebody might be using it in kind of a yelp capacity where they’re trying to make a site that’s all about ratings. And another one might actually be trying to make yellow pages where it’s actually more important to show locations in directories.
[04:45] So I have different modules that you can add on, one that specifically supports ratings and one that specifically supports maps. So you kind of morph the core product depending on what it is you’re looking to do based on the customer’s target need there. And then you can go up a whole other level beyond than when you get into SaaS applications where you have much more general problems to solve.
[05:09] So if you’re talking about something like in Mailchimp it might be as simple as well I just want to collect email addresses and send out blasts to them and then later on it might be well now I need to segment this list and say okay, I want you to send this particular email to this sub segmented list or maybe I want to AB test emails across the list. And I want to try out one version of it to say 10% of my list and I want to try out another version to another 10% and then whichever one did better I want to send that to the remaining 80%. And that’s something that is definitely a much more complex news case than just sort of collecting emails on the first place.
[05:49] Mike: One of the things that you just talked about, it kind of overlaps in feature complexity as well because as you said, something like Mailchimp might have all this different used case scenarios and that goes into the feature complexity. When I was talking about marketing complexity, what I was kind of getting at was that when you’re faced with marketing complexity, it is substantially easier to explain to somebody what you’re offering is if you know exactly what that type of person is going to be. Because if you solve a very, very specific problem, so say you’re solving 2+2 well, the answer’s going to be 4 but you’re trying to explain that to people in a way that they’re going to understand. Versus if you’re trying to explain and you’ve got all these different variables in place, all these different people who might be using the product. Maybe you’ve got designers and developers, managers, things like that.
[06:36] When you’ve got all these different moving parts, it can be very difficult to explain to people what your position is because you don’t necessarily know who’s visiting the site at the time so you have to essentially multiply the full print of your website. You have to talk to different types of people and in different ways and that’s really what I was getting at with the marketing complexity which I think the feature complexity also factors into this. As you get more features, you seem like you just naturally end up with more marketing complexity because of that.
[07:07] Dave: Absolutely. Some of the stuff that you’re talking about, you’re right. I jumped right into the feature complexity thing here and didn’t really talk about that marketing aspect. If you have something that is addressing the needs of various kinds of audiences like I’m thinking of appointment reminder or Patrick McKenzie, he’s got a lot of different kinds of audiences he’s trying to target this thing to, one of which is like medical professionals but you might also do it to massage therapists. Now that’s an entirely different set of keywords he’s got to target different landing pages, different messages, possibly different pain points to make it sound like you really understand their particularly niche.
[07:45] He’s going to have to cater those pages in a very specific way so that the massage therapist feel like yes, I really know that this person gets my problem here. I want to buy their product. That is definitely going to be much harder than if you have a very simple e-product or eBook where you’re saying okay I want to tell you how to raise your prices as a freelancer. That’s a very easy marketing thing by comparison.
[08:07] Mike: And the terminology can very well be different between some of those different fields as well. That also adds to the challenges. So just keep in mind that there’s a lot of these challenges that you’re going to have to deal with depending on how complex the offering is. Something else that factors into is the operational requirements. And by operational requirements I’m really talking about how much it takes for you in terms of your resources and your support cost and things like that to maintain the business operating.
[08:35] So for something like an info product, let’s say that your website goes down. Well, if you have an info product, who does that affect? It doesn’t really affect your customers because they’ve already purchased the product and they have already received it so they don’t have to come to your website. It will affect the people who are coming to your website to buy it but if they can’t get to your website at all, then they’re not quite your customer yet and sure they have a problem with that but the person who that ultimately affects is you.
[09:02] Now with a SaaS application, if you were hosting an application for customer whether it’s infrastructure related or just ancillary to their core business, it can still be a problem for them because you have to make sure that website and that application are up and running at all times. So you have to install monitoring services, you probably want at least a little bit of redundancy. You have to make sure you’re doing backups and all this additional operational things. And that’s in addition to the support burden that you’re going to bear which is going to be medium to very high for a SaaS application and low to medium for an info product or a plug-in of any kind.
[09:37] Dave: Absolutely. There’s definitely a higher stress level when you have a software service application because of that.
[09:44] Mike: Definitely. And as I said before, the one thing that really factors in to that is how tightly integrated into your customer’s business is your product? If it’s quarter operation, if they need your product in order to do business then obviously your support cost and your operational requirements are going to skyrocket. You’re going to have to have a lot more redundancy and a lot more things in place than if it’s just something where they go into your product maybe at the end of the day or once a week or something like that.
[10:14] Dave: Absolutely. Very different, yeah.
[10:16] Mike: So next we’re going to talk about if you’ve taken a look at these tradeoffs. So you’ve decided that you want to go down the road of building a plug-in of some kind. Dave, you’ve got some experience building plug-ins. How would somebody go about learning word press development? Especially where do they get started with that?
[10:33] Dave: Well that’s a great question. First I’d like to say this is not the only type of plug-in that somebody could actually do. There are other ecosystems but I think WordPress is probably one of the most commercially viable and hottest economically that you can really tap into right now. There just seems to be a lot of energy and money in the community as a whole. So it’s probably a good place to focus your time if you’re going to do a plug-in of any kind.
[10:59] But when you get started, there’s tons and tons of tutorials and examples and how to write a WordPress plug-in that have been written at this point that just Goggleing something like how do I write a WordPress plug-in is probably going to get you a million results right off the bat. Starting from that, you can then go to the WordPress codex, codex at wordpress.org and get the basics of what are the things in the WordPress API that are important? How do I actually apply the calls in the API into my plug-in here? What are some architectural considerations that I need to have for a plug-in? And then going with that, you can also look at WordPress best practices, that’s another great thing you can Google for. You could spend easily two weeks on just two activities right there.
[11:49] Mike: That’s a good number to know too. Roughly two weeks for just that. I mean how long would it take you start to finish if you – let’s say I started today. How long would it take me to be able to get the basic knowledge to create just a very simple plug-in?
[12:02] Dave: Obviously that’s going to vary quite a bit on the person who is writing that plug-in. If you have somebody who’s a senior developer coming from a background that allows you to understand PHP very rapidly, so if you’ve been doing C, C++ Java Python and Ruby to a lesser extent or just PHP directly, you can understand the syntax very quickly then you’re going to be able to be productive quite fast.
[12:28] If you’re not as technical, if you’re not as facile on one of those languages right there, it might take you a little bit longer and that’s going to be very much dependent on your learning style. If I were to say how long would it take a senior developer who knew these things in advance to actually come up to speed on the WordPress API and be able to write some very basic stuff in a plug-in, I would say you can do that in under two weeks.
[12:53] Mike: Okay. So when you’re talking about going to look in through these API’s and best practices and the wordpress.org repository, there’s also additional information you can get from those places, not just the technical side of things, but you can also find some underserved niches and abandoned plug-ins there as well right?
[13:11] Dave: Yeah. In fact several people have asked me I’d like to do a WordPress plug-in. You did these particularly WordPress plug-ins for classifieds and business directories. How can I find something that I can serve as well? And one thing that found is that by going and just researching wordpress.org you’d go in there and type a search on something that you might be interested in or something that you might think okay, well if I was building a WordPress site and I wanted to add an events manager or I wanted to add classifieds or a business directory or I wanted to be able to manage RSS feeds, these are just things I’m pulling off the top of my head.
[13:51] But that sort of stuff you can find out what plug-ins exist in there and taking a look at those, you could see well when was the last time it was updated? Is the support forum something that looks like people are posting but the authors aren’t really responding? If you look at this plug-in and there’s a lot of people that are posting on the support forum, that indicates that there’s certainly some level of popularity for it but depending on how the author is responding maybe that plug-in is not doing a good job of supporting it.
[14:17] So you can go through the WordPress repository there to actually find some good ideas and then once you got an idea there, another possibility is that you could actually bootstrap your plug-in development by actually forking an existing plug-in on wordpress.org since everything that goes into wordpress.org is under GPL version 2 licensing, you are actually allowed to grab somebody’s source code lock, stock and barrel and start from scratch on that particular plug-in if you wanted to. There are pluses and minuses to that and you might incur the wrath of the author doing so. But in some cases I know for example there’s competitor to business directory. The guy actually started his directory plug-in using an older kind of abandoned listing plug-in for an address book. So that’s certainly a viable way to go about it as well.
[15:07] Mike: Now you mentioned that everything that goes up on wordpress.org is covered by the GPL. I mean how can you go about building a business? Are there specific business models that you can put together for this plug-ins? It wouldn’t seem like you can sell your WordPress plug-ins directly from there but you could have three plug-ins that lead to premium module or something along those lines. What other sorts of business models could people be looking at or entertain as possibilities for WordPress plug-ins that they’re creating?
[15:36] Dave: Well, turns out there’s four that I can think of that are viable business models. Now like you said, wordpress.org, they’re very strict about you can’t sell anything through there. In fact if you directly have a link on there that isn’t something like a donate, it tends to frown on that. But they’re okay if you like point to a site that says okay, here’s the professional version of the plug-in on so and so site and you can buy it there. But you know, you kind of have to keep it sort of moderated I guess is the way to put it.
[16:08] But the four business models that I know of from other plug-ins are things like premium offering, so you have the free plug-in in the repository and then off on an external site you offer a pro upgrade. So the plug-in that I can think of does this as the Pinterest pin it plug-in by Phil Dirkson. Another one would be the premium add on model and that’s exactly what my business directory does. So you get the core plug-in in wordpress.org and then you can buy add-ons to it, it’s not really an upgrade to the core plug-in so much as it is just things that enhance the functionality to it and then there’s a number of things that you can add on to it.
[16:47] There are some where the plug-in itself is actually sort of gateway to a SaaS product. So HitTail is a great example of this where there’s a WordPress plug-in that goes on to your site that actually does your keyword tracking and then that feeds that data back to HitTail and then HitTail will give you further suggestions based on what that WordPress plug-in is collecting. So it’s not so much that the plug-in itself is making revenue but it’s enhancing an external SaaS site to basically give you another channel of customers.
[17:16] And then the fourth model is where people actually offer paid support for the plug-in. So you get it, you download it for free from wordpress.org but the level of the plug-in might be complex enough that you really need some help in actually setting it up, configuring it, maybe skinning it, that sort of activity is paid for directly on a site. Gravity forms is an example of a plug-in that does that.
[17:42] Mike: So we’ve talked a little bit about some of the different tradeoffs. We’ve talked about how to learn and how to do WordPress plug-in development and a little bit about where to get some ideas and some of the business models that you can put behind those ideas. Most that we’ve talked about so far relates directly to WordPress and plug-in development. The other side of it is info products and people might be wondering where do I get an idea for an info product that would be marketable. I think this is where a lot of people really underestimate their own capabilities. Anyone with a career as a professional developer has something that they can teach somebody and charge for. Pretty much everybody and I can almost guarantee that.
[18:19] For example you Dave, you could easily put together a book on WordPress development. You don’t have to be an expert and that’s the part where I think that people kind of struggle with is like oh, I’m not an expert. The fact is you don’t have to be an expert in order to teach people what you know. Typically if you’ve been working in a particular field or a particular area, you tend to have a lot more knowledge than the average developer about whatever that specific field is. What other sorts of examples can you think of?
[18:48] Dave: Oh, well there’s two great examples of guys that I met at MicroConf. There’s Nathan Barry, he’s got a couple of different eBooks out there that I’m aware of. One is a book on app design and another one is about a web design guide. Clearly these are both areas of expertise of Nathan’s that he’s acquired as a developer over the years and he just simply took the time to write it down and share his knowledge and experience.
[19:14] Same thing with Brandon Dunn and his freelancer’s business guide. It’s basically a guide that solves a very specific problem that freelancers commonly have and that is how much did I charge for what it is I do and if I’m charging already, how can I raise y rates to get better income out of my livelihood? And these questions are things that all freelancers have and certainly Brandon himself struggled directly with but he just took the time to write it down, think about it very thoroughly. I think he spoke with a number of freelancers to get additional input from outside of his own spear of influence and he created this great product that is selling quite well based on his experience.
[19:53] And he certainly wasn’t an expert on it before he started that guide. I spoke with him about it. He knew a little bit about it from his own experience but mostly it was about him being willing to research it and come up with something that he could teach to others in a clear and concise manner, that’s what made it a valuable product.
[20:11] Mike: So that’s one of the ways that you could do it. Another way you can do it is to just find something that you think is interesting and you want to learn about and want to be able to share that information. So for example one of the things that I have an interest in from years and years ago is robotics and partially because I’ve done assembly language programming and done hardware and software interface and I’ve always found it kind of fascinating. But that might be something where if I decided that in the future oh, I kind of want to learn a little bit more about this and maybe build an information product or an eBook about how to do it, maybe I’d put together something on how to interface with the raspberry pie or something like that.
[20:46] And I think something like that would probably do reasonably well and their chances are really good because somebody else has already done something similar and if you haven’t, just look around, feel free to rip off that idea. If you have the inclination and the interest, you can definitely learn enough about a particular topic that you can share that information and charge for it.
[21:08] Dave: I’ve seen the same sort of thing that sort of plays over and over again as like the beginner’s guide to whatever or how I learned X in Y days. There’s lots of people that have gone out that say how I figured out Ruby for the first time or how I went and learn robotics from scratch not knowing anything about electronics. Those sorts of guides seem to be very popular. So even if you didn’t know something, you could write a guide that was kind of following that theme on a subject that you’re interested in and then approach it as a complete novice and basically record your experience along the way with the intent of making an info product out of it.
[21:46] Mike: Yeah and again, this isn’t about pitching or positioning yourself as an expert in the field. It’s really about positioning yourself as somebody who is capable of teaching other people. And as long as you have a message that you can put together that’s clear and people can easily understand it, people are going to be willing to pay for it. And that leads to another point which is when people are looking around for information on the internet, you’re sure they can go and find free information all over the place.
[22:15] I mean if you want to start a business for example, there’s tons and tons of free information out there but there are still people who go out and buy books on how to build a company and how to build a startup and why did they do that? And it’s because that information is complied in a way that is easy for them to consume and has theoretically been have a lot of people look at it and provide feedback and get it to a quality level that’s acceptable for general consumption. Don’t be afraid to put a price on any sort of info product that you’ve put together.
[22:43] Dave: So speaking of pieces and info product I want to share an idea that Nathan Barry actually did and it was part of his talk at MicroConf. He has essentially one product and that’s his various eBooks. But in addition to the eBook, he added on additional let’s call them value services here. So he’s got the eBook itself and then he’s also got an audio version of the eBook and then he’s also got product videos that go with it and some additional resources and instead of just offering the eBook by itself, he’s offered the things at various priced tiers.
[23:21] So you’ve got sort of the value driven eBook for just the people that want the bare bones and then somebody wants a little bit more, they get the eBook with the audio and some screen cast that go along with that. And then for somebody who wants sort like the Grandpre package, they get the audio book, the eBook, the screen cast and all the additional resources that go along with that and they’ve got this great set of price points where you can really actually increase the overall value of what it is you’re offering. So even if you started with an info product, you can actually increase the value as you’re going along by finding ways to create these value adds to it.
[24:01] Mike: Another way to do that is through a simple licensing trick and I think that Patrick McKenzie was the first one that I saw to do this but I know that Nathan Barry does this as well. But essentially it’s charging more for the same products for a slightly different license that allows them to distribute the products within their company. So with Patrick McKenzie, he has an email course where I think he doubled the price if you want to download it and put it on an internal company server and share it with the people in the company. Otherwise you just get like a single license for one person. It’s almost like buying multiple copies of the book for everybody in the company.
[24:38] Well, with that other license you can download the stuff, host it on an internal company server and then anybody in the company can view it. All it is a simple please use this license if you’re going to save it to an internal server and make it freely available for everybody in the company. So that’s definitely another way that you can drive the price point up without doing a heck of a lot of extra work. So let’s talk about how do you go about delivering these types of products? What sorts of methods have you used in the past to distribute like your WordPress plug-ins and your book for example.
[25:21] Dave: Well for me, obviously being a WordPress guy, WordPress was sort of a natural fit for the sites that that I’m actually distributing them on. So I have WordPress based sites that I use WordPress plug-ins that are shopping carts and digital download managers and even in the case of my website buyers guide, there as PDF delivery plug-in on there that I added to that. And then I also added on affiliate programs to those as well. So those are all things that are managed through WordPress plug-ins. You drop them in, configure it a little bit, throw a theme on it and you’ve got yourself kind of a website in a box sort of minimal effort. But that’s certainly not the only thing that you can do. What are some things that you’ve actually done or seen other people do Mike?
[25:56] Mike: For my Altiris training site, I have it integrated into Wistia and I’m just taking credit cards and sending them through stripe. And then once they’ve paid for it, then they get access to the rest of the site and they can view the videos. But other things that I’ve seen people use are Gumroad for example, e-junkie is another one. And then fetchapp and pulley are two others that are similar in that they basically allow you to take your content. You upload it and they will handle a lot of the front end shopping cart so that you don’t have to. And then some of them are monthly fees, some of them just charge you for hosting files or they’ll take a percentage of the sales.
[26:35] So there’s a lot of different services out there that will do it for you if you don’t want to go down the road of setting up your own WordPress site or integrating into stripe. Gumroad is one that I’ve heard a lot more and more lately. But again, there’s a lot of different options out there for people.
[26:48] Dave: Sure, you can also publish it on amazon.com directly if you wanted to. I know a few people that have tried that route as well.
[26:55] Mike: Yeah. I forgot about that. Amazon has their own digital publishing services. So if you wanted to go the route of actually having a physical book, they have an on demand print service that you can use. There’s other publishers other than Amazon that have an on demand model as well.
[27:11] Dave: Right.
[27:12] Mike: I think the last thing we want to talk about today is what source of limitations are you placing on yourself by going down the road of an info product or plug-in?
[27:21] Dave: Well, I think the one thing that is the most limiting of going either those routes is that because you are not going to a recurring revenue model right away that you’re constantly in this I’ve got to keep selling it mode. So you’re always going out there every month starting from scratch and having to dig up customers again. Sometimes in some cases you can resell some things to your customers but it’s not like everybody that was a customer last month can be sold to again this month. So that can be kind of grind and ultimately I think that tends to limit the amount of revenue that you can pull out of one of these things on a long term basis
[28:02] Mike: Yeah. And that goes back to the business model itself. It just makes things more difficult when you’re selling any product that is not recurring because you’re essentially starting from ground zero every single month. I mean you’re always starting at zero. It can become a grind after a while. Especially if you haven’t an automated a lot of your marketing efforts. That can be somewhat challenging. I would also think that for different products especially in the info product space, you will probably run into – I’ll say a cap on the maximum revenue that you can pull in from any given product because eventually you would saturate that market.
[28:36] Dave: Yeah, I think it’s not just market saturation you have to be concerned about but I think info products, let’s call it an expiration date on them because whatever it is that you wrote about it, unless it’s like something truly ever green like you write it now and it’s going to be good for the next 10 years I’ve not seen info products that don’t have to be occasionally refreshed like for example my website buyers guide, it’s a couple years old at this point. I probably ought to go in and actually get current screen shorts of Flippa here but I haven’t done that. So that’s something that’s definitely getting a little stale on that book.
[29:10] Mike: That’s definitely a main issue that you have to be aware of for info products they may very well have a shelf life. I can think of a lot of books. That I purchased in the past where I look at them now and even though it may have seemed evergreen at the time, things have changed enough that they are not necessarily as relevant anymore. So that’s definitely an interesting point to me.
[29:30] Dave: I mean that’s going to be true regardless of the kind of product that you have. I think it’s just very, very poignant on info products. The applicability of that product to a given market not taking into account saturation is definitely going to decay over time whereas if you’re still providing value with a SaaS application, as long as you continue to deliver that value on day 1, day 365, day 730, it’s not going to be as difficult.
[29:58] Mike: Well, cool. So I hope that this has given listeners a good idea of what the advantages and tradeoffs of going for a plug-in or an info product versus a SaaS product. One thing that I think has become more mainstream is to build an info product upfront before you build a SaaS product so that you can get a lot more in depth knowledge about a particular market and then use that as a launching point to build a SaaS product around where that info product is.
[30:28] One of the people that I’ve seen kind of leverage this technique and probably the one I’ve seen leverage it the best is Nathan Barry with his authority book where it’s a book on self publishing and he uses a lot of the ideas from publishing his first two books and he uses that information and shares it with people in his book called Authority. Then he also has a software product called convert kit which is also aimed at people who are doing self publishing. So essentially what he’s doing is he’s creating an overlapping market where he’s got an info product that kind of leads into a SaaS application and then I think that Brandon Dunn also does this with some of his products around plant scope and his info product double your freelancing rate.
[31:13] Dave: Absolutely. Yes he does.
[31:16] Mike: I’ll say it’s starting to become a trend. It is certainly not a bad trend to follow. If you can get an info product out there very, very quickly and the use that to learn enough about a particularly market or use it to gage interest in that particularly market, you can leverage that information to build a SaaS app around it or you can use it as a determining factor to decide not to build a SaaS app because again, building that SaaS app is going to be a very major investment of time, energy and resources and it may not be worth it. And just building that info product could be enough to tell you whether or not it’s going to be worth it or not.
[31:51] Dave: Absolutely and in fact just building that info product does a couple of things. I mean it allows you to sort of dip your toes into the water of how do I market this thing? How do I handle the sales? Are there support issues I’ve got to deal with? I mean sort of like baby steps to the real thing. Right? Where you’re actually getting experience in running this whole business from end to end. In addition I know that Nathan and Brandon both built their launch lists for plant scope and convert kit using their eBooks as a way to get people’s emails for their future products. So not only are you building that product, but you’re also building an audience to sell a product to.
[32:32] Mike: Yeah, that’s absolutely right. And this is in some ways kind of mirrors what Rob and I have discussed in the past about a latter approach where you build these smaller products that enable you to learn the things that you need to be able to make larger products successful.
[32:47] Dave: Yeah, definitely.
[32:48] Music
[32:51] Mike: I think that pretty much wraps this up for our discussion on plug-ins and info product. If you have question or a comment, you can call it in to our voice mail number at 1-888-801-9690 or email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening and we’ll see you next time.